Pittsburgh (2550)

Monday, 22 July 2002 09:40

A fond farewell

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For nearly three years, it has been my pleasure to write this column and share a few pearls from my experiences. But life is full of surprises, and later this month, my wife, Margaret Tyndall, and I will be moving to the Big Apple.

So, I've been thinking about what I could say as an appropriate farewell to the city I have called home for 35 years. Certainly, regular readers will know how I feel about the importance of the special relationship between a manager and his or her people. It may sound a bit old-fashioned in today's business environment, but your people are still your greatest resource. Investments in developing your people will continue to pay dividends.

In several columns, I wrote about the importance of having a clearly defined vision or mission statement that can provide direction to people, one that creates a sense of community which allows your workers an opportunity to enjoy a sense of participation and personal growth from their working experiences.

I also have written about the importance of creating a working environment based on mutual trust, and how an organization can save money by establishing an atmosphere founded on values and principles rather than relying on rules and regulations. In his book "Trust," Francis Fukuyama points out that systems of formal rules and regulations have to be negotiated, agreed to, litigated and enforced. Monitoring rules and regulations can be costly and disruptive, while a sense of trust can add value to an organization.

Without a doubt, the column that resulted in the greatest number of phone calls and e-mail -- and speaking opportunities -- was the one entitled "Workplace Spirituality" (August 1999). It was gratifying to know that so many people recognize that there is a place for the Golden Rule in the workplace. I'm talking about spirituality, not religion, per se. People have a right to believe, or not to believe. They have a right to work without feeling compelled to accept another person's belief system.

But, in today's environment, with all the mistrust, anger and violence, an ever-increasing number of people are looking for a sense of purpose for their lives. It's apparent to me from my interactions in workshops and following speeches that people are looking for a way to make their lives more meaningful.

Since most people spend the majority of their time working, having a strong sense of purpose in their work can readily transfer to their personal lives. One way to help people grow through their work is to encourage a sense of commitment. I realize that, today, it's not uncommon for people to change jobs and even make complete career changes with alarming regularity. But where a strong sense of commitment to the job and to the organization exists, so does a greater sense of purpose.

W. H. Murray wrote: "Until one is committed, there is hesitancy ... the moment one commits oneself, then Providence moves, too. All sorts of things occur to help one that would never otherwise have occurred ... "

The commitment that builds within each organization ultimately will expand to the community at large. And the result will be a stronger and more viable Pittsburgh.Best wishes to you all. William Armstrong, a management consultant for 30 years, is president of Pittsburgh-based management consulting firm Armstrong/Associates. Until he leaves for New York City, he can be reached at (412) 276-7396.

Monday, 22 July 2002 09:39

The time is now

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Given its large number of electoral votes, Ohio has always been an important state in presidential politics.

As the 2000 campaign comes to the forefront, it seems to be developing into an important swing state in determining who will be our next president. In keeping with its mandate to promote the open discussion of issues affecting businesses, Ohioans for Better Business (with SBN affiliation) would like to host a two-part forum in September that will provide the Republican and Democratic nominees for president separate opportunities to discuss issues of concern to business owners and to explain their plans for creating a strong pro-jobs environment in Ohio and the nation.

We spearheaded the creation of Ohioans for Better Business because of our experiences during the past 10 years as the largest chain of business-to-business publications in Ohio. In our business dealings throughout the state, an increasing number of business leaders voiced their interest in creating a forum to discuss taxes, health care, the environment, labor relations, campaign finance reform and other issues of importance.

I have aired many of these issues in my column, which reaches more than 300,000 readers -- most of whom are presidents and owners of companies ranging in size from 20 to 500 employees. Few topics bring as much feedback as those that have a political focus to them, because politics can affect whether a business is successful or not.

A simple change in an environmental law can have a huge impact on business. An administrative ruling can mean the difference between a business surviving or failing. Too many times laws are enacted or changed without proper input from business owners and leaders. It's time our representatives in Congress and the White House hear our side of the story.

In short, business owners care about what happens in Washington, which is why we created Ohioans for Better Business. We believe the work of the federal government clearly dictates the future of Ohio's business climate, for better or worse. Ohioans for Better Business is dedicated to promoting the open discussion of issues impacting our business communities.

