Loan Restructuring Reflects Thomas Strategy

While Thomas Properties has always been careful in managing its capital, "We are laser-focused on capital preservation and creation now," Thomas said. He pointed out that the company is deferring elective capital expenditures, reducing development activities, reducing capital required for new investment and pursuing other strategies that have overall reduced its cash burn rate.

The Thomas Properties CEO added that, despite its continuing effort to conserve capital, the company also continues to aggressively lease its properties, which will require tenant improvement expenditures and leasing commissions to which Thomas remains committed. "We will continue to make those capital expenditures without hesitation," he said. He also commented that, although the credit crunch and the economic meltdown continue, the company is hopeful that federal programs aimed at reviving the commercial real estate credit markets will bear fruit.

Despite the general slowing of development throughout the commercial real estate industry, Thomas Properties has landed an assignment as a fee developer in one of the few major office projects to be announced in recent months. The project is a $1 billion mixed-use development by Korean Air, which has named Thomas as fee developer for the project, which is designed as a redevelopment plan for the Wilshire Grand Hotel and office site in Downtown Los Angeles.

Commenting on the Korean Air assignment, Thomas said, "We think that now is the time to capitalize on our development and entitlement skills; as a result of this relationship, we will be responsible for redesigning a nearly two-million square foot development in the heart of the city. We believe that there will be an opportunity to develop a major new office building in downtown Los Angeles in the next three to five years and this positions us to participate in developing the best site to take advantage of that opportunity."

Thomas has trimmed its overhead via layoffs, salary freezes and reducing bonuses, plus other cuts. The company also continues to keep its eye on the investment sales market and has a number of assets that are ready to be marketed, according to Thomas. He said that the company would pursue those deals "as the market opportunities permit."

The Thomas properties chief noted that, in today's environment, "Debt maturities are very much on everyone's mind right now." Thomas Properties intends to exercise all of its extension options for debt that is maturing in 2009, with the exception of a $3.9 million unsecured loan that the company paid off at a substantial discount. In addition, it is working closely with all of its lenders to obtain new extensions as it exercises existing options.