By Megan Greenwell
Washington Post Staff Writer
Thursday, April 3, 2008
The developer of the St. Charles planned community plans a significant corporate restructuring, which could include selling the company and its 4,000 acres of landholdings.
In a report filed Friday with the Securities and Exchange Commission, American Community Properties Trust officials wrote that they are considering splitting the company into two or selling the entire operation. ACPT, Southern Maryland's biggest developer, has been owned by J. Michael Wilson and his family for 50 years.
"We need to split the company into two parts to make it more efficient," Wilson said in an interview Tuesday. "We want to create a vehicle for shareholders to make more money." Wilson succeeded his father, James, as chairman and chief executive.
A major change in the company's structure could shift control of 4.8 million square feet of commercial and industrial holdings and more than 2,000 apartment units in St. Charles, the massive planned community in southern Waldorf.
Created in 1968 and modeled on the planned community Columbia, St. Charles is now home to 35,000 people, nearly one-quarter of Charles County's population. ACPT plans to add enough housing over the next several years to accommodate twice the number of people now living in St. Charles.
"For many years, non-family shareholders have felt that the stock market does not fully value the company's assets," said Eric Von der Porten, manager of the San Carlos, Calif.-based Leeward Investments, which owns 5.4 percent of the total shares in ACPT. "This type of step seems very positive."
The struggling housing market has plagued ACPT over the past year. The company lost $500,000 in 2007 and was forced to suspend dividend payments to shareholders for the first quarter of this year. ACPT has not announced whether it will reinstate a dividend in the second quarter, which began this week.
In an SEC filing last July, ACPT reported a plan to take the company private by finding investors to buy the remaining stock shares not held by members of the Wilson family. But in last week's filing, a special committee of the company's board of trustees wrote that ACPT officials had talked to 80 potential investors without success.
"We had some interest, but not with anyone who had a satisfactory proposal," Wilson said Tuesday.
Wilson said company officials believe that ACPT's two distinct business interests -- rental residential and commercial properties, and home sales -- have limited its growth potential and may deter investors. Additionally, he said, the company's high tax liability is problematic for shareholders. As much as 55 percent of ACPT earnings is paid in taxes, Wilson said.
Restructuring the company would allow it to be designated a real estate investment trust, which would strictly limit or eliminate the corporate income tax that the company's rental arm pays.
"The goal is to make this a vehicle to acquire new business," Wilson said.
Shareholders said that the eight months between ACPT's SEC filings represented an unusually long time to consider options for restructuring. Last month, Thomas Kirchner, manager of the Washington-based Pennsylvania Avenue Event-Driven Fund, which owns stock in the company, wrote on his blog that the deteriorating housing market and ACPT's slow progress in evaluating potential steps might "spook many potential investors."
Last December, Von der Porten wrote a letter to ACPT urging the board of trustees to act quickly on its findings. He said that the costs of strategic planning, combined with the suspended dividend, have hurt loyal shareholders.
After last week's SEC filing, Von der Porten said he was pleased to see the company considering a wide range of options.
"There'd been no indication that they were willing to sell the whole company, but from a shareholder perspective, that's very positive," he said. "Because of the uncertainty of the long-term future of the company, if there's an investor out there who values these assets more highly, there's a good chance their offer will be considered."
Wilson pledged that his family would continue to play some role in ACPT "for the next 50 years, at least," but did not rule out the possibility of selling the company.
"As I've always said, except for my wife and my children, everything is for sale," he said.