Lunch With ... Frank Dalene of Telemark

Frank Dalene’s company, Telemark, has been one of the East End’s leaders in the high-end construction market for the better part of three decades. Their reputation for superior craftsmanship has earned them acclaim within the industry and from the region’s most discerning clientele.

Among the company’s notable jobs in recent years was the Southampton Village estate that sold for $65 million in 2007, at the time the most expensive residential sale ever (rumored, incorrectly, to have been purchased by golfing great Tiger Woods).

Earlier this year, Mr. Dalene and a handful of other local businessmen founded the Hamptons Green Alliance, a consortium of building and home-care industry companies dedicated to helping clients and the general public properly identify the most energy efficient and environmentally responsible building materials, designs and products for their homes.

Mr. Dalene has written articles on building, industry trends and environmentally responsible construction practices. He has been quoted in the Wall Street Journal and numerous real estate industry publications discussing the health of the local real estate market. He is the chairman of the Membership Committee of the Long Island Builders Institute.

And he sat down for lunch at Bobby Vans in Bridgehampton recently with Press reporter Michael Wright to talk about his business and the building trades on the East End.

Q: Tell us about Telemark. You own it with your brother?

A: It’s my brother, Roy, now. I started with my father. It’s 30 years now. He had a building business, I had a carpentry business. His partner retired and the two of us put our businesses together and formed Telemark. That was 1978.

Q: Where does the Telemark name come from?

A: The name is a county in Norway where we’re from. I’m born in Norway. My father came over here in 1954, when I was six months old. ... We have a lot of pride in our work and we wanted to relate that back to our Scandinavian roots. Our woodworking skills, things we did with different types of woods, complicated millwork, our knowledge of different types of materials, being able to steam bend wood, which when we started not many people around here knew how to do. We started in St. James. There was a real Norwegian community in St. James, many skilled craftsmen and we learned from each other.

Q: Where does Hamptons Luxury Homes come in?

A: Hamptons Luxury Homes is a publicly traded company. We were approached by some people to merge Telemark into Hampton Luxury Homes. It was an opportunity to grow our company to another level. We have a service and maintenance business here that is working very well and we have a business plan that if we can grow our company through an acquisition strategy we can make our company more recession proof. This is a second-home market and absentee ownership and there is a great need for quality service and reliable service.

Q: You mention recession. What a coincidence. Compared to the 1970s, compared to early 1990s, how do you see what’s going on now?

A: We have to define that and it will be important to define that actually. There’s been a middle market out here that’s been in recession for about two years or more. When you’re thinking about all the spec houses that were built, most of that fell within the middle part of the market and there was more supply than demand in that market. It wasn’t a result of any kind of economic situation in the Hamptons, it was overbuilt and that part of the market got soft. The upper end has always been strong. Even today you talk to some of the real estate people and they think that’s strong, I think it’s fallen off. The lower end goes through its own cycles too and we’re seeing sales happening at that lower end of the market right now.

Q: Why sales now? Because prices are right?

A: Exactly, that’s the thing. People were thinking—and someone was telling them—that they could get a certain amount for their house and prices were escalating at such a high rate that they were overreaching and I think they priced themselves out of the market. They were all overpriced. That’s really the problem. Once the people that had to sell began dropping their prices to realistic levels then they would trade. And that has happened, I would say, really in only the last three months.

Q: Three months — what changed?

A: We can trace it to ... the Lehman Brothers collapse at the end of September. That’s when everything out here started to go on hold. We had a project in the village of Southampton that was a Lehman executive that went away. The rest of what we’ve seen is kind of similar to what we saw after 9/11. People contracted, there were projects lined up and people said “wait, let’s hold off. We’re not going away but we want to see what’s happening.” After 9/11 that went on for about 6 months. We’re seeing a very similar trend, and then also we’re seeing people who are not affected.

Q: Who’s that unaffected?

A: During economic cycles, wealth changes hands. The new hands it goes into, the people have to come out to the Hamptons to establish a status. Now that the Hamptons is a global arrival place that is even more apparent because there is a factor when it comes to the value of the dollar, let’s say. The one thing that we noticed too is that during an economic downturn, attorneys make money. People are losing money and they want to blame somebody, they want to sue somebody. There’s bankruptcy’s happening. There is a lot of legal work out there.

