Terry Brown, CEO of Edens & Avant
April 22, 2009
LowcountryBizSC:
What is your core business?
Terry Brown:
We are a national shopping center company with a focus on large urban markets along the Eastern Seaboard.
LowcountryBizSC:
What is the business model? Do you build shopping centers or do you buy them?
Terry Brown:
Both – we acquire and develop shopping centers in strategic locations. Locally, for example, we own Trenholm Plaza where we recently completed phase one of a complete redevelopment. We also own properties in major markets such as Boston, Washington, D.C., Atlanta and Miami. We lease and manage all of our own properties.
LowcountryBizSC:
How much has the company grown its assets since it started?
Terry Brown:
Joe Edens started this company back in 1966 and built it from the ground up. In 1997, we had $275 million in neighborhood centers, In the last 10 years we have grown from a Southeast operator to a significant owner and developer from Boston to Miami through acquisition and development. Today we have over $3 Billion in assets.
LowcountryBizSC:
How many employees do you have?
Terry Brown:
We have around 300 employees. We are very proud to be headquartered right here in Columbia, South Carolina. About half of our employees are located here, with the remaining half in our offices in Boston, Washington, D.C., Atlanta and Miami.
LowcountryBizSC:
What is your background in the business and how did you get to the position of running this company?
Terry Brown:
I grew up in a small town in north Georgia and attended to the University of Georgia on an Army ROTC scholarship. I was in the Army for a few years before joining Arthur Andersen on the consulting side. At the time of Andersen’s demise, I was CEO of Andersen Corporate Finance, which was the their investment banking division in the U.S.
I started working with Edens & Avant in 1993 to help develop and raise capital for their growth strategy.
I had thought from 1997 on about the possibility of joining Edens & Avant at some point, but I was a young partner at Andersen with an exciting job that offered me the opportunity to work with interesting clients on interesting transactions around the world. At the end of 2001, Joe Edens approached me about joining the Company to succeed him as Chief Executive Officer. Personally, I had become tired of the endless travel and the toll that it was taking on my family. What was exhilarating at age 30 had become a lot less appealing at age 40. The timing worked out. About that time it became clear that Andersen would not survive the Enron crisis.
I always loved being in Columbia and felt comfortable moving here. I had a special relationship with Joe and felt somewhat personally responsible for Edens & Avant’s business strategy, so I decided to make the move. Columbia has been a great place in which to do business and also to raise our three sons.
LowcountryBizSC:
How did you grow so fast after 1997?
Terry Brown:
In 1997, we had 75 shopping centers mostly in South Carolina, and a few in North Carolina and Tennessee with a value of $275 million. To execute our growth strategy, the company accessed institutional investors to acquire assets and move into urban markets.
The first large institutional investor to fund into the company was the State of Michigan Retirement System. With this backing, between 1997 and 2000, Edens & Avant bought over 50 shopping centers and grew by over a $1 Billion in assets. We invested in a $300 Million portfolio in New England and also bought up large shopping centers in other major Mid-Atlantic markets. In 2000, we started accelerating our asset accumulation by taking on an additional pair of sophisticated institutional investors, the New York State Teachers’ Retirement System and the JP Morgan Strategic Fund. Each of these investors has more than half a billion dollars invested in the equity of our company today.
LowcountryBizSC:
What strategic initiative did you take on as you became CEO in 2002?
Terry Brown:
When I came on board as CEO, we started a process of evaluating and deciding on the kind of a company that we wanted to become. Our strategic shift was to move aggressively into larger urban markets with higher levels of average household income and higher population densities. We felt that these assets would better hold their value over time and provide a greater rate of return for our investors. We opened offices and assembled business units in Boston, Washington and South Florida.
We divested our holdings in small markets selling off over $1Billlion worth of shopping centers during a four year time period. Of the 75 shopping centers that we owned in 1997, today we own just one – Trenholm Plaza here in Columbia.
We grew to more than $3 Billion in assets somewhat evenly divided between the Northeast, the Mid Atlantic and the Southeast. We own some great shopping centers such as the Lenox Marketplace, across from Phipps Plaza in Atlanta and South Bay Shopping Center in Boston In August of last year, we bought a really phenomenal shopping center at 5th and K Street in Washington, in close proximity to the Capitol.
One of the first moves I made as CEO was to commit to attracting and developing the talent that we needed to execute our growth strategy. We started actively recruiting MBA graduates from places such as the Real Estate Schools in Chapel Hill, Virginia, Wharton, and Harvard who would want to work in these large urban areas. The average age of our management team is 43 years old. If you polled our peers, investment bankers and others around the country you would hear that we have assembled one of the strongest and most respected teams in our industry.
LowcountryBizSC:
How do you maintain your culture through such rapid growth?
Terry Brown:
We have shifted to a performance-oriented culture, but still retain aspects that people love about working here. The family-oriented environment that is prevalent here is part of Joe Edens’ strong legacy
LowcountryBizSC:
What projects are you most proud of here locally?
