Here are the stories behind the headlines. Deals are the touchdowns and home runs of the business world. Dealmakers grab headlines like touchdown scorers and home-run hitters, but deals cannot be completed without hard work, perseverance and perfect timing.

Recently, three different companies in as many real estate sectors generated deal-making headlines, each in its own way. Although Kramont Realty Trust, U.S. Franchise Systems Inc. and ProLogis displayed differences in approach, the stories behind their deals share both similar business visions and the tenacity to make those visions real.

Merger produces new REIT The result of the June merger of Kranzco and CV REIT, Chicago-based Kramont Realty Trust is a publicly owned, self-administered, self-managed real estate investment trust (REIT). It acquires, develops and manages retail shopping centers in 16 states and has more than 12 million sq. ft. of leasable space east of the Mississippi River. The merger was a somewhat lengthy process, according to Louis P. Meshon Sr., president of Kramont.

"I first made contact in January 1998," says Meshon, who was president, CEO and a director for Plymouth Meeting, Pa.-based CV REIT. Meshon has more than 30 years' experience in the shopping center management/development field. "Some time later, I received a phone call from the president and chairman of the board of Kranzco, Norman M. Kranzdorf. He said, `Let's get together and have lunch to discuss if there's any synergies between the companies.' There was an elongated period where the deal structure of who gets what, preferred issuances, SEC approvals and shareholder considerations had to be dealt with. It was really more of a reorganization. That gives you an idea of the inordinate amount of time the merger took from the initial contact until June 16, 2000, when the transaction was officially completed."

Conshohocken, Pa.-based Kranzco had greater geographical diversity and a larger portfolio than CV REIT's, which had approximately 30 assets with all the (mostly grocery) anchor stores in place. Meshon says the company was looking for an opportunity to take on a larger portfolio with a significant number of retail centers having either vacancy/redevelopment possibilities or vacant anchors that were still paying financially although they were no longer occupied.

He says the merger was something both companies were eager to do. "When you take all that together, we were looking at approximately 1.2 million sq. ft. in December 1999 when we inked this merger," says Meshon.

Putting two companies together, no matter how similar, is a daunting task. Meshon acknowledges the difficulties in finalizing the alliance as well as getting the two companies to work as one. He notes the diligence required of both sides in order to make sure the assets that each thought they were acquiring were what they were reported to be in terms of operating income, physical condition, environmental conditions and other factors.

Salomon Smith Barney provided CV REIT with a fairness opinion in the transaction, and CV REIT's own in-house attorneys, architects, engineers and investment personnel provided their own input, ultimately figuring on approximately $1.5 million in annual savings from the merger.

"There are personnel issues in this kind of a proposed merger," Meshon says. "Those issues can include who does what, who sits where, do we do things the way we used to do them and do we do them a new way. Other things to consider," he says, "are what the priorities are, who's going to make the decisions in the management structure and hierarchy of this new company, and how will this blend together so that one company plus one company at least equals two-and-a-half.

"Each company put together a transition team around the first of January and we proceeded to sort through everything from stationery color to signs on the property," he recalls. By June 16, six months after the creation of the integration team, "everyone knew where they were going to sit, what they were going to do, what the job descriptions were, what the priorities were for the company, and all were fully cognizant of their roles."

Meshon says the blending of personnel has worked well. About 30 Kranzco employees relocated and joined some 50 CV REIT workers at CV REIT's former headquarters in Plymouth Meeting. Regional offices are in Yonkers, N.Y., Woodbridge, Va., and Atlanta.

The biggest difference between the way the two companies operated, says Meshon, was that CV REIT maintained an in-house leasing staff while Kranzco did not. The newly formed company hired leasing personnel in each geographical area to handle relationships with tenants, deal with the outside brokerage community, and physically seek prospective tenants. The new arrangement did not go into effect until May.

"We wanted to make sure that the transaction was going to close before we hired people," explains Meshon. "We have very good, experienced personnel who are paying huge dividends already and having a significant impact on reducing vacancies. We are shooting for the 94% to 95% occupancy range by the time this year ends. That number is really exemplary in the commercial strip shopping center arena."

Other time-consuming obstacles to the merger included legal matters. CV REIT was an UPREIT and Kranzco was not. Kramont therefore had to reorganize 62 assets into an UPREIT, which it called the Kramont Operating Partnership. The process proved to be a month-long, full-time job because 16 states were involved, each with different regulations and requirements.

