THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, February 20, 1995 TAG: 9502180627
SECTION: BUSINESS WEEKLY PAGE: 04 EDITION: FINAL
SOURCE: Ted Evanoff
LENGTH: Medium: 82 lines
Slowly but surely, apprehension about base closings has begun to fade in Hampton Roads.
Only a year ago, bleak talk about the fate of landmarks such as Oceana Naval Air Station marred the business climate.
Now there's shallow optimism. Tidewater has eluded sharp blows from the Defense Base Closure and Realignment Commission.
Yes, the commission still might recommend closing bases in Hampton Roads. And interest rates are higher. But this year and '94 differ sharply so far. A new attitude appears to have taken root.
``We're seeing more optimism here than there was six months ago,'' said Steve Gibson, NationsBank head of commercial lending for Eastern Virginia. ``I think that will lead to more opportunities.''
More opportunities refers to lending money for expansion. On that score, lending appears to have rebounded across the mid-Atlantic region.
Among the major banks based in Maryland, North Carolina, Virginia and Washington, commercial and industrial loans totaled $29.5 billion on Jan. 25, up 14.14 percent from a year earlier, said the Federal Reserve Bank of Richmond.
Whether bankers can maintain the lending pace into the summer remains to be seen. Climbing interest rates have slowed economic growth. Companies are uncertain they can sustain the sales volume needed to justify an expansion.
However, relief may appear in the form of peaking interest rates. This year, ``fed funds will not go beyond 6.5 percent,'' said Eric Cheung, manager of a $2.8 billion investment pool for Wilmington Trust Corp. in Delaware.
This puts Hampton Roads at the proverbial crossroads. With interest rates peaking, Tidewater appears primed, not for a boom, but at least for growth.
Hampton Roads has recovered steadily from the '91 recession. By autumn '94, third-quarter retail sales had reached $2.67 billion on the Peninsula and the southside, up almost 7.7 percent from a year earlier.
While not spectacular, it marks steady growth. Combine the steady trend and the fading apprehension about the bases, and it puts many companies in a good position, said Patrick Callahan, managing partner of the Norfolk accounting firm Frederick B. Hill & Co.
``What has been happening is that a lot of companies around here have been more or less holding their breath, waiting for the ax to fall (with BRAC),'' said Callahan, whose client base includes wholesalers, manufacturers and real estate firms.
``While they're actually doing better as far as revenues and net profits are concerned, they're still holding their breath,'' Callahan said.
``As more time goes by and companies have profits, and find the bad things have not happened, they will then begin to consider what their next steps are.''
One step is simple. It's just keeping the business open. The stubborn faith apparently surfaced in the bankruptcy courts in Norfolk and Newport News. Business bankruptcy filings totaled 8,479 last year, down 8.4 percent from the year before.
``There are a lot of people who are holding on rather than shutting down,'' said accountant Jay Steer of Virginia Beach. ``Why they're staying with it, I don't always know, but many of them are waiting to see the economy turn around.''
Steer's clients include a doctor who owns a clothing store and continues to pour money into it despite strong competition from chain stores. A number of body shops Steer services are also on the edge, but still considering relocations or expansions. ``The ones who are losing money are sticking with it,'' he said. ``They think the economy is going to change.''
Another step is to look outside Hampton Roads. Ed Stovall, president of Tidewater Scale & Butcher Supplies Inc. in Norfolk, took that route.
Tidewater Scale, which has 18 employees, is trying to expand its geographic reach. Last month it bought a Toledo Scale distributorship in Richmond and is negotiating to buy a second Richmond distributorship.
``What we're seeing is our business switching from selling new equipment to servicing old equipment,'' Stovall said.
Tidewater Scale's expansion isn't unique, Callahan said. ``I see companies trying to see how they can expand their business horizons,'' he said.
``Because they were scared a little bit during the last couple of years, they began to look outside the area for alternatives. Now they're expansion minded and they have the money to do it.''
KEYWORDS: ECONOMY by CNB