PROFILES The Growth Industry

THE NEWCOMERS

Downtown resident Cliff Booth sometimes gets a bit lonely rollerblading in the shadows of skyscrapers. But Booth, downtown residential developer, doesn’t plan to be lonely long.

That’s because this former Canadian, president of Southwest Properties Group, has recently linked up with another firm to jointly convert five old downtown buildings into roughly 700 apartment units with a $70 million value.

If the partners’ individual track records are any indication, the projects will flourish. Booth has been quietly but profitably redeveloping buildings around Dallas and elsewhere since the 1980s. And his partner, Robert Shaw of Columbus Realty Trust, has successfully developed nearly 2,000 high-end apartments in the swank Uptown district off McKinney Avenue.

Booth says work on the old Santa Fe II Warehouse, which will be redeveloped into 208 lofts leasing for SI per square foot, will begin this summer. Other properties involved in the deal are the historic Await Buildings at the entrance of the West End Historical District, 1530-1604 Main next door to Neiman Marcus and the Union Bankers complex on Elm Street on the edge of Deep Ellum.

But while the 42-year-old Booth may be known these days in real estate circles as one of the downtown residential guys, his interests have extended far beyond the confines of the Dallas central business district. Among his other acquisitions is the landmark Village on the Parkway shopping center at the intersection of the Dallas North Tollway and Belt Line Road. He also owns land near Texas Stadium and has developed apartments in McKinney.

Although his profile had risen in recent years. Booth actually is not a newcomer to Dallas. He first came here from Montreal in 1979 with plans to carry on his family’s art, antiques and real estate ventures. For a while, he owned a building next to the Hotel St. Germaine on Maple Avenue and operated a family gallery there.

He joined Southwest Properties in the early 1980s, became partner in 1984 and bought out his partner in 1987. Al the lime, the company was “doing a lot of smaller deals,” he says, buying little shopping centers, warehouses and some land in and around Dallas.

In 1991, Southwest got more aggressive. With funding from wealthy European friends, Booth started buying depressed properties he says none of the big pension funds and other institutional investors liked; multi-tenant, light industrial centers. Of about 10 million square feet of property Southwest acquired in the following years, nearly 8 million was this type, Booth says. Once he fixed these properties up and made them profitable, he packaged and marketed them to the big funds and investors, who now were interested.

Booth says he’s moved on to redeveloping other property types and hopes to do the same thing with them that he did with the “depressed” properties. “What we do is identify a niche maybe a little ahead of the curve and put a team together to realize apian,” he says.

What’s next after downtown redevelopment? “I don’t know where the next niche will be or what it’s going to look like or even if it’s in Dallas,” he says. “But hopefully, we will be nimble.”

What’s a former marketing director of a German TV station doing in Dallas? Running a successful real estate acquisition and management firm, what else?

Although the connection may not seem obvious, 31-year-old Sabine Gaedeke Stener learned a lot about the basics of buying and selling while working in television overseas. So when her father’s extensive real- estate investments in the United States became too big to manage from Germany, she agreed to relocate here to take over the family business.

That was three years ago. Now Stener is vice president of operations for Gaedeke Holdings Texas Limited Partnership.

Gaedeke Holdings first entered the Dallas market in 1988, when it was possible for wealthy investors with the luxury of time to buy Class A properties for bargain-basement prices and hold them until they became profitable. Her father, a well-heeled German architect, first began investing in residential properties then began looking at office projects, Stener says.

The family philosophy, she says, is straightforward: “Buy really nice properties in good locations and keep them for the long term.”

In fact, Stener says, the partnership has sold only one property-a Class B building off Stemmons Freeway-and that’s because it didn’t quite match with the other Class A buildings in the company’s portfolio.

In all, the company owns roughly 4 million square feet of office and residential space in 19 properties. In Dallas, the company owns about 10 first-class buildings, including Regency Plaza in Oak Lawn and Banner Place in far North Dallas. Most recently. the partnership paid an estimated $25 million to snatch up the 14-story One McKinney Plaza just north of downtown Dallas. Gaedeke Holdings’ other properties are in Florida and Tennessee, Stener says.

