The bulldog growls in sell call on Rouse

Profile: Analyst David M. Fick has the reputation of telling it like it is.

October 31, 2002|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

David M. Fick, the Legg Mason Wood Walker Inc. analyst who on Tuesday accused the Rouse Co. of improper accounting, is known for telling it like it is.

His boss describes Fick as a "bulldog, absolutely tenacious." Executives at companies he analyzes for investors call him strong-minded, opinionated and fiercely independent.

"David has strong opinions and isn't shy about letting you know what his opinions are," said F. Patrick Hughes, president and chief executive of Lutherville-based Mid-Atlantic Realty Trust. "He may disagree with you, and you may disagree with him. It's nothing personal."

On Tuesday, Fick recommended that investors sell their shares in Rouse after saying the company had improperly accounted for $25 million in expenses - enabling it to show a record profit in the third quarter.

Rouse executives denied any wrongdoing, but acknowledged that they didn't follow industry guidelines when they excluded bonuses and retirement costs from funds from operations - a key benchmark for most real estate investment trusts.

Yesterday, Nancy Tucker, a Rouse spokeswoman, said company officials don't comment on analysts or their reports.

The independence of research analysts who cover public companies has been a hot-button issue for investors, investment banks and regulators this past year.

Citigroup and Merrill Lynch & Co. have each agreed to separate their equity research from their investment banking business after the companies faced increased scrutiny from the SEC for alleged conflicts of interest.

"We're certainly very aware of what's happening on Wall Street," Fick said yesterday. "We feel that here at Legg Mason, we've always been encouraged to be very, very blunt, and very thorough in our research approach. ... We've made many sell calls over the years."

Fick, 45, is a top analyst in the firm's research department, having come to Legg Mason after years of experience as a certified public accountant and a stint as chief financial officer of Arlington, Va.-based Mills Corp.

At Legg's research department, Fick oversees 10 people who cover various real estate sectors, while he specializes in covering office, industrial and retail investment trusts. Some of the local companies he covers include Corporate Office Properties Trust and Mid-Atlantic Realty Trust.

"We're not in the business of slamming stocks," Fick said yesterday. "We're in the business of getting it right."

"I've had a number of CEOs who've yelled at me, called me names on public conference calls ... but not anybody who refuses to speak to us."

Fick's boss, research director Ira H. Malis, said the analyst just hates being wrong and that he'll "dig and dig and dig."

"He's very passionate about what he believes; he's very passionate about what's right and what's wrong," Malis said.

Roger A. Waesche Jr., chief financial officer of Columbia-based Corporate Office Properties Trust, said Fick is strong-minded, independent and "willing to penetrate very difficult issues." COPT is a real estate investment trust that owns 110 properties totaling 9 million square feet.

A few years ago, Fick downgraded the firm's shares along with those of several similar REITs.

"It would serve the investment community well if analysts were independent thinkers" like Fick, said Waesche.

Fick used to cover Baltimore-based Prime Retail Inc., once the nation's largest factory outlet center owner, but dropped coverage after the company's finances worsened. Prime's shares were delisted from the Nasdaq stock market last year.

"I had a speculative risk rating on [Prime] throughout" until finally advising investors to sell, Fick said.

"It was the worst stock pick I ever had in my life. We all have those as analysts."

Analysts such as Fick will probably have to be more careful in the future as the SEC gets tougher with company misrepresentations, according to Debra R. Sheldon, associate dean of graduate programs in George Washington University's School of Business and Public Management.

They'll face more pressure to dig deeper into a company's financial statements in light of all the corporate financial restatements over the past year, she said.

"Analysts are going to have to look at the quality of earnings and management choices more carefully than ever before," Sheldon said. They have to assess whether management is conservative or aggressive in how they report their earnings, she said.

Is management "taking every opportunity to overstate earnings, or are they conservative? Are they taking special caution not to overstate earnings?" she said.

For Fick, his job has gotten a little bit easier.

The Ellicott City resident said his wife used to work at Rouse as a controller in the operations division before leaving in June.

"We had a Chinese wall right down the middle of our bed," Fick said. "There was virtually no discussion of the Rouse Co. at home other than when she'd read the paper and see a quote and say: `Gee whiz, there you go again.'"

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