Lessons from the Land

Q.: What type of enterprise do Chrysler Corp., CNA Financial, Fibreboard, Walt Disney Productions, International Paper, LTV Aerospace and Signal Oil all have in common?

A.: Development of recreational real estate.

There is a lemming-like quality to today's corporate captivation with large-scale ventures in leisure-time communities. Scores of prominent, publicly held companies have leaped into the risky business, investing more than $700 million in the hope of big, though perhaps slow, profits. Few have become so extensively involved as Boise Cascade Corp., which has 29 recreation projects spread from Hawaii to New Hampshire. The company's chiefs, much to their surprise and dismay, have belatedly discovered that environmental zealots are increasingly able to stall or block even the well-planned development of unspoiled woods and shorelines.

About 1 1/2 years ago, for example, Boise Cascade bought 17,000 forested acres along a finger of Puget Sound near Bremerton, Wash., and laid elaborate plans to convert about a third of the property into a community of vacation homes. Pouncing on the fact that the company failed to specify that it would install a sewer system, conservationists and local residents began to complain about possible pollution. Kitsap County commissioners imposed so many conditions that the development is still stalled. "We tried to relate to the local people," says David Carey, the project manager, "but we didn't know how. They were frightened out of their wits." Because of another communication gap, Boise Cascade's state-approved plan to create a hotel and resort complex on the island of Hawaii started a furor among people opposed to just about all speculative subdivisions. The company has sunk $30 million into the development but has not yet sold the first lot.

All together, Boise Cascade lost $ 11 million last year in recreation markets. At the same time, the recession and tight money weakened two of the company's mainstay activities, housing and lumber. As a result, total profits fell 55% to $13.4 million, while sales dropped 1% to $1.7 billion. During the fourth quarter the company suffered a net loss of $5,100,000.

That performance was doubly disappointing because until last year Boise Cascade had seemed to be doing just about everything right. In the 14 years since energetic Robert V. Hansberger, now 50, took over as president, the company has spread from lumber into other building materials, paper, packaging, office supplies, factory-built houses, on-site houses, apartments and mobile homes. Almost all of Hansberger's 35 mergers have been with firms related in one way or another to timber or its uses. Even last year's acquisition of San Diego-based CRM Inc., a publisher of magazines (Psychology Today) and textbooks, fits the pattern. A Harvard Business School graduate, Hansberger was so successful in filling his headquarters in Boise, Idaho, with imaginative young men from elite business schools that other companies made Boise Cascade a hunting ground for executive recruits. Hansberger, however, had a stable of ready replacements.

Mistaken Silence. How could such a company topple into trouble in land development? One reason, admits Executive Vice President John Fery, is that the company had picked up some indifferent managers along with the land companies that it had acquired. "We had people running that operation who didn't give a damn about Boise Cascade's public image," says Fery. Frequently, high-pressure salesmen (some earning as much as $100,000 a year) encouraged customers to buy lots for speculation, thus arousing conservationists. Another difficulty, says Hansberger, is that "we didn't fight back when attacked. Frankly, it was a mistake."

A different approach would surely have helped Boise Cascade in its most painful environmental battle. Bulldozers had hardly begun carving the roads for a resort community--called Incline Village--on the Nevada shore of Lake Tahoe before conservationists denounced the company for contaminating the lake with silt and creating ugly scars in the alpine forest. As the company went through a maze of government agencies to win permission to build 3,000 homes, it met furious opposition at every point; so far, the company has been able to build only ten homes and four condominiums. Though other developers were almost entirely responsible for despoiling the fragile terrain at Incline Village, a conservation-minded group of students derisively gave Boise Cascade an award as "polluter of the year."

The Lynching Rope. Rather than risk more calumny, says Hansberger, "we'll never go to a spot of natural beauty again. The situation is just too emotional." Well-intentioned conservationists--and some groups that merely want to bar entry to all newcomers--may force other big corporations to avoid projects in ecologically sensitive areas. Ironically, the effect of their withdrawal would be to leave second-home development in the hands of the shoestring operators who created most of today's mess. So long as U.S. population and incomes keep rising, more people will be seeking a home away from home, and the demand for leisure-time projects can only increase. Not long ago, the Daily Union Democrat in the sleepy Sierra Nevada foothill town of Sonora, Calif., extended a note of sympathy: "Whenever there's an ecological lynching party, Boise Cascade comes out on the loop end of the rope."

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