Palm Beach Post Article- March 21,1998
LANTANA—When he was in high school, Jose Ramirez knew his family’s poverty would stop him from going to college and becoming a doctor.
So, the Cuban born immigrant took another path to prosperity, one tailor made for the South Florida heat-repairing air conditioners.
So far, so good. Ramirez started with one van in 1986. Today, he has approximately 125 employees and 60 vans covering Fort Pierce to Pembroke Pines. Sales at his Lantana based East Coast Mechanical have grown150 percent since 1995 to 6.5 million last year from 2.6 million.
Now, Ramirez is positioning his privately owned business which sells warranty contracts on air conditioners, water heaters, appliances and electrical and plumbing systems to be among the few remaining giants as the air conditioning maintenance industry consolidates across the country. He plans to buy companies in the Tampa-St. Petersburg area and well beyond the Sunshine state.
Ramirez, 45 is aiming to join the ranks of national air conditioning service companies such as Service Experts Inc. of Brentwood, Tenn(NYSE:SVE) and American Residential Services Inc. of Houston (NYSE:ARS)
I’ve told them I’m not for sale, and i’m just getting warmed up,” he said.
Ramirez’s plan is to take his company public in about two years, after its annual revenue passes $10 million.
As if to mark the start of a new chapter, Ramirez moved his corporate headquarters last November to a new 24,000-square-foot building in Lantana from West Palm Beach. He also hired a marketing director.
Luck and talent powered Ramirez’s ride from rags to riches-using as fuel the demand from new and aging developments.
Ramirez, the eldest of six children, came to Palm Beach County when he was 9 years old. He graduated from an air conditioning repair program at North Technical Education Center in Riviera Beach in 1972 and went to work for JCPenny.
He worked for several companies over the next 14 years and learned how to repair all types and brands of air conditioners and appliances.
He also learned how to manage people. He founded East Coast Air Conditioning Co in 1986 with $25,000 he made by selling his house. The business, later renamed East Coast Mechanical Inc., took off when he started subcontracting for General Electric, which had sold warranty service contracts. By 1992, Ramirez wanted to sell service contracts himself.
To do that, businesses must deposit $50,000 with the state and meet other requirements, including keeping 25 percent of contract revenue in escrow. Though the state has 3,138 certified air conditioning contractors, only 96 companies are licensed to sell warranty service contracts. But that hasn’t stopped a new breed of entrepreneurs.
Their aggressive Wall Street-backed companies are rapidly buying out the estimated 35,000 contractors who serve the nation’s $65 billion heating, ventilation and air conditioning maintenance market.
In the past 21 months, four companies have gone public: three in Houston and one in Brentwood, Tennessee. Most are targeting the less risky, more profitable residential market, which is valued $24 billion annually.
Four factors bode well for this industry’s growth, says Rob Nicoski, an analyst with Piper Jaffray Equity Research in Minneapolis.
Old air conditioners, installed during a construction boom in the 1970′s and 1980′s, need replacement. Central air conditioning has become a standard feature in residential construction. New comfort systems that allow for humidity control, air purification and separate cooling and heating for different parts of homes have created demand for the upgrade and more consumers are concerned about indoor air quality and its effect on health.
The consolidation spree will be successful if it provides reliable, professional service to customers, Nicoski said. “From my personal experience, its been extremely spotty.”
Ramirez said he hopes to change that. “In time, you’re going to see 20 large players in the industry, and i plan on being one of them,” he said.