On Turnarounds

OSHA Update?

Respecting Diversity: Reach Out

Sexual Harassment

Energy Deregulation

Auto Reform: Pay On Time!

Corrections or additions?

These articles by Peter J. Mladineo were published in U.S. 1

Newspaper on September 16, 1998. All rights reserved.

Real Estate Future

With a bear market threatening Wall Street, some real

estate developers may lose some working capital. But because the

economic

fundamentals are good, the situation probably won’t plunge into a

crisis similar to the early ’90s.

The experts agree on that, but not on much more than that. Sparks

could fly at a panel at the National Association of Industrial and

Office Properties that features five professionals from different

corners of the real estate world on Thursday, September 17, at 5:30

p.m. at the East Brunswick Hilton. Cost: $140. Call 732-417-9010 for

information.

The moderator is Joseph Gyourko, acting director of the Wharton

School’s Zell/Lurie Real Estate Center. The panelists are Michael

Maturo, the CFO of Reckson Associates Realty Corp., a real estate

investment trust (REIT) that owns the University Square buildings

on Campus Drive and is co-developing Northeast Business Park at Exit

7A; Emanuel Stern, president of Hartz Mountain Industries, a

privately owned real estate developer in northern New Jersey; Frank

C. Wuest, director of AEW Capital Management LP, a real estate

advisory firm; and Kevin Riordan, managing director of

commercial

mortgage and real estate securities at Teachers Insurance and Annuity

Association, an institutional investor. Call 732-417-9010.

Gyourko reports that the program was originally called a "Forum

on Consolidation and Capital Strategies," but changes in the

equity

markets in the last weeks have prompted a slight alteration of the

subject material. "It’s going to be a little less

consolidation-oriented

than we thought," he says.

"For a while not much is going to happen in terms of

consolidation,"

he says, "but in the long run if what we get out of this later

is a recession then you’ll see the strong devouring the weak, and

consolidation will speed up."

Gyourko points to the recent decline in the value of REIT stocks.

(REITs are publicly owned real estate firms such as Mack-Cali,

Reckson,

Boston Properties, and Brandywine Realty, all of which have made

significant

acquisitions in the Princeton area in the last year.) These declining

prices "may have been signals to the fact there may be a

spreading,

rolling credit problem in the world," he says. "But I’m not

predicting a catastrophe by any means. I don’t think you’re going

to see anything like the early ’90s in real estate."

But Stern of Hartz Mountain says that REIT activity is completely

hamstrung. "On the equity side the REITs are dead in the

water,"

he says. "They can’t go and issue equity. The REIT stocks are

down 20, 30, 40, 50 percent, therefore the public doesn’t want to

buy the stock anymore."

Shares in Reckson, for instance, are now trading at roughly $19 per

share, compared to $29 a year ago. Mack-Cali, which owns 400 Alexander

Park, 5 Vaughn Drive, Horizon Center, 103 Carnegie Center, and 3

Independence

Way, costs roughly $26 per share, compared to $43 a year ago. Neither

firm responded to repeated phone calls for comment.

These sagging stock prices are creating a double whammy for the REITs,

Stern maintains. "As their stock prices fall their debt ratio

rises without new capital coming in," he says. "If you look

at it, REITs were the dominant acquisition vehicle for properties

in the last three years. In the last four or five months they’ve lost

their capital, so to speak."

In a related story, last week marked groundbreakings of a new spec

building at the Carnegie Center, being constructed by one of those

aforementioned REITs, and of the Commons on Roszel Road (see this

week’s Life in the Fast Lane column, page 56). Charlie Hatfield,

a vice president at SJP Properties, the Parsippany-based developer

of the Roszel Road project, says there’s no reason to fret. The

fundamentals

are still there. "They need space down there like they need

oxygen,"

he says. "We have financing from large institutional investors

so we have deep pockets similar to the REITs and these investors are

partners with us and our projects."

— Peter J. Mladineo

Top Of Page
On Turnarounds

If the current "market correction" turns out

to be a long-term plunge, here’s one group that might do even better

than short sellers: Turnaround experts. This special breed of

executive

(whose ranks include Sunbeam’s ousted hackster Al Dunlap) is

called in to rescue companies in dire straits.

