Bold Bet on Florida

By Business Observer Staff
| 6:00 p.m. September 25, 2008
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Entrepreneurs

Bold Bet on Florida

With the acquisition of Kraft Construction and a substantial stake in Bank of Florida, Francis Rooney makes a bold statement about what he thinks of Florida's future.

ENTREPRENEURS by Jean Gruss | Editor/Lee-Collier

Francis Rooney is making a big bet on Florida.

Through his company, Rooney Holdings, the Naples resident acquired Kraft Construction in August, the largest construction company on the Gulf Coast with $559 million in revenues last year. Rooney also became the largest shareholder of Bank of Florida this year, a $1.4-billion bank holding company headquartered in Naples.

Rooney Holdings is one of the largest privately held companies in the country, according to a recent Forbes magazine ranking. Together with Kraft, Rooney Holdings' construction company, Manhattan Construction, will have revenues of $1.5 billion this year.

Rooney, 55, has invested in the two industries hit hardest by the real estate downturn: construction and banking. But like other investors who are raising money to invest in Florida, Rooney likes what he sees.

It's a vote of confidence at a time when many others are starting to give up on the state that is bedeviled by slower population growth, job losses and a high rate of foreclosures.

"Florida has a lot of unique drivers," Rooney explains, ticking off pluses that include tourism, growing universities and a nascent biotechnology sector. He says Americans' "unparalleled mobility" lets people choose where they want to live. "Florida's going to be a net gainer in that," he says. "It's not hard to be optimistic about Florida."

Rooney says Florida reminds him of Oklahoma and Texas during the late 1980s, when the oil bust ravaged these states' economies. He and his brother Timothy Rooney took over the Tulsa-based family construction business in 1984, just as the region was beginning to experience the effects of the oil bust.

"I'm either really naïve or it's another cycle," says the self-deprecating Rooney. But he quickly answers his own question: "These things are always cyclical."

Oklahoma redux

When Francis and brother Timothy Rooney took over Manhattan Construction in the mid-1980s, the oil-price crash was busting the once-booming economies of Texas and Oklahoma. The company was started in 1896 by Rooney's great grandfather in Tulsa, who built the Oklahoma State Capitol Building in 1907 and later built military installations during World War II.

But the oil bust would be one of the company's most severe challenges as construction projects dried up. "It was painful to have to lay people off," Rooney says.

The key to survival was having a good management team that believed the company would ultimately survive. Manhattan Construction's survival was due to the fact that executives were "willing to put the organization above any individual," Rooney says.

But eventually, the economies of Oklahoma and Texas turned around and Manhattan Construction was in a position to benefit. Francis bought out his brother in 2004 and now controls Rooney Holdings.

Looking back, Rooney says his company's structure as a private company ensured its survival. "Being privately held is very important because it's a cyclical business," he says. "You can't look at it quarter to quarter or even year to year."

What's more, Rooney was well diversified. Government work held up during the downturn, much as it has for Kraft Construction. Another Rooney-owned company, M.J. Lee Construction Co., builds bridges.

Rooney landed high profile projects, which cemented its reputation as a premier construction company. It built terminals at Dallas-Fort Worth International Airport, the Cato Institute's headquarters in Washington, D.C., and the new baseball park for the Texas Rangers team.

At the time, President George W. Bush was the managing partner of the Rangers and the two men became friends. Manhattan Construction built the George H.W. Bush Presidential Library and will build George W.'s library next. Rooney was a big financial supporter of Bush's last presidential campaign. "With the president, it was personal. He's a friend," says Rooney, who recently returned to Naples after a nearly three-year stint as U.S. Ambassador to the Vatican.

Manhattan's current and recently completed projects include the Dallas Cowboys football stadium, the U.S. Capitol Visitor's Center and Reliant Stadium, the home of the Houston Texans football team. These kinds of projects don't come without their unique challenges, Rooney acknowledges. "High-profile jobs can be a distraction for your people," he says. Much of Rooney's bread-and-butter work consists of building office buildings, schools and shops.

Moving to Naples

An avid sailor, Francis and his wife Kathleen were sailing down the Gulf Coast of Florida five years ago when they stopped in Naples and decided it was a better place to live than Tulsa. When Rooney became ambassador in 2005, he was forced to resign from all his volunteer and professional posts in Oklahoma. Rooney says that gave him the opportunity to start fresh in Florida.

Manhattan Construction has an office in Tampa and Rooney knew Kraft as a tough competitor. When Kraft's controlling shareholder, Fred Pezeshkan, was considering selling his shares, Rooney jumped at the chance to acquire the company in August (terms were not disclosed).

Rooney says he and Pezeshkan share the same management philosophy when it comes to doing business, which is to get ingrained in communities by establishing permanent offices, supporting local organizations and hiring local people. That's unlike many large construction companies, which establish temporary offices long enough to complete a job before moving on to the next town.

Rooney and Pezeshkan attribute their firms' success to landing repeat business from customers and remaining well diversified by pursuing a wide variety of projects in the private and public sectors. "There are old contractors and bold contractors, but there are no old, bold contractors," Rooney chuckles.

Rooney says he wouldn't have bought Kraft if Pezeshkan had not agreed to stay on to lead the company and retained an ownership interest. "Construction is the ultimate team sport," Rooney says. "It's important the top guys have an ownership interest."

The combination of the two construction companies will make them a stronger competitor in the Tampa Bay region, both men say. Eventually, Pezeshkan says the companies will take on projects in other parts of Florida.

This focus on deep involvement in community affairs led to Rooney's investment in Bank of Florida, a $1.4-billion publicly traded bank holding company with banks in Naples, Tampa and Fort Lauderdale. Currently, Rooney is the largest individual shareholder in the bank with a stake recently valued at more than $8 million.

"Banks are quintessential community organizations," says Rooney, who was encouraged to join the bank's board on the advice of fellow board member and Naples estate-planning attorney Joe Cox.

Rooney is confident Bank of Florida will overcome its recent financial challenges. "I really like the management team," he says. Michael McMullan, the bank's president and chief executive officer, has been through banking downturns in Texas and Florida. "They're positioned to do well. Their risk and internal controls are very strong," Rooney says.

At least for now, Rooney is not planning more acquisitions.

"I'm not a deal person," he says. "We have our work cut out for us."

REVIEW SUMMARY

Company. Rooney Holdings

Industry. Construction

Key. Florida is in a cyclical downturn and firms that manage through the downturn will be rewarded.

Rooney

Holdings'

companies

• Manhattan Construction Company. General contractor.

• Kraft Construction. General contractor.

• M.J. Lee Construction Company. Bridge builder.