Taking chances in tough times

By Dick Hughes  

APRIL 26, 2012 12:26 p.m. (0)

When Windsor Aughtry Co. moves into Main @ Broad, it will nearly complete occupancy of the Greenville hotel, office and retail complex the company planned in good times but started and finished when the economy was in bad shape, costs were high and the future uncertain.

Those were not the times when most developers were willing or able to ride out a $45-million construction project, least of all one in a downtown urban center.

Adding to the nervousness was the fact that the centerpiece 135-room Courtyard Marriott would be in competition with the company’s own 115-room Hampton Inn & Suites at RiverPlace.

In an interview, Bo Aughtry, founder and managing director, talked about those risky times, how the company got through them better than many did and what it sees on the horizon.

In the latter regard, the company has “for some time been sniffing around” Greenville for opportunities to build apartments and has in mind “a larger project that would add a meaningful number of units to the downtown market.”

But nothing is imminent, he said. “We are working on a couple of locations, but we’ve been chasing this for three years. That’s the nature of the commercial development business.”

On the hotel side, the company is “working on an urban hotel in Western Virginia.”

After coming out of 2009, “the worst year we had,” Main @ Broad opened in May 2010 when activity, while picking up, still was slow, Aughtry said.

“When we started, we saw an upward trend, but when construction was under way and when we opened I was very concerned about the impact on the Hampton. But the horse was out of the barn, and I had to ride it.”

“The project was a major expense, major, major,” Aughtry said. “We built that project, one could argue, at the worst economic time since the Great Depression. That project was priced out at the absolute peak of construction costs at the cusp of the downturn.”

Aughtry is satisfied Main @ Broad “is working, albeit not at levels we were accustomed to. The hotel is doing good, not great.” He said getting to 90 percent occupancy, including the company itself taking space, was fortunate given the short time it has had securing leases in a soft economy.

What helps, he said, is that “Greenville with its downtown vibrancy and panache has fared certainly better than most … (and) was never a hot market so it didn’t have as far to fall” in the downturn.

On July 10, Aughtry is scheduled to move his 22-employee company from the Green Point office park – where it has been for 25 years – into 7,500 square feet on the fifth floor of the six-story Main @ Broad.

The city sold the lot for the building – named for the intersection of Main and Broad streets next to City Hall and across from the Peace Center – to Aughtry for $3 million and retained a voice in how it was to be developed.

Aughtry said financing with Carolina First (now TD Bank) was “nip and tuck,” closing in early 2008 as “the river headed toward the waterfall” to drown credit access across the country.

What made the project possible, he said, was $27.5 million in New Market Tax Credits from Carolina First and Greenville New Markets Opportunity.  The federal tax credits, which banks take over a seven-year period, typically reduce construction costs by about 20 percent.

During Main @ Broad’s construction period, the company’s “earnings were depressed” by the housing collapse. Its housing business took “a huge hit” with sales off 55 percent and margins down 90 percent, Aughtry said.

Business at the company’s hotels (through separate entities, the company had seven) was off just 8.5 percent, unlike some “friends who had hotels that were down 45 percent,” he said. “We never had a hotel that didn’t experience positive cash flow.”

As difficult as those times were, Aughtry said the company was able to ride out the recession and emerge “healthy today” because Drew Norwood, his partner who runs the residential side, and Russell Smart, chief financial officer, were instrumental in keeping ambitions in check and debt low.

“We were fortunate. There were things we didn’t do in the prior 10 years that might have given us the opportunity to expand to greater earnings, but also would have … required us to take on more debt.”

Main @ Broad was the fourth commercial project Windsor Aughtry has built in downtown Greenville. The Hampton and Marriott hotels are just two of 14 hotels it has built and owned across the country since 1993.

Six have been sold.  In addition to the Hampton and Marriott in Greenville, the company’s entities own Hampton Inns in Columbia, Johnson City, Tenn., and Tallahassee and Gainesville, Fla., and a Hilton in Columbia. A Hampton Inn & Suites is near completion in downtown Baton Rouge, La.

The hotels are managed by Hospitality America Inc. of Nashville, Tenn. Windsor Aughtry receives a percentage of revenues from the franchising hotel chains. The company is designated as a “preferred developer” for Hilton, which owns the Hampton Inns.

Most of the commercial developments, including the hotels, are done as separate single-asset limited liability companies in which “almost without exception, 50 percent or more of the capital for whatever the endeavor is comes from individuals associated with the company.”

For example, Aughtry explained, Broad @ Main is owned by a separate LLC.  Windsor Aughtry “developed the project for a fee for that entity.”  Ownership is separate from Windsor Aughtry, although Aughtry, Norwood and Smart are principals and managing partners.

The company was formed in 1988 with the merger of Aughtry’s commercial development and brokerage business and Windsor’s residential business.

Trim and fit at 62, Aughtry is an avid outdoorsman. He moved to Greenville, his mother’s hometown, from Columbia when he was seven and attended public schools. After graduating from the Citadel, he moved back to Greenville “literally not knowing what I wanted to do.”

At a friend’s suggestion, he started selling real estate on commission, and he credits mentoring by Greenville Realtor Tommy Huguenin with teaching him the business.

“I am very fortunate in a lot of ways,” Aughtry said. “I still love my business, and it still stimulates me. You’ve got construction, finance, so many aspects of business within that spectrum.”

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