By John Schaffner
“All businesses are being strained” in these economic times, says Lee Katz, managing partner of Sandy Springs-based turnaround firm Grisanti and Goldress. “Sales are getting weaker. The receivables are getting softer because their customers are having problems. Every business is being stressed.”
Katz, talking to Reporter Newspapers after speaking to some 100 business owners and consultants March 26 at an executive briefing on “Terrorism and the Economy”, said, “I see the next 18 to 24 months as being difficult.
“We are in a recession even though the Fed is in total denial,” he explained. “They are waiting for those two consecutive quarters of various ratios to officially say it is a recession. But all the people I talk to are worried about the recession. And, everybody is telling me—especially the real estate sector—this is an 18-month to two-year endurance.”Katz, spoke to the Vistage-sponsored CEO Summit in Alpharetta on the subject of “Profiting During an Economic Downturn and How to Avoid Hiring Guys Like Me,”
He said his feeling about running a company “is to run it mean and lean and take advantage during the recession to buy assets cheaper, buy companies cheaper, buy product lines cheaper so that you are positioned to come out to make a better return on your investment and more profit.”
Turning to the problems with real estate in this economic period, Katz said, “Obviously we are overbuilt. But which came first, overbuilding or the sub-prime lending market? I see more problems in commercial real estate speculation.
“There are going to be some more bank failures, especially the community banks,” Katz said. There are a lot of loans out there that were 85 to 90 percent loan to value situations to buy raw land. “What is happening is they are not income producing and those banks are starting to get defaults on interest payments.”
Katz explained, “If you go down Peachtree Street, they are building all those condominiums. I don’t have a clue where all those people are going to come from. But from a condominium sales standpoint, Atlanta has always been wonderful about new condominiums. New condominiums sell in Atlanta. The problem is that re-sales don’t. At some point, that has to balance out.”
Katz commented that Buckhead has been very resilient. “It just keeps morphing into something else. I think Buckhead is going to have problems. But in the long run, Buckhead will be just fine.”
CEO Summit attendee Bruce Fike of Sandy Springs is a business consultant who recently sold his business to retire, but finds himself right back into it. “I am a big believer that these kind of times are when you take stock,” Fike said. “I am extremely optimistic. We are going into an election year. They just dropped the interest rates. Everybody thinks the world is going to come to an end. That is when my eyes get big and I say okay, full charge.
“When everybody is in full retreat is when I get into it,” he states
He said he thinks economic times like this “differentiates people who run their businesses from people whose business runs them. I would say 80 percent of the people that go out of business don’t run it. It runs them. If you are truly running your business you are not so emotional about it. You can truly look up and see where things are going.”
Another attendee at the summit was Bill Holden, president of the Sandy Springs Community Bank, who proclaimed, “it is going to be a challenging year, although I have seen some bright spots.”
He said he has seen some pickup in the housing market lately. “I think the only thing I have seen in Sandy Springs is maybe a little bit of a slowdown. Houses are still selling just not as fast.”
He said his bank is not seeing any problems with the commercial loans it has in Sandy Springs.
“There certainly is a lot of uncertainty out there and a lot of banks that have some problem loans,” Holden said. “I think there will be some mergers and consolidations of banks, which may help strengthen the banks.”
Robert Bradshaw, who owns The Peach shopping center on Peachtree Road in Buckhead, said this year “will be a key year for two major anchors, Barnes & Noble and Linens ‘n Things. Both have leases coming to an end and with options to renew, ” he explained. “That will be an indication of their confidence in the site and in Buckhead.”
Bradshaw said he has not had any tenants come to him and say things are a little tight can we re-negotiate the lease. “I would say the trend in my experience recently is that existing tenants want more time, especially with the development nearby of the Streets of Buckhead,” he said. “They see that will change the entire landscape of Buckhead.”