While Baltimore Gas and Electric Co. will be basking in the glow of improved earnings at its annual meeting today , an unregulated corner of its corporate structure is losing money on one of the scourges of recent years -- commercial real estate.
Despite two years of losses in that sector, BG&E is determined to stay in the business, although it has cut back development until it can sell some of its mature projects, said Bruce M. Ambler, president of Constellation Holdings Inc., the unregulated subsidiary that includes the real estate operation.
"We don't have any intention of getting out of real estate property," he said. "We feel it will get stronger as we go forward."
Although BG&E is intent on staying in the real estate business, TC one utility analyst suggests that the utility should leave the market and stick to what it knows -- generating power.
"It dilutes management's abilities to best enhance the wealth of shareholders," said Gary F. Hovis, director of utility analysis for 00 Argus Research Corp., an independent research business in New York.
The Public Service Commission, the state agency that regulates BG&E rates, keeps tabs on the utility's non-regulated activities to ensure that they do not affect the regulated operation, said Frank B. Fulton, a commission spokesman.
Although BG&E does not file regular reports on its Constellation operations with the commission, company records are accessible to the commission, and its performance is part of rate hearings, Mr. Fulton said. "We are always concerned about a utility's diversified activities," he said.
BG&E first got into the real estate business in 1981, when it established its resource and property management division. That operation later became part of Constellation Holdings, which was set up in 1984.
Last year, Constellation reported income of $8.5 million, or 11 cents a share. But its real estate and senior living facilities division lost $13.6 million, or 16 cents for each share of BG&E common stock outstanding, partly a result of a $9 million write-down on properties and mother losses.
That followed a loss of $2.2 million, or 3 cents a share, for the division in 1990.
Results for KMS Group Inc., the Constellation subsidiary that manages real estate projects in Maryland and Delaware, are not reported separately. KMS is managing or developing four shopping centers, five office projects, five business parks and .. three mixed-use developments.
Among those developments, 95 percent of the retail space is leased and 85 percent of its office space is rented, excluding National Business Park, a 350-acre business park in Anne Arundel County.
KMS Group projects
Valley Centre: 225,000 square feet in Owings Mills
First State Plaza: 180,000 square feet in Wilmington, Del.
Cranberry Square: 151,000 square feet in Westminster
Piney Orchard Village Center: 25-acre parcel will contain 150,000 square feet of retail space.
5801 Allentown Road: 80,000 square feet next to Andrews Air Force Base
Centre Park: 110,000 square feet in Columbia
Concord at Pratt: 23-story, 350,000-square-foot building planned
Offices at the Greens: Two five-story buildings with 150,000 square feet in Laurel
Constellation Centre: 25-acre office, hotel complex in Prince George's County
The National Business Park: 350 acres, Baltimore-Washington Parkway and Route 32
Montecito Business Park: 520 acres, Interstate 270 and Route 109
Hickory Ridge Industrial Park: 213 acres just south of Aberdeen
Brandywine Commerce Center: 360 acres, Route 5 and U.S. 301 in Prince George's County
MA Piney Orchard Business Park: 210 acres in Anne Arundel County
Piney Orchard: Planned unit development in Anne Arundel County
Brandon Woods: 350 acres for offices and manufacturing, 375 acres for homes; 10 miles southeast of Baltimore
Brown's Wharf: Offices and retail space in Fells Point