Europeans who have gobbled up depressed but first-class real estate in Dallas and similar markets are nothing new. What makes Stener’s partnership unique is the formation of Gaedeke Landers, which manages each of its own projects. That way, she says, the company can keep close tabs on its investments.

“We want to keep them state-of-the-art,” she says.

The welcome wagon wasn’t exactly waiting for Dary Stone in 1992 when he first took over management of sprawling Las Colinas in Irving.

Southland Financial Corporation, operated by the famous Carpenter family that transformed its ranch into the 12,000-acre development, was at war with the institutional investors who had acquired a controlling interest in the project three years before. Among the family’s beefs was that Stone’s company, Faison-Stone Inc., wasn’t qualified to run Las Colinas.

But Stone didn’t let this flap distract him from the task at hand: to make troubled Las Colinas thrive again. In the five years since he took over as manager and operator of the project, Faison-Stone, a partnership between Stone and North Carolina builder Faison Associates, has done just that. Its biggest accomplishments have been helping to persuade several large corporations to relocate their headquarters there. Among the new corporate residents of Las Colinas are NationsCredit Corporation, TIG Holdings and Quaker State. The relocations helped reduce Las Colinas’ office vacancy rate to only about 5 percent. What’s more, Stone hints at a few more major relocations in the near future.

“I have a couple more in the hopper,” says Stone, a former aide to then-Gov. Bill Clements and chairman of the Finance Commission of Texas.

As if that weren’t enough to keep Stone busy, he also has recently begun several development projects that account for about 20 percent of the company’s business. One project is a 100,000-square-foot office building in suburban Austin. Add to that a choice tract of land in downtown Dallas, management contracts for a couple of large shopping centers in Houston and a few other properties, and the Faison-Stone portfolio totals about 7 million square feet. Stone says.

“We have grown pretty rapidly at a time when there has been a fair amount of consolidation in the business,” he says. The company intends to continue on a steady growth pattern, he adds, choosing more complicated management contracts like that of Las Colinas in Dallas, Houston, San Antonio and Austin.

“We don’t want to go out and manage or lease every strip center out there,” he says.

Ask former Green Beret Udo Walther if his wartime experience in Vietnam taught him anything about how to run a successful construction firm, and he’ll tell you plenty.

“A lot of people went to college while I was dodging bullets.”’ he says. “To me, Vietnam was my college, and it put things in perspective. There is nothing in business that’s going to kill you. No matter how bad it is, you’re still going to walkaway.”

But all of that is sort of moot because things are not at all bad for Walther these days.

His Precept Builders Inc., with offices on the edge of downtown, is just 3 years old but already has a lengthy list of clients for its general construction, tenant finish-out and project management services. Among the household names that have hired Walther’s firm are Sony Theaters, Hewlett Packard, Price Waterhouse, Comerica Bank and even the Lawrence Welk Resort & Theater in Branson, Mo. Among the company’s most high-profile projects is the newly opened Lone Star Park in Grand Prairie; Precept was project manager.

Actually, many of his clients are executives Walther met years ago during his days at Trammell Crow Company, where he worked from 1980 to 1991. Walther rose to partner in charge of design and construction. While there, he watched as building cranes erected some of the country’s most spectacular high-rise office projects, including San Jacinto Tower and Trammell Crow Center in downtown Dallas.

He left Crow after the real estate bust of the late ’80s forced the company to completely revamp, when “the emphasis was on reorganization not development,” Walther says. He formed his own project management firm in late 1991, but by 1993 began to seek out a partner with deep pockets who would provide the financial backing needed to take on large general contracting deals. He found that partner in Precept Cos., and he calls their union “the perfect marriage.”

The two split last year, however, when the parent went public. Precept Builders, financially sound on its own, was spun off.

Walther says that in fiscal year 1997, which ended in June, the company will have completed about $30 million in tenant finish-out work-which represents about a third of Precept’s overall business. He expects at least that much in the next fiscal year.

Another sign of the company’s rapid expansion is its swelling workforce. Originally run by a handful of workers, Precept Builders now has more than 100 people on its payroll, Walther says. The task ahead, he says, is to provide his employees with a steady income but keep tight reins on the company’s growth.