While more than just a business advocacy group, we will be supporting the advancement of federal, state and local legislation that will support successful Ohio businesses and make the climate here business-friendly.

Each of our two proposed forums will be by invitation only and include business owners and members of top management from companies throughout the state. This will be a great opportunity to talk to other owners who have similar concerns and to hear first-hand what our representatives are doing to improve the business climate. If you are interested in attending these events, please contact us.

We also want to encourage any feedback on issues you might have. It is very important that we hear from you about the issues that affect your day-to-day operations.

What can political leaders do to make your business more successful, generate more jobs and make the community a better place to live? Now is the time for your voice to be heard. We need your support. Many people don't bother to get involved because they don't feel they can make a difference. However, our goal is to create a unified voice for business owners and leaders and bring attention to the issues that affect them. Synergy is where the sum of the parts is greater than the whole. Without you, we are missing a very important part. Fred Koury (fkoury@sbnnet.com) is president and CEO of SBN.

Monday, 22 July 2002 09:38

Web watch

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Easy-to-use Web sites with free information to help you manage your business

www.whatsnu.com

The name just about says it all. This site displays all of the URLs posted within the last 24 hours, organized by topic and category. And you can subscribe to an e-mail newsletter to receive information in your areas of interest. Subscribers receive a free weekly newsletter notifying them of new Web sites being launched . The search engine accepts URLs and filters new Web site submissions by date and/or category.

www.score.org

The Service Corps of Retired Executives has beefed up its site, offering a revised version of its online counseling, success stories and a content-rich resource center that doles out information on business planning, human resources, legal matters and more. Online counseling puts you in touch with seasoned business pros who answer questions via e-mail. Business professionals, authors and entrepreneurs offer their wisdom and comment on the latest trends in the guest feature section.

www.entreworld.org

Entrepreneurs offer advice on topics from business valuation to marketing to growing your company. The site provides a free e-mail newsletter, a Top Advisors in which experts give valuable how-to information, and discussion groups that connect entrepreneurs, academics and service providers.

www.home.cnet.com

Arranged like many of the popular search engines, CNET.com offers hardware and software reviews, Web site building information, the latest pricing information on equipment, Internet tools and more. TechNews offers the latest scoops in the technology industry. Investors can get stock quotes, product recommendations and how-tos.

Monday, 22 July 2002 09:38

Saving and the self-employed

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Self-employed individuals make up the fastest-growing segment of the business community.

Unfortunately, many self-employed entrepreneurs believe that, because they are on their own, they don't have access to retirement plans. They don't realize they have access to a variety of plans to shelter income for their retirement. Most have limits, but they far exceed the limits for IRAs.

Defined-contribution plans

These plans, known as profit-sharing plans and money purchase pension plans, can cover the self-employed person as well as incorporated businesses. With a profit-sharing plan, you can contribute as much as 15 percent of your first $170,000 of compensation in the year 2000.

For money purchase pension plans, you can contribute as much as 25 percent of your first $170,000 of compensation in 2000. Businesses can have both types of plans, but participants, including owners, can contribute no more than $30,000.

With a money purchase pension plan, you must make contributions every year. With a profit-sharing plan, the contributions are at your discretion. Therefore, many self-employed people establish both types of plans.

However, they typically make maximum contributions to the profit-sharing plan (contributions are optional if the business gets in financial trouble) and minimal contributions to the pension plan -- but enough to maximize the $30,000 contribution.

SEP plans

Under a Simplified Employee Pension (SEP) plan, those of you who employ others can contribute toward your employees' retirement. You simply have each employee establish an IRA wherever he or she would like. SEP rules allow you to make yearly maximum contributions of up to 15 percent of an employee's compensation or $30,000, whichever is lower, to a SEP-IRA for each participating employee. You then can use these contributions as a tax deduction.

As with a profit-sharing plan, it's not mandatory to contribute to your employees' SEP-IRAs, but if there are contributions, they must be based on a written allocation formula and cannot favor highly compensated employees. After the contribution is made to the SEP IRA for each employee, the rules for traditional IRAs apply.

If you're self-employed, you have to consider special rules when calculating the maximum deduction for contributions. According to the IRS, your limit is equal to your net earnings. The IRS provides a worksheet in Pub. 590, chapter 4, that can help you make these calculations.

