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An Inventor, Innovator and Investor: A Conversation with...Martin Tuchman

An Inventor, Innovator and Investor: A Conversation with…Martin Tuchman

ON MARCH 3, 2016, THE NEW Jersey Institute of Technology’s School of Management was named Martin Tuchman School of Management, in honor of distinguished alumnus, entrepreneur, and philanthropist Martin Tuchman. This is the first time in the school’s 27-year history that it will carry a person’s name—making this honor very prestigious. A recipient of NJIT’s Alumni of the Year Award, Tuchman has been a member of the school’s Board of Trustees and is currently on its Board of Overseers.

A New Jersey native, Tuchman started his career at Railway Express Agency as an automotive engineer. In this role, he and a team of shipping engineers at the American National Standards Institute developed the current standard for intermodal containers and chassis, which is still in use today. The innovation allowed for total interchangeability of equipment in every mode—ship, rail and truck—and offered uniform structural integrity.

Tuchman and a colleague would later launch one of the nation’s leading container leasing corporations, Interpool, which was sold for $1 billion. In 1987, he went on to form Trac Lease, which became the largest chassis leasing company in the United States. He sold this company to a private equity firm for nearly $2.4 billion in 2007.

Today, Tuchman is the CEO of Kingstone Capital V, an investment firm with holdings in real estate, banking and international shipping. He also serves as CEO of The Tuchman Group and Chairman of The Tuchman Foundation, an umbrella company for the Parkinson’s Alliance, which works closely with Parkinson’s disease organizations to fund promising research in the field. Among his many other roles, Tuchman continues to use his success and resources to advance opportunities for students pursuing careers in science and technology, both at NJIT and at Seton Hall University, where he earned his MBA.

In this exclusive interview with COMMERCE, Martin Tuchman discusses the major challenges in real estate, retail, community banking and international shipping, his firm’s best investments for 2016 and his ideas to jumpstart economic growth in the United States.

COMMERCE: Can you speak to some of the major trends and issues in real estate today?
MARTIN TUCHMAN: We look at real estate in three broad categories: retail, office and residential. Retail is currently challenged from the likes of Amazon on the Internet side, and the big-box stores such as Costco. Shopping malls, anchored by movie theaters, are not getting much assistance from the so called foot traffic created by these entertainment centers. More often than not, the population has entertainment contracts from Netflix, HBO, Showtime and so forth. When it comes to going to the traditional movies, there has been a significant drop-off in the younger groups. With the exception of some key, location-driven entities such as restaurants, Apple stores, etc., we are very negative on retail space, especially the malls who have taken on a great deal of debt to “spruce up” their space. As soon as interest rates climb back up, these institutions will have a difficult time.

Office space is really broken down into two areas: urban and suburban. In the suburbs, once utilization hits a high rate and rents move up, some developer finds another piece of land and begins building a new facility, thus creating competition. When business turns down, this manifests itself into lower utilization, which translates to lower rates competing for the same customer. In the urban areas, such as New York City, when the market tightens, the rentals go up. There is very little new space available in the city itself to build a new product. When the market weakens, prices may fall, but utilization does not drop as much as the suburban market. I think you will find many of the major real estate developers adopting a strategy of concentrating in the urban areas.

Residential real estate is very much a byproduct of the economy, interest rates and population growth. Currently, many people simply cannot afford to purchase a new home and are deciding to rent. To meet these needs, many projects are going up, and there will eventually be a saturation of the market.

We have all three categories in our own portfolio, with a heavy concentration in the Princeton area. Our utilization is almost 100 percent, and that’s due to a heavy concentration in residential properties.

Q. What are some of your current real estate projects?
A. A current real estate project we are working on is in Kingston, New Jersey. A building, owned by Franklin Township, was last used as a school almost 20 years ago. The Tuchman Foundation has been engaged to redevelop and lease the property for non-profit use. The building has been completely renovated to meet modern school code requirements. It will contain 13 classrooms, a library, offices and a commercial kitchen. Additionally, there will be a multipurpose room with a gymnasium and performance space. This is a great project as it demonstrates how the will and desire of a local community, working with state and local municipalities, can make something happen that is good for everyone. Construction activities are expected to be complete by summer of 2016.

