Some real estate firms go public

The Charlotte ObserverMay 13, 2010 

Permanent capital.

To many real estate firms these days, the idea of a guaranteed source of funding might sound too good to be true.

When the financial system crashed, credit dried up, forcing many firms to abandon projects. Some are losing properties because they can't refinance or raise enough cash.

But Frank Spencer, president and CEO of Cogdell Spencer Erdman, offered up a way for companies to find such money, and possibly avoid financial dry spells if they're willing to undertake the changes and risks involved: Go public.

"It's exhausting. It's exasperating. It's definitely expensive," Spencer told a group of real estate professionals attending a workshop sponsored by the Urban Land Institute in Charlotte on Wednesday.

But for companies that decide to give up their independence as a private company and turn themselves over to shareholders, "permanent capital gives strategic alternatives you can't imagine," he said.

Spencer and James Cogdell took their Charlotte-based company public in 2005 and expanded into the nation's largest health care developer with more than 5,000 finished projects. A real estate investment trust, Cogdell Spencer Erdman acquires, develops and manages health care properties, most of which are located on hospital campuses.

As a private firm, the developers had to raise money to do every deal, Spencer said. Now, as a publicly traded company, the company has $80 million in liquidity and can start "any project we want to." And the firm can do so without a lender's approval, he added.

Among the drawbacks: Executives answer to an independent board. Shareholders and investors want to see growth. Stagnate and the market will punish you by pushing down the company's stock. And everything, including CEO pay, is public.

"It will be a shock how much control you've got to be ready to give up," he said.

Spencer also had to teach himself how to talk socially about his business without saying much of anything. That's because executives are legally forbidden from sharing anything that could be considered insider information.

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