“The problem I have today is controlled growth,” he says. “I used to know every employee, every employee’s wife and every child. Not anymore. And once you bring these people in and they’re on your payroll, you have to feed them.”

THE SURVIVORS

If you ’re noticing a lot of dirt flying across the street from NorthPark Center these days, it’s Bill DuvaII ’s fault. As head of the commercial division of Lincoln Property Company, Duvall is overseeing one of the most ambitious, mixed-use real estate projects to be undertaken in Dallas in years. It’s the development of what’s left of the old Caruth farmstead at North Central Expressway and Northwest Highway, which, until Duvall started moving tractors there, was the last large, untouched tract in the vicinity.

Duvall, 49, talks glowingly about what will eventually be built there: first a high-end shopping center featuring a new and improved Simon David grocery store. Apartments-400 luxury units to be exact-will follow. So will two 10-story office buildings, a hotel and an assisted-living center. The first phase, he says, will open next spring.

And that’s not the only big project at Lincoln, which in the 1980s became one of the nation’s largest commercial developers but then fell on hard times when the real estate market nose-dived. The company also is planning a four-building office project on 24 acres in Electronic Data System’s Legacy business park in Piano. And it has begun other developments in Nashville, Orlando and Charlotte, N.C., Duvall says.

“We clearly are back in the development business,” Duvall says via cell phone. “But we are being very cautious, very careful.”

With good reason. As part of working out financial difficulties with one of its main development partners, Metropolitan Life Insurance Co., Lincoln sold back 11 properties to the insurer, including the silvery Lincoln Centre at the Dallas North Tollway and LBJ Freeway. Its number of employees dropped from 5,500 to about 4,900.

But Duvall says Lincoln’s extensive property-management contracts helped keep the company from going belly-up during those rocky days. For that reason, management remains a big part of Lincoln’s activities today, with a staggering 115 million square feet of space under contract nationwide.

“We just got up every morning and worked hard, and somehow we survived it,” Duvall says.

In addition to developing and acquiring properties in the United States, Lincoln has set its sights on Europe, building apartment or office buildings in Berlin, Hamburg and Prague, he says. “We’re still buying in markets that haven’t totally come back.”

Few real estate executives had as high a pro-file in the 1980s as syndicator Craig Hall. At his summit in 1985, Hall controlled roughly $3 billion in assets and was the nation’s third-largest apartment owner. Charismatic and bold, he was a self-described “dealaholic” who was good at getting wealthy individuals to invest in his real estate packages. He also was good at persuading lenders-too good, it would turn out-to back him on many of his deals.

In addition to thousands of apartment units across the United States, Hall’s company. Hall Financial Group, also had interest in office buildings and other real estate and several businesses. Then came the real estate bust and the party ended. Just as everyone had watched Hall climb to huge success, they watched him fall. There were foreclosures, a massive restructuring of $500 million in debt, payments of more than $ 100 million in settlements to banking regulators, even a personal bankruptcy.

But by 1993, he had worked himself out of the hole and was ready to start over-very cautiously, that is. Using, in part, money from the sale of thousands of apartment units he still controlled, Hall began buying office buildings and land in depressed downtown Dallas.

Among his holdings today are the 22-story St. Paul Place, the 36-story 1999 Bryan Tower, a tract of land in the Dallas Arts District and the historic Kirby Building, which he plans to convert to apartments. He also broke ground this spring on a 162-acre office park in Frisco near the Dallas North Tollway and State Highway 121. The development calls for about a dozen mid- and low-rise office buildings.

But even all this can’t compare with the company’s activities in the early 1980s, Hall says, and that’s fine. “There was a time when we were building $ 1 bill ion of property in a year all over the country,” says Hall, 47. “Today, our goal is to do select niche projects that are different than what the institutions are doing at the moment they’re doing it. We made a conscious choke after we came out of our difficulties not to be so large again.

“We never used to think that way at all,” he adds. “We were turning the crank and growing bigger and bigger. Now, if we can’t make a good return on our investment, we’d rather sit on the sideline. We were never sideline-sitters before. But it feels great.”

