Southwest Properties makes 'opportunistic' its watchword

Being able to react quickly to changing market conditions and take advantage of investment opportunities that present themselves is the goal of most real estate pros but, for Clifford Booth, CEO and president, and the other principals at Southwest Properties Group Inc. in Dallas, it is a business philosophy.

And it is one that is paying off in terms of growth and success for the firm, which boasts the acquisition of some 21 properties during the last three years representing more than 1 million sq. ft. in downtown Big D, as well as development and renovation of a substantial array of properties in several other cities and states.

The entrepreneurial company is also involved in projects in several other cities, including Atlanta; Orlando, Fla.; Jacksonville, Fla.; Tulsa, Okla.; San Antonio; Houston; Denver; Colorado Springs, Colo.; Los Angeles; Tucson, Ariz.; Corpus Christi, Texas; and Portland, Maine.

Founded in 1981, Southwest Properties Group was originally created by Jim Anderson in partnership with the Dallas landscape architecture firm Myrick-Newman-Dahlberg (MND).

"I actually joined the company in 1984," says Booth. "Jim Anderson had bought out MND, and I bought one-half of the company from him. And a couple of years later, I ended up buying him out."

Booth witnessed the roller coaster ride in Dallas and the Southwest first hand, having been in Dallas since 1979. "l have been in the real estate business since that time but, for the first few years, was also involved in an antique and art gallery, which was my family business. Since the 1983-1984 time period, I have devoted all of my energies to real estate."

The firm Booth grew from those beginnings remains deliberately lean in terms of staff but does have a separate construction company, Forum Construction, headed by Larry Wallace, which provides construction services for Southwest Properties' projects.

While the parent firm is involved in a variety of activities, it outsources many of the day-to-day project responsibilities. Except construction, "everything else, of late, we subcontract out," says Booth. "We used to do all of our own management and leasing, but we no longer do."

"We own real estate in about a dozen cities, mostly in the southern half of the United States, and we never set up a management or leasing office in any of these other locations," Booth says.

"In a city like Atlanta, for example, we grew the portfolio because that was a city where we wanted to be. So, the fact that we were using third-party services in other cities proved to be a good experience for us. Earlier this year," he says, "we decided to do that same thing in Dallas. We own the Village on the Parkway, the old Sakowitz Village, and the Weitzman Group manages and leases that property for us."

Booth says that Southwest Properties does not find it practical to add staff to micro-manage its assets. "Our philosophy is that we are investors who own and operate all kinds of real estate, and we don't feel it is practical for us to hire the best people to do whatever is necessary to maximize the value of each one of those assets. So we go out and outsource the best firms for any particular asset on a case-by-case basis."

But, Southwest Properties does not give up overall control of its assets even to the firms with which it outsources. "Since we are in the real estate business and that is our full-time activity, we are not a `passive investor.' We sign the leases, we talk to people, we approve the budgets, we negotiate big leases and plan capital improvements."

The company does not limit itself as to a specific property type or geographic location. "We are pretty diverse in our product type. We like to think of ourselves as `opportunistic,'" says Booth, "and I know that's a word that's thrown around quite a bit."

Expanding on the "opportunistic" concept, Booth says, "In the early part of the '90s, we were buying all sorts of things. We bought apartments, office buildings, shopping centers, and we also bought some industrial."

"We started to see that industrial was where we were identifying the best buying opportunities, and they were the properties on which we were achieving the best returns." The firm, he says, set out on a deliberate program to acquire multitenant, light industrial, as opposed to big-box industrial.

This type of product, Booth says, "is what took us to most of those other cities where we bought about 7 million sq. ft. of multitenant, light industrial product."

Southwest Properties Group bought this type of property for many years. Then, "about a year and a half ago, we started seeing fewer opportunities to buy that type of product," says Booth.

"All of a sudden," he says, "the REITs and others started to be our competitors."

The result was that "we were not as interested in buying anymore, and we became a seller at that point," Booth says. "We started selling a lot of that product, about one-half of the industrial holdings. We were buying light industrial when the institutions weren't, because they were not there yet. But we ended up buying a lot of small acquisitions, leasing them out, cleaning them up and selling them on a portfolio basis to the institutions. That was a perfect scenario for us."

The firm then started looking at other types of properties. "What we found was retail product," says Booth. "We bought a shopping center in Tulsa called Village of Woodland Hills across from Woodland Hills Mall. That was about 220,000 sq. ft. and was 45% leased and obviously under-utilized. It is now over 80% leased about a year later."

Booth reports a similar situation with the Village on the Parkway project in north Dallas. "The location and amount of land are ideal for future development. We can see the possibilities of a master-planned development, complementing the retail with hotel and office use."

And the firm is doing similar things in other cities. "In Los Angeles, for example, we have a building in the downtown area which we are looking to convert to residential." Pointing to the firm's downtown Dallas acquisitions, Booth says that these, too, fit the order of creating value. "We now own 21 buildings in downtown Dallas. A lot of these, of course, are small, but they are nonetheless acquisitions. We're in the pre-development and pre-leasing stage on most of these properties right now."

The company has a whole block in Dallas' "Deep Ellum" area and a series of buildings in the West End Historical District as well as several on Main Street.

"We've been working on these for the last year-and-a-half or so," says Booth. "The Katy Building on Commerce Street was our first acquisition about six years ago in 1990."

Regarding the historic buildings in their portfolio, Booth says, "an important financial consideration for those deals is to obtain the historic tax credits. There are certain compliance issues we need to adhere to in order to be able to benefit from those tax credits."

"We think that doing all of these things is good business," Booth says, "and that it will attract the right kind of tenant and consumers to our product."

At the same time all of this is going on, the firm is also involved in land investment and development north of Dallas.

"Our diverse portfolio allows us to make investments, not only for today, but for the long-term growth of the cities in which we operate," says principal Randy Moses.

"Looking ahead, Booth is positive of the direction he wants the company to take, and "opportunistic" is the watchword.

"We were investing in multitenant, light industrial, and we saw that as opportunistic. We are buying downtown buildings because we see that as opportunistic. And we are developing now, as compared to investing before, because that is where we see the market going," Booth says. "We are positioning ourselves as a company through outsourcing, through the kind of staff that we have here, through the capital structure that we use, to be able to take advantage of where we see the market."

"l guess I see that as what I want to encourage us to continue to do and to, hopefully, identify niches," Booth says. "Because we're an entrepreneurial company and not an institution responsible to a board of directors, we can move quickly and act upon ideas in a quick way as we see fit. I think those are definite advantages in a business that's becoming institutionalized."

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