Terry Brown:
I would rank our recent renovation of Trenholm Plaza as one of our top projects anywhere. Our goal here was to restore the center’s original allure. We focused on creating a pedestrian orientation by adding landscaping, new walkways, water features, and teak benches, for example. We added lighting fixtures from Charleston, mahogany door fronts in some places and brought in new retailers. It is a huge draw for the community.
LowcountryBizSC:
What challenges do you face after the downturn?
Terry Brown:
The biggest challenge for me as a CEO is finding the best way to continue to find opportunities for the talent that we have here or they will go elsewhere.
How do we keep those people together? Do we want to grow geographically? Do we want to stay a well-managed $3 Billion company or become a much larger company? Do we want to do public?
LowcountryBizSC:
Have you considered going public?
Terry Brown:
If we needed the capital, and if capital could be accessed in the public markets more efficiently and cost advantaged than in the private equity market or the debt markets, then we would consider it. Right now, we operate largely as a public company.
That said, we have no real desire at this time to be publicly traded. We believe being a private company fits better into our strategy of making long-term real estate decisions.
LowcountryBizSC:
Outline the future of the changing business of retail shopping.
Terry Brown:
The period between 2002 and 2006/2007 constituted one of the biggest bubble economies in recent memory.
Demographically, the baby boomers will work their way through the system, the Generation Xers will take over, and there will be a resulting lower level of demand. We see a return to higher savings rates for consumers, therefore less spending. And consumers will also come out of this recession with a relatively higher focus on value and be more demanding and discerning in their spending habits. We do not expect to see a return to 2005, 2006, or 2007 spending levels. We expect things to moderate and improve late in 2009 and 2010.
LowcountryBizSC:
How have you been affected by the downturn?
Terry Brown:
We have been aggressive in our real estate strategy, but match that with a very conservative balance sheet. We have been relatively unaffected by the financial crisis because we operate at a low level of 30-35% debt to total capitalization. The norm in the industry is typically around 60-70%, so we feel that we are in a good financial position. We are not over leveraged and we have very little debt coming due over the next couple of years.
We still have equity commitments from our investors and available lines of credit from our lenders. We have capital to take advantage of the marketplace opportunities in the coming years.
In addition, we have a lot of stability in our centers. 90% of the shopping centers that we own are anchored by a grocery store which helps to draw people to the surrounding stores. Grocers are doing well right now because people are eating at home more often. We were fortunate also in that we had just 2 Circuit Cities and 2 Linens and Things in our portfolio.
LowcountryBizSC:
Are there good deals out there?
Terry Brown:
We believe distressed buying opportunities will be coming in 6-12 months. It’s hard to convince ourselves that today’s attractive deals won’t be even better in the coming months. As a result, we are still sitting tight for now.
LowcountryBizSC:
Why are you moving into the new building at the corner of Main and Gervais? What advantages will this move bring?
Terry Brown:
As one of the preeminent real estate companies in South Carolina, we want to be in a preeminent location and building. We also don’t feel our current office space is reflective of our culture. 80% of our people in this office space work in private offices so it’s not very conducive to interaction and collaboration.
We feel like our new building is a great addition to the architecture and centers of business activity already in the immediate vicinity of Main & Gervais. When viewed along with the state capitol, the Meridian building and the First Citizens building, we believe this area will be recognized across the region as an anchor for the Central Business District.
LowcountryBizSC:
What is your ownership structure?
Terry Brown:
The majority of our company – about 90% – is owned by our large institutional investors – State of Michigan Retirement System, New York State Teachers’ Retirement System and JPMorgan. The balance of the company is owned by management.
LowcountryBizSC:
How would you describe the company culture?
Terry Brown:
When we talk about corporate culture, there are eight corporate values that we talk about:
Intellect. Real estate is a capital-intensive industry that is dominated by large firms and a premium is put on high level business decisions using complex methods of valuation. We need smart people.
Connectivity This refers to how we connect with each other internally, with our customers, and how the shopping centers connect to their local communities.
Innovation Not a word typically associated with our industry, but it is a critical component of how we envision shopping centers of the future. We are also innovative in the way we train our employees.
Stewardship We are all entrusted with protecting the great legacy of Joe Edens and the reputation of the company. We also have a stewardship role to our investors.
Passion Skill and intellect without passion makes for a very ineffective employee in any industry.
Integrity Do what you say you are going to do. We take a long-term view of relationships and value creation.
Execution & Accountability
LowcountryBizSC:
What is your leadership style?
Terry Brown:
Despite having a military background, I am not a command and control type of leader. I look to create the kind of work environment where people are empowered where everybody has autonomy, everyone feels accountable and feels that their interests are aligned
LowcountryBizSC:
What books would you recommend?
Terry Brown:
I spend a lot of time reading books about business, but the best book I have read for pleasure recently is Serena by Ron Rash. He is a fabulous regional writer, and I always await his new releases eagerly.
By Alan Cooper, Publisher, LowcountryBizSC
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