A Firm Floor Under United Capital

For a company in the thick of rough-and-tumble real estate, United Capital has been having an upbeat time since 1991, when earnings started to stabilize. Its shares, trading on the American Stock Exchange at 3 at the end of 1992, have zoomed to 10. Time to bail out? In fact, new players have been buying in--convinced the stock is worth much more. What's the deal?

More steady earnings from its property business, say some investors, plus a big contribution in years ahead from Kentile Floors, a major producer of resilient vinyl flooring that United acquired in March. This newcomer is expected to help double United's sales and boost earnings.

"Kentile certainly improves the sales and earnings picture of United and makes it much more attractive," says Elizabeth A. Pearce, director of research at Anderson Capital Management in San Francisco, which has been adding to its holdings. She says United was underappreciated and undervalued even before it acquired Kentile. Back then, she figures, United's property assets were worth about $20 a share. With the addition of Kentile, which posted sales of $70 million last year, she thinks United, which earned 70 cents a share last year--vs. 44 cents in 1992--should make $1 this year.

United owns and manages low-rent properties that it leases to highly visible corporate tenants, including Kmart, PepsiCo, and Boston Chicken. The company has more than 6 million square feet of space, renting at an average $3 a foot. Says United Chairman and CEO A.F. Petrocelli: "The low rent gives a lot of upside potential--if we lose a tenant, it's easy to find another at a higher rent, even in a down market."

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