A New Partnership

Todd Gates was in his Bonita Springs office a year ago when he received a most unusual phone call.

A consultant hired by the Seminole Tribe of Florida asked Gates to consider responding to a request for proposals to form a joint venture with the tribe to bid on construction projects.

Gates is no stranger to such arrangements. After all, he teamed up with Swedish construction giant Skanska to win the contract to build the Golisano Children's Hospital in Fort Myers, currently the largest project on the Gulf Coast. “By ourselves, it would've been very difficult to win it,” he says.

Gates, a native of rural Virginia who moved to Naples in 1984 with barely three months of savings, built his namesake company into one of the largest construction firms on the Gulf Coast by establishing partnerships with deep-pocketed investors.

Working through Naples consulting firm Peninsula Lifestyle Capital, the Seminole Tribe was seeking a new partner to build for its own account and to build for others. “They wanted to get into construction and development,” Gates says.

Now, after a year of private talks, Gates and the Seminole Tribe formed Seminole/Gates Development and Construction. The firm will focus on securing construction contracts set aside for minorities on large-scale developments throughout the state.

This is no small endeavor. Indeed, it could significantly alter the competitive landscape in construction on the Gulf Coast and throughout the state because of the tribe's financial strength.

The Seminole Tribe's extensive gaming enterprise brings a kind of financial might to virtually any project it could consider. The tribe owns seven gaming and resort facilities in Florida and Hard Rock cafes throughout the world through its ownership of Hard Rock International. The tribe's revenues aren't publicly available, but its agreement to pay Florida $1 billion over the last five years in gaming revenues hints at the war chest it has amassed.

In a statement, the Seminole Tribe says it has bold projects in store. “Through this new joint venture, we expect to significantly expand our construction business,” says Tony Sanchez Jr., the president of the tribe, in the statement.

“The Seminole's vision is a long view,” says Jeffrey Schoonover, chief operating officer and chief financial officer for Peninsula Lifestyle Capital. “Tony Sanchez and the [Seminole] board have a mission of building revenue and acquiring companies and doing projects that are not only good for today but for future generations.”

The big minority
The financial backing of the Seminole Tribe can't be underestimated, especially on large construction projects that require millions of dollars in bonding and huge upfront expenses. “They bring the financial wherewithal,” acknowledges Gates.

Terms of the joint-venture agreement between the Seminole and Gates haven't been disclosed, but Gates says the new Bonita Springs-based firm has three goals.

First, the firm plans to build for the Seminole's own projects. Besides the reservation land around the casinos and resorts, the tribe also is involved in a wide range of businesses including agriculture and fuel distribution to diversify its revenues.

Second, Seminole/Gates will target public and health care projects where goals for minority contractors have been established. “It gives them an advantage over non-minorities,” Gates says. Further, Seminole/Gates itself will also engage minority subcontractors on various projects.

Third, Seminole/Gates will provide construction services and consulting with other Native American tribes across the U.S. The Seminole Tribe has been at the forefront of developing the successful model of modern Indian casino operations and it is widely acknowledged as a leader in the sector.

Gates says the firm won't be pigeonholed into projects that require minority contractors. “There are a lot of private opportunities as well,” he says.

With such a broad mandate, it would seem challenging to select projects on which to bid. “We're not going after everything,” Gates cautions. “We have to go after projects we're qualified for.”

Among the projects Gates has successfully completed are schools, hospitals, university buildings, libraries and fire stations. He's recently launched a residential division that builds high-end custom homes. “We've kept the core team through the recession,” Gates says.

Better outlook for Florida
During the downturn, Gates stayed in business by building projects for earthmoving giant Caterpillar in Panama. Now that the recovery is underway, Gates has returned to Florida.

“The retail and office is starting to pick up,” Gates says. “I'm very optimistic locally and statewide.”

Gates estimates the current economic cycle of growth will last six or seven years. “Everything is cyclical,” he says.

Still, lenders aren't providing the financing for many projects and uncertainty at the level of the federal government is holding investors back. “A lot of what we're doing is private and cash,” Gates says.
Gates says it's important for Florida to keep its edge compared with other states: low taxes and a good quality of life. “That's why Hertz is here,” he says, referring to the car-rental giant's decision to move its global headquarters from New Jersey to Estero.

“Nationally, I'm very concerned,” Gates says. “Just ask Burger King.” The restaurant chain recently announced it would acquire a Canadian company and move its headquarters to Canada to lower its tax burden.

Virginia native
Gates arrived in Naples in January 1984 with barely enough money to rent a duplex with his wife, Angela. One evening after they arrived, when Angela was off to work with the family car, Gates rode his bicycle to a furniture shop to buy a bed, a couch and some chairs on credit for $700 so they could entertain his in-laws.

Gates' first job in Naples was hanging drywall for Hank Krehling. He eventually bought him out with partners and renamed the company Wall Systems. He sold his shares in Wall Systems in 1993 and started a construction firm called Gates McVey in 1995 with Jim McVey, who had recently left Boran Craig Barber Engel Construction.

Gates later bought out McVey and rode the construction boom through the downturn. To help him grow, Gates tapped into the vast network of wealthy investors who live in Naples.

Despite 30 years in Florida, Gates remains proud of his roots in Virginia. In fact, his family can trace back to the first settlers in Jamestown. It's a detail may impress many people, but not the Seminoles.
“We were here first,” they gently reminded him.

Executive Summary
Company. Seminole/Gates Development and Construction Industry. Construction Key. Forming joint ventures can help win big projects.

Children's hospital underway
When Skanska Gates broke ground in April on the new Golisano Children's Hospital for Lee Memorial Health System in Fort Myers, it was the culmination of an effort that began during the depths of the downturn.

Now, it's the biggest construction project in the region. While the construction of the tower that will house the new hospital is estimated to cost $150 million, the entire project will come closer to $242 million.

“There's a lot of moving parts,” says Dave Kistel, vice president of facilities and support services for Lee Memorial.

Besides building an eight-story, 300,000-square-foot tower that will house the new children's hospital at Health Park in Fort Myers, Lee Memorial plans to renovate the adjacent existing hospital building, add parking and build a new energy plant.

“The site work had to happen first to relocate parking. That's been completed,” says Kistel. “That's allowed us to fence in the site where the children's tower is going. We are doing the underground work.”
Visitors will be able to see the tower rise early next year. When it's completed in spring 2017, the new children's hospital will have 128 beds with room to expand to 160 beds.

To fund the project, Lee Memorial's fundraising arm has raised $82 million and has targeted $100 million. That includes a $20 million gift from Tom Golisano, a Naples resident and founder of payroll company Paychex. Lee Memorial plans to sell bonds next year to fund the rest of the project.