Construction ahead - excerpt from Atlantic Progress Magazine

Tim Banks learned from an early age that his calling was to help build businesses on Prince Edward Island.

September 23, 2003

By Scott Higgins, Atlantic Progress Magazine

Despite the fact that wealthy entrepreneurs in Atlantic Canada tend to invest in companies from Central Canada or the Untied States, some notable business leaders from this region spend big money to boost businesses right here at home. Progress magazine spoke to Tim Banks, one of those influential investors, to discover the how, why and when of his investing habits.

Tim Banks spent his childhood years as a grease monkey at his father's garage in Summerside, P.E.I., but a lifetime of servicing cars was not his long-term goal. "I struggled my way through school," he says. "Dad died when I was 16, and back then people judged me by looking at my academic background and family". the now 49-year-old president, CEO, and founder of The APM Group, originally Atlantic Project Management Inc. (APM), in Charlottetown wanted to make his mark on the island's business landscape.

After the loss of his father, Banks sought out successful island entrepreneurs as mentors. Those home grown role models, all now deceased, including Harry McLaughlin, the founder of Island Cable Systems, Island Petroleum Products Ltd., and Island Coastal Services Ltd., a road-building company; W.G. Barbour, a land developer who built and operated the Islander Motor Lodge and owned several Chrysler dealerships; and Billy Rix, the president of Charlottetown Metal Products Inc.

After Banks formed APM, he worked for all of his mentors in one capacity or another; they showed him the importance of becoming a role model himself, how to make business work, how to handle success and defeat, and - perhaps most importantly for his community - how vital it was to build a business in Atlantic Canada.

"My vision is that anyone can do it here," says Banks, "because there's so much opportunity everywhere you look." that theme runs through his investment philosophy; he spouts the same time-worn phrases that many entrepreneurs use when they talk about doing business and living here, particularly that it's easy to find loyal employees and that the quality of life is first rate. However, his focus on business expansion in his home province before expanding elsewhere is something you won't find in many local entrepreneurs.

There's a reason for that. banks sees himself as the living continuation of the spirit exemplified by his role models. "I want to be one of them," he says simply. "I think their message of building their communities has to be taken directly to the schools, and I've done that myself because I want kids to do what I have done here. I want them to realize they don't have to leave home to make it."

From his teenage years on, Banks worked as a labourer, time-keeper, and foreman for Fitzgerald and Snow Ltd., a Summerside general-contracting firm. In 1976 he was 23 and had graduated from Holland College's construction technology program, Still with Fitzgerald and Snow, he moved into management, first as project manager and then as general sales manager. Realizing after only four years in management that he had more knowledge and drive than his job allowed for, he struck out on his own. In 1980 he founded APM, which has since morphed into The APM Group--13 companies that specialize in everything from retail construction to shopping-mall management to manufacturing of fixtures and store fittings to retail displays. With annual revenues of close to $100 million, it boasts 400 employees and has become the biggest player in the office and home-construction trade on P.E.I.

Banks focuses on acquiring businesses that make APM Construction stronger. Although he has had to go the way of start-ups to get the supplies to build homes and shopping malls., he says there's often no need for that. "Start-ups are an awful lot of work, and, honestly, I like to buy revenue," he says. "I like to buy older well-established businesses that are looking for a change."

By change, Banks means companies that have older owners who are uncomfortable with the increasing investment that is required either to upgrade facilities to meet market demand, fight big-box competition, or react to changing demographics. In other cases some business owners want to sell and retire outright and may be having trouble finding a buyer. Still other companies are in too much financial trouble to survive on their own; roughly a quarter of the 20 companies APM has purchased fall into this category.

One such company is United Sign of Dartmouth, N.S., As Banks got deeper into retail fixtures, he knew he wanted to become a one-stop shop, which meant supplying everything from property development to furniture and fixtures. Signage was integral, so he decided to buy a sign company.

He couldn't find one on PEI that wanted to sell, so he began looking farther afield, United Sign, in Dartmouth's Burnside Industrial Park, had worked for APM on Nova Scotian projects, and the two companies had a solid working relationship. Banks knew the company was reliable, met deadlines, and did sound work. He found more than he bargained for, however, when he arrived at the Dartmouth plant in late 1999 to propose the idea of selling to APM.

"United Sign was in serious trouble", says Banks. The product of a merger between two sign companies that wanted to decrease overhead and increase profits, it was half staffed and, in Banks's opinion, undercapitalized. A building owned by the partner who relocated to United Sign's facility was unsold and draining profits. The stressed-out owners were being harassed by "a couple of vultures" who were trying to buy the cash-strapped venture for a song. "But we knew it still had a lot going for it," says Banks, "so we went for it."

