Griffin Land & Nurseries, Inc.

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Griffin Land & Nurseries, Inc.

One Rockefeller Plaza
New York, New York 10020
U.S.A.
Telephone: (212) 218-7910
Fax: (212) 218-7917

Public Company
Incorporated: 1979 as Culbro Land Resources, Inc.
Employees: 353 (1999)
Sales: $62.9 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: GRIF
NAIC: 531210 Offices of Real Estate Agents and Brokers; 42293 Flower, Nursery Stock, and Florists’ Supplies Wholesalers

Griffin Land & Nurseries, Inc. is a spin-off from the Culbro Corporation, which in 1997 decided to separate its holdings into tobacco and nontobacco related businesses. The former became General Cigar Holdings, and the latter Griffin Land & Nurseries. Operating out of its offices in New York City, Griffin is divided into two subsidiaries. Imperial Nurseries sells containerized plants (mostly azaleas and rhododendron) to garden store chains, retail and wholesale nurseries, as well as landscapers. Imperial distributes its plants through its seven wholesale centers located in Connecticut, Maryland, Ohio, Pennsylvania, and Virginia. A second subsidiary, Griffin Land, manages the company’s many real estate holdings, the bulk of which are located in Connecticut. The company also owns approximately one-third of Centaur Communications, a British publisher of business magazines that includes Marketing Week and New Media Age. Through Centaur, Griffin also controls an interest in Linguaphone Group, a designer and distributor of language teaching materials. The Cullman family, known for its long ties to the tobacco industry, owns 48 percent of Griffin.

The Cullman Family Comes to America in 1848

The roots of Griffin Land & Nurseries reach back to the mid-19th century when a German wine merchant named Ferdinand Kullmann immigrated to the United States and changed his name to Cullman. In addition to his wine business, he is supposed to have made and sold cigars. Ferdinand’s son Joseph became involved in the tobacco business as a teenager, going to work for a New York City merchant who bought and sold leaf tobacco. His son, also named Joseph, continued the family connection with tobacco after he graduated from college in 1904. He traveled throughout the United States and the world, buying tobacco seeds, leaf, and wrapper tobacco. Cigars consist of cut tobacco filler pressed inside rolled-up wrapper leaf. Because it requires a variety of properties, wrapper tobacco is the most expensive leaf. It should be strong, yet silky in texture, even in color, flavorful, and burn properly. Despite his father’s misgivings, young Joseph Cullman wanted to grow wrapper tobacco in the Connecticut River Valley. Connecticut broadleaf, a maduro-style (very dark) wrapper tobacco, was already being grown there. Joseph tried growing Havana seed in the fertile soil, and the result was a lighter wrapper that proved to be extremely popular with customers. The Cullmans quickly became one of the largest growers of tobacco in Connecticut and acquired land that would one day become the bulk of the property held by Griffin Land & Nurseries.

Tobacco became king in a corridor that ran from Windsor, Connecticut, to Hadley, Massachusetts, with wrapper tobacco grown on 12,000 acres of land and binder tobacco grown on an additional 30,000 acres. The Cullman family business, known as Cullman Brothers, expanded its holdings in the area by buying smaller farms and in 1960 added more Connecticut land when it acquired General Cigar Company. The deal also allowed Cullman Brothers to move into manufacturing and distribution. Diversification would become a necessity in the late 1960s when the business was greatly changed by the introduction of homogenized leaf, a man-made cigar wrapper that consisted of tobacco by-products. The demand for natural wrapping tobacco began to drop precipitously.

Continuing to increase its holdings, Cullman Brothers bought the Connecticut-based American Sumatra Tobacco Company in 1969. As part of the transaction, Cullman Brothers received Imperial Nurseries, a 200-acre business that Cullman Brothers would dramatically expand to 1,500 acres, as the need for land on which to cultivate tobacco continued to fall. Unlike many tobacco companies that sold off their holdings, Cullman Brothers opted to put their 5,500 acres of Connecticut land to different use.

