Tight lending market complicates business

November 14, 2009|By ARNOLD S. PLATOU

'We can only hope that it gets better'

WASHINGTON COUNTY -- Richard Ward has 16 employees in Washington County and wanted to add dozens more with a new business here this year.

But amid the recession, a local lender refused to loan him money to buy the more than 20-acre property because Ward didn't need all of it, which made it "speculative," he said.

"And that refusal wasn't a reflection on credit-worthiness. It was more a reflection on the types of loans they're willing to do" in this economy, Ward said.


"It's frustrating," he said. "I think it would be frustrating for the person trying to sell the property, too."

So, by way of economic twist, Ward's misfortune became Arnold Eby's good fortune.

Eby and a partner had bought a small strip shopping center in the 1400 block of Salem Avenue in Hagerstown's West End last summer.

Salem Point Plaza is home to Cafe Del Sol, a restaurant that rents three of the center's five spaces. Two other businesses had the others, but about the time Eby bought the center, they announced economic troubles and moved out.

In a short time, Ward moved in, taking both spaces for the expanded office and training facility he needed to complement his existing business. Moving in there "was my Plan B" to buying the other property, he said.

For Eby, it seemed a stroke of luck to have filled commercial vacancies so quickly in this economy.

"I feel pretty lucky. Or blessed," he said. "One of my friends told me it was a miracle."

A changed lending culture

In 1926, Ward's grandfather founded Rockville Fuel & Feed Co. Inc., selling wood and coal to heat homes in Montgomery County, Md., and selling feed and straw to farmers.

In time, the company changed its mission -- now, with six plants and more than 60 trucks, it bills itself as a leading supplier of ready-mixed concrete in suburban areas of Baltimore and Washington, D.C. But the company's name has stayed the same.

Ward, 44, the third generation in the family-owned business, now is vice president of Rockville Fuel & Feed and, since July 2007, president of Richards-Wilbert Inc., a burial vault manufacturer near Hagerstown that also has two plants in Virginia.

Together, in 2008, the Hagerstown and Virginia operations had about $3.5 million in gross sales, which was about 20 percent higher than in 2007, Ward said. They sell about 4,000 burial vaults a year, he said.

Richards-Wilbert is the family's second such company. In the late 1980s, it bought Montgomery Vault Co., with manufacturing plants in Rockville and Woodsboro, Md.

In all, the Ward family operations employ about 45 people.

So Ward was no economic flyweight early this year when he asked local lenders to help finance his plan to buy a manufacturing building on more than 20 acres outside Hagerstown. He wanted to open a new business, likely employing "close to 30" people here.

He said he only needed about eight acres of the property, so "my thought would have been to have subdivided it and sold that to somebody else."

But he hadn't figured on the recession and the recent banking crisis and how they changed the risks the financial world is willing to take.

"The lending culture changed," Ward said. "In past years, I'm sure -- we're credit-worthy -- we would have gotten the loan.

"This time, they were like, 'More than half the property value is based on this excess land. That acreage is speculative and I'm not going to lend on that.'"

So Ward dropped his plan to open the second business here and, instead, began looking for space to lease that would complement his local burial vault operation.

There was some office space in the Richards-Wilbert plant, on 3.5 acres off U.S. 40 west of Hagerstown, "but we need more space for our office staff and we now have a facility to train and educate our (funeral home) customers. We don't really sell to the public, but business to business," he said.

He chose to finance the new setup through his own company instead of going to a lender. And for the new facility, he hired two more workers, adding to the 14 he already employs at the local manufacturing plant.

Coming up with the money

For similar reasons, Eby and his investment partner chose to pay the cost themselves -- rather than seeking a loan -- for the changes needed at the strip center to accommodate Ward's business.

Had they not financed the work themselves, "I doubt that we would have been able" to get a loan, Eby said. "We bought the place a year and a half ago, but just the way values have dropped, it would have been very difficult to get a loan for it."

Eby is no economic lightweight either.

Now 45, he is vice president of Henry Eby & Sons Inc., the general construction company his father founded in 1982, and managing partner of Salem Point Investments LLC, which has rental properties.

But this year, Eby said, his construction company has focused its business on clients it knows, and not asked for new financing.

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