Trading on the New York Stock Exchange under the symbol KRT, the common shares for Kramont Realty Trust have been swapped since June 19. Meshon says he believes Kramont will continue to grow. "This is a company that will be looking to effectuate further consolidations based on the fact that we have done two in three years," he says. "You might say we are getting the hang of it. In the REIT world, whether it is storage, apartments, multi-housing or malls, there is continual consolidation because we believe bigger is better."

Cash infusion leads to new ownership for USFS With three brands of hotels covering various segments of the market, but the market for new hotel construction down, U.S. Franchise Systems Inc. (USFS) found it needed an infusion of capital. The Atlanta-based company's brands - Microtel Inn & Suites (budget/economy), Hawthorn Hotel & Suites (upper end), and Best Inn & Suites (mid-priced) - have grown at a rapid and steady pace.

As NREI went to press, USFS announced that it had agreed to be acquired by the Pritzker family of Chicago, owners of the Chicago-based Hyatt Corp. and Hyatt International Corp. In the acquisition, the Pritzkers will pay $5 per share, or $99.8 million in cash. The offer excludes those shares already owned by the Pritzkers and those owned by USFS Chairman Mike Leven's family.

In June, USFS had received a cash infusion from the Pritzker family totaling $75 million in USFS in exchange for $65 million of a new series of 8.5% redeemable preferred stock and $10 million of a series of 6% redeemable convertible/exchangeable preferred stock to effect a recapitalization of the company.

Leven and President and COO Steve Romaniello will remain with the company, which will now be private. Leven and his family remain major shareholders.

"We are looking to continue to grow the company at the same rate that we have been able to grow it to this point," Romaniello told NREI before the acquisition. "The market is certainly down a little bit in terms of the amount of overall new construction that is occurring. We are combating that by the fact that we have a lot more momentum behind us from our sales effort.

"We have reached a very significant milestone - now more than 200 Microtels are open," Ramaniello says. "Since the construction level has gone down, just staying at our current pace has been an accomplishment that our sales people are quite proud of."

"As long as things stay relatively stable, our brands continue to perform, and we treat our customers correctly, I think our prospects are quite good," Romaniello says, looking to the future. "We have a strong focus on the western part of the United States with Microtel, a strong emphasis on Texas and the Southeast region for Best Inns. Hawthorn continues its major market expansion strategy throughout the United States in order to gain some exposure quickly."

Romaniello assumed his position as president and COO in June and heads the company's sales, franchise operations (including design and construction), franchise support, quality assurance, administration, human resources and purchasing departments. He has been in charge of the franchise sales and development departments since the formation of USFS in 1995.

In USFS's franchising system, the company will often find someone who is a successful builder of businesses from another industry and invite that person to franchise a Microtel facility.

A new franchisee also may be someone who simply has a desire to enter the business. USFS will typically find the land and locate a consultant to conduct a feasibility study. The company can also contact an architect and a contractor for the proposed project.

Finally, USFS trains the new recruits and finds financing for them. The whole process from initial sales contact to hotel opening may be about 24 months for a qualified, motivated prospect, says Romaniello.

Continuing contact with potential franchisees is an important element of USFS's service.

"In a new company experiencing rapid growth, there are constantly new things that come up that, in most cases, strengthen our position in the marketplace," says Romaniello. "We feel one of our main jobs through sales is to communicate those changes to people and to stay in touch with them."

To develop globally, ProLogis sets sights high - and long Using a slogan such as "the global distribution solution" can set a company's goals almost impossibly high. Aurora, Colo.-based ProLogis is successfully doing its best to live up to that goal. The company owns, manages or is developing distribution facilities totaling more than 185.2 million sq. ft. (as of June 30, 2000) in 98 global markets. A new business atmosphere has ProLogis dealing in Europe as never before.

ProLogis recently acquired a few companies in Europe, but is not planning to acquire any more in the near future. "We bought the best development group in the United Kingdom and brought them into our organization," says Robert J. Watson, managing director and COO for ProLogis in Europe. "We purchased the largest owner of industrial properties in France and brought that team into our organization. We bought a project in Warsaw, Poland, that had a good group of people and we brought them in, too.

