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The right moves


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  • | 2:38 p.m. March 11, 2011
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REVIEW SUMMARY
Company. DeAngelis Diamond Construction
Industry. Commercial construction
Key. Diversification, expense controls and no debt were the keys to managing through the downturn.



The construction collapse on the Gulf Coast hasn't spared anyone, but here's the thing that separates David Diamond and John DeAngelis: They didn't make the big mistakes that many competitors made.


Naples-based DeAngelis Diamond Construction has no debt, its founders never sought outside investors, they didn't invest in costly equipment, they never focused exclusively on one kind of project and they sought out clients who shrewdly managed their businesses through the downturn.


The partners laid off employees when they had to while carefully building the firm's bond-insurance capacity so they could handle ever-larger projects. DeAngelis and Diamond expanded their construction-management company statewide when they realized there wasn't enough business to sustain them in Southwest Florida, and they focused on renovations, health care and government work at the right time.


The payoff: Revenues rose nearly 28% to $60 million last year. DeAngelis forecasts the firm will grow revenues another 50% this year because it currently has a backlog of projects worth almost $100 million.


“2012 is what we're really excited about,” DeAngelis says.


DeAngelis says he's spoken recently with bankers who tell him they're eager to finance new projects and with executive recruiters who are busy again helping companies grow. “I talked to a lot of civil engineers and architects and they're getting really busy,” he says. “Those are all really good signs.”



Radio Road


DeAngelis and Diamond gained their experience by managing complex commercial and condo projects for another large builder in Naples, Boran Craig Barber Engel.


But the entrepreneurial duo wanted to run their own company and gradually saved enough money to cover the costs their first year in business. “We needed at least one year's worth of salary,” Diamond says. “We saved every dime we could.”


From the start, neither Diamond nor DeAngelis wanted to owe anyone. “We made a conscious decision to not have backing,” Diamond says.


When they started DeAngelis Diamond in June 1996 in a small office off Radio Road, they had no work lined up. “We didn't have a single job or a single lead,” Diamond says. “We didn't take any clients from BCBE.”


Taking clients from their previous employer would have run against their Christian philosophy, upon which they say they've based their business. “When we left BCBE, we wanted to be men of integrity,” Diamond says.


To land new customers, they pledged to do business more openly by sharing the financial details of a project with customers, showing them exactly how much labor and materials would cost and the size of their management fee.


DeAngelis Diamond didn't try to lowball by underbidding the competition to win new clients. “In the early days it was relationships,” Diamond says. “It wasn't price.”


Devout men, DeAngelis and Diamond don't allow swearing on the job sites and insist on clean work areas. They pledge to customers to finish on time, not to surprise them with change orders and to communicate well. “We wouldn't let our problems be their problems,” Diamond says.


Those courtesies extend to employees and vendors. “I like to be paid on time and not screamed at,” Diamond says.


Understanding that construction runs in deep cycles, DeAngelis and Diamond also made an effort to diversify early on, building offices, schools, churches and health-care facilities. “We said we'd never be a niche builder,” Diamond says.


The pair's first job was building a $3.5 million Naples Dodge dealership, owned by a pair of young entrepreneurs. “They were young guys like us; we had a connection,” Diamond says.


Jon Myers, president of what is now the Naples Dodge Chrysler Jeep dealership, says he was aware of the builders' reputation when they worked for BCBE and believed that they would work extra hard on that first job. “We liked that we were their first customer,” Myers says. “If they did it right, it would be a landmark for them.”


From their first project, DeAngelis and Diamond carefully built their business and grew their bonding capacity to $100 million today. To please the bond insurers and strengthen the firm's balance sheet, DeAngelis Diamond has an untapped $2 million line of credit. “We've never touched it,” Diamond says.



Managing the boom and bust


Starting a construction business in Naples during the mid-1990s was fortuitous because of what lay ahead: a construction boom of epic proportions on the Gulf Coast.


But the growth of the mid-2000s proved to be tough to manage. “The tough thing was that you just didn't have enough people on a project,” Diamond says.