Turnaround professionals are growing in number and even have their

own trade group, the Turnaround Management Association, the New Jersey

chapter of which celebrates the turnaround of the year (KIWI

International

Airlines), on Thursday, September 17, at 5:30 p.m. at the Eagle Rock

Club in Roseland. Call 973-226-1500 for more information.

"It’s an international group devoted to the corporate renewal

process," says Tom Hays, the president of the national TMA

and of Nachman Hays & Associates, a turnaround firm based in Narberth,

Pennsylvania. "The profession is going to continue to grow. We

are going to gain further visibility and we have already achieved

substantial recognition as a viable industry." More than 3,000

members are expected to join the TMA by the end of the year, Hays

reports.

Hays, a CPA, started his turnaround practice in 1993 and says that

the field of turnaround professionals is expanding to attorneys,

managers,

accountants, banks, and lenders. "We wish to be an all-inclusive

group because what we’ve found over the years is that turnarounds

work better when everybody is involved," says Hays.

But the differences between a turnaround practitioner and a regular

executive can be dramatic. "The typical issue is generally running

out of cash," he says. "Important decisions have to made in

a compressed time frame. The long-term chief executive is primarily

interested in growth while the interim CEO or turnaround manager is

interested in the ability to sustain the corporation’s existence and

lay the groundwork in returning to profitability."

Hays maintains there are three basic elements necessary for a

successful

turnaround. "You need one or more core businesses, you need

adequate

bridge financing, and you need adequate human resources to be able

to sustain a business," he says.

A turnaround goes through five stages, a management change stage,

a situational analysis stage, an emergency action stage, a business

restructuring stage, and the return to normal. "What we’re really

looking at is the basic blocking and tackling that any business

needs,"

says Hays. "The differences are the timeframes are more acute

and the problems are more severe. The skill sets that a turnaround

manager has are different skill sets than taking the business forward

and growing the business, so there’s generally a handoff in the

restructuring

stage and the return-to-normal stage."

Hays instructs boards to follow these rules and their businesses won’t

end up like Sunbeam (Al Dunlap’s former employer that fired him after

his mega-cuts failed to revive the company’s profits). "What

Dunlap

did not truly figure in business restructuring was the development

of human resources," Hays says. "And essentially he burned

so many bridges that he left a hollow shell within a corporation.

One of the key future resources are your people."

If the economy worsens, the turnaround industry will benefit, but

Hays predicts it will be harder to help companies pull through.

"The

lending institutions’ workout policies are basically driven by the

quality of their balance sheets, so they’ll give less time for a

workout,"

he says. "When the downturn comes it’s going to be much less

forgiving."

— Peter J. Mladineo

Top Of Page
OSHA Update?

What’s OSHA up to these days? Not much, says Mike

Yarnell, assistant area director of the central New Jersey

Occupational

Safety and Health Administration office in Avenel. "It’s a quiet

time," he says. "It’s the end of the fiscal year. We’ve got

a lot of people who want an OSHA update."

Yarnell will give an OSHA update on Wednesday, September 23, at noon

at the Middlesex Chamber meeting at the New Brunswick Hyatt. Call

Nancy Ostin at 732-821-1700 for more information.

"There are no new standards," says Yarnell, though "there

are a couple on the horizon." Instead, Yarnell will describe in

intimate detail OSHA’s fresh new outlook as mandated by the federal

government.

"We have identified certain strategic goals," he says.

"We’re

looking at our enforcement differently." While 70 percent of

OSHA’s

work is responsive in nature — answering complaints about unsafe

workplaces or investigating accidents, 30 percent of its job is

considered

pro-active or preventative. That latter portion is getting the

philosophical

overhaul.

The first thing OSHA will attempt is to try be quicker in response.

"This may be sound like a ridiculous goal but 95 percent of

fatalities

will be investigated within one working day of notification,"

says Yarnell.

