Carter, Atlanta’s top office builder, emerged from 2003 in much better shape than other area commercial developers.
The firm finished the year with some high-profile projects completed, including the BellSouth Metro Plan with three business centers totaling 2.8 million square feet, and the Georgia Tech Stadiums Project, a joint venture with Turner Construction.
The key to Carter’s success — in a market with an office vacancy rate of 23 percent — is its skill with at-risk projects, in which the final price is guaranteed and any overage is the responsibility of the builder. One of Carter’s recent at-risk projects was the $45 million administration building for the Atlanta Public Schools.
“(We) spell out that we’re going to deliver, and then we take the risk,” says A. Trent Germano, executive vice president for development at Carter. “At the end of the day, we represent a single point of responsibility for our owner-clients.”
Germano is responsible for the operational oversight of a 44-member team of development and support professionals who manage the development of nearly 7 million square feet of office, industrial, educational and medical projects throughout the Southeastern United States.
Germano spoke with Smart Business about the state of commercial real estate in the Metro Atlanta area and how to avoid delays with your next big construction project.
What were some hot areas for commercial development last year?
Probably the hottest was in-fill housing, multifamily housing for condominium development on a low-priced end, which attracted a lot of first-time buyers.
Obviously, apartment development and apartment housing fell off quite a bit this past year, and the office market was very, very silent, as you can imagine.
The industrial market continued at a pretty decent pace. We had some success there.
We are seeing now — I wouldn’t say it was hot — but we are seeing a lot of corporate users starting to look and rethink their needs, and finding despite the glut of space on the market, it doesn’t necessarily fit their requirements. We are seeing just the beginnings of some built-to-suit activities for owned or leased space. But we have a tremendous amount of vacant office space in Atlanta, and it’s going to be a long time before we’re down to a 10 percent or lower vacancy level.
The good news here is most of the projects that were built in the 1990s were well-capitalized and underwritten, and also have a lot of institutional investors involved, so it’s not a high-leveraged situation as it had been in the 1980s.
Last year was a good year for you. What’s your secret, when the rest of commercial development was so slow?
One of the things we have done, and we started this over 10 years ago, is to move ourselves into the service business. We have developed a lot of projects for third-party users, in addition to building projects for ourselves, but the main focus was on really being a service provider for the industry. We have been doing educational projects, for example, for over 10 years.
We have done over 50 buildings and projects on college campuses, everything from major stadium renovations at Georgia Tech, for example, to new business schools, to student centers, dormitories, and we’ve worked on about 25 different campuses.
We have done probably 15 medical office buildings over the last 10 or 12 years. The most recent completion is St. Joseph’s in Atlanta, a 200,000-square-foot medical office building. We also do a fair amount of public sector work: courthouses, other public works projects.
How do you decide which projects to bid on?
When we look at an opportunity, we’ve got to feel that we can really provide the value, that it’s got enough complexity and enough of a challenge where we can provide the benefit for our clients.
If we’re doing a project for our own account, such as New Manchester, which is an industrial project which we own, or the Lindbergh (City Center) retail project, we drive that differently because we can control all the factors internally. We look at what we can produce in terms of economic results. We do that with our clients, certainly, but in order to get involved in the project, we’ve got to feel like we can really provide value for them.
We try not to be all things to all people. There are some projects that look tempting to us, but everything that we do takes time and energy, and basically that’s what we have to offer.
We can invest in projects when we need to and when it makes sense for us financially, and when we feel like there’s the potential for value creation. But a lot of the projects we go after are really projects with no investment opportunity; they are simply more of a delivery or implementation type project.
How can CEOs avoid costly building schedule delays?
The first thing that we try and do with any customer is really understand what they want to accomplish, in terms of the big picture and what their real estate needs are or what their facility requirements might be. In understanding what their needs are, we also need to understand the constituencies involved in that decision-making process, planning process, so we can truly understand the input for the requirements.
It’s really the planning on the front end, and the process that’s set up and carried out that makes the difference in delivering projects on time. It’s not setting overly conservative benchmarks; you need to be realistic.
If someone needs to be in a facility by a certain period of time, as long as you plan the process correctly, you can usually accomplish that goal.
One of the things that we try and really work at is to make the process of development understandable, a little bit fun, and good for our clients. If one of our clients is confused about what we’re doing or confused as to what the cost is or concerned as to whether it’s going to come in on time, then we’re not doing our jobs.
So, we’ve got to make sure that the process is a smooth process.
How to reach: Carter, (404) 888-3000 or www.carterusa.com