If only FEMA prepared for a disaster as well as The Mitchell Co. While confusion and inactivity plagued the government's response to Hurricane Katrina, this diversified Gulf Coast multifamily company mobilized almost immediately to help its properties and communities. In the fishing and shipbuilding village of Bayou La Batre, Ala., Mitchell Co. employees scrambled almost 2,000 eggs and fed approximately 1,500 people. Company staffers delivered vegetables to six Mitchell Co. complexes in Biloxi, Miss., and Gulfport, Miss., sharing the extras with Old Pass Road Baptist Church in Gulfport. The company also prepared 500 survival kits for people who were returning to their homes after the hurricane and installed roofs on single-family homes in Mobile that were damaged by the storm.
How can this multifamily, commercial, and single-family builder do so much so quickly? Just look at the parking lot at its Mobile, Ala., headquarters, where two large trucks that resemble RVs sit on the asphalt. The black one contains three bathrooms with showers. The red one essentially operates as a rolling kitchen, complete with dishes, pots, pans, silverware, cabinets, refrigerators, and a freezer. When a storm hits, The Mitchell Co. sends these trucks, staffers, and SUVs with "Disaster Relief Team" signs into hurricane-scarred areas to help residents and employees alike.
"We will load up the red wagon and black shower truck and will take it to wherever our people are," says John Saint, Mitchell's president and CEO. "We'll feed them and do whatever we have to do keep that operation going."
With properties all up and down the Gulf Coast, The Mitchell Co. (which also manages commercial properties) knows it's not a question of if a hurricane will affect the company–it's a question of when. According to Chuck Stefan, senior executive vice president for apartment development, 60 percent to 70 percent of the properties that Mitchell has built or manages sit in a hurricane zone. So, when a storm hits, the company has to be prepared to take care of its people. And in recent years, the company has put its disaster response plan into action more times than it would care to remember.
"They've seen a lot of hurricanes," says Jane Z. Harrison, a former Mitchell employee and vice president of Collateral Real Estate Capital, a lender based in Birmingham, Ala. "They have their systems in place. They ... ascertain what the damage is and what needs to be done. They immediately start working."
Military Precision
It really should come as no surprise that Mitchell is so prepared to respond to a hurricane. After all, three Vietnam vets–Saint, Stefan, and Donald P. Kelly Jr., the senior executive vice president for commercial development–run the company, and their military experience taught them to be ready for any natural catastrophe. "We have a very sophisticated disaster plan," Saint says. "The minute we have a storm in the Gulf, it activates. We have to take care of our people first. If we do that, the rest of the plan works like clockwork."
The company opens its offices to employees who live in areas at risk for flooding, and it stocks its headquarters with disaster-friendly supplies such as Heater Meals. These red-packaged, self-heating entrees provide nourishment for workers when food can't be cooked or groceries are in short supply. "One of the biggest mistakes we made the first time was that we didn't have food here because nothing was open," Saint says. "Now, we have the food to be able to feed our people for a short period of time."
With gas also often in short supply during a crisis, transportation can become an issue as well. "They have gas available for their employees that is stored at the airport hanger where they keep their aircraft," marvels Mike Granger, president of Compass Bank's Mobile market. After a hurricane hits, "obviously, when you burn up the tank of gas you filled up before the storm, you're in dire straits, and you can't get to work or do recovery work."
Communication also becomes difficult, as telephone lines go down and cellular circuits get overloaded. So Mitchell provides all of its seven main offices with at least one satellite phone. For those employees who must leave before a storm hits, the company establishes a toll-free number. "If they're going to evacuate, our employees call and tell us where they're going and how we can reach them," Saint says.
Money also can get scarce when power outages shut down ATMs and banks. So Mitchell withdraws enough money to pay subcontractors and cashing employees' checks. The company also does what it can to keep its workers solvent. "No matter where our employees are, they will get paid for 60 days," Saint says.
