BTR Realty Inc. is still considering converting from a corporation to a real estate investment trust, but the switch has been held up by a hefty initial price tag and some raw land in the company's portfolio that does not produce income.
Company President F. Patrick Hughes said most of the company's earnings increase in the first quarter was based on real operating gains rather than asset sales or one-time events, but he stopped short of saying the Linthicum-based development company could keep up its progress throughout the year.
"There's a couple of things in there that aren't going to repeat," Mr. Hughes said after BTR's annual shareholders meeting at the World Trade Center yesterday. But he added that operating profits improved.
BTR reported $703,000 in earnings before non-cash charges, such as depreciation and deferred taxes, in the quarter that ended March 31. Non-cash charges led to a loss of $228,424, or 3 cents a share, considerably less than the $836,233 loss in the first quarter of 1991.
Like other real estate companies, BTR focuses on cash flow because accounting rules require that real estate be marked down for depreciation even when its value is stable or rising.
Overall, Mr. Hughes and BTR Chairman Archibald McKay painted a picture of a grim 1991 for BTR but said that with continued cost-cutting and a small upturn in leasing, this year could be an improvement.
"We're in a tough industry," Mr. McKay said. "The nation is in a tough recessionary period, and it's not easy to do the job."
Part of the adjustment could be the switch to a status as a real estate investment trust (REIT). At last year's shareholders meeting, the company said it was going to study such a move.
A REIT is usually less of a growth vehicle than is a conventional corporation, which BTR is today, because a REIT pays out 95 percent of its income as dividends. But Mr. Hughes said REITs can grow by issuing new stock.
Mr. Hughes said the study of the conversion has been slowed by the fact that raw land and housing assets that BTR is trying to sell aren't suited to income-oriented companies such as a REIT. And he said the company hasn't decided how to finance the $7 million to $10 million the conversion could cost.
But growth isn't BTR's short-term goal. The company has been consolidating since 1990 and cutting back development of new projects in favor of running its existing properties, mostly neighborhood shopping centers anchored by food or drugstores.