Then we see people out here that are just not affected. The wealth is so great and their portfolio is so diversified that no matter what catastrophic thing may happen it doesn’t affect their lifestyle. It may affect their overall wealth, but not to the extent that they need to cut back their lifestyle. There are people here who are multi-billionaires. There are people who made fortunes shorting the financials. There are a lot of people who still have a lot of money.

Q: How do you see things overall developing? What has to happen for things to turn around?

A: I’ve been thinking about that a lot and I have to say, at this point, that is uncertain because the economy is uncertain. I don’t think there’s too many people who really understand what is going on. So how long is it going to take us to rebuild? I think what the government is doing now are short-term fixes. What needs to happen is trust needs to return into the system. The reason a lot of what they’ve done already hasn’t worked is because it hasn’t created trust. Once people start believing in the system again, I believe, at that point, will be the turnaround. And I believe the people out here are going to be some of the first to know and the indicator to us will be when they turn their projects back on.

Q: So, assuming we’re not on the verge of a great depression, how is the building business going to weather this?

A: There is a shakeout of the market right now. It’s a cleansing. There was a lot of builders who came out here during the good times that had no business being builders. They didn’t have their basis in the trades and building science and they were producing houses that were shoddily built. It’s a good cycle to go through from time to time. There is this correction that needs to be done. People need to be brought back to reality. They need to be sober about it.

Q: I hear the building industry is asking for a bailout now too (the owners of the “Big Three” automakers are giving testimony to Congress on the television over the bar).

A: Can you believe those idiots? Do they think they’re fooling anyone driving hybrids there?

Now, the builders are asking for some help, but they’re not asking for a bailout, per say, They’re not coming to the feds hat in hands. They’re not asking for money. What they’ve asked the feds to do is stimulate mortgages so that mortgage rates, through the competitive market, will come down and open up buying and refinancing and stimulate construction through a natural process, which I think is a lot more wholesome than handing over billions of dollars or nationalizing banks. They want to see rates come down to 4.5 percent. They believe that is the benchmark that will stimulate people to now buy a house. I thought that was a reasonable request and I think it is something that needs to be done. Will that affect it here in the hamptons? Absolutely not.

Q: Tell us about the Hamptons Green Alliance.

A: That is something that came up from [Telemark employee] Bob Morsch and I talking. Our clients want to go green, they want to do something that is positive. But the information is complicated and is very fragmented. There is a lot of things out there that have a green label on them that are not green. Building science has been left out of the discussion. We believed there needed to be an education of the public.

In April of this year we formed the Hamptons Green Alliance with six founding members who agreed to volunteer their time. It’s Treewise—here’s a local company that’s being sought after by Princeton and they’re leaders in their field nationwide; Flanders Heating and Air Conditioning—Doug Matz is someone who is very innovative in developing some of the geothermal systems we’ve been using; Delfino Insulation—they have been very progressive in bringing forward new products but backing it up with science; Connected Hearth, he’s an innovator also; and Sun Stream, a photovoltaic energy company started by John Tortorella that’s been very progressive also.

We want to determine which information is correct and which is not, so those things will be adopted in the industry. We want to bring building science into it. The green movement is something that’s coming ... it’s coming like a freight train and that freight train is out of control. What we want to do is take control of that freight train—we can’t let it crash because it will do too much damage to the movement if something horrible were to happen. So we want to use the expertise that we have through the trades to help put forward the correct information so it will be adopted in the construction industry.

We have a project with a client in the estate section of East Hampton, who wants to build a zero-energy carbon-neutral footprint home. We don’t know if we’re going to be able to do it but we’re gathering together universities and national building scientists and the owner has agreed for us to film a documentary as an example of building with this as a goal—and it’s a very lofty goal. We’re reaching out to manufacturers. Our company is going to Germany this weekend to visit a company that manufactures windows. Their performance standard blows away everything in this county. Windows are your number one heat loss area. We’re going to ask them to contribute to this project. I believe it can be done.

Q: You sound like your interest here is more than just saving your clients some money on their heating bills

A: I’m an environmentalist at heart. I’m a builder and an environmentalist. People say that’s an oxymoron but I was involved in green building back in the 1970s before it was termed “green.” We have developed systems in water-source geothermal going back to the 90s. Passive solar, active solar, using certain materials like bamboo early on, geothermal before it became popular. I went to the Amazon to photo-document sustainable yield forestry and selective harvesting for a project we were working on. I’ve always had a green consciousness.