By the peak in 2005, DeAngelis Diamond had 100 employees. Fortunately, the two partners had built their company to be a construction management firm and the staff consisted of project managers and administrators. Because they outsourced the construction work to subcontractors, they didn't have the labor, trucks and equipment overhead that many of their competitors had.


Still, DeAngelis and Diamond had to pare down staff and cut salaries when the downturn began. At first it wasn't too painful because they cut people who weren't top performers. “The second year we had to cut people we liked,” Diamond says. They have 60 employees today.


Both DeAngelis and Diamond are modest about their accomplishments. “We did a lot of things wrong,” DeAngelis says. “I would say that we fared better than most. Through the good years we socked away reserves and were careful fiscally. We were frugal.”


On the revenue side, DeAngelis Diamond created a health-care division and pursued more government work. During the bust, those were the two areas that still provided opportunities.


“The pros about government work is you're going to get paid,” Diamond says. “It's slow, but you'll get your check.” But because of the competitive bidding in the public sector, the challenge is that “margins are thin, thin, thin,” he says.


In health care, the challenge is that customers demand builders' focus exclusively on their industry and generalists are viewed with suspicion. “It's very important to separate yourself from other contractors,” says Reggie Morgan, president of DeAngelis Diamond Healthcare Group.


Because hospitals demand such specialized work under difficult conditions, Morgan says he and DeAngelis and Diamond decided to spin off health care as its own company in January. “It's a huge selling point to clients,” says Morgan, who has an ownership stake in the venture.


Now, DeAngelis Diamond has joined a half dozen contractors around the state who do most of the hospital work. “The competition is very small,” Diamond says. Health care clients include medical-device manufacturer Arthrex and hospital giant Health Management Associates. DeAngelis Diamond recently was awarded the job to build the new Park Royal psychiatric hospital in Lee County.



Future growth


DeAngelis and Diamond are both increasingly optimistic about this year and next. With a backlog of work approaching $100 million, they say revenues will rise 50% this year.


“I don't see it going crazy, but it's slowly recovering,” Diamond says.


The health care business is especially strong, and Morgan says he hopes that company will expand nationally. For now, the company is targeting the Southeast U.S. “We have plans to open an office in Birmingham and Orlando,” he says.


Besides health care and government work, Diamond says he's hearing about more commercial projects on the drawing boards, ranging from auto dealerships to condominiums. Even DeAngelis Diamond's small custom-home division is seeing some growth.


Credit is starting to become available again. “Banks are chasing us to lend,” says DeAngelis. “I've talked to four different banks in the last few weeks.”


Diamond says he's also encouraged by the improved political climate in Tallahassee. “We've very happy with Rick Scott,” he says. Even in Collier County, one of the most difficult places to do business in the state, there's a more pro-business attitude, he notes.


From his perspective, DeAngelis suspects the economy will recover faster than many suspect, and companies such as his must be prepared. “It's going to turn very quickly,” he says.


Angel investors


David Diamond and John DeAngelis are angel investors — in business and philanthropy.


Both men regularly travel to remote places in Cambodia, Darfur and Brazil on behalf of Christian-based organizations to help start and operate orphanages.


They also visit tech hot spots such as Palo Alto, Calif., in search of startups in which to invest. Through their venture, called StartupAngel.net, they've funded more than a dozen small startup companies in the mobile applications and consumer Internet technologies.


“I love starting companies,” Diamond says. “It's my hobby. I don't play golf, I don't fish.”


Diamond and DeAngelis invest $50,000 to $500,000 in tech startups, which provides seed money before companies get big enough to attract venture funding. “There are so many bright people in that area,” Diamond says. They expect to make 10 times their money over three- to five-year periods because of the risky nature of their bets. “Angel investing is the riskiest thing out there,” Diamond says.


Both men are quick to say that their tech investing is a sideline to their commercial-building company. As for their philanthropic efforts overseas, Diamond sees it as his obligation for his good fortune. “You have to give back,” he says.

 

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