Surviving real estate collapse

What do you do when half of your business gets clobbered?

If you’re Bob Peterson, you focus on growing the other half of your commercial real estate operations. You also search for new opportunities.

Peterson, chairman and CEO of Atlanta-based Carter, has had to pilot his company through an industry tailspin.

“I clearly think this is the worst I’ve been through,” said Peterson, a 35-year veteran of the business.

Essentially, he explained, every type of commercial development — office, retail, hotel, industrial and apartment — has been hit hard. By one measure, he said, the value of commercial properties has fallen about 30 percent during the past year.

The prognosis?

“It’s not going to get much worse, but we’ll stay here for a long time,” he said.

How long?

“A couple more years at this low point,” Peterson, 57, said. “We need to figure out how not to be a part of that.”

Privately held Carter, one of the country’s largest commercial real estate firms, is still profitable. But it has seen its “transaction” business — selling and leasing property — fall dramatically. As a result, the company’s annual revenue has dropped from about $40 million to the “low 30s now,” Peterson said. The transaction business now represents only about 30 percent of that revenue — down from 50 percent.

An optimist at heart, Peterson didn’t dwell on the bad news, but told himself: “It’s OK. We’re going to get through this.” Then he and the other four owners figured out a game plan:

– Go after new business niches by forming strategic alliances or hiring experts in other fields.

“You take advantage of this [economic] debacle by adding excellent people,” Peterson said.

For example, Carter forged an alliance with T5 Partners, which specializes in “mission critical” data centers. Carter became project manager this year for a new $400 million Apple data center in North Carolina.

Just last week, it announced an alliance with Align Healthcare to plan and develop hospitals, clinics and medical office buildings in that growing field.

And the company hired two local experts for a new consulting business helping banks decide what to do with their foreclosed commercial properties and bad debt.

– Take advantage of the crisis by investing in foreclosed properties that will be worth more in a few years. In fact, Carter already has accumulated funds from investors and is scouting distressed real estate now.

– Get more revenue out of the existing business of managing properties, which has to be done in good times and bad. Carter manages everything from three office towers at Atlantic Station to a signature office complex in downtown Minneapolis.

– Finally, cut costs. In this business, that means people.

“Probably what hurts the most are the layoffs, the salary reductions,” Peterson said. “Those are the tough decisions.”

The company now has about 375 employees, which is down from a peak of 450. It implemented an across-the-board salary cut of 8.5 percent. Also, bonuses are down 70 percent.

Because of the cuts, Peterson said, it’s easier for him to communicate a key message of the game plan to the troops: “You have to be so good at what you do today.”

That’s being said by a lot of CEOs these days.

14 comments Add your comment

Rick

July 21st, 2009
9:33 am

“Finally, cut costs. In this business, that means people.”
Yep…human beings are now just a completely expendable commodity like everything else.
Just wait and see how much longer a society with this mentality holds up.
“The more things change, the more they stay the same.”

Seminole84

July 21st, 2009
9:54 am

Rick’s new socialized economic model: if you have a heart beat you DESERVE a job. No, check that, you are ENTITLED to a job, despite being part of a firm’s dead weight for some time. Sometimes it just takes a recession to finally pull in the reins on staffing.

stu

July 21st, 2009
9:55 am

Yes. Layoffs should be outlawed and those who propagate them subject to prosecution. We’ll never have utopia at this rate. Gosh. I mean this world…it’s just so mean and cruel. I wish I was never born.

Now if we can just outlaw cancer.

Amber

July 21st, 2009
10:00 am

Henry, fascinating look into the mind of a top CEO here in Atlanta. It might be tough out there, but we all have to stay positive and look for alternative ways to bring in business.

Deas

July 21st, 2009
10:01 am

Excellent moves by Carter. Often a delay in these strategies will result in more pain . As far as the painful part of the move – cutting people and salaries, I have to be sorry for good people that are cut. However, the players that add value keep their jobs, because they bring more to the company than their cost. Its in slow economic times when the fat gets exposed and cut. When employees begin to act more like owners than employees, they will find more job security.

As far as pay cuts, that comes with the territory. I believe there were some very good years in the past and I bet there were raises and bonuses to reflect the good harvest. Good luck Mr Peterson!

John

July 21st, 2009
12:39 pm

Wow…alot of angry, bitter people read this blog.

Nancy Lynn Jarvis

July 21st, 2009
2:37 pm

For some of you less angry readers, start killing people. That’s what I did. After twenty years as a successful Realtor, I took experiences I’d had, created a real estate agent protagonist, and started writing murder mysteries set in the real estate community. For the less angry here, you’ll enjoy the books. For the more angry, you need to kick back for some light reading. You can find them on Amazon.
Nancy Lynn Jarvis

[...] post: Surviving real estate collapse | The Biz Beat Share and [...]

Marc

July 21st, 2009
3:35 pm

Enter your comments here This country needs more CEO’s like Bob Peterson. CEO’s that truly have the big picture mentality.When things slow down sacrifices have to be made so you can live on. Better times are ahead. Stay positive and innovative.

roger

July 22nd, 2009
1:52 pm

I made it through the 1974 downturn when we could not buy gas for our cars. I kept my job and the company I worked with had a meeting and we offered a incentive for all restaurant operators that we would give them a new Lincoln Mark III (a hot car then) if they increased their sales by 40% over the previous year. Bingo, of the 25 operators all took the challenge and 6 of them made the goal. Naturally all the sales were up and we survived. I left the company a few years later, but they are now the top chicken sandwich company in the country. We also did a lot of praying. Today they have 1400 restaurants.

Please

August 4th, 2009
10:48 am

What a joke; Mr. Peterson an involved CEO…. Wow. And the clowns that he surrounds himself with, please…. Out of touch, all surface, no substance management.

Please

August 4th, 2009
12:25 pm

Enter your comments here

Ole Guy

December 13th, 2009
1:02 pm

As all leaders in the American Business landscape are wont to do, Mr. Peterson projects a positive vision of the future of his livelihood, a return to “normalcy” as we have known it to be for most, if not all, of our lives. There will be efforts, both by the business community, and, of course, our benevolent keepers inside the Beltway, to “assist” in this social restoration.

The reality…sad, happy, or indifferent, will, most-likely, be a “new-and-improved” normalcy. The two questions will be: 1) define “new and improved”, and 2) will we, consumers, the business community, and (GULP) those “keepers on the Hill” be willing AND able to adapt and adjust our expectations. Following decades upon decades of unbridled, near-cancerous growth, we would do well to consider the economic challenges of the first decade of the 21st Century to be a “reset button”. We’ve already witnessed glimers of this reset mentality: the “green movement”, an effort at departing from oil dependence, demand for smaller cars, smaller houses, and the “let’s face facts” motivation at buying and selling foreclosed properties at hitherto unknown prices. Yes, we’re already adapting…will it be enough?

Passer-by

February 15th, 2010
7:48 pm

Rather interesting place you’ve got here. Thanks for it. I like such topics and anything that is connected to them. I definitely want to read more soon.

Best regards