BG&E subsidiary to shift to management services

March 24, 1993|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

Constellation Real Estate Inc., the Columbia-based develope that is part of Baltimore Gas and Electric Co., said yesterday that it is branching out into asset management and brokerage services in order to sustain itself during a continued development recession and reduce the company's reliance on projects it owns outright.

"We're not doing a lot of development right now, so it's a good way to use our experienced personnel," said J. Richard O'Connell, president of Constellation. "The strategic goal is for us to be able to utilize all the skills we've achieved over the last several years through our own projects. We have that expertise in-house and there appears to be a market for it."

The company will offer services in asset management, construction management, sales and leasing brokerage, and "value creation services," which the firm described as a potentially broad-based consulting business.

Richard Uhlig, senior vice president of Constellation Real Estate, will run the new operation. He has been in charge of sales, leasing and marketing for projects Constellation owns.

Mr. O'Connell said there will not initially be any hiring or firing at the 46-employee company as a result of the shift.

The diversification serves Constellation's goal of cutting its reliance on projects it already owns and on new development. Commercial developers have practically no work to do on new projects because the office market has been one of the last economic sectors to bounce back from the recovery. The new businesses also carry less financial risk than development, and asset management is less cyclical than development or brokerage.

Constellation's parent company also wants its subsidiary to reduce the amount of real estate it owns. Mr. O'Connell said last year that Constellation's business plan in the 1980s was to build projects and quickly sell them, but the recession slowed sales and saddled the company with more completed projects than it wanted.

Constellation Real Estate is part of Constellation Holdings Inc., another BG&E unit. Constellation Holdings President Bruce M. Ambler said last year that the holding company has about $1 billion of assets and wanted about 20 percent of them to be in real estate. The figure is now more like 40 to 50 percent.

Mr. O'Connell downplayed the difficulty of moving from the development business, in which the company managed its own construction, leasing and building services, to building a service company that competes with established real estate brokerage firms for third-party business.

"We may be new in the third-party arena but we're not new," Mr. O'Connell said. "It's not a whole lot different."

He said the company's core market for third-party services will include lenders who have taken back properties, big companies that have cut back in-house teams to monitor their real estate lease costs, and investors looking to buy office buildings while their values are still depressed.

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