In the multifamily business, if you’re a third-party apartment builder, you generally make that your bread and butter. More than half of the companies on Multifamily Executive’s Top 10 General Contractors list solely did third-party starts in 2010. One company did 92 percent of its starts for third-party customers. And everyone on the list started more than 68 percent of their units for third-party clients.
In many cases, the third-party contractors in the Top 10 had a niche that made them particularly valuable to developers. Without a lot of conventional financing available for market-rate development, developers looking to get projects off the ground needed to find a niche that still had legs from a construction and financing perspective. If they didn’t have such expertise in-house, these developers could turn to general contractors to help them out.
For instance, Franklin, Tenn.–based Construction Enterprises (CEI), which placed sixth on the Top 10 GCs, with 1,202 third-party starts, had been doing projects with HUD Section 221(d)(4) for 30 years. That put the company in a good position to secure work when HUD was the only place developers could turn to get financing. In some cases, the lenders even dictated that developers go with CEI because of the firm’s experience with HUD, according to Shelby Shafer, CEI’s president.
“We got lucky that those [221(d)(4) projects] were our niche,” Shafer says. “When everything went bad, those were available. So we benefited from our experience.”
Jacksonville, Fla.–based Summit Contracting Group (No. 7) also put its HUD experience to use in 2010 to start 1,068 third-party units. Company president Marc Padgett says 80 percent of his work in 2010 was HUD projects, but that’s changing with the backlog in the 221(d)(4) program. “I think we’ll go 50/50 conventional versus HUD in 2011,” he says.
Arlington, Va.–based Clark Builders Group (No. 4) was able to start 1,961 third-party units in 2010 because it was in the hot Washington, D.C., market and had a vibrant military housing platform. CEI, meanwhile, got a boost from student housing projects, which were able to get financing if they were well-located, according to Shafer. “Where there was a need, there seemed there was money for student housing to get put together,” he says.