Baltimore Business Journal
By Melody Simmons
Maryland businesses will have a new set of benchmarks to follow as the state begins to lift its state of emergency and various restrictions for Covid-19. Restaurants will have new configurations to serve customers. Gyms will reset to allow socially distanced workouts. Office spaces will be totally redesigned. Public spaces like coffee houses, bars and, yes, even bathrooms will require new protocols.
We spoke with four local real estate executives about how they’re planning for Maryland’s reopening. Below are their stories.
Toby Bozzuto, president and CEO, The Bozzuto Group
Toby Bozzuto likes to look at the big picture when trying to sort out the Covid-19 pandemic and its impact.
“I am incredibly confident that the human spirit will prevail,” says Bozzuto, CEO of the Bozzuto Group. “This will ultimately end, and my company will use this time to adapt and become stronger, smarter and better.”
The past six weeks under the novel coronavirus crisis have created a push-and-pull effect on the large Greenbelt developer with 70,000 units in its management portfolio. Bozzuto has been focused on closely monitoring the needs of its tenants in dozens of upscale multi-family properties, while also overseeing several large expansions.
One project is the development of the 45,000-square-foot Whole Foods market at Towson Row now underway. Another is the $200 million Chevy Chase Lake development in Montgomery County that will hold 470 apartments, 65 condominiums and 100,000 square feet of retail. Then there’s the $140 million project just south of the University of Maryland campus that will add 400 luxury apartments and more retail to the College Park landscape.
Bozzuto and his team have constantly been in touch with their tenants in the 14,000 units they manage in Baltimore who may be struggling because of layoffs or work furloughs. May rent payments remained uncertain, he said, even though April rents dropped only 3%.
Another facet has been the use of virtual tours of apartments to attract new tenants, even though amenities such as infinity pools, grilling stations and plush common spaces are indefinitely closed at Bozzuto’s upscale properties, including Liberty Harbor East, Anthem House, 1305 Dock St. and Luminary at One Light.
He considers his apartments “a sanctuary” for residents best defined by Bozzuto’s focus on customer service. But ultimately, the future under Covid-19 is a two-way street.
“It’s our job to take care of our residents as best we can while also running the building as well as we can,” he said. “We have to pay real estate insurance, taxes, our maintenance staff and managers.
“We’re in choppy waters right now, the entire world is, but it’s important to keep your eye focused on the ridge line ahead.”
Scott Dorsey, chairman and CEO, Merritt Properties
Scott Dorsey has been searching for an elusive balance for the Merritt Cos. in the last couple months.
The company’s CEO made the painful move to lay off 800 at Merritt Clubs on April 1 after the upscale fitness centers locked their doors due to the novel coronavirus. On the other hand, he continued to oversee construction at several Merritt projects in Aberdeen, Owings Mills and Arbutus, as well as a company expansion into the Research Triangle in North Carolina.
“We’re just happy those projects are continuing and we’ve been able to keep the economy open even at a much-reduced level,” Dorsey says. “It’s still a whole lot better than nothing.”
A nearly six-decade career has brought many lessons, he said, most of them forged with his friend, the late Leroy Merritt, who founded the company that today has $1.8 billion in investments. Dorsey says it would have been difficult to forecast how to get through the personal and economic tsunami brought on by Covid-19, but he is channeling Merritt’s words of wisdom to try and do so.
“One thing LeRoy and I learned growing up is how important it is that we pay our contractors and suppliers,” Dorsey said. “And we’ve made commitments to various charitable folks like the House of Ruth and the Maryland Food Bank, and if there is a time that they depend on it, it’s now.”
About 80% of tenants paid April rent at Merritt properties, but future collections remain uncertain.
“The restaurant tenants, the pain they’re feeling is enormous,” he said. “We’re asking, ‘what is your situation?’ We’re working with them to make sure they are doing everything they can to get through this.”
Dorsey, 69, said his children nag him to stay at home and socially distance himself, which is not easy. He added he often flips his sharp business focus to a more philosophic outlook trying to figure it all out.
