In a slow economy, it’s often helpful to hear how your peers have adapted, what they’ve learned and how they continue to move their businesses forward. To that end, Southeast Real Estate Business spoke with several members of its editorial board to learn how their companies fared in 2002 and discuss their game plans for 2003. They include Bruce Ficke, CEO of Jones Lang LaSalle’s account management group; Chris Dyson, senior vice president of Collateral Mortgage Capital; Karen Burkhart Dick, executive vice president-brokerage division of Ackerman & Company; and Bo Jackson, executive vice president-office division with Colonial Properties Trust.

SREB: How did your company as a whole fare during 2002?

Ficke: In 2002 and moving forward into 2003, Jones Lang LaSalle continues to build market share across the U.S. and globally. We are winning a high proportion of major transaction instructions and long-term corporate alliances with household names, including Bank of America, Motorola, Microsoft and Whirlpool Corporation. We have redeployed our resources to focus on the key strategic growth areas of capital markets and investment management.

Dyson: Thanks to an exceptionally strong fourth quarter, Collateral Mortgage Capital is going to be right in the neighborhood of $1 billion in funding, which is consistent with our goal for 2002 and probably slightly more than 2001.

Dick: I’m proud to say that Ackerman & Company is in the black, but things are slow. We are active in metropolitan Atlanta, and we don’t really expect the economy to start showing signs of health again until 2003 at the earliest, and it may even be 2004. We have such excess supply, especially in office and industrial space, that it’s just going to take us a while to work through that.

Jackson: Being a diversified real estate investment trust with office, multifamily and retail properties has allowed Colonial Properties Trust to outperform single asset owners. A good example of our diversified strategy was illustrated last summer when we sold a large portfolio of multifamily apartments at an attractive cap rate and used the process on a quick, accretive reinvestment buying Heathrow International Business Center, a 1 million-square-foot premier suburban office park in Orlando, Florida. This acquisition now makes Colonial Properties Trust the largest suburban landlord in Orlando.

In Birmingham, Alabama, using the same proceeds, we purchased the high-profile Colonnade, a 500,000-square-foot office and retail center.

SREB: How has your company adapted its business lines to meet the challenges of the current economy?

Ficke: We’ve taken several steps to enhance our service delivery to meet the long-term needs of our clients and not solely to meet the challenges of the current economy. We’ve migrated from a product-oriented firm to a customer-oriented firm over the past 3 years.
We are now organized primarily in two customer service groups, Corporate Solutions and Investor Services. Our Corporate Solutions business focuses on our “owner occupier” clients, essentially the corporate business client. Our Investor Services group focuses on clients buying real estate, to be occupied by third-party tenants, as an investment.

Additionally, Earl Webb has agreed to move from being the CEO of the Americas to take the helm of Capital Markets in the Americas. Capital Markets will be established as a stand-alone entity, serving both corporate and investor clients. Webb is uniquely qualified to lead this critically important profit center and really help to generate strong overall results in America.

Dyson: We didn’t officially change our budget mid-year, but I think we expected to fall short of our goals. The economy has caused us to have to look very closely at a lot of the multifamily markets where we lend. For the first time in several years we started to see significant softness in some of the major multifamily markets.

SREB: Has there been any change in strategy, in terms of how you serve your clients?

Ficke: In these conditions, new business relationships and the development of sophisticated solutions to real estate challenges do not always produce immediate fees. But they do represent the bedrock of our future growth and profitability as clients recognize the value of what our people, technology, and research and consulting capabilities can deliver. We have very deliberately followed our business practice of laying out a 3-year business strategy, looking beyond the current travails to the vision we have for the future.

Dick: On the development side, we are looking at more acquisition opportunities. We’re also trying to get more third-party leasing and management business. We’re targeting Class B properties, primarily office and industrial, and we landed three assignments in 2002. We are also growing our brokerage group with a lot of bright, energetic junior agents, which has been positive because they make cold calls every week and definitely turn up business prospects.

Jackson: We will not build any new speculative buildings in 2003. However, we will develop build-to-suit office facilities for corporate clients. Retaining our existing corporate clients is critical to our same store performance in 2003.

Our operating philosophy is “keep it simple.” Here are some examples of “being brilliant on the basics” we use to attract new clients:
• Rapid response with simple proposals
• Reduce transaction time using short form leases
• Fast pay brokerage commissions
• Localize decision making, ensuring these common sense practices are fully implemented

SREB: What new projects have you recently completed or do you have in the works?

Ficke: AtlantaXchange LLC has retained Jones Lang LaSalle as the new leasing and management agent for 180 Peachtree. It’s in close proximity to restaurants, retail and hotels — the Ritz-Carlton is directly across the street. The site also offers a parking deck with a uniquely abundant amount of parking space. During the past year, the Jones Lang LaSalle Atlanta leasing and management team has been awarded a total of 2.8 million square feet of new business in the Atlanta marketplace, including this new assignment.