Mitchell doesn't require its property-level employees to evacuate or remain near their properties. But some will stay on-site. That's what Troy Whaley and Patrick Steenkamp did. The two current Mitchell maintenance workers and former military men decided to hunker down in Biloxi and wait out Katrina at Oak Grove Apartments and Grandview Apartments, respectively.
"They barricaded the job with personal vehicles," Stefan says. "They armed themselves and organized to keep the vandals out. They had locked the gate and had an SUV blocking the front gate. They were carrying firearms and had gotten the residents to patrol."
The company's high-rise corporate headquarters don't have quite so much drama–the building sits 30 minutes from the Gulf. But after a storm passes, the office becomes a picture of activity. "The team reports here, and we start taking assessments," Saint says. "The managers call in on the satellite system and on the 800 number, and we take assessment of where our people are. Once you determine that, you start looking at how bad the buildings are."
Back in Business
Within days after a hurricane, Mitchell has properties up and running. How? Because the company can get subcontractors to the rebuilding sites fast and keep them there.
One reason: the company's size. "Mitchell is a big general contractor," Compass Bank's Granger says. "All of their labor suppliers realize the hurricane recovery will be around six to eight months, but Mitchell will be around for 20 years. They're the big animal, and [subcontractors] better treat it well if they want to eat for the next 20 years."
Still, managing such work in a disaster zone is a logistical challenge. First, laborers from outside the area need a place to stay. So Mitchell opens up the properties, allowing workers to live in undamaged units. It's a tight fit: Given the limited housing available, sometimes as many as 20 workers will stay in a condo or an apartment. Stefan and Saint have even invited contractors to stay in their own personal condos in the Legacy Villas in Gulfport, Miss., when they were repairing the damaged complex.
Second, building materials must be available at the site. For the most part, the company has been able to get supplies to the damaged properties. Look at the Mitchell-built and -managed Grandview Apartments in Biloxi. "They had stockpiled shingles when they saw the storm was coming," says Denny St. Romain, president of BCOM Investment Advisors in Miami, which owns the property. "They had the materials to get it back up quickly. Before the storm, they prepared for the repairs that need to be done. We kept operations up the whole time."
Third, subcontractors must be paid. While delayed insurance payouts have created cash flow problems for many Gulf Coast apartment owners and managers, Mitchell has financial wherewithal to pay for property repairs before its multifamily owner clients receive their insurance money. "Even though [Mitchell doesn't] own the properties, they helped get them back online and helped make them fully functioning in advance of any insurance check ever being received," Granger says.
Fortunately, Mitchell did manage to collect all the expected checks. Its strategy: personal meetings with insurance representatives at Mitchell's Mobile offices. Despite plenty of yelling and screaming on both sides, Stefan negotiated agreements with each carrier. "One of the reasons that we manage for a lot of people is because, in a storm, it's a nightmare to deal with insurance and get your property back up and operating," Saint says. "Knowing they have us there can help."
It certainly does.
The Villas at Legacy and Legacy Condominiums at Gulfport–two Mitchell-built properties in Gulfport, Miss.–were both hit by Katrina. "Mitchell came in, got their supplies ordered, and started," says Suzanne Guyton, who manages the condo properties. "They took what would have been an overwhelming situation and made it bearable."
Only after Mitchell has fixed all the buildings it originally constructed and all the properties that it manages will it agree to repair other structures. All in all, after Katrina, the company fixed about 25 complexes containing 3,872 units. The repairs added up to approximately $23 million.
Return to New Orleans
Now that it's finished many of those repair jobs, Mitchell has decided to add to its Gulf Coast work by entering New Orleans, a market it left 10 years ago because of "political discomfort," according to Saint. What prompted this decision? An impromptu marketing study by Stefan.
"One night we saw all of these out-of-state pickup trucks, obviously workmen, leaving the city," Stefan recalls. "We did our market study on I-10. If we could buy these and get them fixed, we would know where the customers are."
