Corrections or additions?
This article by Barbara Fox was prepared for the December 6, 2000
edition of U.S. 1 Newspaper. All rights reserved.
Life in the Fast Lane: RCN
Seven months ago Jamie Herring, RCN’s vice president
for real estate, was told by his boss, CEO David McCourt, to get RCN’s
corporate campus built by 2002 or find another job. With this gentle
encouragement Herring assembled a team of architects, developers,
and engineers who wanted a piece of the lucrative RCN pie and moved
quickly to break ground on Princeton Pike (U.S. 1, May 3). Now the
former headquarters building for Union Camp has been demolished, the
trees have been removed, the foundations and the pond have been
dug, and the storm drains are almost in. The roadside view is of bare,
Last week, in response to RCN’s falling stock, Herring had to put
this huge construction project on hold. It’s only a temporary hold,
he insists, six months to a year, and the architects have been
to finish their drawings. "This isn’t a crisis," says Herring.
"We are a company that is growing as quickly as we can, and we
have to be agile. There are always challenges, and this is one of
RCN provides three-way communication services — high speed
connections, local and long distance phone, and cable television —
to major residential markets in the United States. It has just over
Herring grew up in Princeton, where his father has an ocean modeling
research company at Research Park (Dynalysis) and his mother moved
from being head of leadership gifts at Princeton University to
and is now head of development for the Asia Society. After Princeton
Day School, Herring majored in political science at Johns Hopkins,
Class of 1986, worked in real estate for Jones Lang LaSalle in New
York, and earned an MBA from Columbia. His wife, Kathy, has a cooking
business named Twin Fish, and they have three children under seven.
He plays hockey in the Pennington and Kingston adult leagues.
Two months before the groundbreaking, RCN’s stock fell below 60, and
one month before it went below 30. At the groundbreaking, when CEO
McCourt was asked whether the stock would affect his expansion plans,
he brushed off that idea. "We never start anything we don’t intend
to finish and we always have enough money in the bank to finish what
we start," he said then. "If the capital market stays closed,
we will use the money we have. The fundamental value of the company
has not changed. Over time this company will be worth much more than
it is today. If we keep doing what we are doing you will be back in
this room in a couple of years and the stock will be worth $200 a
The stock has indeed moved dramatically, but in the
wrong direction — even lower. In May it dipped below 20. Over
the summer it hovered in the 20s, dropped to 10 in October, and is
about 11 now. Meanwhile, RCN shifted its strategy, moving away from
centralized training and administration (which would require a large
campus) and moving toward training people in each market area. RCN
already has training locations in Manhattan, Queens, and Boston.
are refocusing our efforts on building out our major markets, and
the stock market is requiring us to be as efficient with our funds
as we can," says Herring. "It is a change, but we have to
RCN has about 700 workers in 220,000 square feet at the Carnegie
now. Its first construction phase, 450,000 square feet in four
was intended to hold 1,200 people and be completed by 2002. RCN was
hiring at the rate of 15 people per day, nationally. Though Herring
says this decentralizing strategy will not affect the need for lots
of office space in Princeton, RCN will slow its hiring, particularly
in Princeton. It is also considering moving some people from the
Center to other key markets and if that happens, it will certainly
need to reduce its space.
The blight of bare earth at the RCN site was to be replaced by
in 2002. Though that will be delayed, RCN has given assurances that
everything necessary for the site to weather the winter is being done
— just as if the project were still on schedule. RCN will finish
putting in the storm drains and provide hay cover and silt fences.
One foundation was partially dug, and that has been partially filled
"We had done a large part of the site work anyway, except for
putting in the roads," says Herring. "The Union Camp building
has been completely demolished, and 95 percent of the building is
being reused." The demolition contractor, Red Ball, is reselling
some of the materials (equipment, steel, and concrete) and refining
the remaining rubble to use as a base for the roads.