Complaints, which comprise 55 percent of its workload, will be

responded

to within one day for an investigation (by letter), or five days,

for an on-site inspection. Currently, the standard time for an on-site

inspection is 30 days, Yarnell reports. "To be honest I’ve had

some that have gone four to five months, so we have a little work

to do on this. The average time (for an inspection) is a month. They

want it down to five days. That’s an optimistic goal."

OSHA will also be focusing its attention on what it considers are

the worst safety and health problems in the workplace — silica

exposure, lead, and amputations. "Those things are things that

we want to reduce," he says.

Certain high-hazard industries, such as shipyards, food processing,

nursing homes, and construction, will also be under OSHA’s microscope.

"As a sidelight of construction we are going to be looking at

the four major reasons for fatalities: falls, `struck by,’

electrocutions,

and `crushed by,’" says Yarnell. Watch your step.

Top Of Page
Respecting Diversity: Reach Out

<B>Sandy L. Ewell knows what it’s like to be singled

out for being black. The former CEO of the Trenton YWCA, Ewell spent

much of career on various nonprofit boards in central New Jersey.

But she remembers one conference where she was the only African

American

and was tapped on the shoulder by a white woman who informed her that

there was no toilet paper in the bathroom.

When Ewell blithely shrugged off the woman’s assumptions, she came

back at Ewell again, this time imperiously demanding that she take

care of the toilet paper deficiency. As this altercation became the

center of attention and jaws dropped, the woman realized her

indiscretion

and quickly slipped away.

In hindsight, what hurt Ewell most about the situation was that the

offending woman was more interested in saving face than in repairing

hurt feelings. "I probably would not have felt the hurt if she

had said, `I’m so sorry, can we talk?’ or something," says Ewell.

"She just split."

Ewell, who is now a diversity trainer, uses this story to make her

point that communication is the key to respecting diversity in the

workplace. "There is absolutely a difference between folks’ total

separatism and unintentional racism, classism, or homophobia,"

she says. "Sometimes it is just that we have a tendency to react

to situations that we’re not familiar with in a very negative way.

We put out negative vibes because of fear, because of not

understanding

what the difference is all about. We don’t know how to approach

people."

In January Ewell started a new business, the Common Ground Institute

LLC, out of her home in Bordentown. The group, which organizes

diversity

programs for management, holds a two-day seminar on Tuesday and

Wednesday,

September 22 and 23, at 8:30 a.m. at the University Inn and Conference

Center at Rutgers in New Brunswick. Call 609-291-9730 for more

information.

"The major thrust in the conference and work we do is to get folks

to understand the role that communication plays when you’re dealing

across racial, cultural, gender, age, class, or sexual orientation

lines," Ewell says. "We have found that this has been the

drawback to people having to work together. We don’t know how to talk

to one another."

The program is being co-sponsored by Avanta, the Virginia Satir

Network,

an international training group named after the noted family therapist

that ascribes family of origin theories to issues of racism. "A

lot of this is passed on," says Ewell.

Here are some pointers Ewell has for any workplace where diversity

could cause a problem:

Sharpen your listening skills. "People have to learn

to listen — to everybody," says Ewell.

Don’t deny the problem. "The other thing that is so

key is to believe what people tell you," says Ewell. "I think

that the anger and the rage that you hear about, it comes out because

that people don’t believe that this really happens. `Oh I didn’t mean

it therefore it should be all right’. You need to stay, you need to

talk about it, and you need to go after a resolution. You need to

show that it really matters."

Don’t just tolerate, embrace. Tolerance is practically

a buzzword these days, and isn’t enough. "Embracing really means

respecting and respecting means willingness to learn about them,"

she says. "You have to go after information instead of assuming.

We rarely have the opportunity to talk to people across cultural

lines.

We work with people who are different from us every single day, but

do we really take the time to know about who they are? Do we know

when we are insulting someone?"

Ewell, 48, grew up in Philadelphia and attended Salem College

in West Virginia, graduating in 1972, long before the school was

acquired

by a Japanese college and changed its name to Salem Teikeyo

University.

En route to a graduate degree, she started working for the Trenton

YWCA, where she stayed for the next 25 years. She also sat on the

boards of McCarter Theater and the Princeton Area Foundation and

various

commissions in Trenton.

