Forced Patience

Forced Patience

construction by Mark Gordon | Managing Editor

Market slumps don't just whack local and regional construction firms. Multi-office national giants aren't too big to be spared, either.

With every day the Gulf Coast building slump lumbers along, it would be easy for Mike Beaumier to change his title from vice president of Boston-based construction giant Suffolk Construction to chief second-guesser.

Who could blame him? Beaumier, who had been working in the company's Florida headquarters in West Palm Beach, agreed to take on the job of leading the firm's official Gulf Coast expansion efforts early last year. The company opened an office in Lakewood Ranch in April.

As Beaumier's first year comes to an end though, the construction market for large-scale projects - any projects, really - from Naples up through New Port Richey has significantly dried up. And the lone market showing any signs of real substance - school construction - is becoming hyper-competitive, prolonging some companys' struggles.

Good thing the company set a modest goal of reaching $10 million in revenues its first year on the Gulf Coast, though even that mark proved elusive: The division reported more like $7 million to $8 million in revenues over its first year.

There isn't much to talk about as far as individual projects, either. The company has been working on some components of Ave Maria, the private Catholic university in Naples for the past few years. It also recently signed a deal to build a shopping mall under The Loop brand name in Punta Gorda, but that project is still in the preliminary permitting stage.

A"You could sit here and say doom and gloom, doom and gloom," Beaumier says. "Or you could figure out how to make some money."

Beaumier says he's generally an optimistic guy, but he's been especially buoyant lately, and not because he's spotted some turn in the market.

His source of optimism, instead, is Pat Neal, the Lakewood Ranch-based homebuilder who has spoken publicly several times over the past few weeks at events in the Sarasota-Manatee market about how adjusting to the changes in the marketplace doesn't have to be a death march. Indeed, Neal Communities sold nine houses in three days late last month in northern Manatee County, albeit for prices in the $125,000 range - considerably lower than the boom years.

A growth target

Suffolk is far from the only construction firm with a presence on the Gulf Coast to be knocked down by the market slump.

For instance, two of the region's largest firms, Kraft Construction Co. and Boran Craig Barber Engel Construction Co., suffered significant drops in revenue last year but were still able to maintain top status in the Review's annual list of the Gulf Coast's largest contractors. (See special section in this issue).

Revenues at Naples-based Kraft were down 20% last year to $559.2 million in 2007. And Boran Craig, also based in Naples, was down more than 40% in 2007, from $487.7 million in 2006 revenues to $337.22 million last year.

Not every firm was down in 2007. W.G. Mills, for example, reported 28% growth in revenue in 2007, from $169.9 million to $217.5 million, while Fort Myers-based Owen-Ames-Kimball grew 38% in 2007, from $145 million to $200 million.

From a long-term statewide perspective, Suffolk projects it will be mentioned in the latter category when it comes to growth. In fact, the company plans on reaching $500 million in revenues by 2012, a 45% increase from the $345.1 million in statewide revenues it had in 2007 and the $343.7 million it had in 2006. Company-wide revenues reached about $1.3 billion in 2007.

Rex Kirby, the president and general manager of Suffolk's Florida operations, says the company plans to grow slightly in the state in 2008 and 2009, based mostly on having several large projects that are two to three years in the making. But Kirby expects even more growth in 2010 and 2011, a theory he hopes is based on fact-based projections, not Pollyannaish optimism.

"We are trying to predict the future," says Kirby, who works out of West Palm Beach. "We are trying to prepare ourselves for the next wave."

One wave the company is counting on in Florida is the biology services sector. While the market in the state is so far small in scope, it's lucrative in terms of individual projects because of the intricate construction components, Beaumier says. The West Palm Beach office of Suffolk was recently retained to work on Torrey Pines, a $100 million molecular science complex planned for Port St. Lucie.

Beaumier adds that the gaming industry and hospitality sector could also be a growth target, especially considering pro-gambling legislation that is working its way through Tallahassee.

School is in session

Suffolk executives are also relying on school construction as a key component of its growth strategy. So much so that the sector has its own unit among the four Florida branches of the company's overall office. The other three are geographically-based: One is in Miami, one is in West Palm Beach and third one is the new Lakewood Ranch office.

Building schools, from public elementary jobs to private colleges, has become the market du jour for many Gulf Coast construction firms. Some of the attraction to the jobs though, which includes available funding and repeat work, are the same features that are making it so competitive.

Both Beaumier and Kirby say the number of construction firms statewide interested in building schools has multiplied significantly in the last year. Kirby says more than 20 contractors are showing up for pre-bid meetings on the east coast of the state, a number three times greater than what it was late in 2006. Beaumier reports the same experience on the Gulf Coast of Florida, in counties as diverse as Pasco and Lee.

Says Beaumier: "There is a dramatic increase in the number of contractors who, three years ago had nothing to do with schools and now all of a sudden are building schools."

Competition isn't the only challenge facing Suffolk in the school market. The company's size and statewide presence provides both a boost and a drag. A boost because the size gives the company insurance and bonding capacity that few other companies can match. "A player like Suffolk," says Beaumier, "makes the banks a lot more comfortable."

The drag stems from local school boards and county governments in several parts of Florida that have recently sought changes to the bid process that give more points to a local based contractor - while penalizing one without a local headquarters.

So, according to Beaumier, even though Suffolk has almost 300 employees in the state, it's automatically put at a disadvantage when working in counties with a home-based rule. Sarasota County has been considering changing its structure to reflect a home-based advantage.

Nonetheless, Beaumier remains optimistic, both on landing new school jobs in 2008 and 2009 and on the entire Gulf Coast construction market. "I'm still very positive on Florida," he says. "I anticipate you will see a lot more red and blue signs around town over the next few years."

Suffolk Construction

Figures reflect statewide revenues and employee counts, including offices in Lakewood Ranch, Miami and West Palm Beach.

Revenues

Year Revenues %Growth

2004 $210.4 million

2005 $223.8 million 6.4%

2006 $343.7 million 53.6%

2007 $345.1 million 0.4%

Employees

2004 145

2005 171

2006 257

2007 265

REVIEW SUMMARY

Business: Suffolk Construction, Lakewood Ranch

Industry. Construction

Key. The billion dollar-plus Boston-based company hopes to grow its Florida revenues at least 45% over the next four years, partially by focusing on the Gulf Coast.