Lowe Enterprises profits from patience

Giant developer unknown by public, respected by peers

Real estate

June 18, 2000|By Meredith Cohn | Meredith Cohn,SUN STAFF

The buildings aren't Loews movie theaters or Lowe's hardware stores. But many of Lowe Enterprises' properties are just as familiar.

With $6.7 billion in assets under its control - including big-name hotels, office towers and residential developments - Lowe's next big project is planned in Cecil County at the long-vacant Bainbridge Naval Training Center.

The company is studying a $500 million resort, business park and residential community that could take 10 to 15 years to build and employ up to 2,400 people. Lowe is studying the market to determine if the site northeast of Baltimore off Interstate 95 is appealing to investors and potential users.

Commercial real estate and investment experts said the Los Angeles-based company, which seldom invests its own money and owns few properties, can pull together financing to develop and operate the project. While it is little known in East Coast real estate circles and even less known to the public, industry experts said the company is well-respected, well-capitalized and is regarded as a top flight development, investment and management concern.

"Some developers of national stature do the same things over and over, but there's no easily capsulized definition of Lowe because they have a variety of products and relationships," said Timothy C. Macker, president of WESTMAC commercial brokerage company, which helped lease properties for Lowe. "But they do what they say they're going to do."

Lowe Enterprises was founded in 1972 by Robert J. Lowe, now chairman, chief executive and one of 32 shareholders of the privately held company. In the same planned and deliberate manner in which the company undertakes its projects, Lowe grew to become a large, diversified animal in the development world.

Through wholly owned subsidiaries, Lowe buys, develops and operates properties in all real estate segments, including residential, office, retail, industrial and hotel. It develops planned communities, such as the one proposed in Cecil County.

Occasionally the company enters into public-private partnerships and seeks public subsidies. Money to buy and build comes from several sources, including real estate investment trusts, other developers and institutional investors. It also invests on behalf of nine public and private pension plans.

That diversification in financing sources, real estate segments, and even geographic locations helps to insulate the company from market ups and downs that bankroll and bankrupt other developers, the chairman said.

But the company that has properties across the country and England also has no name brand. There's no one hotel flag or neighborhoods and office parks bearing the company logo. Robert Lowe said he isn't avoiding publicity, but is much more concerned with his financial partners and potential partners knowing his name than the public.

He said Lowe's other shareholders, who average 15 years with the company, and more than 7,000 employees who work out of 10 offices across the country and London, aren't flashy. Young employees are given latitude to show their entrepreneurial skills, Lowe said. If they perform, they are invited to become shareholders.

They aren't looking for big egos.

Lowe would rather stick to projects such as the historic and celebrity-strewn Hotel del Coronado in San Diego, which the company recently spent $330 million to buy and $50 million to renovate on behalf of a pension fund - one of many attention-grabbing projects that seem to belie the culture of the company.

But Lowe said they do fit.

Lowe often lays out mammoth sums of cash on behalf of investors. The projects are generally large and long term. Because the company is private and doesn't have to answer to a lot of shareholders, and because of the nature of the institutional investor, Lowe doesn't have to worry about making money immediately.

Lowe said a downturn in the economy has meant some projects have taken years longer than expected to become profitable and meet the investors' expectations. Of a dozen real estate, investment and government officials interviewed, no one could name a project that Lowe abandoned.

That doesn't mean every project has gone according to plan.

As an example, in the mid-1980s, Lowe invested in a partially vacant, 100-acre industrial property in downtown Los Angeles. When Southern California was hit with a real estate crash, along with the rest of the nation, the company had to redo its plan. It shifted from expensive new construction that users didn't want to rehabbing existing buildings. Without much demand, the property spent three or four years of the 10-year development process in limbo.

But Lowe has become adept at dealing with market fluctuations. It spent much of the 1980s investing in distressed buildings. Adding value to them through rehabilitation became a hallmark of the company.

That caught the attention of pension fund managers, who were searching for conservative, long-term growth.

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