Lumbering along
by Anthony Noto
Updated 03:10 PM, Sep-17-2010 ET
Perhaps nothing can be greener than using all the old planks, beams and other materials stripped from factories and barns to remodel homes. The nostalgic, often distressed, look has even gained a measure of design sophistication.
But like their new construction counterparts, wood reclamation and restoration companies are as beaten down by the real estate and economic slump as a weathered plank of flooring from a log cabin. Some companies have filed for bankruptcy, while others aren’t fetching anywhere close to the valuations they were in yesteryear. It’s an industry dominated by very small operators, and many have seen their sales cut in half.
“We’re about as mom and pop as you can get,” says Rick Fast, who owns Canadian Heritage Timber Co. in Chilliwack, British Columbia.
But for buyers, the wood reclamation and restoration industry could be an opportunity. Deals are being made. In May, Boston and New York private equity firmCharlesbank Capital Partners LLC acquired Cedar Creek Inc., a Tulsa, Okla.-based cedar and lumber distributor, for an undisclosed sum. And on Sept. 8, New York PE firm Agora Capital LLC acquired Antique and Vintage Woods of America Inc. Plenty of other assets are available through bankruptcy. Eugene, Ore.-based States Industries Inc., which manufactures and sells natural wood-veneered panels to be used for cabinets, furniture and fixtures, filed for Chapter 11 on Aug. 24 and is looking for a buyer. St. Joseph, Kan.-based American Walnut Co., a maker and distributor of lumber and flooring products, went bankrupt in July. Chesapeake Hardwood Products Inc. of Chesapeake, Va., which manufactured wood paneling and plywood in the days before the housing downturn, is liquidating.
“We’re definitely open to acquiring complementary businesses,” says Jamie Hammel, the president and founder of Agora Capital. “It’s very fragmented, and we’re looking to consolidate the industry.”
In Pine Plains, N.Y.-based AVWA, Agora Capital got a company that managed to salvage wood from a torn-down stretch of boardwalk in Coney Island, N.Y., as well as material from an ancient Chinese temple dating as far back as the 16th century during the Ming Dynasty.
“It comes out of the structure, we beautify it and install it,” Hammel says. “Every product has a historical narrative to it.”
Not to mention, in many cases, a steep cost. AVWA sells material for between $8 a foot and $50 a foot. “That might not include installation,” Hammel adds.
Little wonder why business has warped for many wood reclamation companies. The construction industry on the whole contracted during 2008 and for most of 2009 due to excessive supply, high inventory levels and insufficient demand. Wood restoration and reclamation was a particularly cluttered sector.
“During the building boom that led up to this crisis, we were selling all kinds of lumber,” explains Dale Lehmer, who owns Antique Woods & Colonial Restorations Inc. “A lot of people thought it was a good business and got into it. They went and took down a bunch of barns. Then the crash happened, and a lot of people were sitting on lumber and the sales stopped. I’d say our sales went down by 50%.”
In the last couple of years, Lehmer says, his Morgantown, Pa., company reached around $1 million in annual sales. “In the ’80s, I was up to $3 million,” he notes.
Lehmer, 66, wants to retire, but he’s skeptical that an outsider will be able to run the company he started 35 years ago. “The problem with my business is me,” he explains. “It’s my experience. You can’t really sell that.”
Lehmer would prefer to transfer ownership over to his business partner Rick Haller, who’s already familiar with the process and craftsmanship behind wood restoration, but he’d consider a sale of AWCR now if the right price was offered. So far, though, he hasn’t come across any potential buyers.
David Facia has, but the offer he got for his Baraboo, Wis., operation, Restoration Lumber Co., was from a Chicago company back in 2008. “We spoke a few times, but at the time I just wasn’t interested,” he says.
He is now, however. “We’ve talked about it, my wife and I, but haven’t done anything yet,” Facia explains.
Facia, now in his 60s, has been running the company with his wife for about 10 years. He operates mainly by networking with various demolition companies, taking the lumber left over from when an old barn or log cabin is torn down and selling it to local contractors who will then turn it into, say, wide-plank flooring.
“We’ll do $1 million in sales during our best year or so, and a lot of other companies would be in the $2 million range,” he reports. “Although our business is down about 40%, we’re still moving our product.”
Then there’s Vintage Timberworks Inc. of Temecula, Calif., which like many other reclamation and restoration companies, caters to “almost exclusively high-end customers,” says owner Jeff Husted. “Our exit strategy is, at some point, to definitely sell the company to someone outside or [within], but I wouldn’t consider selling it until we get our numbers back prior to the recession.”
Indeed, despite a clutch of bankruptcies in the industry, owners are careful not to sound desperate.
Canadian Heritage Timber’s Fast has been approached by prospective buyers interested in breaking into the market, but he has resisted cutting a deal.
“You have these approaches, but you have to be careful,” he says. “It’s personal. It’s my business and if someone wants to hunt it down, I have no problem selling it, but it’s got to be well worth it.”
Four years ago, Canadian Heritage Timber’s annual revenue was more than $1 million. Now it’s at $750,000. Within that period, Fast was able to repay $25,000 in debt by cutting staff and finding new ways to turn a profit, such as taking the wood from trees felled by the pine beetle, and recycling it. “Pine forests are dying off because of a beetle that climbs under the wood and kills the tree,” he explains, adding that the problem prevails in British Columbia, Alberta, parts of Washington state and Idaho. But the wood itself, Fast says, “makes beautiful flooring.”
Fast keeps wood ranging from white oak that was once part of a 19th-century tobacco warehouse in Tennessee to pine that was retrieved from a burnt down strip club in Vancouver, British Columbia. “If I was in the conventional wood industry, there’s no story,” he asserts. “And most environmentalists would say I’m not helping the [environment]. [But] we do our part in the world of recycling.”
And yet it was the desire that Agora Capital’s Hammel had to do something environmentally sound that led the PE firm to make AVW its first portfolio buy. “He was looking for something natural or green,” says his Manhattan-based business broker, Mel Lisiten.
Over the course of about six months, Lisiten assisted Hammel in looking for an initial target to launch the Agora Capital portfolio, including a medical software firm based in Long Island, N.Y., and a nutritional supplement company in Miami. But it was a prospect Lisiten had firsthand knowledge of — AVW owners Dale Mitchell and his wife hired him in 2008 to explore exit options before deciding to put it on the market in April — that caught Hammel’s eyes.
“That’s what’s interesting about our project,” Hammel says about AVW. “It’s reclaimed wood. We’re not taking down trees.”
Even though he has no prior woodworking experience, Hammel will be taking on a managerial position with AVW. For several months, the Mitchells will work with him to ensure a smooth transition before he runs the business on his own.
Among Hammel’s plans is one to expand product offerings, which right now include mostly wide-plank flooring and hand-hewn beams. Another is to open new locations across the U.S., including a showroom in New York, with the goal of attracting designers, architects and contractors to the industry. He’s knocking on wood that a double-dip recession won’t interfere.
