Peak performance.

• Author: Noland, Terrance
• Position: Summit Properties Inc. - Company Profile

When he took Summit Properties public last year, Bill Paulsen reached one of his career goals. He hopes it's not all downhill from here.

From the day he got out of business school in 1971, Bill Paulsen nurtured a dream. "To build a company to a point where it's large enough to go public, to be listed on the New York Stock Exchange - for me, it's like making it to the NBA," says the CEO of Charlotte-based Summit Properties Inc.

"I'd rather do that than be president of the United States." Seriously? "Well, taking a company public was on my list of goals. Being president wasn't."

So when Summit, one of the Southeast's largest developers and operators of upscale apartments, made its initial public offering last year, it was a triumph for Paulsen, who had taken $50,000 of start-up capital in 1981 and turned it into a $58 million business that owns 45 complexes. His formula? Cutting-edge designs and amenity packages that appealed to an emerging group of middle-aged renters, coupled with conservative financing that saved the company during the crash of the early '90s.

In its first year and a half as a public real-estate investment trust (REIT), Summit has performed well. It pushed net operating income at existing properties up 8.8% and posted a $14 million profit in 1994, bumped its dividend up 4 cents in March and bought a 13-complex portfolio from The Crosland Group in May, a move that solidified its presence in the Charlotte market.

Problem is, investors either haven't noticed or don't seem to care. Summit's stock has languished as a glut of REITs have hit the market. (REITs are public real-estate corporations that don't pay corporate income tax as long as they pass on 95% of net income to investors as dividends.) After a $19-per-share IPO, Summit's stock price had sagged to around $17 in late June.

To have realized a dream, only to see it turn into a bit of nightmare, has been frustrating for Paulsen, 49. "I check the price every day, and when it goes down for no reason I can figure, that's distressing."

Some analysts say the REIT industry needs time to shake out. "You have 32 multifamily REITs out there now kind of fighting for shelf space," says James Kammert of Atlanta-based Robinson-Humphrey Co., one of Summit's IPO underwriters. "Quite frankly, it puzzles me. We think the stock should be trading around $21 within 12 months." Louis Taylor of New York-based Prudential Securities Inc., another underwriter, agrees: "The management team is too strong, their markets are too good, and the properties are too well-designed not to ultimately get the stock price higher."

The challenge for Paulsen is to convince investors his is not just a run-of-the-mill REIT. It won't be easy. Threats of overbuilding in some Summit markets might be putting off investors. So might Summit's debt level, lowered to 42% with a second offering in May but still high among REITs. And interest-rate hikes since the IPO probably pushed some investors toward Treasury bills and bonds. One thing's for sure, Paulsen won't sit passively by while his company's stock flounders. "He's not happy unless he finishes on top," says Bill McGuire, Summit's chairman.

Bill Paulsen's father scratches his head every time he thinks about his son making a career in real estate. "He's a product of the Depression," Paulsen says of his dad, who spent 42 years as a mechanical engineer with DuPont. "To think of taking the risks I had to take to build this business was just not part of his mind-set. He grew up in a culture where getting a job and climbing the corporate ladder, getting a pension, benefits, all that stuff was security. I grew up in a family that was upper middle-income. I never went hungry, never had any needs that were unmet. So I didn't have the fear that that creates."

What he did have was an insatiable drive to make his mark in the business world. That was apparent even as a teenager in Kinston. Though his dad gave him an allowance, Paulsen picked tobacco...