SIMPLE plans

Savings Incentive Match Plans for Employees (SIMPLE) cover employers with 100 or fewer employees. Retirement accounts under this plan can be set up as a 401(k) SIMPLE plan or a SIMPLE IRA plan.

Under a SIMPLE IRA plan, employees can choose to reduce their pay a certain percentage each pay period and allow the employer to contribute that amount to the IRA. You also can make matching contributions of up to 3 percent of salary to only those employees who participate by reducing their salaries or nonelective contributions of up to 2 percent of salary to all eligible employees, regardless of whether they participate by making elective salary contributions.

To be eligible, employees must earn at least $5,000 during any two years prior to the current year and expect to earn at least that much during the current year. Maximum elective contributions, adjusted for cost-of-living increases, are $6,000 for employee-deductible deferrals. With a matching employer contribution, the total potential contribution to a SIMPLE-IRA could be $12,000 a year for the most highly compensated employees.

A 401(k) SIMPLE plan is merely a qualified 401(k) plan that adopts some of the SIMPLE rules to satisfy annual nondiscrimination tests. Louis P. Stanasolovich, named one of the best financial advisers in America the last four years by Worth magazine, is founder and president of Legend Financial Advisors, Inc., a fee-only financial advisory firm located in the North Hills. Reach him at (412) 635-9210. The firm's Web site is www.legend-financial.com.

Monday, 22 July 2002 09:38

More good questions

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Last of a two-part series I am frequently asked by clients to spell out the questions they should be comfortable asking on a sales call. This is a dangerous task because it presupposes that every prospect is the same and every sales call is going to go perfectly.

Nonetheless, here are the final 20 fundamental questions which you need to be comfortable asking during the early stages of the sales process, if you want to master the art of selling. They're part of what I call "Lewis' Essential 44" -- or 44 questions you should consider asking during a sales call.

Responding to questions and objections

25. I'm glad you brought that up, but why is it important to you?

26. Good question. You must be asking that for a reason?

27. Suppose I said (blank), what would you say?

28. I'm not sure I fully understand; could you help me?

Uncovering a prospect's budget

29. Do you have a budget for this?

30. Would you mind sharing it with me in round numbers?

31. Now that you know how much it is going to cost you in terms of time and money, are you still committed to moving forward?

Uncovering the decision process

32. What is the process you go through when making these kinds of decisions?

33. Who, in addition to yourself, is involved in making the decision to buy?

34. You mean you don't get any help, from a president or a committee?

35. When do you see yourselves making this decision?

36. Why is that date important?

Gaining commitment

37. If I were to present a solution to the problems we've discussed in a manner that is consistent with how you make decisions, at an investment that is consistent with your budget, is there any reason why you couldn't tell me yes or no when I make my presentation?

38. On a scale from one to 10, with 10 indicating that you are ready to buy and one indicating that you have no interest in our help, where do you stand?

39. What do you need to see or hear to get to 10?

40. What would you like me to do now?

Confirming the sale

41. What is the one thing that could kill this deal?

42. When the competition finds out that you have given us your business, what do you think it's going to do? How are you going to handle this?

43. How often should we meet to discuss our business relationship so that I can ensure that we are meeting your expectations?

When the day comes where we have met or exceeded your expectations, I would like to be able to ask you for your help in meeting other people like yourself who might also benefit from our services. Would you be comfortable with this? Larry Lewis is president of Total Development Inc., a Pittsburgh-based consulting firm specializing in sales development and training. Send him your comments and questions via fax to (724) 933-9224 or visit his Web site at totaldevelopment.com. Reach him by phone at (724) 933-9110.

Monday, 22 July 2002 09:38

Firing your customers

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The opportunity to supply major components for a 52-story high-rise in the middle of Manhattan seems like the kind of project that most companies might jump at the chance to snag.

That's not necessarily so, as far as Sandy Ussia and Laura Huch are concerned. The sisters, owners of Cranberry Township-based Castcon-Stone Inc., a $3 million revenue fabricator of precast concrete stairs and architectural products, have discovered that basing their business relationships on anything but predictable profitability is worth avoiding.