Michael Prentiss is adjusting nicely to living in a fish bowl. After nine years of running a large and very private real estate firm called Prentiss Properties, last fall he took his show public, raising more than $290 million in a stock sale and forming a new Real Estate Investment Trust.

Any discomfort he may feel by the company’s new place under the public microscope is offset by the enormous access to capital it now has to fuel its growth. “You don’t give up the freedom of a private profitable company unless it’s worth it,” says Prentiss, 53. “But the real estate business has rebounded and to be able to take advan-tage of those opportunities, you have to have money.”

Indeed, he’s got it now. Lots of it. And he’s spending it. Since its initial public offering in October 1996, the acquisition portfo-lio of Prentiss Properties Trust, which is also involved in devel-opment, leasing and management, has mushroomed from 85 office and industrial properties to 102. The lion’s share of those are in Texas, including the Park West complex at LBJ Freeway and Luna Road and Walnut Glenn Tower in North Dallas. Other properties are in such growth markets as Atlanta, northern Virginia, Chicago and Milwaukee. Recently, the trust snagged its largest acquisition to date-the $78.7 million Natomas Corporate Center in Sacramento, Calif. The company’s also revved up its development activities, with three office or industrial projects under construe-tion for a total of $25.6 million in new property.

It’s been a while since Prentiss has been on such a buying and building spree. Originally the U.S. subsidiary of Canadian devel-oper Cadillac Fairview Corporation, the company under Prentiss’ direction was one of the largest real estate developers in the coun-try. Bui Prentiss refocused in 1987 after he acquired most of Cadillac Fairview’s U.S. assets and formed Prentiss Properties. He concentrated on leasing and property management, a decision, he says, that was crucial to helping the firm remain profitable every year of its existence while others swam in seas of red ink.

Prentiss Properties Trust is now embarking on a conservative but aggressive acquisition and development program funded by REIT proceeds. Prentiss says he’ll continue to look for good investment opportunities in each of the 21 markets in which the company either owns property or provides leasing and management. In all, the trust leases and manages about 43 million square feet of space, according to its quarterly report. “That gives us eyes and ears around the country,” he says.

AFTER NEARLY 30 YEARS IN THE COMMERCIAL real estate brokerage business at Henry S. Miller Company, Herb Weitzman had risen to become one of the best in the business. He’d built and leased so many shopping centers that his name was synonymous with retail brokerage throughout the region.

But after The Collapse, Weitzman was left responsible for millions of dollars in loans on projects that were worth half their previous value. His credit was so bad that when he left Grubb & Ellis, which had purchased part of Henry S. Miller, he couldn’t get approved for a lease to set up his own shop.

“It was absolutely the worst of times,” says Weitzman. He won’t say how much he owed to lenders, but he admits he probably had more loans outstanding at the now-defunct First RepublicBank than anyone else. And, he adds, the value of those notes “’totaled up to be a big number.”

But then a friend offered him 25,000 square feet of free office space in the Oak Lawn area. And he was in business. (That friend would be the first of many business colleagues to help Weitzman regain his momentum.)

The Weitzman Group’s first big deal came almost immediately. Handy Dan, which was shutting down its home improvement stores from Texas to Florida, needed to dispose of 68 vacant stores. Using software designed specifically for that assignment, Weitzman helped sell or lease all the buildings. After that, deal after deal came together and Weitzman’s small company of two or three brokers ballooned to dozens. Today, the company employs about 120 brokers. And its sister firm, CenCor Realty Services, which handles retail development and management, has a like number on the payroll. He also handles the ongoing real estate needs of several major retailers, including Baby Superstore, Golfsmith and Homeplace.

Weitzman says the key to his comeback is basic: “This is a people business. Do a good job, work hard and be fair.1’ Having zillions of contacts in the retail community hasn’t hurt, either, he admits.

As for the future, he has no plans to take his business national or even international, as many of his colleagues are doing. His regional approach, he says, is working just fine, thank you. In addition to Dallas, he has offices in Houston, San Antonio and Austin.