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Legatus Magazine

Gerald Korson | author
Jan 01, 2018
Filed under Featured

Coming out of the dark

Surviving storms of recession and crisis

The late 2000s saw the most significant decline in the U.S. economy since the Great Depression. Sparked by the bursting of the “housing bubble” in 2007 and a calamitous drop in the value of mortgage-based securities, the Great Recession created a devastating ripple effect on the economy: The stock market plunged, unemployment spiked, banks began to fail, and consumers had far less money to spend.

We talked with two Legates whose businesses faced particular challenges during this time. One suffered a catastrophic loss and was forced to rebuild; the other rode the real-estate market through its darkest days and resurfaced with a dynamic business model that drew from lessons gleaned from the process.

Trial by fire

Ralph Chappano’s company emerged from its major crisis in a blaze of glory —and it all started with a blaze, too.

In December 2009, the corporate headquarters and regional distribution center of Office Furniture Rental Alliance in East Hartford, Connecticut, was gutted by fire.

“It happened first thing on a Monday morning,” recalled Chappano, a Legate of the Hartford Chapter and the company’s co-founder and president. He had just finished a meeting offsite when he received the phone message and immediately drove to the scene. Cresting a ridge ten miles outside the city, he was startled to see a plume of smoke rising to the sky. “My hands started shaking,” he recalled. “I froze, and almost wrecked, because obviously at that point I knew it was serious.”

A five-alarm fire that started in a warehouse heating unit had engulfed the 50,000-square-foot facility, and nearly a hundred firefighters were on the scene. Fortunately, the couple dozen employees who had arrived that morning made it out safely.

By the time the fire was under control, the building was a complete loss. Several million dollars of inventory had gone up in smoke.

Chappano remembers the mayhem and confusion. Misinformation spread by word of mouth and in the media. “One of the real takeaways is that there is no substitute for good communication,” he said. “That’s one of the most important things we have at our disposal on a good day, but it becomes so much more magnified during a crisis.”

Good communication began with his employees. Chappano and his team gathered them offsite to explain the situation and the plan going forward. They offered counseling and encouraged employees to take whatever time they needed to recover from the trauma. There would be no layoffs, but everyone was asked to be willing to perform tasks outside their regular duties as necessary to get the business back on its feet.

“We committed to them, and they committed to us,” Chappano said. “We didn’t lose a single employee.”

Next was keeping the dealers and customers informed and getting systems running again. From temporary quarters, Chappano and staff contacted the other regional distribution centers across the country and discussed logistics for fulfilling orders. A message on the corporate website assured of continued operations. Much of the company’s documentation had previously been transitioned to the cloud, so most vital records were accessible.

“I don’t think we lost any customers as a result,” Chappano said. “It cost us a little money to respond, but that wasn’t even a consideration. Our focus was to take care of folks and to do what we needed to do.”

Rebuilding the physical plant went relatively quickly, with operations and inventory moving into the new facility about nine months later. Still, it was a difficult transition. “That whole first year amounted to a blur,” Chappano admitted. “But things just kicked in. We had great employees, and they all stepped up.”

From the first day of the crisis, Chappano found strength in his Catholic faith. “I found myself praying for help, for guidance, for calm,” he said. “The Lord tests us in different ways, but it’s all in how we respond.”

Chappano said his wife, Mary, “was an absolute rock through this process. I was under a lot of stress, but she was incredibly patient, supportive, and encouraging.” He credits Mary with helping their three children cope as the rebuilding process inevitably required more of his attention.

“If I had not had my faith and my family, I’m not sure what would have transpired,” he said. “That’s clearly what got me through this.”

Passing the cycle test

In 2005, Robert Reynolds and his brother Pete pooled their savings and invested in residential real estate. What immediately followed is what Robert calls a “five-year-long intense learning experience.”

The first years were “blissful,” but the recession years “were quite the opposite,” said Reynolds, a Legate of the Tampa Chapter. Had he known the recession was coming, “I don’t think I’d elect the extreme struggle that ensued.”

To be “cycle-tested” by the Great Recession presented special challenges for the Reynolds brothers. Their options were clear: success or bankruptcy. They knew the markets would turn and improve again someday, but not when. The strategy for survival required flexibility and instinct, and there was little margin for error.

They found themselves overextended in their investments. They had trouble with unreliable service technicians and foremen. Many residents defaulted on rent payments; to fill vacancies quickly, they accepted new renters without upholding high background and credit standards, which only exacerbated their troubles. “A short-term fix and a long-term headache,” is how Reynolds described that strategy. “We learned not to compromise on integrity of both employees and renters.”

To enter the real-estate market in 2005 was not a bold move, he noted, but to fight and succeed during the recession years certainly was. “Perhaps we were hard-headed,” Reynolds mused. “But it worked out. We persevered because we believed in the value we were creating in business and for society through owning and managing apartment homes.”

Fruits of perseverance

That spirit of perseverance was buoyed by realizing the impact of their efforts on the residents they served. “It was very important to us to not just collect rent from tenants, but to acknowledge the dignity and humanity of our residents and their families and seek to understand how we can improve their home and community,” he said. Treated with dignity, the residents took greater ownership in their homes and communities. “This is value creation on many levels, and certainly proved to be critical in maximizing our profits.”

The fruit of this experience was the emergence of Avesta Communities in 2010, just as the recession was winding down. With headquarters in Tampa, Dallas and Austin, Avesta is invested in some 11,000 apartments serving 30,000 residents. Robert and Pete are managing directors.

Avesta continues the vision the Reynolds brothers honed during those recession years. It is guided by a set of core virtues: namely love, faith, hope, humility, servant leadership, stewardship and hard work. “They’re a guideline for creating value in society through business in pursuit of the common good using Christian moral principles and ethics,” Reynolds explained.

Employees, or “teammates” — of which there are currently more than 300 — must commit to the Avesta vision. Hiring virtue over talent, he said, is critical: “You couldn’t bribe me enough to hire someone I didn’t trust after the hardknocks lessons of those recession years.”

Faith is at the foundation of Reynolds’ life, in business and beyond. His wife, Marya, and their five young daughters provide purpose and inspiration.

“My ultimate goal in life is to spend eternity with my family in heaven and to inspire as many other people as possible to seek truth, knowing that doing so will lead them closer to ultimate joy and fulfillment,” he said.

The Franciscan University of Steubenville graduate signs his emails AMDG (Ad Majorem Dei Gloriam — “For the Greater Glory of God”) as a way of keeping himself accountable, he said.

“I want to glorify God in everything I do, and I want my life to be a guide for others that points to something and someone far greater than myself,” Reynolds said. “Many Catholics hesitate thinking you can’t do this in business.

“They’re wrong. You can.”

GERALD KORSON is a Legatus magazine staff writer.


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