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Expanding into New Markets Responding to growth opportunities across the country, St. John Properties has created an innovative Partner-in-Training program that educates qualified individuals interested in development on every aspect of commercial real estate development. The program takes four years to complete, and trainees are mentored in every area of commercial development, including site selection, acquisition, development, design, construction, leasing, marketing and property management, according to the company. In addition to this rigorous training, trainees must obtain a Master of Business Administration or a Master of Science in Real Estate during the four-year period. On successful completion of the program, graduates are sent to a region of the country where St. John Properties sees major growth opportunities. Program participants have come from both inside and outside the company. Four individuals have completed the program, and three are currently enrolled. Financial Consistency and Stability Although St. John Properties has never defaulted on a loan in its 47-year history, it has been tested time and again through numerous downturns in real estate and economic cycles. Three tough lessons the company learned in the 1980s and 1990s, however, helped it to navigate the recession of 2008 successfully and put it on its cur- rent growth path, according to St. John Properties president Lawrence Maykrantz. The toughest lesson the company learned in the recession of 1991 was never to use lines of credit to finance real estate. Maykrantz says that banks began issuing lines of credit to real estate companies in the early 1980s. Three banks furnished St. John Properties with lines of credit totaling $90 million. When the recession of 1991 hit, the three banks consolidated into one; that institution told St. John Properties that it did not want anyone to have a $90 million line of credit — so the company needed to pay the money back. St. John Properties paid the bank $30 million in the first year and the remainder in the second year, but vowed it would never again use a line of credit in its business.

A second important lesson was never to be “liquidity poor,” especially going into a recession. After struggles in the 1980s and 1990s during recessionary periods, the company resolved to create a giant war chest for the bad times. Over the next decade, it created a $100 million stockpile at the corporate level and a $50 million reserve for capital improvements at the property level. When the recession of 2008 took hold and banks were not lending, St. John Properties had its war chest. With this cash on hand, the company was also able to make some strategic real estate acquisitions, which positioned it well for the years after the recession. Spacing out loan maturities so that few loans come due at one time was another lesson from previous recessions. “We have 150 projects and 150 separate partnerships,” says Maykrantz. “Each project has its own independent source of financing. When we put a loan on a project, we look at all loan maturities going out. Traditionally, with our type of projects, banks or life companies lend at terms of anywhere from 10 to 20 years, with 25-year amortizations. Accordingly, we methodically look at each and every loan and position its maturity.” Looking Ahead at Commercial Real Estate One of St. John’s key tasks at the company is to continually look ahead at what may be coming in the commercial real estate industry. Currently, the company is watching two potential areas of change. The first is the fevered pitch of data center development. St. John says that he is astounded by the number of data centers being constructed in Northern Virginia. He questions the sustainability of ever-increasing land valuations and the long-term utility of many of the purpose-built data center buildings. “Land prices have skyrocketed at a rate that I have never encountered in my life,” he explains. “We don’t know what technological advances are just around the corner with regard to data storage and computing. Things are evolving so quickly that storage technology could

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St. John’s Corporate Office

410.859.1483 410.859.1581 FAX P.O.Box 281 Linthicum, Maryland 21090 . .1581 FAX . . i t i , l ll t i i .



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