Q. How is your company involved with the banking industry?
A. The Tuchman Group has a substantial interest in a community bank. First Choice Bank started as a small bank with $30 million in assets. Today, we are a $1.1 billion bank with 8 branches, originating more than $200 million per year in commercial loans and residential mortgages. We have continued to support the community in many ways, both through
our foundation and banking projects. Our investment portfolio consists of more than $500 million in investment-grade paper, which assures that we proceed safely and soundly going forward as a financial institution. We feel there is a continued need for community banks to support the local population.

Q. What are some of the greatest challenges in international shipping today?
A. Oversupply of vessels is a continuing problem in the shipping industry due to the long lead time it takes for a ship to be built. It is very difficult to plan ahead regarding when the
new tonnage will come into the system. It’s really a matter of weathering the storm. Companies today have the benefit of lower fuel prices that help to offset the oversupply situation. The cost of containers has also come down substantially in price, which offers an additional benefit for companies who are leasing in their fleet. Unfortunately, the current situation will take between two and three years before utilization reaches an optimum point. This is caused by the container fleet that will be aging over that period of time. Just take a look at the current market value of public companies in the space. These values have dropped by more than 50 percent in the past year and continue to present challenges to these companies.

Q. Can you speak to the innovations within the shipping industry that you believe have had the greatest impact?
A. One of the basic innovations to the industry was the standardization of the container itself. This meant that any container could go into any vessel, anywhere in the world, and could be picked up with the gantry crane and handled by the standard chassis. From a logistical standpoint, a great innovation was the formation of neutral pools. This meant that any container could be placed at a shipper’s dock, be loaded with cargo and then routed with any shipping company that the shipper chose. This relieved congestion at all the inland areas and allowed for selection of vessel departures. It met the needs of the shipper and the consignee on a very efficient basis.

Q. What are some of Kingstone Capital’s best investments this year?
A. While it’s very early in the year, I do feel our best investment so far has been in a company named Jet East. We operate out of the Trenton Airport with our own hangar. We also have mobile operations at Teterboro Airport. The company inspects and repairs corporate jet engines for the airline industry. We employ more than 50 mechanics throughout the region, including New England and western Pennsylvania. We are filling an important niche in the airline industry and expect to grow this business over the coming years. We will also continue to efficiently train our mechanics so that we always have the service component of our business at peak performance.

Q. You have just had the NJIT School of Management named after you. How do you see your role at NJIT, and how often are you on campus?
A. Obviously, having a prestigious school named after you is quite meaningful. NJIT’s Martin Tuchman School of Management is an incredible honor for me. We have 90 incubator companies on our 45-acre campus. I would like to monitor their progress and understand how they transition from their current state to the next phase of their evolution. This should keep me very busy as I am on campus once a week.

Q. Your MBA is from Seton Hall University. Are you involved there, too?
A. We work very closely with the university in creating scholarships for incoming freshmen. We also have a “special intern program” that provides compensation to students to work in their field, even if the internship pays little or nothing. After four years of school, they have experience as interns in their field of study.

Q. What other schools do you work with?
A. We provide 3-D printers to Mercer County Community College and Trenton Catholic Academy so the schools all have the latest, cutting-edge technology for students.

Q. Where do you see economic growth coming from in the current environment?
A. According to many economists, the economy will continue to move along at a 2 percent growth rate. The main impetus to growth, good paying jobs, will continue to be missing from the equation. One thing that will kickstart the economy is the rebuilding of our infrastructure. This includes bridges, roads, municipal buildings and schools. The expenditures for all of these projects are local in origin. The construction of a road cannot be outsourced.

The funds for these projects are already available in the form of offshore profits held by major US corporations. By assessing a reduced federal tax rate of 5 percent versus the higher 35 percent rate, we can bring a substantial amount of money back into the United States. The condition upon which the U.S. government would forgo the higher tax rate would be to require companies to take the sum of the capital they save in taxes and invest it in a pre-approved project.

It is amazing what can be accomplished by creating jobs and how this job creation manifests itself into generating taxes for the local communities, as well as the federal government. A perfect example of this is our own little company, First Choice Bank. When I joined the bank, we had less than 25 employees and less than $30 million in assets. Today, we have over 500 employees, more than $1 billion in assets, and generated profits of more than $25 million. Our federal and state taxes generated more than $20 million, and when adding the employee payroll taxes, this number exceeds more than $80 million, all in the time span of eight years. This plan should be implemented as soon as possible as a means of kickstarting our economy with some meaningful jobs.

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