Pat­er­akis fam­ily plans a more cau­tious path for next gen­er­a­tion

Baltimore Sun - - FRONT PAGE - By Natalie Sher­man

When John Pat­er­akis Sr. set out to build a Four Sea­sons ho­tel and con­dos in Bal­ti­more as part of his Har­bor East re­de­vel­op­ment, he was pre­pared to risk ev­ery­thing to do it. As lend­ing slowed amid the re­ces­sion, he put up the bak­eries that made him his for­tune as col­lat­eral for loans to fi­nance the project. That kind of move was in keep­ing with Pat­er­akis’ meth­ods: His hand­shake was his word, his po­lit­i­cal influence was leg­endary and his taste for gam­bling was well known.

Now, as Bill Pat­er­akis pre­pares to take the helm of the fam­ily’s com­pa­nies fol­low­ing his fa­ther’s death on Sun­day, the son said he ex­pects to take a more con­ser­va­tive ap­proach. The fam­ily plans to con­tinue to de­velop Har­bor East and to ex­pand the bak­ery busi­ness.

“We cer­tainly are a lit­tle bit more risk-averse than my dad,” said Bill Pat­er­akis,

64.

As for politics, Bill Pat­er­akis said he rec­og­nizes the im­por­tance of build­ing re­la­tion­ships with politi­cians and ex­pects some fundrais­ing ac­tiv­i­ties to con­tinue. But he does not style him­self as the city’s next be­hind-the-scenes mover and shaker.

“My dad be­came the God­fa­ther, right? That’s not my vision for my­self,” he said. “There is only one John Pat­er­akis.”

John Pat­er­akis, whose fa­ther started the bak­ery in a row­house with busi­ness part­ner Harry Tsaka­los in 1943, grew it into a mas­sive op­er­a­tion with about $800 mil­lion in an­nual rev­enue and 2,500 em­ploy­ees at 12 lo­ca­tions, in­clud­ing about 1,000 peo­ple in the Bal­ti­more area. It pro­duces hundreds of va­ri­eties of bread and is the largest sup­plier of ham­burger buns for McDon­ald’s.

Af­ter branch­ing out into real es­tate, John Pat­er­akis made his big­gest deals in Har­bor East, a bustling de­vel­op­ment that has drawn res­i­dents, restau­rants and other busi­nesses that em­ploy thou­sands.

Chair­man un­til his death, John Pat­er­akis con­tin­ued to work at his down­town of­fice into his 80s.

While he re­mained in­volved, he started plan­ning early for a tran­si­tion in lead­er­ship. His four sons spent child­hood sum­mers work­ing in the bak­eries, and Pat­er­akis passed his own­er­ship stake in the bak­eries — Sch­midt Bak­ing Co., North­east Foods, and H&S Bak­ery — to them decades ago for tax rea­sons.

“A cou­ple times, a cou­ple of us de­cided we were go­ing to ven­ture out and do some­thing different, and we were prac­ti­cally dis­owned,” said Bill Pat­er­akis, the sec­ond-old­est son, who be­gan by fo­cus­ing on engineering and bring­ing the lat­est tech­nol­ogy to new plants. “To keep the peace, we just stayed where we were.”

Tsaka­los fam­ily mem­bers also still work there; the es­tate of Harry Tsaka­los’ son, Nicholas, re­tains a stake in the bak­eries.

The sons took over day-to-day re­spon­si­bil­ity for the bak­eries about 15 years ago, but John Pat­er­akis tech­ni­cally re­tained con­trol over de­ci­sion-mak­ing. He re­mained more in­volved in H&S Prop­er­ties De­vel­op­ment, where own­er­ship includes his daugh­ters and other busi­ness part­ners, un­til a health scare about three years ago.

At that time, he stepped back fur­ther, and it was well known that he had con­fi­dence in Bill to take the lead in mak­ing de­ci­sions. The three other broth­ers also have lead­er­ship roles.

John Pat­er­akis was well aware that fam­ily-owned firms of­ten stum­ble when they move from one gen­er­a­tion to the next, said Richard Al­ter, pres­i­dent and CEO of Manekin, a long­time friend and some­time busi­ness part­ner.

Hav­ing a man­age­ment tran­si­tion plan in place is rare but makes the pri­vately owned firm bet­ter po­si­tioned than most for the fu­ture, said Wayne Rivers, co-founder of the Fam­ily Busi­ness In­sti­tute, a North Carolin­abased con­sult­ing firm that works with busi­nesses on suc­ces­sion is­sues.

While many firms may not be pre­pared, most see a switch to a more con­ser­va­tive lead­er­ship style af­ter the pass­ing of an entrepreneur who built the busi­ness.

“No­body takes risks like the found­ing gen­er­a­tion, usu­ally,” Rivers said.

Fu­ture re­de­vel­op­ment in Har­bor East is likely to pro­ceed at a slower pace, as the com­pany avoids tak­ing on any debt that might threaten the core bak­ery busi­nesses, Bill Pat­er­akis said.

Con­struc­tion un­der­way will con­tinue, in­clud­ing a new bak­ery in Fells Point and a $170 mil­lion build­ing that will in­clude a larger Whole Foods and apart­ments.

North­east Foods sup­plies McDon­ald’s and other firms in the fast-food in­dus­try; H&S caters more to in­sti­tu­tional clients, in­clud­ing schools and pris­ons; and Sch­midt of­fers re­tail brands. The firms are ac­tive in seven states and dis­trib­ute to more than 20.

Bill Pat­er­akis said he and his broth­ers ex­pect to look for growth op­por­tu­ni­ties for the bak­eries, but only if they make sense, he said — “not just for the sake of growth.”

Like his fa­ther, Bill Pat­er­akis said one of his most im­por­tant tasks now is pre­par­ing the next gen­er­a­tion to lead. Five Pat­er­akis grand­chil­dren and three Tsaka­los grand­chil­dren work in the busi­ness.

“Our re­spon­si­bil­ity the next15, 20 years is to re­ally get the next gen­er­a­tion to a place where they can be lead­ers and run this com­pany,” he said.

Bill Pat­er­akis

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