Some of the trees were taken down but most of the building was on
farmland, Herring says. The future pond has not yet been dug but is
represented by a swale that feeds into the storm sewer. "There
are some costs associated with winding down and starting up, but the
majority is not duplicated work," says Herring. "The biggest
challenge is making sure the team is intact. We spent a lot of time
creating a team with strong players that can balance cost, design,
and speed. We are looking forward to working with them six months
down the road. None are looking for one-shot deals."
"This is not uncommon that projects go on hold or have different
schedules," says Gordon Griffin, the lead architect for this
from the Hillier Group. "That is always the challenge, keeping
the team." Among the Hillier architects are Rick Taylor, John
Conroy, Tom Stearns, Tim Haworth, Mark Chen, Jeff Berghage, Brian
Kanefsky, Toby Johnson, Ernie Hunt, and Joan Grozalis. Stearns worked
with Louise Schiller of Louise Schiller Associates on the landscape
design. The team also includes Schoor dePalma’s traffic engineer Henry
Ney and civil engineer Mike McKenna. Sordoni Construction is the
Richard F.X. Johnson is in charge of the project for Matrix
Group, which represented RCN in the land negotiations, as did attorney
Christopher Tarr of Smith Stratton Wise Heher & Brennan.
Delayed though it may be, the result of the $110 million project will
be beautiful, says Herring. The "grand entrance," as he
it, opens off Princeton Pike between the former Union Camp building
and Lewisville Road and is on the crest of a natural hill. "As
you look down you face the pond and the campus beyond the pond."
The Georgian-style buildings will have pitched roofs and brick and
limestone facades. Recessed arcades, covered canopies and walkways
will encourage people to walk from one building to another.
steps, pathways, and sitting areas are planned to create the feeling
of a campus. All the buildings will face out onto the large pond and
are inside the "ring" road. This phase of construction is
on 55 acres on the side of Princeton Pike, with the back part
"The campus was a key terminology in CEO David McCourt’s
says Griffin. Hillier had done the Bristol-Myers campus on Scudders
Mill Road and is doing a 4 million square foot campus for Sprint in
Kansas City. "The CEO wanted to create an environment that brought
disparate groups together into one home. The attention to detail in
the landscape is a key thing, and a lot of special things are being
done with attention to the pedestrian."
Construction of the first phase was supposed to cost $110 million,
not including the cost of the land, and no one is saying what the
delay will cost. But McCourt has been told that having his own
would save $70 million over 10 years and also that — in the event
of a downturn, he has an effective exit strategy — the ability
to lease out some space.
Others in the real estate business question whether a money-burning
telecom company should make grand plans for a campus that is more
typically owned by older, more profitable companies such as
Squibb and Merrill Lynch. They also ask whether a brand-new company
that must focus its energies across the nation can indeed build and/or
run a campus more cost effectively than leasing space.
"RCN is a good company but will be a very attractive target for
takeover and the one thing nobody wants is a pile of bricks and
says one insider.
Aside from its stock price, how is RCN doing, anyway? Paul Allen’s
Vulcan Ventures had chipped in $1.65 billion and the company has $2.6
billion in available cash. That means the company is fully funded
to "pass" (run cable by) 5 million homes and is continuing
to execute that plan. It is active in 16 markets — with 7 of the
top 10, including New York, Chicago, Philadelphia, San Francisco,
Boston, D.C., and Los Angeles. It is constructing a network in 90
cities across the country.
In the third quarter, RCN "built" to 200,000 homes and added
50,000 connections over its own new network, and its other networks
are being upgraded to carry telephone, cable, and highspeed Internet.
Of every dollar spent, RCN says, 90 cents goes into building the
Such capital expenditures for the third quarter were $346 million
or a total $802 million for three quarters.
So far so good, but the real threat of competition from wireless
and the specter of an economic downturn are also looming in the
"To be agile you have to be exposed and be able to juggle the
ball," says Herring.
— Barbara Fox
300, Princeton 08540. David C. McCourt, chairman and CEO.
fax, 609-734-7551. Home page: www.rcn.com.
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