"ProLogis has set a pace to be a leader in most of Europe," continues Watson. "We are No. 1 in the United Kingdom, Netherlands, France and Poland in terms of developing new industrial-distribution facilities. We will be No. 1 in Spain and Italy within the next year, and we believe we will eventually achieve that position in Germany as well.

"Our goal is to be the No. 1 competitor in each market," he emphasizes. "We are the only Pan-European source of distribution facilities. No one else is attempting to do that today. We hope to build our business in such a way that nobody else would want to try.

"The things that are working in the European Union have a lot to do with the fact that the borders came down," Watson says. "You can now take a truckload of goods from the United Kingdom to Rome without even a minimum hassle. It's probably less of a hassle than taking a truckload from the United States to Mexico."

The typical European developer is a country- or city-focused developer, which is why ProLogis could do this successfully while others couldn't, explains Watson. The company came in, looked at the opportunity, analyzed what its people knew about customers, supply chain, land acquisition and development, and applied it to Europe. It has been a successful formula.

"A Rotterdam developer would never go to Antwerp, which is only 75 miles away," says Watson. "That just wouldn't happen because it's another country. If you think about the vastness of the United States and how Prologis is in 36 markets and has 27 offices, going to another place to do business is exactly what we do. But it's not what has ever been done in Europe."

Based in Amsterdam, the Netherlands, Watson is responsible for the ProLogis Operating SystemsTM in Europe. He notes that a number of conditions make Europe vastly different in its business dealings from the United States. Europe, as a whole, is a very development-controlled and rural environment. Governments and businesses try to maximize the number of jobs for the scarce amount of land that is allocated for employment uses.

The availability of zoned and titled land is a major issue in Europe, much more so than in the United States, Watson notes. And getting planning approvals from local authorities is no small challenge in order to build the type of project you want to build.

"That's really the biggest problem on the transaction side of the business - making sure that we are moving through the planning, zoning and entitlement process," he says. "It is a long and arduous process."

ProLogis has been operating in Europe only a few years, not really long enough to see just how long property zoning there sometimes can take. But a couple of the European businesses ProLogis acquired are now building projects on lands that have been in the zoning and titling process for nine years. ProLogis is currently putting under option and under contract properties that will not be available for another three years.

"In Europe, they don't want speculative development, they want planned development. They want to know who the occupants will be," explains Watson. "What they will do is allow an amount of land to come out of the entitlement process and get filled up, and then they will give permission for the next site. That site will get filled up to 60% or 70% and they will go to the next site."

It's very much a planned process, he indicates. "You've got to show the planning authorities what you're going to build. You have to stick to what you say you'll build or you have to go back to get planning permission for the entire site again. If we build an inventory building, we have to be pretty good at building a building that the majority of the customers could go into."

Most ProLogis customers are repeat customers, says Watson. ProLogis concentrates on a list of the 1,000 largest users of distribution facilities globally that company professionals call the "global 1,000." Of that thousand, more than 440 have leases with ProLogis.

So, despite the precise planning required in Europe, Watson says ProLogis can make an efficient and functional facility that will fit 80% of the uses that people are going to use for an industrial building. "We understand what the customers' requirements are."

Join our Leadership Team BOMI Institute is now seeking candidates for the position of Vice Chairman. This position provides strategic and financial decision-making for the organization. The Vice Chairman will act as one of four officers of the Institute. Candidates should be familiar with BOMI Institute's educational programs.

To date, more than 50,000 professionals have received BOMI Institute training and some 16,000 hold one or more of its RPA, FMA, SMA, and SMT designations. Help guide BOMI Institute into the future and keep pace with this dynamic industry by participating in quarterly meetings of the Executive Committee, which include semi-annual meetings of the Board.

Please submit a letter of interest, a resume, and a professional biography by December 1, 2000, to:

Lorraine B. Kucinski, RPA, FMA Nominating Committee Chairman c/o BOMI Institute 1521 Ritchie Highway Arnold, MD 21012

Candidates will be asked to attend an interview with the Institute's Nominating Committee during the 2001 BOMA Winter Business Meeting being held from January 26 - 30, 2001 at the J.W. Marriott Hotel in Washington D.C.

Candidates selected to serve on the Board will be notified, by mail, on or before February 1, 2001. The Vice Chairman Elect will officially take office at the end of the BOMA June 2001 Convention (to be held in Baltimore, MD from June 17 - 19, 2001).