Castcon-Stone is doing work for the aforementioned New York City project, but Huch, Castcon-Stone's president, emphasizes that she had to first be assured that her company could do the job on its own terms.

"They would have very much liked to have done it on their terms," says Huch of the client.

What allows Castcon-Stone to wield such clout? Huch acknowledges that a surging economy has produced strong demand for its products, keeping the business growing at a brisk clip. But a more deeply held principle is involved as well.

"Even if we weren't busy, it would still be my position," says Huch.

Huch and Ussia have learned that having a lot of customers, even a lot who place big orders, isn't necessarily a sure path to solid profitability. For Castcon-Stone, that has meant taking a hard and comprehensive look at the company's costs -- and its customers.

While Huch and Ussia assumed ownership of Castcon-Stone just this year from their father, both have worked in the 46-year-old business for more than a decade. About five years ago, they got the feeling that something wasn't quite right with the company's growth efforts. They were working hard and doing business, but their profits weren't reflecting their efforts.

"I was having a lot of problems with our profit margins fluctuating so much," says Huch.

The partners decided they needed to analyze two general aspects of their business -- their product offerings and their customer roster -- and how the two combine to produce profits.

They realized it would be no easy task. The variables proved complex and sometimes difficult to quantify. They knew that the cost of projects didn't just involve time and materials, but other factors as well, including the terms and conditions of payment and the level of hand-holding they might have to do with a client to complete a project.

And they suspected that some of their long-time customers would be among the poor performers.

They also knew that some of their products weren't bringing enough profit. They sensed that if they were selling low-profit products to customers who were stretching out payment schedules, their margins likely would shrink even further.

Ussia, who joined the company in 1990 after spending several years teaching college-level computer and accounting classes, had upgraded the company's information systems, giving Castcon-Stone a good handle on its costs. That allowed them to figure out what their profit is on each type of product and to have detailed records of all the projects they had performed the previous five years.

They also looked at how terms and conditions of payment affected their profitability with each customer.

Says Huch: "Certain customers, no matter what we were selling them, weren't profitable."

In some cases, the payment terms they had arranged required Castcon-Stone to draw on its line of credit or dip into cash reserves, something that increased its costs.

After they crunched the numbers, they concluded that about 15 percent of their customers were producing little profit for the company because they weren't purchasing profitable products or they operated under terms that cut into Castcon-Stone's margins. In some cases, it was both. The answer, they decided, was to increase prices on their low-profit products and adjust the terms and conditions of their contracts.

The number crunching was relatively easy. Huch and Ussia say they realized they would have to approach customers with some adjustments in pricing and terms. For some, it was a case of "sticker shock." Some accepted the new arrangements, others objected. In the end, they lost about half of the bottom 15 percent as customers.

Bracing for the change

As Huch and Ussia learned, making changes in the fundamental ways you do business isn't always easy. Customers are going to resist change, especially if it might cost them more.

"Certainly, you're going to have long-term customers saying, 'What's going on here?'" says Huch.

Even so, having hard data and a solid rationale makes it easier for customers to accept.

She also points out that the changes can alter the way you look at your company. Cutting back on some lines of business and increasing others can have dramatic internal effects, the sisters acknowledge.

The process, which Huch says needs to be ongoing, has yielded positive results. While some customers went elsewhere, the company made up for the losses by focusing sales and marketing efforts on more profitable customers and products. Sales last year increased 25 percent, and are expected to increase by the same amount this year. Even more important, profitability is up -- a fact that makes the effort worth it.

Says Ussia, "It's not a good feeling to have busted your butt for a whole year and only made 1 percent." How to reach: Castcon-Stone, (724) 776-1777

Ray Marano (rmarano@sbnnet.com) is associate editor of SBN magazine.

Monday, 22 July 2002 09:38

Business Notes

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Spence Publishing Group, led by husband and wife team Bill and Stephanie Spence, has rolled out its second annual Pittsburgh NOW, a magazine guide book showcasing the region's "treasures and hotspots." The publication, they say, is designed to attract commerce, families, students and visitors to the region. Distribution includes hotels, the airport, relocation services, bookstores, corporations, universities, grocery stores and other retailers. Spence Publishing Group also publishes the monthly Pennsylvania Health & Fitness Magazine.

