Wednesday, September 2, 2009
Archives---September 2, 2004
######## surrounding the article denotes it is a “press release”
Archives---September 2, 2004
In the "small ticket" era of the 70's, 80's, and 90's, the leaders of this period were Advanta, Denrich, Foothill, IFG, Manifest, to name a few, but the most innovative and one that lasted the longest was Colonial Pacific Leasing, until they were purchase by General Electric.
Colonial Pacific Leasing Company of Portland, Oregon traces its roots to a captive finance company formed in Massachusetts in 1961. The original name of the company was Colonial Leasing Company of New England. Its specialty was transactions under $2,200; the small ticket marketplace.
In the 1960's, Ford Industries, a subsidiary of Roseburg Lumber Company of Roseburg, Oregon, placed the financing for a number of its "Code-A-Phone" interconnect systems through Colonial Leasing of New England. When Colonial ran onto hard time in 1967, a time of recession, Roseburg Lumber bought the company, thinking it could finance its equipment themselves, and moved it to Portland in 1971 ( the 11 month recession ended November, 1970, ) changing the name to Colonial Pacific Leasing. According to published records, it had a $6 million portfolio, and 10,000 leases, primarily all small ticket items.
Roseburg Lumber operated Colonial Pacific on a limited basis. By 1976, the portfolio was $3.5 million, serviced by four employees. Late in 1976, the manager of Colonial Pacific retired and Roseburg Lumber made the decision to become more active in the marketplace. John W. Thorne, president, was hired. He was given the goal to increase the company portfolio to at least $15 million. In 1981, he built it to $50 million in "outstandings" with 52 employees.
Thorne built this portfolio by attracting lease brokers. Instead of having lease salesmen, which was the trend in the 1970's, Thorne saw having a "commission only "salesman as the most cost affective manner in attracting business. Instead of going after vendor business direct with your own sales force, he decided it was more cost effective to establish a lease broker network. This was quite different than the times, as the main two leasing associations did not accept members who were not full recourse lessors or managed their own portfolios.
In 1979, lasting through 1980 (the country came out its six month recession in July) into early 1981, there was a West Coast Brokers Associations, an ad hoc group (no dues) that numbered up to their top growth of forty members when it disbanded, with original members such as Mont Gates of Leaserite, Salt Lake City, Utah, Jim Harris of Oregon,: George Masters in Reno, Nevada, Jim Swander
Thorne had much experience working with larger leasing companies, forming two of them before coming to Colonial Pacific. Before his arrival, it is noted he had been a partner in a multistate firm of lease brokers. He brought with him the idea to build a company through broker transactions, and knowledge of how to do this.
In early 1979, Colonial bought Seattle-based World Wide Leasing, Inc. It installed a man as the general manger of that operation who had owned Transworld Leasing in Albuquerque. (sorry, no record of the person's name.) The Albuquerque company was retained as a branch location and World Wide continued. The concept was to form other branch locations, but using independent lease "super brokers," who were part of the exclusive network.
Thorne's idea was to look a personal credit scores and not collateral. Literature from him to the outside sales force he was created said CPL "... considered all transactions except aircraft and automobiles at the time. Our marketplace was $2,500 to $50,000, requiring the lessee to have at least three years in business, along with good credit."
Thorne actively courted broker transactions, particularly in the smaller amounts. The company was the first note to require financial statements on lease transactions below $15,000 (it was the policy that financial statements may overcome the "application only" submission). The idea was to create faster approval time, and attract more lease brokers.
Colonial Pacific continued its vendor programs, almost all on a recourse basis. CPL ran all credit investigations. Vendors were screened for this program, and according to literature of the time, "Since it does not require financials of the lessee, it must place a great deal of trust in that vendor. The vendor's ability to service the equipment and its reputation for doing so are essential ingredients.
Colonial maintained its own sales force, but in the first four years since Thorne took over, more and more business was coming from lease brokers. The change started taking place were Dennis Doyon, Gordon Roberts, and others become more "broker coordinators." Thorne then had the idea to open territories.
According to literature of the day, " In order to prescreen brokers in cities distant from its headquarters, Colonial will establish one of its brokers in each city as a "broker screen". Any broker unknown to the company who approaches Colonial from one of those cities will be asked to submit his transaction through the broker screen until such time as the company feels comfortable dealing with him directly."
This was the start of what was later to become the Pegasus program. There were several "super brokers" who built up "fiefdoms," based primarily from lease brokers who could not qualify due to volume, experience, or perhaps credit, to represent Colonial. The lease broker went through a super broker, who not only "filtered," but with a volume would increase the commission or percentage shared (often including the residual of the lease).
"Colonial also protects its brokers. If a transaction is brought in from a vendor originally introduced to Colonial through a broker, Colonial will protect the broker," said literature in 1981.
Thorne attracted many brokers, as he was the first in the industry to actively pursue this marketplace. Until this time, lease brokers were considered not experienced or reliable, and vendor business through direct leasing salesmen was the key to leasing business.
"In its price range, Colonial does very little rate bargaining," Thorpe said. "In all other areas, however, it will negotiate. It will do skips and almost anything else consistent with good credit decisions to make the deal. It prefers to retain Investment Tax Credit since the shelter requirements of Roseburg Lumber are very large, but it is perfectly willing to pass ITC for an increase in rate."
CPL underwent several changes in management again. Roseburg both faced the changing lumber industry, plus a capital program for a growing leasing company.
According to a press release of this event, "Colonial-Pacific Leasing Co. is a wholly-owned subsidiary of RLC Industries Co. of Roseburg, Oregon. The parent company is one of the nation's major producers of lumber, plywood, paneling, particle-board and wood chips for pulp and paper manufacturing doing business as Roseburg Forest Products Co.
The ownership of RLC Industries co. recently decided to concentrate its investments in the wood products bushiness. Thus Colonial-Pacific, its only financial service business, does not fit into RLC Industries Co.'s future plans even though Colonial-Pacific's financial results and tax benefits have produced an excellent return on RLC Industries Co.'s investment. The sale of the business is contemplated to be structured as a sale of the stock of Colonial Pacific. "
Again, along came a company who thought their product, postage meters, which had catapulted U.S. Leasing, could be of better financial benefit if they also controlled the financing.
Bruce Kropschot, on our Leasing News Advisory Board, formed Kropschot Financial Services in 1986. His first client was Colonial Pacific. He arranged the sale to Pitney Bowes Credit Corporation, which was finalized on December 31, 1986. According to public records, at their fiscal year-end of March 31, 1986, prior to the completion of the sale, the company had net lease receivables of $92 million. Mike Burns was the president.
In February 1987, "James Merrilees accepted a newly created position of vice president of operations for Colonial Pacific Leasing Corporation. The company was the first to use a "wide area network," before the days of the internet. BLISS was the first available for brokers and lessors. It was a telephone direct "dial-up" to the CPL main frame computer. Rich Viola, Chief Financial Officer, named the program: Broker-Lessor Information System Support. It revolutionized the processing of applications and fundings of transactions.
Express Lease was trade marked by Pitney Bowes Credit/Colonial Pacific Leasing. Merrilees enjoyed the support of the parent company. (After he left, he said in a conversation it was the happiest time of his career and had many good things to say about Pitney Bowes.)
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