Going Coastal

Going Coastal

ENTREPRENEURS by Jean Gruss | Editor/Lee-Collier

The trick to diversifying a business is to do it before times get tough. Coastal Engineering Consultants' Michael Stephen did it right.

Just as Florida's real estate market started to boom, Michael Stephen went looking for new business elsewhere.

Stephen, president of Naples-based Coastal Engineering Consultants, started scouting opportunities in Louisiana in 2000 and established an office there two years later.

Smart move.

While rival engineering firms plunged into real estate development in Florida, Stephen concentrated on what his firm does best: fixing and restoring beaches, channels, mangroves and estuaries in Florida and Louisiana.

"A lot of our competitors were making a lot of money," Stephen acknowledges. But because it didn't stray completely from public-sector work and focused on its strengths, the firm hasn't been as hard hit by the current real estate bust.

It's not that Stephen ignored the real estate boom. His firm offers the full array of planning, surveying and mapping for real estate clients. Coastal opened - and subsequently closed - an office in LaBelle in Hendry County, an area east of Fort Myers where residential and commercial development was forecast to surge. Because of the downturn, revenues dropped from $4.5 million in 2006 to $4 million in 2007.

But Coastal also maintained its public-sector business, never letting its work for municipalities account for less than about half of the firm's revenues. Today, by contrast, many rival engineering firms in Florida are racing to chase government projects because work for private developers and builders has dried up after the bust.

The diversification to Louisiana paid off. Work in that state now generates about 35% of the firm's annual revenues. To continue growing, Coastal is aiming for the Charleston, S.C., area and Stephen hopes to double the revenues from Louisiana within the next five years.

Coastal regions grow

When Stephen established his firm in Naples in 1977 after obtaining his doctorate in coastal geology from the University of South Carolina, U.S. population migration to the coasts was beginning in earnest. Federal, state and municipal regulations of development were also starting to make things more complicated for developers and municipalities.

At the same time, older coastal developments needed work. Seawalls were crumbling, beaches were eroding and navigation channels were getting clogged with new sediment. "We fix the sins of the past," Stephen tells prospective clients. "Coastal restoration is such a big business."

Meanwhile, environmental groups were gaining political clout, complicating things further for developers and municipalities. "We did the first mangrove restoration project in Southwest Florida" in Naples Bay, Stephen says.

Together, all these forces created opportunities for firms such as Coastal to help clients manage through a growing labyrinth of regulations and political pressure that boosted the cost of coastal development. For example, the cost of beach renourishment has quadrupled since the late 1980s.

To do that, Coastal doesn't just provide the engineering know-how. It also has become intricately involved in helping politicians, regulators and environmental groups understand the complex and evolving science that underlies the work its engineers do.

Today, the coastal permitting process is daunting. "It takes sometimes 18 or 24 months to get a permit," Stephen says. He calls it "the ultimate paper chase."

Frequently, permitting agencies hire young engineers fresh out of school who know little about the complex field of coastal engineering. "The reason we have difficulty getting permits is the agencies don't understand [the science]," Stephen says. So Coastal sponsors training sessions for agencies such as the Florida Department of Environmental Protection (DEP). Without this education, a permit that would ordinarily take 18 months to obtain can quickly turn into a 36-month ordeal. "That saves our clients a lot of money," Stephen says.

During the real estate boom, the U.S. Army Corps of Engineers in Florida was so overwhelmed by the hundreds of development applications that Coastal organized a coalition of about 50 engineering firms to chip in money for administrative staff to relieve the regulators of tasks such as data entry. "We all threw a $1,000 into a pot," says Michael Poff, Coastal's vice president of engineering.

Poff says he goes out of his way to praise the regulators and this kindness is often returned in the form of faster service. "Most people yell at us," regulators tell him.

Poff takes the same approach with environmental groups, some of which are particularly strident.

"I hit 'em with love," says Poff, whose charm often disarms the opposition. "They want you to get combative," he says. He understands their concerns because Coastal is an active member of most environmental organizations, sponsoring events and attending their functions.

In addition, Coastal encourages elected officials to become better educated about the science that underlies their work. The firm is involved with a group called the Florida Shore & Beach Preservation Association, which conducts seminars on coastal engineering for politicians and other laymen. "They learn about how beach issues are approached," Stephen says.

Coastal teams up with larger firms on some projects, lending their expertise to companies such as CH2M Hill and Camp Dresser McKee. That lets the company spend more time working on projects than chasing bids.

Bayou bound

By the end of the 1990s, Stephen was scouting for ways to diversify away from Florida. He had done projects elsewhere in the past, including the Florida Keys, California and overseas in places such as Jordan. "Our business has always been extremely portable," Stephen says.

Louisiana seemed ideal because the state had just devised a 50-year plan for its coastline, which is undergoing substantial changes. Erosion is causing the loss of 25 square miles of marshes in Louisiana each year. That's due to sinking sediment, oil and gas development that is water-intensive, rising sea levels and beach erosion due to river controls.

The Mississippi Delta is such an important center for shipping and energy that work in Louisiana should be plentiful for years to come.

So if there's so much work in Louisiana, where's the competition? Most of the engineers in that state work for the oil-and-gas industry, which on occasion has been blamed for coastal erosion. "We were rapidly accepted in Louisiana," Stephen says.

Hurricane Katrina didn't generate more business, in part because much of the work had already been planned before the monster storm hit. "Katrina was just disruptive," Stephen says. "We had to redo things that were already done."

Now, Stephen is scouting other areas that have the same potential for coastal restoration and redevelopment. One of these areas is Charleston, S.C., which has marshes, marinas, beaches and a new proposed "land port" that will link shipping with Interstate 95.

"In this business, you have to be an entrepreneur and a scientist," Stephen says.

Gulf Coast Projects

Naples-based Coastal Engineering Consultants has been in business since 1977, focusing on projects such as beach nourishment, channel dredging and marina development. Projects include:

• Sunshine Skyway boat ramp concept and design.

• Punta Rassa boat basin rehabilitation and expansion in Fort Myers.

• Design and permitting of Calusa Island Yacht Club & Marina in Goodland.

• Racoon Island shoreline protection and marsh creation in Terrebonne Parish, La.

• Riverine sand mining and Scofield Island restoration, Plaquemines Parish, La.

• Cable Beach restoration and breakwater design, Cable Beach, Bahamas.

• Grenada storm surge analysis, Island of Grenada in the Caribbean.

• Stump Pass inlet management, Charlotte County.

• Wiggins Pass dredging and beach nourishment, Collier County.

• Matanzas Harbor management plan, Lee County.

• Bayfront mooring field design, Sarasota Bay.

• Charlotte County erosion control project.

• Sarasota County inlet management program for Big Pass and New Pass.

REVIEW SUMMARY

Company. Coastal Engineering Consultants

Industry. Engineering

Key. Diversifying across clients and geography will pay off.