United Sign's balance sheet was so sickly that APM knew it couldn't go to the banks looking for money to turn the business around, and it couldn't handle both the purchase and refinancing itself. So Banks went to the Business Development Bank of Canada in Halifax and purchased a debenture - a sealed bond that secures a long-term loan - that was used to take back a mortgage on the business.

Now the books are cleaned up enough for APM to go to the bank for funds to operate the company until it can re-establish a positive cash flow. Today, with 40 employees and orders on the books, the company is thriving, and APM will soon be able to recover its initial $800,000 original investment.

Other businesses that attract Bank's attention might have a great balance sheet but still need a good deal of work. Banks decided that APM construction companies - especially House of Excellence, which does interior decor - could get a better price break on paint and flooring if it bought supplies wholesale. In mid-1999 APM was looking to buy a building supply store and found one in Southport Home Centre in Charlottetown, PEI. The 50-year-old Home Hardware dealership was bringing in solid revenues but needed to be renovated. "It was scary to look at," says Banks. "The store was rundown and it had been expanded over the years adding lean-to sections to the original structure."

After Banks convinced the young owner, Joe Corcoran, to sell, he knew that that kind of building wouldn't be able to compete with big-box building supply stores. APM had a lot of experience in retail planning and knew what kind of remodeling had to be done; it had to be turned into a 75,000 square-foot market-type enterprise. The only snag was the store's Ltd. network of dealers and that national company's embrace of 15,000 to 20,000 square-foot stores. Home Hardware stores are owned and operated independently, with sign, fixtures, and national products provided by the head office.

At first there were minor personality conflicts between Banks and head office. "Home Hardware is a co-op, and I'm just not a co-op kind of guy," says Banks. "There were pockets within the Home Hardware organization that resisted the changes we were planning for Southport." Some Home Hardware store owners on PEI were worried that a large store would take away their customers. While they couldn't influence APM's plans or change Home Hardware's wait-and-see attitude, Banks kept their opposition in mind as he proceeded with the renovations.

The result was a new Southport Home Hardware store - the largest in Canada - with a RadioShack, Tim Hortons, rental department, garden centre, furniture department, and auto service. Southport Home Hardware - which cost APM $2.5 million of its own money, and cost the bank "significantly more" - is a draw for consumers from surrounding communities, with service spin-off revenues for all of Stratford. APM's relationship with Home Hardware and its member store owners improved significantly after Banks proved his renovations didn't hurt other area Home Hardware stores.

According to Banks, it's important for investors such as him to be aggressive if they want to succeed. Another good example of this aggressiveness concerns the local Canadian Tire (CT) store, which is Southport Home Hardware's main competition. Like the previous owner, Banks decided that Southport would accept CT money for purchases; he uses the notes to buy loss leaders at CT, which he sells at Southport for a profit. CT threatened to sue but backed down when Banks refused to stop the practice. Legally, there was nothing CT could do.

There is more to Banks's character than aggressiveness, though. Jim Travers, a senior partner with the Charlottetown law firm Stewart McKelvey Sterling Scales, attended school with Banks and has been handling his development deals for the past 15 years. Travers says banks is a noteworthy investor in several ways. "He sees his deals through even if they take two years or more, and he completes them irrespective of the obstacles," he says. "He is extremely aggressive in pursuing opportunities , but he's also generous." APM built a recreation centre, with a rink and a gymnasium, as a major name donation to the town of Cornwall; the APM Centre serves 13 Island communities. Banks also has been a big supporter of child literacy, sponsoring, under the APM name stalls and spaces in island schools for students who need extra help. And has spent more than $50,000 to send dozens of children and young adults to reading-efficiency classes at Charlottetown-based Spell Read P.A.T. Learning Systems Inc.

"He values the individual," says Colin Deacon, the CEO of Spell Read. "He's a bit of a troublemaker, but he has a heart of gold." In late 2001, for example, APM Construction was preparing to demolish Charlottetown's old Dr. Eric M. Found Centre, which over the years had been a tuberculosis and drug-rehabilitation sanatorium and a centre for chronic cancer care, in order to build a residential development. Banks received a call from a gentleman whose son had painted a large mural on one wall before he died at the facility; he asked to see the mural one last time. Banks agreed and was so touched by the mans reaction to viewing his son's final work of art that he halted demolition until his men could carefully cut the mural out of the wall and deliver it to the man as a gift.

For Banks, the deal - and the community - are priorities. "It hasn't been easy since 1980," he says. "I don't have a record of everything I touch turning to gold, because that's not the real world. But APM is at the point where I can look at a couple of opportunities a year, and that's important. I want to prove to young people that they don't have to leave here. That's my goal."

From Atlantic Progress Magazine.