Becoming known as Culbro Corporation in 1976, the family business created a division called Culbro Land Resources in 1977 in order to develop its land holdings. The entity created the Griffin Center, a 600-acre complex in Windsor, Connecticut, featuring 700,000 square feet of offices and a million square feet of research and development and light industrial space. Major tenants included CIGNA Group and Hartford Insurance. Adjacent to the Bradley International Airport, Culbro Land built another 600-acre park called Hazelwood Business Center, later changed to the New England Tradeport. In 1988 the company made an entry into residential development when it began infrastructure work at a 152-acre site called Walden Woods. Forty-five homes were eventually built and sold before the company discontinued the enterprise.

Culbro’s nontobacco business concerns included Centaur Communications, as well as the Eli Witt Company, a wholesale-distributor that primarily served the southeastern United States. By 1987 tobacco sales contributed only nine percent of Culbro’s total revenues. Despite efforts to diversify, the company saw the price of its stock remain stagnant. What no one could foresee was that cigar smoking would enjoy a rebirth of popularity in the 1990s and prompt renewed attention to Culbro’s tobacco interests.

Renewed Popularity of Cigars Leads to Griffin Spin-Off

In 1995 Tabacalera, a Spanish tobacco monopoly, offered $100 million for a 50 percent stake in the General Cigar division of Culbro. Alerted to the changing climate in cigar smoking, CEO Edgar Cullman, Jr., declined the offer, deciding instead to reinvigorate the company’s original business, in particular its premium, high margin cigars that included the Macanudo and Partagas labels. In May 1996 Cullman opened a cigar lounge in Manhattan called Club Macanudo, which became extremely popular and profitable. He then began to consider a major acquisition in the cigar business, a transaction that might necessitate a public offering of Culbro stock. In order to receive the highest net dollars from an offering, it was felt that Culbro would be better served as a “pure play” cigar company. As a result Cullman decided to split Culbro into two public companies that would operate independently. The tobacco business would belong to General Cigar Holdings and all nontobacco business would go to a new entity called Griffin Land & Nurseries. The split went into effect on February 27, 1997. Culbro shareholders received equal shares of Griffin stock at no cost, tax-free.

Management for Griffin Land & Nurseries came from the ranks of Culbro. Although Edgar Cullman was chairman of the board, day-to-day operations were run by Frederick M. Danziger, named president and chief executive officer. Danziger, a Culbro director since 1975, had been involved in the company’s real estate operations in the early 1980s. Richard L. Wyckoff remained president of Imperial Nurseries, a post he had held since 1991. Although it was not installing an entirely new management team, Griffin was starting many support operations from scratch, and for a period of time would have to depend upon General Cigar for financial and administrative services. General Cigar also held a lease on approximately 500 acres of Griffin land in Connecticut, should conditions warrant an expansion in the cultivation of tobacco; but the two companies quickly began to lead their separate existences.

Griffin’s commercial real estate land holdings included 3,335 acres in Connecticut, 432 acres in Massachusetts, and 15 acres in Florida. Nursery real estate included 712 acres in Connecticut, 1,046 acres in Florida, 26 acres in Pennsylvania, 16 acres in Virginia, 28 acres in Ohio, and 20 acres in Maryland. The smaller parcels were the sites of Imperial Nurseries’ seven sales and service centers that each included a warehouse and office facility and several acres of nursery stock. The book value of the company’s undeveloped land holdings, located primarily in Connecticut, was approximately $12 million.

Griffin inherited some problems as well. Before the Culbro split, Eli Witt had filed for bankruptcy in November 1996, and Griffin was obligated to indemnify General Cigar for any liabilities, in particular unsecured creditors that had formed a committee to inquire about the asset transfer to Griffin. The matter was eventually settled when a sale of Eli Witt to the H.T. Hackney Co. was completed.

The value of some of Griffin’s property located in Simsbury, Connecticut, was also compromised by the presence of the pesticide chlorodane. Until the company’s plan to reduce chlorodane contamination was approved by local authorities, and the work completed, Griffin would be unable to develop the property. Griffin faced other obstacles in utilizing its real estate. The majority of Connecticut land holdings were located in the northwest quadrant of Hartford, where the company’s ability to develop the land to its best use was subject to material zoning and other regulatory restrictions. Furthermore, the Hartford area had in recent years suffered a loss of employment in the defense and insurance industries, which depressed the local real estate market.