As of press time, Mitchell had closed on one New Orleans complex with 161 units and was in contract negotiations to purchase another property with 460 units.
It represents a big opportunity for the experienced Gulf Coast company. But early in the repair work on the New Orleans property, Stefan realized what made the company leave the Crescent City in the first place: red tape and outright corruption. "We had to get letter from the electric, gas, and cable television companies," Stefan says. "It was like pulling teeth. When you can't get these simple letters, it starts making lenders nervous."
With letters in hand, Mitchell is now wooing investors. Ordinarily, it would hold the repaired properties through lease-up, but rules for the Gulf Opportunity Zone (a program in Louisiana, Mississippi, and parts of Alabama that provides tax benefits to post-Katrina investors in those areas) require that the company line up its investors early. "They have to be in place when the project is put in use," explains Donald Denham, manager of Mitchell's apartment development department.
Despite the challenges, the company wants to purchase more Crescent City properties in need of repair, as long as they are not in a flood zone. "We looked at about five different jobs," Stefan says. "We walked every unit on every job and sorted them out. We looked at a combination of price, location, and unit mix."
Mitchell executives are controlling their enthusiasm, though. "I don't want to be last [into the market] because they're not all coming back," he says, referring to displaced New Orleanians. "The market is going to be good for awhile until you house the people who want to come back," he predicts. "But one day it will fall off of a cliff."
Until then, Mitchell will be bringing its discipline and disaster plans to New Orleans. "If Mitchell gets in there, they won't play around," predicts Mike McDonald, owner of Commercial Renovators, a Mitchell subcontractor in Daphne, Ala. "They get in there, get complexes ready, lease them out, and go to the next one."
Regardless of the weather.
The Mitchell Co.
- Founded: 1940s
- Headquarters: Mobile, Ala.
- Leader: John Saint, CEO and president
- Employees: 125
- 2006 Revenue: $300 million (projected)
- Multifamily units managed in 2005: 7,500
- Units built in 2006: 860* (projected) *includes apartments and condos
- Geographic coverage: Southeast
- Online:www.mitchellcompany.com
Leadership Lessons: John Saint
- Title: CEO and president, The Mitchell Co.
- Age: 60
- First job: Cutting grass and washing windows
- Biggest challenge as a company: Purchasing the business from the Resolution Trust Corp. in 1993.
- Last good book read: The Collectors by David Baldacci
Colorful History
When John Saint, CEO and president of the Mitchell Co. in Mobile, Ala., looked out his window on May 11, 1991, his first instinct was to lock the doors to his company's offices. What did he see outside? Federal agents storming the building that housed the company's headquarters. It was the middle of the savings-and-loan crisis of the early 1990s, and the government's target was a banker on the first floor.
But Mitchell was also threatened by the S&L scandal. Saint soon knew that the company, then owned by a savings-and-loan called Altus Federal Savings Bank of Mobile, Ala., would also be taken over by the government. "We entered our dark period," Saint says. "We were in a controlled liquidation."
Ironically, the only thing saving the company was a flurry of lawsuits, which were filed when Mitchell's single-family division split from the company after the federal takeover. "Old friends and business associates were suing each other back and forth," Saint recalls.
Because of the suit, no one would buy the company. So the Resolution Trust Corp. eventually sold the business to Saint and his team in 1993. (This was yet another transaction for a company that in the 20 previous years had gone from the Mitchell family to the Singer Sewing Co. to the Mitchells again, then to Altus Federal.)
Incidentally, that was also the last year the Mitchell Co., which develops everything from condos to apartments to office and industrial properties, didn't turn a profit.
"We've had a steady increase in sales profits since 1993, and we will have a good year this year in spite of the downturn," Saint says. "We have a bunch of individual divisions that produce profit at different times. When housing is down, apartment development and occupancies go up, while the commercial business is a lagging industry that will perform four or five years after a recession."