We were also retained to serve as project manager for two of Jackson Memorial Hospital’s large development projects in Miami. The first project, named the Coulter Building, will contain five stories when constructed with the structural opportunity to add six more floors. The 300,000-square-foot Coulter building will house pathology services, research, education and professional specialty services. The second project is a 210,000-square-foot rehabilitation facility for both inpatient and outpatient rehabilitation.

Dyson: Most of Collateral Mortgage Capital’s business is garden-variety apartments and manufactured home communities. We just announced the funding of a Freddie Mac variable-rate bond credit enhancement. The loan portfolio, which totaled $13.03 million, was secured by four properties in the Birmingham area: Ascot Place Apartments, Meadow Wood Apartments, Forest Ridge Apartments and Woodbrook Apartments.

We also recently funded Eaton Square, a 240-unit, garden-style multifamily property located in Pensacola, Florida. The $11.2 million loan to refinance the property was funded through our SMART loan program, which allows our customers to save money and real time when financing commercial real estate transactions.

Dick: We purchased Centrum at Glenridge, a 180,000-square-foot office building in Atlanta, in June 2002. We also just broke ground on a new product, called Riverstone Corporate Center, in Canton, Georgia. It’s a 30,000-square-foot medical building — the first building in a 150,000-square-foot office park. It’s more than 50 percent pre-leased, which obviously offsets some of the risk, but it’s also in a special niche market that’s not covered up with other developers.

Jackson: Our Colonial TownPark in Orlando is a shining example of how Colonial Properties Trust is uniquely qualified to execute live/work/shop mixed-use developments. We created 1 million square feet of office space and 500 luxury apartment homes, and we are underway with the pedestrian-friendly Main Street retail center. The entire community is connected to restaurants, hotels, park settings and bike paths.

We believe these mixed-use communities are the future, and Colonial Properties Trust is well positioned to deliver such communities throughout the Southeast. The company was recognized with several prestigious industry awards this year: NAIOP Orlando Office Developer of the Year, NAIOP Orlando Office Development of the Year and Atlanta BOMA [Building Owners and Managers Association] Building of the Year.

SREB: What areas of the Southeast do you think will be hot in 2003?

Ficke: The firm, along with its investment management business LaSalle Investment Management, has launched a three-phase research program called World Winning Cities. This program is aimed at defining the essence of competitiveness in cities of the future and using this analysis to pick winning locations ahead of the curve for commercial real estate developers, owners and investors.

The North American continent as a whole has been a significant generator of new employment over the past decade. The metropolitan areas of the southern United States show the strongest growth in the country in a band running from Nevada to Florida, and including the cities of Las Vegas, Phoenix, Denver, Dallas, Atlanta, Raleigh, Charlotte, Orlando and Tampa. These nine metropolitan areas grew in population by an average rate of 3.1 percent per year and have generated new employment at over 4.2 percent over the past decade.

Dyson: Florida continues to grow, and we’re getting our fair share of that business, although there is some softness in Orlando. The big thing that has had an effect on underwriting commercial real estate in Florida is insurance. We’ve seen property casualty insurance premiums in the state of Florida double, triple and, in some cases, literally quadruple. And while Florida continues to be a very important part of our business plan, and an important part of our growth for the future in terms of lending activity, we really have to be careful about looking at softness in some of the markets there.

Atlanta is another big market, but it’s also experiencing a little softness. And Charlotte is an area that everyone is a little nervous about, but we’re looking at opportunities there as well. They’ve lost some jobs, and we’ve seen some occupancy levels in Charlotte like we’ve never seen before.

Dick: I think Atlanta is going to continue to plug along, but I definitely don’t expect it to be hot in 2003. Having said that, I do think Atlanta is a good long-term market to be in. It has some strong fundamentals — it’s just going to take some time to work through this recession.

SREB: What’s in store for your company in 2003?

Ficke: Looking ahead to 2003, the forecasts for economic conditions continue to indicate tough markets around the world. In that context, we continue to plan for the tight management of costs and continuously seek ways to work faster, better and more efficiently.

Dyson: We’ve got the Southeast pretty well covered. I think we will probably open another office or two in the Midwest, and we’ll continue to look at the Mid-Atlantic areas.

Dick: A lot of what we did in 2002, such as some acquisition opportunities toward the end of the year, was to set the stage for a more productive 2003.

Jackson: Colonial Properties Trust sees 2003 to be an “instant replay” of 2002. Our economic forecast projects continued anemic demand with companies giving back space — not taking more. This will increase vacancies until net absorption gains positive traction in 2005.


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