Key Dates:

1960:: Cullman Brothers adds to Connecticut land holdings with purchase of General Cigar Company.
1969:: Cullman Brothers acquires Imperial Nurseries through purchase of Sumatra Tobacco Company.
1995:: Bid for General Cigar division of Culbro Corporation prompts division of Culbro businesses.
1997:: Griffin Land & Nurseries becomes an independent business.
1998:: Company is accepted for listing on the NASDAQ.

Aside from the problems that the company inherited from the Culbro split, and which it assumed would ultimately be overcome, Griffin also faced natural forces that would simply remain a constant. The nursery business was seasonal, with the bulk of sales coming in the spring and dependent on how weather disrupted construction projects that used its plants for landscaping. Because the company’s containerized plants were maintained for as long as five years before they were mature enough to be sold, predicting future demand was paramount— and exceedingly difficult. To lessen risk, Imperial Nurseries decided to increase its production of perennials, which have a shorter growing cycle. The division also began to terminate its involvement in field-grown plants, opting instead to outsource to other growers.

Griffin Begins First Full Year of Operations in 1998

In 1998, the company’s first full year in operation, Griffin posted net sales of $51,231,000 and a net income of $121,000. In April the company was accepted for listing by the NASDAQ Stock Market; previously stock had been traded on the OTC Bulletin Board. The Eli Witt matter was also resolved, freeing Griffin from further liability. Imperial Nurseries enjoyed strong sales during the fall, which contributed greatly to the company’s final results for the year. During the second quarter, Griffin Land completed construction on a 98,000-square-foot warehouse in the company’s New England Tradeport. By the end of the year the facility was fully leased, and the company began construction on an additional 100,000-square-foot warehouse to be located nearby. Occupancy at Griffin Center South was also increased to 95 percent by the end of 1998. The company’s equity investments were adversely affected by losses at Linguaphone but more than compensated for by positive results from Centaur. Griffin also increased its ownership in Centaur, purchasing an additional 500,000 shares of common stock to total 35 percent of Centaur’s outstanding common stock.

In 1999 both of Griffin’s subsidiaries showed marked improvement over the previous year’s results. The company reported a net income of $2.47 million on net sales of $62.94 million. Much of the increase in the operating results for Griffin Land was due to the sale of undeveloped land for approximately $1 million. In addition, the division’s new 98,000-square-foot warehouse in the New England Tradeport was fully leased for the entire year. The construction of 100,000 square feet of additional warehouse space was also completed during the course of 1999, but was not yet leased. In August Griffin completed an agreement that provided it with a $20 million line of revolving credit to provide working capital for both of its divisions.

In November 1999 Griffin Land announced it had filed an application to build a planned residential community on some of its land in Simsbury, Connecticut, to be called “Meadowood.” The company hoped to build 640 homes on 363 acres, ranging in price from under $130,000 (deemed “affordable” by Connecticut statutory provisions) to over $500,000. Plans called for over one-third of the acres to be devoted to open space, with walking trails and room for a soccer field and little league field. Residents would have access to meeting houses, pools, as well as tennis and basketball courts. The company also made an effort to satisfy environmental concerns about the area, in particular the remediation of residual pesticide use from previous agricultural use.

Griffin entered 2000 with the goal of making significant improvements to both sides of its business. Imperial Nurseries looked to open a new wholesale center in Somerset, New Jersey, subject to municipal approval. The division planned to make improvements to a Florida farm operation by building additional loading docks, renovating customer service facilities, and increasing irrigation capacity to cultivate previously unused land. The operation looked to faster growing plants as well as different soil mixes to help increase profitability.

Griffin Land planned to continue its efforts in residential development, as well as on the industrial side by adding buildings to both Griffin Center South and New England Tradeport. In July the division announced a major agreement with JDS Uniphase Corporation to build a 165,000-square-foot facility on a 65-acre parcel in Windsor, Connecticut, with the possibility of two additional buildings of 150,000 square feet each.

In little more than three years, the spin-off corporation had made a successful transition from a collection of tobacco company interests to a viable independent operation.