Key Equipment grows worldwide from Superior headquarters

SUPERIOR ? An equipment leasing company that bought the long-successful Boulder company Leasetec in 1997 has grown 20 percent during the last five years.

Key Equipment Finance Group, with world headquarters in the Denver/Boulder Corridor at Superior, leases a range of equipment from aircraft and rail cars to office furniture.

President and Chief Executive Officer Paul Larkins said the company moved into its two-building complex at Superior Pointe in March 1999. Key Equipment chose the area for its world headquarters because Leasetec, one of Key Equipment’s operations entities was here; because it’s close to the Denver International Airport; and because the region has quality employees, Larkins said.

Key Equipment has more than 700 employees worldwide and is a division of KeyCorp., a firm with $85 billion in assets. Both are publicly held companies.

Key Equipment manages a $7.5 billion equipment portfolio with more than $3.5 billion in annual leases. It is in the top five of domestic bank-backed leasing companies with global business in 27 locations worldwide. The Superior location employs about 250 people.

Larkins said the company chooses assets from manufacturing and profits in three ways: from nominal interest on the equipment it leases, by taking the tax benefits on the equipment, and by re-marketing the equipment when the lease runs out.

Key Equipment supports corporations and vendors. It is the capital company behind the scenes of Boulder-area businesses such as Storage Technology and Cisco Systems Inc. and Herman Miller, the leading manufacturer of commercial furniture in the world.

Key Equipment is structured with a capital company and calling officers that make contacts for and process direct origination leases. The firm negotiates leases with small businesses and Fortune 100 customers, and handles large business ventures.

“An example of a large business venture would be to finance corporate aircraft,” Larkins said. A company may have leased a jet that flies half-way across the United States, for example, but with the addition of a European office, it needs an airplane that can fly across the Atlantic. Key Equipment takes the old one back and provides the new jet.

Lee Ilers, vice president of Herman Miller Capital Corp., said Leasetec is the captive leasing agent for Herman Miller Capital Corp. “Leases are a tool for us to sell more office furniture,” he said. The normal sales cycle is for Herman Miller to offer a proposal to a customer for commercial furnishings. Calling officers from Leasetec and representatives from Herman Miller make a joint call to structure the lease.

“The driver is a funding source alliance,” Ilers said. “The lease is typically 24 to 72 months.”

Herman Miller’s is headquartered in Zeeland, Mich., has sales of $2 billion and 11,000 employees.

Larkins said companies have a huge competitive advantage when they have the flexibility to lease the equipment they need and to have a firm like Key Equipment meet their tax and accounting needs as well.

“With a larger cash flow, companies can reinvest in research and development or human capital. Leasing allows them to balance cash flow and not tie it up in production assets that are not making them money,” he said.

Another Key Equipment customer is Gas-A-Mat with headquarters in Boulder. According to Chief Financial Officer Ben Chaney, Key Equipment helped his company with a million-dollar, phased-in, computer-system installation.

“We set up a master lease agreement and rolled in the equipment over a year’s time,” Chaney said. “We didn’t have to pay for it all at once, and Key Equipment matched our schedule for implementation.”

It was better for Gas-a-Mat’s bottom line to do a few of its 70 locations at a time, he said. The company was growing rapidly and wanted to conserve cash.

Gas-A-Mat had revenues of $130 million in 1999. The privately held family business consists of Cigarette Store in addition to Gas-a-Mat. Combined, the businesses employ 500 people in four states.

Larkins said nearly two-thirds of Key Equipment’s business is small- to medium-sized companies typical of Boulder, with $10 million to $50 million in revenues.

He said the leasing industry began in San Francisco in 1952 but was formalized as a business about 30 years ago. The first leases were rail and aircraft — both were so expensive and lasted so long, the cost of buying them was prohibitive. Today, more than 50 percent of all aircraft and rail cars are leased, and more than 85 percent of U.S. companies lease their equipment rather than buy.

Besides its rapid growth rate, another unusual characteristic of Key Equipment is its International Assignment Program. The company sends employees to other countries for one or two years for a business-idea exchange among its offices.

“Leasing is an intricate business, and we need feedback from different cultures to stay viable,” Larkins said. Ex-patriots from Australia and Great Britain also come to the United States. Some employees in the program even want to extend their stays in a foreign country.

” I can’t stress enough the importance of quality employees,” he said.

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