BroadStreet Communications has been launched with a $62 million equity investment by Frontenac Co., Boston Ventures and Catalyst Ventures. The company will deliver an integrated suite of business communication services.

James Lange, an attorney and CPA, has launched www.outestateplanning.com, a Web site providing retirement and estate planning information addressing the specific needs of the gay and lesbian community.

Solid State Measurements Inc. is planning to begin shipping the first of its new line of equipment for testing production semiconductor wafers.

Desbrow & Associates has been selected to develop a multimedia marketing campaign for the Allegheny Trail Alliance.

CFA Real Estate Network, a national full-service title company, has launched its e-commerce Web site at www.cfacts.com.

Management Science Associates Inc. has signed an agreement with DIRECTV Inc. to integrate MSA's Gabriel software into DIRECTV's programming. Management Science Associates has also formed a nonprofit company with CONSAD Research Corp. to bid on U.S. Health and Human Services contracts to manage the national organ transplant system and support the analysis of its data.

The Indiana County Chamber of Commerce has established a Web site at www.indianacountyjobs.org that provides information about job and career opportunities in Indiana County.

IMS Systems, a German manufacturer of isotope, X-ray and optical measuring systems, has opened its first U.S. office in Wexford.

Leveltek International LLC and Leveltec Processing LLC of Benwood, W.Va., have named Levy Industrial as their advertising agency.

Beverly Morrow Associates has changed its name to BMA Communications.

Kerotest Manufacturing Corp. has acquired the Marsh Needle Valve product line from Marsh Bellofram Corp.

Pennzoil-Quaker State Co. has sold its undercoatings business to Pittsburgh-based Oil Service Inc.

Discovery Entrepreneur Resources Inc. has been chosen by Internet start-ups Earthpermit.com, ebooth.com and Cyber Surfin.com to provide marketing support for their online technologies.

Respironics Inc. has signed a three-year agreement with AmeriNet to provide certain of its ventilation products and accessories for a cardiovascular services program.

Advanticom Inc. has leased the first floor of the Stores Building at the City Center of Duquesne. Advanticom installs and maintains voice, data and video systems, and local and wide-area network systems.

Yearick-Millea has been named marketing communications agency for Pittsburgh Companies North, a Butler-based food service company.

General American Corp. has received a multiyear consulting and technology contract to assist in building a new real estate services business for SunTrust Banks Inc. of Atlanta.

P.W.Campbell has been awarded the design/build contract by Jessop Employees Federal Credit Union in Washington, Pa., to construct a 2,500-square-foot main office building.

Howard Hanna Real Estate Services posted a record $708.5 million in collective volume for June. The reported figures are based on listed, closed and written volume from 58 office locations.

MudAdvertising.com has a new client, Abruzzi's Italian Restaurant, located on the South Side.

Howard Hanna Real Estate Services has broken ground for a four-story, 43,000-square-foot office building in Franklin Park Corporate Center.

MD&A Financial Management Co. has been approved as a registered investment adviser with the state.

Your Financial Connection is a new talk and call-in program broadcast on WORD-FM 101.5 from 9 to 10 a.m. on Saturdays. Mike McCormick, president, Atlas Brokerage Co., is the host.

Dick Corp. has received a contract from the Clay Center for the Arts & Sciences of West Virginia for construction of a $56 million cultural and educational center in downtown Charleston, W.Va.

MSA Process Automation Solutions and Services Inc. and the Orsi Group of St. Louis have formed a strategic partnership to develop and provide integrated plant systems to the metals industry.

3 Rivers Connect has received a $50,000 grant from the Richard King Mellon Foundation to enhance greenpittsburgh.net, an interactive guide to Southwestern Pennsylvania's environmental assets and natural amenities.

Point Park College and the Bidwell Training Center have established The Point Partnership, a program that will enable Bidwell graduates to complete bachelor's degrees at Point Park College.

Atlas Software Technologies Inc. has agreed to invest at least $2 million in training, jobs and capital in South Africa over the next three years. During this period, at least 100 South Africans will be trained in advanced technologies through intensive six- to 18-month programs administered by Atlas Software Technologies.

