Trammell Crow, Faison Back at the Closing Table

Bob Sulentic, Trammell Crow's president and CEO, tells GlobeSt.com that the components' return to Faison is a result of segment deterioration and the firm's move away from national to focused local retail strategies. "The continuing consolidation of regional mall ownership into the hands of REITs, which tend to self-manage, coupled with declining forecasts for the merchant build business, made this a prudent decision on our part," he said.

Trammell Crow acquired the components in 1998 along with a majority of Faison's service business. The letter of intent calls for Trammell Crow to retain the net working capital in the businesses and carried interests in certain development projects. The $20.5-million acquisition-related write-offs as of Dec. 31, 2001 include $11.7 million for the two components headed back to Faison, which in turn will regain control of its retail asset base. In line with the decision, Henry Faison, owner and founder of Faison Enterprises, will be stepping down as an officer and employee of Trammell Crow, but will remain a member of the board of directors.

Sulentic describes the earnings statement as "disappointing." In all, $46.8 million of one-time charges hit in 2001, of which $6.5 million arose from severance and layoffs from more than year of reorganization. "In the absolute sense, our earnings declined this year a lot and we took substantial write-offs," he tells GlobeSt.com, "but I believe we made considerable progress in our business." The reorganization, for the most part, is complete and no additional charges are anticipated, he says. Going forward, growth for the coming year is projected at 20% to 25% earnings per share, aided by last year's streamlining. Sulentic says the company will operate "upon the assumption that current market circumstances are unchanged."

The earnings report also brought word that the e-commerce business is being folded into Trammell Crow's Global Services unit. "A year ago, we thought e-commerce was going to be a separate business, but it didn't turn out that way," Sulentic explains. The firm, he stresses, remains committed to the Octane Alliance and its purchasing and transactions platforms. E-commerce costs caused a $1.9-million write-down in 2001, the second consecutive year for a loss in that arena.

The hard-hitting economy leveled a blow to the Global Services unit, which reported revenues of $660.8 million for 2001, down from $670.4 million in 2000. Adjusted EBIDTA and adjusted income before taxes for the segment were $57.2 million and $26.4 million, respectively, in comparison to $88.4 million and $61.9 million, respectively, for 2000. Development and investment revenues dropped to $109.7 million from $141.3 million in the prior year. That segment's adjusted 2001 EBITDA was $29 million and adjusted income before taxes, $16.2 million. In 2000, the unit's adjusted EBITDA was $54.9 million and adjusted income, $40.4 million. Sulentic, in the earnings statement, said the Global Services decline was greater than anticipated at the year's start.

For the full year, revenues overall were $770.4 million, a drop of $41.3 million from 2000. EBITDA, excluding non-recurring charges, totaled $84.2 million in comparison to 2000's $140.6 million. Factor in the charges and EBITDA dips to $36.8 million for last year. Net income came in at $23.2 million in 2001 versus $59.6 million for 2000. The blame is being laid squarely on the economic downturn, oversized cost structure, write-downs and restructuring charges.