Block by Block

Block by Block

During the boom, as much as 90% of Boran Craig Barber Engel Construction Co.'s business was building condominiums. The company is returning to commercial construction and

exploring new avenues to replace lost condo business, including insurance and small projects.

construction by Jean Gruss | Editor/Lee-Collier

Melvin Engel helped build Boran Craig Barber Engel Construction Co. block by block.

Engel joined BCBE as a mason in 1972, rising to become the firm's president and chief executive officer 11 years ago. After building the company into the second-largest construction firm on the Gulf Coast by revenues, Engel has to survive a drought in what has been its bread and butter business over the last decade: condo construction.

At the height of the residential boom, condo construction generated as much as 90% of BCBE's revenues. "We jumped into condos head first," Engel acknowledges. The secret to the firm's success in that field was to perform its own masonry, which allowed it to build residential towers better and faster than its competitors.

Now, Engel is guiding the firm back to its roots as a commercial builder, seeking opportunities in the Panhandle, Orlando and Miami areas. The shift isn't without its pains. The company reported $337 million in revenues in 2007, down nearly 30% from 2006 figures.

But it's not as if BCBE is starving for work. It is currently working on 60 jobs ranging from a $50,000 renovation to $92 million condo tower. "We're not in panic mode," Engel says.

After years of windfall condo work, BCBE is aggressively pursuing commercial work, from office buildings to churches and hospitals. Its executives are targeting small jobs and they even launched an insurance brokerage firm while investing in new software to make operations more efficient. Two business-development executives are scouting jobs all over the state and Engel is not ruling out going across the state line in the quest for work.

Engel doesn't expect a rebound until 2010. "For the next 12 to 18 months you're going to have to work your butts off for the pockets of work," Engel tells employees. "It's going to be a difficult business for a while. Service is going to be the key."

Finding pockets of work

Engel is reluctant to share specifics of where the company will find pockets of work until the construction business recovers more broadly. After all, why tip off the competition?

But the Florida Panhandle, Orlando and Miami are three promising areas, he says. BCBE won't rule out pursuing projects in other states. A customer recently asked it to consider a project in South Carolina, for example.

Industries that are still building facilities are related to health care and hospitality. In particular, assisted-living facilities keep growing and hotels continue to be attractive.

With many big construction projects diminishing in numbers, BCBE created an interiors division that has already brought in $10 million worth of work since it started at the beginning of this year. "I see it growing to $50 million a year," Engel says. Recent Naples projects include the interior renovation of a 16,000-square-foot Florida Cancer Specialists facility and an addition and remodel of the United Church of Christ.

Although bidding on projects is somewhat new territory for BCBE, it has done well on that front. "We get 70% of what we're bidding," Engel says. By contrast, the condo-construction deals of the past were all negotiated.

One of the reasons Engel says the firm is winning the majority of bid contracts is that it has invested in expensive new software to estimate costs and manage projects. The investments were among the results of a self-evaluation process company executives organized with the help of North Carolina-based construction consulting firm FMI.

The new software allows BCBE to bid on projects more quickly and accurately than smaller competitors. "We had to be very, very aggressive," Engel says. "We can turn out more bids than they can."

Insurance is complementary

One of the more intriguing businesses BCBE is getting into is insurance. In March, the company announced the creation of BCBE Client Services, an insurance brokerage that specializes in construction and condos.

John Caballero, who heads up the insurance company, had joined BCBE as a risk manager, helped the construction company manage its insurance plans. After realizing the savings and efficiency they created, they decided they could do the same for the subcontractors who worked for them.

Equally lucrative, BCBE Client Services provides insurance to condo owners associations. Construction and insurance are complementary businesses because BCBE can provide construction services to help building owners lower or stabilize their insurance costs.

BCBE executives wrestled for a long time trying to decide whether to start an insurance company that could compete with clients. For example, one of its biggest customers is Naples-based developer Lutgert Cos., which has its own successful insurance company. "We wanted to be careful not to step on toes," Engel says. "You're trying to offer a better service," he explains.

The idea of creating an insurance agency has sparked other ideas for new businesses, but Engel declines to be more specific. "Talk to me in six months," he says with a smile.

Will condos come back?

Even in today's slowdowns, condos still make up 70% of BCBE's business. They weren't overbuilt everywhere.

For example, the company is building two in West Palm Beach now. In Sarasota, there are seven to 10 major projects in the works. Florida residents "all can't live in single-family homes," Engel says.

Condo prices are stabilizing on the Gulf Coast. "It's righting itself; they're selling condominiums," Engel says.

One of the biggest obstacles now is financing. "The money's there to lend, but all the stars and moons have to line up," Engel says.

Speculators have been weeded out of the market and developers will insist on buyers putting 30% down when they pre-sell a project. "2010 is going to be the year."