The sale of WorldClass Processing Inc. to Samuel Manu-tech has been completed, following the approval of a U.S. bankruptcy court.

The Greater Pittsburgh Convention & Visitors Bureau has launched the Culture Caravan, a shuttle service that operates between downtown and the North Side and downtown and the East End. The shuttles operate between 11 a.m. and 5 p.m. Cost is $1 per person.

Custom WoodWorks Inc. has located in the former Dlubak facility in South Buffalo Township. The company is leasing 38,000 square feet of space with the option to purchase, and is upgrading the facilities in an $815,000 renovation.

Monday, 22 July 2002 09:38

Airing it out

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A little more than a year ago, West Penn Airport was a tiny, obscure, public-use airstrip known only to a close-knit group of flying enthusiasts.

Then, one day, everything changed. Suddenly, that little airstrip and the property surrounding it were propelled into massive economic development that made even the governor's office sit up and take notice.

That was the day Rock Ferrone flew over it.

Ferrone, president and owner of printing industry equipment manufacturer Rock-Built, simply wanted a place to land and keep his four-seater Cessna. So when he found out the airport's owner wanted to sell, he couldn't resist. He also couldn't sit still.

Ferrone didn't see just a tiny airstrip. He envisioned an entire business community built around a slick, new airstrip, with business owners flying in and out all day long. And he saw himself leading the way.

If skeptics existed back then, when he started articulating his high-flying ideas to anyone who would listen, they're gone now, thanks in large part to the giant earth movers, bulldozers and dump trucks that have begun to reshape the land around the airstrip. The earth-moving equipment is preparing the land for a 270-acre office park, which he has named Rockpointe Business Airpark.

Ferrone, with help from Pennsylvania Lieutenant Gov. Mark Schweiker and a host of other local dignitaries, recently kicked off the development with a ground-breaking ceremony. However, Ferrone himself has been breaking new ground, figuratively, for the past year as he works every state and federal government angle in his efforts to talk up the project. He was also trying to line up early funding for a project which he predicts will cost about $30 million before it's all finished.

His efforts have landed him as a poster boy of sorts for general aviation-driven economic development in the state as he cuts through bureaucracy with speed and a welcomed sense of wide-eyed naivete. In fact, he managed to convince not only state officials but township and school district officials as well that his development project was worth getting behind.

As a result, the combined taxing bodies have designated Ferrone's site as a Keystone Opportunity Zone, a program launched last year which allows businesses to locate to the site free of local, school and state taxes for 12 years. Ten-and-a-half years remain on that program, compelling Ferrone to forge ahead even more aggressively than before.

Said Schweiker at the event: "Suddenly we stand here looking at the soon-to-be-developed 300-acre airport industrial park. Together, there's no stopping Allegheny County. There's no stopping Pennsylvania."

Rita Pollock, executive director of the economic development and planning agency SPC, sums up Ferrone's efforts simply.

"He's an absolute dynamo," she says of Ferrone. "You don't see people like Rock Ferrone who are so driven and so active. There's something about him. He's such a good guy. And this project is outstanding, because it combines general aviation and industrial sites. It's so clearly a winning opportunity."

Mulugetta Birru, county development director for Allegheny County at the time of the ground-breaking, adds: "He has the energy to move a mountain."

In a very real sense, that's just what Ferrone and the earth-moving crew are doing. They are preparing the land for a new airstrip that will extend 5,000 feet --almost double the size of the existing strip -- and be 100 feet in width. Plans also call for a new terminal building, which will house a restaurant and fuel service company for aircraft, as well as facilities for the two flying clubs that use the airport.

The airstrip and terminal ultimately will be turned over to a public authority as a requirement of receiving state and federal grants that are available to improve public-use airports.

But the biggest part of the development is the rest of the land surrounding the airport, which Ferrone hopes to turn into a parklike office complex housing 30 to 40 businesses and providing amenities such as a walking trail, a golf course and even racquetball, to name a few.

"I want it to be a country club environment," Ferrone says.

Ferrone has secured a significant development commitment from Zambrano Corp., which has known the Ferrone family for years, according to Eugene Zambrano III, vice president of Zambrano Corp. and a general partner in the firm's commercial real estate holdings. Zambrano, which provides commercial construction services, owns 16 commercial and residential buildings throughout the Pittsburgh area, including a 70-unit high-rise in Leetsdale, a 10-story, 100,000-square-foot building in Monroeville and a 50,000-square-foot commercial/industrial building in the RIDC Park in O'Hara Township.

