When C. Cammack Morton was lured away two and a half years ago by Factory Stores of America, one of the nation's worst-performing real estate investment trusts, his 20 or so colleagues left their previous employer, Washington, D.C.-based Charter Oak Partners, and followed him to Cary, N.C.

"This is probably the greatest achievement of my career as well as the greatest burden," says Morton, 47.

Morton co-founded Charter Oak Partners and turned it into one of the nation's leading independent developers and managers of outlet malls. He became familiar with Factory Stores when the two companies attempted to merge in 1995. The deal was derailed after Factory Stores stock price crashed and the company was unable to secure financing.

Although the merger between the two outlet companies fell apart, Morton's vision, people-skills and hard work impressed the Factory Stores board members, who offered him the job of president and chief operating officer. Morton accepted with one condition: He would change the company's name to FAC Realty Trust, FAC already being the ticker symbol of Factory Stores.

A few months after joining the company in 1996, Morton changed the company's name. After being elected chief executive officer in January 1997, he reorganized the struggling company into a structured shopping center management firm with defined departments, such as finance/accounting, development, leasing, investor relations, management, marketing and legal.

Morton also made diversification a key component of his strategic plan. The result: One of the nation's largest owners and operators of factory outlet centers moved away from the outlet center sector to focus on acquiring and developing community centers.

Outlet to strip Today, only 60 percent of the company's portfolio is in outlet centers. The National Association of Real Estate Investment Trusts (NAREIT), a Washington, D.C.-based industry organization, in January classified FAC Realty as a strip shopping center company.

Gary Boston, an analyst at New York-based Paine Webber, says FAC's diversification strategy is a good move. "The outlet sector has been weak for a long time," Boston says. "FAC is trying to move away from the outlet sector for better multiples."

Although competition for grocery-anchored community shopping centers has become fierce in recent years, they are still a good bet for companies like FAC, Boston says. "Prices on acquisitions have moved up pretty steeply in the past year," he says. "REITs and European investors have gotten very interested in community shopping centers, but there are still a lot of opportunities in this sector."

And FAC is taking advantage of those opportunities. The firm boasts 62 centers in 22 states totaling 8.5 million sq. ft., with another 1 million sq. ft. under development.

"Our objective is to acquire $200 million in shopping centers annually," Morton says. "That translates to 3 million to 4 million sq. ft. per year at a price of $50 to $60 per sq. ft."

The company has cash on hand to fund its growth and diversification. In February, Prometheus Southeast Retail LLC, a real estate unit of Lazard Freres Real Estate Investors LLC, an investment affiliate of New York global investment bank Lazard Freres & Co., agreed to acquire a 59 percent stake, or invest $200 million - $9.50 per share - in FAC Realty over an 18-month period to fund the company's expansion.

The deal was one of two U.S. shopping center investments made by Lazard Freres, the other being CenterTrust, formerly Alexander Haagen.

"This was a watershed moment in our company's history," says Morton. The deal blended the expertise of FAC Realty's management team in the retail business with the sophisticated capital markets, mergers and acquisitions expertise of a leading global real estate investor. "Lazard Freres is a great consolidator."

Stock inches up FAC Realty stock prices have started to inch up slowly. On the New York Stock Exchange, FAC shares recently traded at $8 per share, with a 52-week high of $10 per share and a low of $6 per share. Shortly after Morton took over the company, its shares were traded at $5.25 per share.

During fiscal year 1997, the company's revenue rose by 14 percent to $53.7 million as compared with $47.2 million in 1996. Funds from operations increased 10 percent to $16.2 million in 1997. The firm's net loss fell to $1.42 million, or 12 cents per share, in 1997 from a net loss of $6.08 million, or 55 cents per share, in 1996 and $13.1 million, or $1.11 per share, in 1995.

"Net income is still in the negative category, but this year we are projecting positive revenue," Morton reports. "Our first-quarter revenue rose by 16.8 percent to $13.9 million from $11.9 million over the comparable 1997 period. FFO per share is up by 15 percent."

During the first quarter of this year, the company announced several acquisitions and new developments, primarily in its target Southeast market. It closed nearly 900,000 sq. ft. and has agreed to purchase 11 community shopping centers totaling approximately 2 million sq. ft. from Konover & Associates South, a privately held real estate development firm in Boca Raton, Fla.

The company is expected to complete the Konover transaction in July, which will provide the company a new name: Konover Property Trust. Simon Konover, 75, founder of Konover & Associates, a $500 million real estate company headquartered in West Hartford, Conn., will become chairman of the new entity. Morton will continue in his current position as president and CEO of the new entity. The merger is expected to positively impact FFO in the third quarter.

As a result of the recent acquisitions and merger, more than half of the company's portfolio comprises strip and community centers.

A people person "During the past two years, the firm's revenue, size and staff have doubled. Our corporate staff is 80, and the firm today employs about 200 people across the country," says Morton.

The success of the diversification strategy, a state-of-the-art management team, the participation of Lazard Freres, and acquisition of 11 shopping centers from Konover have put FAC Realty in a position to become the preeminent consolidator and operator of unenclosed shopping centers in the Southeast. The company has identified 20 smaller markets in the Carolinas and southern Virginia.

"The aging baby boomer generation is going to fuel Southeast growth," Morton says. "Over half of all baby boomers are expected to retire to the Southeast."

Changing demographics are altering the retail landscape, a fact not lost on Morton. "I am pretty bullish on retail," he says. "There is a blending of retail formats. Department stores are getting stronger. Specialty stores are becoming more dominant and catalogers have begun to open their own stores."

Morton credits his success to his 200-plus employees and management team, which includes 13 officers who have more than 20 years in shopping centers.

"I hired very bright people," he says. "I've had the opportunity to put together three management teams and lead them to do a better job. Twenty people from Charter Oak helped me turn around the company. It takes a lot of talented people to make a decision and understand the process. We don't have to learn each other's moves because we've been together for so long."

Before Morton took over Factory Stores of America, the company was one of the worst performing REITs in one of the worst performing REIT sectors: outlet centers.

The company went public at $24 per share in June 1993. Its shares rose to a high of $29.25 four months later and then began falling steadily, hitting the bottom at $5.13 in April 1997.

Morton says his recent moves are likely to bolster the company's stocks as long as he can keep and attract good people to work for FAC Realty.

"I am motivated by the success of people around me. I like to see people grow," Morton says. "Our employees are the most important and most valuable assets. If they think there is a better opportunity elsewhere and we cannot provide that here, it kills me."

Although Morton has nearly two decades of experience in the shopping center industry and is highly respected by his peers, his main task is neither running day-to-day operations nor designing growth strategies for FAC Realty.

"My greatest challenge is trying to maintain a culture where people want to grow," Morton says. "I believe that when people are happy in the organization, you get the most out of them."