Not helping the racism problem is the degree of religious separatism

in the United States, Ewell notes. "Sunday is probably the most

separate day of the entire week," she says. "Usually you don’t

find churches where you find different groups of people. We have a

long way to go here."

— Peter J. Mladineo

Top Of Page
Sexual Harassment

Sexual harassment has become a staple of the television

news. Now New Jersey Citizen Action, a consumer watchdog organization,

is sponsoring a public forum on sexual harassment, where women can

have access to attorneys, counselors, and labor leaders, on Thursday,

September 24, from 7 to 9 p.m. at the East Brunswick Public Library.

The event is free; call the hotline at 877-666-6625 for more

information.

The Mercer Chamber hosts a business forum, "Sexual Harassment:

Defining & Enforcing Rules in the Workplace," with Allison

Accurso, a partner with Fox Rothschild, Don Addison, division

chief of economic development and affirmative action for Mercer

County,

and Judy Olsen, assistant vice president of human resources

or Trenton Savings Bank. The forum is Wednesday, September 23, at

8 a.m. at the Palmer Inn. Call 609-393-4143.

Top Of Page
Energy Deregulation

Those who were disappointed when June’s electric

deregulation

conference at the New Jersey Retail Merchants Association and the

New Jersey Food Council was canceled will want to attend a legislative

affairs luncheon on utility deregulation sponsored by the Princeton

Chamber on Tuesday, September 22, at noon. Cost: $10 for the deli

lunch. Call 609-520-1776.

One of the major issues being debated is whether the utilities should

have to pick up the "stranded costs" — the overhead of

the energy infrastructure. "It’s a good argument if you believe

they made those investments," says John Wisniewski, the

state senator who was a scheduled speaker at the canceled conference.

"I think there’s got to be an apportionment of it. You can’t look

at residential ratepayers as being the source of allowing utilities

to recover the cost of stranded costs.

"The industry has enjoyed an above average rate of return on its

investment, that certainly has to be considered. And commercial users

need to share part of that cost. Overall, commercial users would

benefit

far more than the resident on energy deregulation. It’s not just

plants

and equipment, it’s people. The people are also stranded and have

to be added into that calculation."

One group of people particularly eager to see deregulation implemented

are retirement home seniors. In July the Energy Committee from

Clearbrook

joined the Coalition for Competitive Energy. The group represents

3,200 seniors living in planned retirement homes — all of whom

live in electrically heated houses and are struggling to afford high

rates.

In a press release, the CCE held that the Clearbrook seniors were

not happy with a pilot program sponsored by GPU Energy that resulted

in a five percent reduction. The committee also sides with Wisniewski

on the stranded costs issue. "We no longer want to pay for

stranded

costs," says Ted Frankel, the committee’s co-president.

Top Of Page
Auto Reform: Pay On Time!

It doesn’t matter just how you drive, it matters also

how good you are with your insurance company. The first of new auto

reform measures are scheduled to take effect this fall, with the

implementation

of a three-tier rating system that ranks drivers in three categories,

according to their driving record, their accidents, and how promptly

they pay their premiums. (Yes, that’s right, this latter point is

a major determinant of how much you will pay.)

Preferred-tier drivers: have clean driving records, are

experienced drivers, have been customers of the current insurance

company for at least three years, and have a history of paying

premiums

promptly.

Standard-tier drivers: are experienced drivers who may

have up to six motor vehicle points but no at-fault accidents.

Substandard-tier drivers: "Have allowed their coverage

to lapse for nonpayment, have had at-fault accidents, are

inexperienced

drivers, have more than six motor vehicle points or have had numerous

claims."

Logically, the preferred drivers pay the least, the substandards

pay the most. These new tier rates go into effect within 60 days for

new policies and 90 days for renewals. Drivers who renew their

policies

after November 1, will have surcharges replaced by their company’s

tier system.

The mandated 15-percent rate reduction will go into effect in

mid-1999.

More information can be obtained by contacting Professional Insurance

Agents New Jersey, a trade association representing insurance agents.

PIANJ has published a four-page booklet for insurance agents and

companies

to share with their insureds. Call 800-424-4244.


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