"What we bring to the deal is 40-plus years and tons of real estate development credibility," Zambrano says.

For starters, Zambrano plans to build a 25,000-square-foot headquarters building for its own company, which currently is located in Sharpsburg. The firm is doing so on a five-acre parcel it purchased from Ferrone. Zambrano says the company will use three of the acres for its headquarters and the other two for other "real estate investment."

Zambrano says he reacquainted himself with Ferrone last year after seeing a cover story about him in the November issue of SBN. From that point, Ferrone took him for a ride to the airport for an early look.

"As soon as we drove up there last November, it's like I got it -- I understood," Zambrano says of Ferrone's vision for the property. "He's a fireball and a great entrepreneur."

Zambrano and Ferrone also have entered into an agreement to jointly develop a 52,000-square-foot flex-space office building on speculation and are in discussions for others.

Moreover, Zambrano Corp. is in line to provide construction services for any third-party developers who plan to purchase land in the air park for office buildings. Zambrano won't disclose specifics, but he says he's in discussions with at least seven people who have expressed an interest in building.

Says Zambrano: "Right now the action is fast and furious." Ferrone, himself, plans to build a new headquarters and manufacturing facility there for Rock-Built sometime "in the middle of next year." He also has plans to build a new home on the property which would allow him to taxi from the runway right to his home. Daniel Bates (dbates@sbnnet.com) is editor of SBN.

Monday, 22 July 2002 09:38

A Class-A Gimbels

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It's amazing what $50 million, the removal of 25,000 tons of debris and a little attention to historic detail can do for an old department store building in the heart of downtown Pittsburgh.

That's what it's taking to transform an 86-year-old building, which has far outlived its original intent as a sprawling, 14-floor urban shopping experience, into one of the region's most colorful -- and state-of-the-art -- Class-A office buildings. It's a model of what can be done downtown to bring old, architecturally significant buildings into the 21st century.

The Gimbels building, designed by architectural firm Starrett and Van Vleck of New York City (the same firm that designed Lord & Taylor at about the same time), was built at the corner of Sixth Avenue and Smithfield Street in 1914. The building was constructed with structural steel covered with hard-baked clay tile, with a façade of brick and custom-made terra cotta tile moldings and other details.

A building in decline

For years, Gimbels served the region as a major department store, along with Joseph Hornes Co. and Kaufmann's, before succumbing to economic times that were driven largely by suburban shopping malls. Gimbels closed in 1986 and remained vacant until 1992, when a New York-based real estate investor named Richard Penzer bought it and slowly began a transformation.

His efforts brought in anchor retailers Burlington Coat Factory and, later, Barnes and Noble Bookstores, along with a few others on the building's lower floors, bringing it up to roughly 30 percent occupancy.

But it wasn't until members of the Rudolph family, which used to own the Wendy's restaurant franchise in Pittsburgh, and members of the Perlow family (the late Ed Perlow helped start Interstate Hotels), created a partnership to purchase the building last year that its future began to take shape. The partnership bought the building for a reported $15.5 million.

Then, with help from tax increment financing approved by Allegheny County, the City of Pittsburgh and the Pittsburgh School District, the owners embarked on what ultimately would become a $50 million transformation process.

No ordinary renovation

It wasn't just your typical old-building conversion into trendy, if not quaint, new office space. The owners envisioned a Class-A office building which, while showcasing the historic façade, would offer state-of-the-art accommodations for 21st century businesses. Such state-of-the-art amenities would begin with a hard-to-find floor plate of 45,000 square feet per floor -- more than an acre of space on each floor.

"Tenants around the country are looking for large, efficient floor plates," says Jeremy Kronman, a real estate consultant and leasing agent for Oxford Realty Services, which manages the building and its leasing efforts. "But to get a location in the city, you need to go to either an old building, such as a department store or warehouse, or build a new one. Here, we have the best of both worlds, with the combination of an historic outside and a high-tech inside -- and right in the heart of downtown.

"That's what makes this project so exciting."