“I’ve learned more about epidemiology now than I ever thought I would. It’s unprecedented,” he said. “I don’t know know anybody that understood the extent to which we were vulnerable, and most people’s reaction was ‘are you kidding me?’ There’s going to be a sharper recovery in many sectors, but also pain in others. I’ve never seen anything like this.”
Aaron Tomarchio, senior vice president of administration and corporate affairs, Tradepoint Atlantic
As Covid-19 pounded the economy in March and April, one development in Baltimore County soldiered on.
The 3,300-acre redo of the former Sparrows Point steel mill by Tradepoint Atlantic remained steady, says Aaron Tomarchio, senior vice president for the developer that has 75 employees. The project is on track to emerge as the region’s success story amid mounting economic ruin from the pandemic.
Tomarchio says development there is continuing at a fast pace, as is hiring, manufacturing and deal making.
FedEx Ground runs a steady stream of delivery trips out of its huge warehouse daily. A Royal Farms is on track to open this year. Amazon recently announced a second fulfillment center spanning 1.4 million square feet with 500 new jobs.
“The site has been humming with commerce and activity,” Tomarchio said. “I will say Tradepoint is reliably consistent, and that’s been our approach. What we’re seeing is reflective of that.”
Activity at the industrial hub near Dundalk is so strong that the MTA has increased bus service there over the past couple months while slowing or suspending service for other lines. Warehouses and work sites are also being sanitized more frequently after some workers tested positive for Covid-19.
The team behind Tradepoint has learned lessons from the pandemic, including the need to further refine industrial supply chains. That includes sharpening how retailers Amazon, Home Depot, Floor & Decor, Under Armour and Gotham Greens receive and dispatch goods as online orders spike. The full-time workforce of 8,000 at Tradepoint will expand to accommodate that.
“You’ll find other companies looking to see how they can break into the direct delivery service now,” he said. “Folks are going to re-evaluate where the weaknesses are in the supply chains and where to fix them. And that may mean additional investments in other facilities. We have all relied on e-commerce a lot more than we ever have and that trend may continue.
What will the next 12 months look like at Tradepoint?
“We are planning for the future and doing a lot of site prep for the potential market that can come out of this,” he said. “The industrial market continues to be resilient.”
Brian Gibbons, chairman of the board and CEO, Greenberg Gibbons
Brian Gibbons rallied his management team last month to dig into the challenges facing each of his 500 retail tenants.
The effort led to a comprehensive daily log used to monitor revenue or, in the case of closed stores, ways to help them restart and survive once the novel coronavirus crisis winds down.
“Our priority is working with our tenants,” said Gibbons, CEO of Greenberg Gibbons based in Owings Mills. “We have been working at keeping people open and operating at the highest level as possible.”
The company owns and manages 5.5 million square feet of upscale mixed-use development in Maryland. Most properties are anchored by large grocery chains like Wegmans, Trader Joe’s and Harris Teeter, but 50% of the firm’s smaller tenants were not able to make rent in April. It was a stark figure that Gibbons said he expects to repeat this month.
Making it work from there will require his management and leasing team to flood the zone with clipboards and spreadsheets to get the best grip on what help the tenants need to survive and reopen.
“We know every single situation with each tenant. It changes every day, and we have a grasp on how they are and what the cash flow for each tenant is,” he said. “We have provided all tenants resources and links for federal and state grants and we’re trying to help them along with those. And that’s for a total of 500 leases.
“The most challenging thing is the uncertainty. We’re thinking — and hoping. It’s evolving.”
Gibbons’ developments include Hunt Valley Towne Centre, The Shops at Kenilworth, Waugh Chapel Towne Centre, Annapolis Towne Centre and Foundry Row, among other company sites.
A funding partnership with the $200 billion California State Teachers Retirement System, or CalSTRS, has enhanced the company’s stability during the pandemic. The support has helped move Greenberg Gibbons’ $350 million Towson Row project forward as work on a Whole Foods anchor there is underway this month. The project is on schedule to open next August.
“If there’s a silver lining, I’m really proud of our employees,” Gibbons said. “In a certain way, you become closer with your tenants and you want to help them and recognize we’re in it together.”