General contractors doubling as real estate developers

Not long after graduating from the University of Mississippi in 1994, Claiborne Frazier joined the family construction company. But rather than work in the construction end of the three-generation business, Frazier got involved in real estate development - and never looked back.

"I didn't research it," said Frazier, 31, president of Frazier Development, LLC, a subsidiary of Frazier Construction. "I knew I could do it and be effective because I enjoyed it so much."

Even though he didn't realize it, Frazier was ahead of the curve. For numerous reasons, many construction managers are moving into real estate development.

"It's an interesting option that a lot of our larger general contractors, like W.G. Yates & Sons and Carothers Construction, are considering simply because diversification is the key to success," said C.B. "Buddy" Edens, executive director of the

Mississippi Associated Builders & Contractors (ABC). "You never put all your eggs in one basket. Our guys are always looking for new opportunities and this seems to present one that some of our folks are considering."

Real estate development emerged as a natural extension for general contractors because they can't make a living in the industry by simply bidding on work that's on the market, said Perry Nations, executive director of the Associated General Contractors (AGC) of Mississippi.

"More contractors are getting into building ownership to keep up with the times because the margin of profit is so narrow now, with computers giving you a truer estimate of a job cost. and people are willing to work for less and less of a percentage of profits," he said.

Subcontractors have been reluctant to delve into a new venture because they are struggling with weather-related and prompt payment problems in their current jobs, said Kathy Waren, executive director of American Subcontractors Association (ASA) of Mississippi.

"Right now, the heads are down and they are churning," she said. "That's not to say there aren't some forward-thinking subcontractors, but at present, I think everyone is working hard and having to really work close to the profit line to keep things going and to be competitive and they're not looking to get into any additional businesses at this time."

As land gets more expensive and costs more to development, many folks are partnering and using different resources, said Marty Milstead, executive director and CEO of the Home Builders Association of Mississippi (HBAM).

"Somebody might have the expertise of doing the development, but might not have all the cash they need, and they'll partner with some folks that do," he said. "I see that happening more and more often in real estate development."

Frazier's grandfather, Cresco, and father, C.E., inspired Frazier to try something a little different from the beginning.

"Rather than just building a job for a specific owner, I got involved in the design end with the architect as the owner and would design buildings with the architect and lease them out," said Frazier. "I'd also build buildings on a speculative basis, which I've done in Rankin County, and it worked well. Then I fell into several build-to-suits for national tenants."

Late in 1999, Frazier developed his first retail project in Madison. Now, he is developing two retail projects totaling 50,000 square feet, and is working on a third project, a 130,000-square-foot retail development that will be ready next summer, He's also wrapping up a condominium development in Oxford.

"We've got some really exciting ventures that are formed that we will be starting in the next year or two, but I can't elaborate on them," he said. "I will say that our development company primarily operates in Mississippi."

Frazier Construction, which also has a division in Tupelo called Frazier & Williams, and Frazier Development share employees.

"It's an easy transition for Frazier Construction to work for Frazier Development," he said. "For example, my younger brother Austin works for the construction side, but we're all in the same office. We all work hand in hand."

Mark S. Bounds, CCIM, president of Mark S. Bounds Realty in Madison, predicted that by the end of the decade, Frazier would be the largest real estate developer in the state.

"Claiborne's doing retail, office, condos ... and I admire him for having the punch," said Bounds. "He's one to keep your eye on, because he's taken on a little of everything and seems to be doing OK with it."