The owners launched their transformation effort by renaming the building Gimbels Landmark. Then they enlisted the services of Pittsburgh-based architectural firm Burt Hill Kosar & Rittelmann, Architects, which set out to design a floor plan that would meet Class-A standards while also adhering to strict building and renovation standards set by the Pennsylvania Historical Commission and the U.S. National Park Service. Those agencies are involved because of special financing incentives which are tied to historic preservation of the building's façade.

That posed a number of challenges, according to Gary MacDowell, an executive from John Deklewa & Sons, Contractor, who served as construction manager for the project. For instance, the building's windows, made by Traco, could be made of aluminum, but they had to be designed to replicate the style of the original windows.

But when they were installed, a Park Service inspector decided the aluminum was too noticeable on the lower levels. So the owners had to resort to new windows made of wood for those floors.

Moreover, more than 500 pieces of glazed terra cotta tile representing 12 designs had to be matched and replaced. Even the type of solution used to clean the building was determined by the Park Service (Ivory dishwashing detergent), along with the level of water pressure in the pressure washers.

But, as MacDowell says, "In general, everybody has to realize that the Gimbels building will be the nicest office building in town. It's a rock-solid building that offers the best of both worlds."

High-tech insides

Inside, contractors have rebuilt the elevators, installing Otis Elevonics control equipment, which not only makes them faster but, as MacDowell says, automatically measures usage patterns and programs their positions throughout the day. Contractors also are installing a 12,000-volt electrical system that offers what MacDowell describes as triple redundancy aimed at protecting computers and other related equipment that prove sensitive to power surges and outages.

If one line shuts off, the additional lines will switch on in an instant, he says. Reaction time in switching lines on the current system is about an hour or so. Duquesne Light Co. is providing the fail-safe electrical system.

Then there's the heating and cooling system. MacDowell says it's the most flexible available, using an open-loop, closed-loop system that exchanges water that comes from cooling towers on the building's roof. The system will automatically adjust the temperature in any given area of the building, depending on worker preferences as well as variables such as where the sun is shining throughout the day.

The crowning feature

The signature feature in the building, though, is the seven-story atrium punched out of the center of the building and capped by a fancy glass-paneled dome That posed the most significant challenge of the project, since the building was already accommodating a few tenants on the bottom three floors.

All told, workers and bulldozers gathered up about 25,000 tons of concrete, brick, reinforcement rods and other debris, mostly after working hours, and funnel it all down a small chute on Strawberry Way, where tandem dump trucks lined up night after night.

"They hauled away thousands of truckloads," MacDowell says. "But the most difficult aspect was making sure there was safe construction."

In addition, the building features a top-floor outdoor garden courtyard, although MacDowell says it's not clear yet whether that courtyard will become a common for all tenants or accessible only to a tenant that occupies the top floor.

Space available

MacDowell expects the construction to be completed by the end of September. Meanwhile, Oxford Realty Services has been hard at work lining up tenants.

Kronman says the asking price is "in excess of $20" a square foot, which, he adds, is still about 10 percent lower in price than other Class-A offices in downtown Pittsburgh.

At the moment, United Healthcare occupies more than 60,000 square feet and the Port Authority of Allegheny County is moving its executive and other offices into more than 70,000 square feet. The Duquesne Club, which occupies an adjacent building on Sixth Avenue, has expanded its health club and other facilities into a larger space in the Gimbels building.

Kronman expects it to be at more than 65 percent occupancy when it is completed, with most tenants taking advantage of the large floor plate. However, the owners expect to offer smaller spaces as well -- as little as 2,000 square feet -- on some floors.

To market the building, Kronman says the owners and building managers have stuck with the 21st century theme, providing an extensive Web site (www.gimbelslandmark.com) instead of a hard-copy brochure. The site comes complete with artists' renderings, photos, news and information -- and an award-winning virtual tour of the building designed to collect information about the person doing the virtual walk-through.

"It's fun marketing a truly 21st century building, which this has become," Kronman says. "It's an exciting project. It's a world-class renovation, and there's nothing like this in Pittsburgh." How to reach: Oxford Realty Services, (412) 261-0200

Daniel Bates (dbates@sbnnet.com) is the editor of SBN magazine.