Risky - but rewarding - business for MIE Properties

Daily Record, The (Baltimore), Apr 9, 2004 by Ezra Fieser

The smell of cinnamon wafts from behind the folding door of a loading dock a few miles outside of Baltimore in a business park near a busy highway.

Behind the door, Key Wagner is surrounded by white bags filled with dog treats. Her apple cinnamon flavor - one of three varieties of the natural treat she's been baking for eight years - has just come out of the oven.

You can eat them. They are made from human-grade products, Wagner said.

Wagner sends about 300 pounds worth of the treats to pet and grocery stores in the mid-Atlantic region.

Despite the original flavors, bright logo and professional packaging, the Baltimore Dog Bakery is every bit a small business. Wagner has just two part-time co-workers that help bake the biscuits when orders are piling up. And sales rarely top $75,000 per year.

Yet Wagner is exactly the type of company that is pushing Baltimore-based MIE Properties Inc.'s construction plans back to pre- recession levels.

For us to be putting one million square feet up this year is a very good sign for the economy, said Gerard Jerry Wit, vice president of MIE. We're seeing the demand. We really have very few soft spots right now.

Because of the presence of companies like Baltimore Dog Bakery, MIE - the state's largest owner of flex space, a combination of office and small warehouse - is one of the best indicators of the health of Maryland's economy.

I think MIE is a great barometer of the Maryland economy, because we're largely in Maryland, Wit said.

In fact, a recently-completed study found that a 360,000-square- foot MIE flex park has an economic impact of $150 million annually, including more than 1,600 jobs and $62 million in wages.

This style of office space attracts entrepreneurial-driven companies because it can be completely customized to match their exact needs, is more affordable than traditional office space and can be easily downsized or expanded, said Anirban Basu, CEO of Optimal Solutions Group, the Baltimore-based research firm that conducted the study.

Wagner, who moved to the Caton Research Center last year, occupies 1,465 square feet, about the least amount of space MIE offers. But she only pays about $1,000 per month.

For a startup business to get space that's only $1,000 a month, that's pretty affordable. In that sense we're like an incubator, Wit said.

Although leasing to small companies, many of which have an unproven business strategy, is risky, it can also be rewarding.

If we think they have a reasonable chance of making it, then we never say 'no,' said Robert C. Becker, MIE vice president in tenant improvements and space planning. Often times, they're the lowest risk tenants we have because they require very little in the way of improvements to the space.

But with small businesses - those occupying around 1,500 square feet - making up 10 percent of its tenant base, the privately-held MIE has a lot riding on the little guy.

Nine times out of 10 they outgrow their space, Becker said.

One of MIE's larger flex users, Mid Atlantic Health Care, started in 1,500 square feet. It now occupies 18,000 square feet.

Sometimes taking the risk gets you rewarded, Wit said.

In fact, 20 percent of MIE's leases are inked by current tenants. And growing companies are paramount to any economy.

With an increase in demand from prospective and current tenants, MIE is launching a construction plan that calls for building double the amount of product it constructed last year.

Every 20 days, we're breaking ground, Wit said. It's roughly 21 new buildings.

The bulk of the new construction will come in the Baltimore area. Eight office projects are planned for Anne Arundel County. Baltimore County will get seven. Two will be constructed in Prince George's County. Northern Virginia and Frederick and Howard counties will get one each.

By year's end, the company plans to have 11 million square feet of commercial real estate under ownership.