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Construction firms brace for a slowdown

Reviewing the numbers from 2000, it is apparent that Orange County’s largest builders enjoyed the last moments of go-go growth before the economy put on the brakes.

In fact, OC’s 25 largest builders raked in $5.5 billion, 6% more than that group realized in 1999 and a 2% increase from the total on last year’s list, which included some different firms. Excluding No. 1 Fluor Daniel, the 800-pound gorilla of the group with 38% of the list’s total revenue, the other 24 firms on the list posted a 10% gain in revenue against their year-ago figures.

Also, 2000 proved a solid year for lining up new business. The 23 firms on the list that reported the value of contracts won last year had a total of $4.5 billion in new work in the pipeline, up from $4.16 billion in 1999.

Although the market experienced an up trend in new business, not all of the major players were beneficiaries. While 16 saw increases in new contracts from the previous year, seven of the firms experienced a drop in new business. Flour Daniel and No. 6 Haskell Constructors Ltd. did not release information on their contracts.

Among the biggest gainers was No. 2 Clark Construction Group Inc. The Bethseda, Md.. company, with a regional office in Irvine, grew its revenue 70% to $418.5 million in 2000 and its new contract wins rose 56% from 1999.

“We’re diverse,” said Richard M. Heim, the regional senior vice president for Clark. “We’re 50% private and 50% public (in our clients).”

Heim said that, in terms of overall construction, the Southern California market continues to be strong, and he cited San Diego and Los Angeles as markets outside of Orange County that Clark will continue to pursue.

“Southern California is still head and shoulders above other markets,” Heim said.

Among Clark’s notable recent projects in OC are two major endeavors at Disney’s California Adventure: the Esplanade project and Grizzly Peak.

With Disney’s California Adventure now open, Heim is looking to tap into trends his company sees developing.

“Clark sees the private sector starting to retrench, but sees a very strong public sector, especially concerning colleges, universities and municipal works projects,” he said.

Locally, Heim sees the healthcare industry as a solid sector for builders in the next few years, as new state seismic requirements start to kick in, requiring extensive retrofitting or rebuilding of hospitals in particular.

“I also see the power plant market staying strong for another five years,” Heim said.

One of the biggest beneficiaries of the power plant market is Lake Forest-based ARB Inc., No. 7 on the list. ARB had the largest percentage jump in new business, adding a whopping 101% in 2000, or $175 million in new contracts.

Notable projects for ARB include the new Costa Mesa corporate headquarters for Experian (see related story on page 1), Soka University of America in Aliso Viejo, and Orange Coast College, Costa Mesa. But the direction of the company is being shifted from education to energy.

“Our major focus is in the building of heavy industrial projects,” said Brian Pratt, president of ARB.

Chief among the firm’s heavy industrial projects is in the construction of power plants.

“Right now we have 22 power plants under contract,” Pratt said. “We’re building everything from 50 megawatts to 300 megawatts.” That’s about two-thirds of the plants going up now, added Pratt.

The power plants make up about half of ARB’s market, according to Pratt. Another major chunk is in the underground pipelines feeding those power plants. The third major segment for ARB is in building parking structures.

In all, ARB is “gearing up for a $350 million year this year,” Pratt said.

For other firms, growth is in diversity. That’s the case for No. 4 McCarthy Building Cos. The Newport Beach-based Southern California division of the St. Louis, Mo.-based builder grew 57% in new contracts last year, to $529 million in business.

“We are a diverse builder,” said Dennis Katovsich, senior vice president with McCarthy. “We have had the great fortune of being able to construct many different types of buildings, and our markets are very broad.”

Among McCarthy’s notable projects in Orange County are major parking structures at Hoag Memorial Hospital and the University of California, Irvine. It was the recently awarded the contract for the Newport-Mesa Unified School District improvements.

Commenting on the OC market, Katovsich said, “we see it as very active and dynamic, although we see spec office building leveling off to almost nothing right now.”

Another builder adjusting its approach is Costa Mesa-based ALY Construction Inc. The No. 20 firm on the list made a name for itself in the building of movie theaters. With that industry being hit with a wave of bankruptcies, ALY shifted gears.

“Now, we’re in multi-family apartments, senior apartments and hotels. We see these as dynamic markets,” said Jim Lefler, senior vice president with ALY Construction.

In one project, ALY is handling the estimated $70 million to $80 million renovation of the Napa Valley Marriott.

As for employment in the building sector, staffing grew 5% among the 25 firms on the list, to 5,967 workers. No. 5 Hensel Phelps Construction Co. increased staff the most, adding 80 employees to the 100 it had in 1999. n

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