Profit lurks in the ordinary Developers: While others went for glitz, William Wolfe and Stuart Halpert focused on neighborhood shopping centers, creating a 'very successful' real estate company.


When many commercial real estate developers had their eyes focused on glitzy office towers in the mid-1980s, William Wolfe and Stuart Halpert looked for investments in the most ordinary places of commerce -- the neighborhood shopping centers.

The more dumpy and uninspired it was, the better, they thought, because then they could fix it up and add some value with good management.

The move proved prophetic, allowing them to survive the real estate woes of the 1980s and emerge with something of value.

Today, their Bethesda-based company, First Washington Realty Trust Inc., is still known for its single-minded strategy. It recently purchased South Baltimore's Southside Marketplace and renovated the shopping center with new signs, new lights, new paving and a new look. The result, they hope, will be more shoppers and increasing rents.

It is a formula they have followed in shopping centers as high end as the Festival at Woodholme on Reisterstown Road, and as middle class as Southside.

"They have developed a very successful company," said Thomas B. McKee, of Crown American Realty Trust, who specializes in commercial real estate. "They have had success in taking what some people think is marginal real estate."

A public real estate investment trust, or REIT, First Washington trades on the New York Stock Exchange. In two years, it has doubled its size to 48 shopping centers along the congested Interstate 95 corridor and in Chicago. Earnings are growing by 7 percent to 10 percent a year, and the company has given investors a 15 percent annual return on their investment.

First Washington stock price has risen from $15.50 in 1994 to a closing price Friday of $27.75.

"I think it is a very strong management team with a well-positioned portfolio," said Kevin Comer, an analyst with BT Alex. Brown Inc. in New York.

Southside, on Fort Avenue just south of Federal Hill, is a typical property for Halpert and Wolfe.

"When I am buying property, I don't like to see a lot of green grass and cowbells," said Halpert, the chairman. "I like to see rooftops."

Rowhouse rooftops are what he saw in South Baltimore in May when he purchased Southside, but he also saw a neighborhood shopping center on a peninsula with a number of national chain stores and little nearby competition.

Like nearly all First Washington projects, Southside is anchored by a grocery market, in this case Metro, but has a variety of necessity stores -- the type that customers are likely to visit regularly.

Although the center still has empty storefronts, Halpert said they are negotiating with a variety of stores, including restaurants, paint and hardware stores, children's shoe stores, a frame shop and a mail services shop.

While First Washington tries hard to get the right group of tenants in its shopping centers, Halpert said the company does not buy a property because it has a "hot" tenant.

"All retail concepts will eventually hit the wall," he said. "We are not in retail. We are in real estate."

So the more glamorous centers with big-box retailers are not for First Washington. As Halpert asks: What do you do with the space when a Wal-Mart or a Kmart or a Home Depot goes hTC under? On the other hand, the walls of neighborhood centers can be expanded or contracted reasonably inexpensively as the tenants change.

John Ryder, Metro Food Markets' chief executive, said First Washington is one of the best of the real estate companies from which Metro leases space. Talks are under way about expanding the Metro in Southside.

Real estate investment trusts have become popular among investors who want take a chance on real estate without buying it. As a result, First Washington and others have been able to fund acquisitions through public offerings. Others in the business are as enthusiastic as Wolfe, the company's president, and Halpert.

David Cordish, a developer of retail and entertainment complexes, has 25 neighborhood centers. "I still own every one I ever built," he said. "I think they are a terrific investment."

The centers are able to withstand economic downturns more easily than other types of retail centers, such as malls, he said.

Fifteen years ago, a bank was in every neighborhood center, but today the banks have been replaced by video or computer stores.

Even during recessions, Cordish said, "everybody's got to eat, and they want it close by."

Pub Date: 10/20/97

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