WorldCity Business Magazine

(7-a) Who's Here Profile - OHL USA - Playing in a BIGGER Sandbox"

by Karen-Janine Cohen

Two years ago, Hialeah Gardens-based Community Asphalt Corp. would have been an improbable bidder on the billion-dollar I-595 reformation project that will widen the roadway between the I-95 interchange and the Sawgrass Expressway. But now with OHL, their giant Spanish parent, behind them, Community is vying for a piece of the coveted contract.

Madrid-based OHL bought a majority stake in both Community and in Davie-based The Tower Group Corp. in mid-2006 for about $140 million. The acquisition smoothed the way for OHL, whose roots go back nearly 100 years, to enter the U.S. market while giving Community and Tower the resources to pursue bigger projects. Now we can go after these mega projects, as well as private-public partnerships that include financing components, said Ignacio Halley, executive vice president of Community Asphalt that was started in 1980 by a handful of Cuban Americans entrepreneurs.

Over the last several years, Halley explained, more and more public sector projects, such as roads and bridges, have been financed as public-private partnerships, which generally require that private firms shoulder part of the up-front financing (they do eventually get paid back). Used extensively in Europe, the model is becoming more popular in the United States and attracting big offshore firms such as OHL that see the U.S. market as essential to its overseas expansion.

OHL, with a presence in 17 countries, had been seeking the right opportunity to enter the U.S. market said Lauro Bravar, president of OHL USA, headquartered in Davie. OHL, whose initials stand for Obrascn, Huarte and Lain, three firms that merged to form the company in the late 1990s trades on the Spanish stock exchange. More than 40 percent of their $4.6 billion revenue in 2006 came from international projects. In August, Engineering News-Record, a weekly publication that follows the industry, ranked OHL 37 on its list of the top 225 global contactors, up from 48 a year earlier.

Bravar, previously in charge of OHLs international expansion and who oversaw the firms debut into Asian and Eastern European markets, said that the company considered various methods of entering the U.S market, including bidding for projects from their home base. They eventually settled on acquiring the two firms in South Florida where Spain is already a big investor. The advantage we have as a multinational is that when we acquire companies, the people who are working for the companies the project managers have a backlog of ongoing projects, he said.

The two South Florida firms that OHL acquired have hundreds of projects of various sizes under way, he said. Tower, involved in building the Shops at Midtown Miami, is now constructing the $47 million South Miami-Dade Cultural Arts Center in Cutler Ridge, designed by the world renowned Miami architectural firm Arquitectonica International. Its complex, Bravar said of the building. Everything must work perfectly.

Bravar said it took several years to find the companies they wanted to acquire. The combined revenues of Tower and Community were about $440 million last year, and Bravar expects about 14 percent growth by the end of 2007. Meanwhile, he said his personal goal is to double the size of OHL USAs revenue.

The two firms together have about 1,000 employees, who now can access OHL resources and expertise from around the world, Bravar explained. The plan is to radiate strategically from the South Florida base. Each (U.S. construction) market is local, you have to take that into account, he said. The U.S. market is extremely large but extremely fragmented. You have to be cautious in expanding your activity.

OHLs expansion comes at a time when some U.S. heavy construction not just roads and bridges, but hospitals, plants and other structures is going strong even while residential building and retail construction are on the wane and as slowing growth in Europe has big firms such as OHL looking for big returns outside their borders.

Its no surprise that European firms are focusing on the U.S. market said Scott Hazelton, director of construction services at the Lexington office of Global Insight, the Boston-based economic research and consulting firm. Economic slowdowns at home have firms from Europe looking elsewhere he said, noting that Spains growth has slowed from about 6 percent annually in the early part of the decade to about 3 percent.

They got used to high growth, he said. So where do you look? If you are a multinational you look to a market like the United States. While U.S. growth has slowed, the countrys stability makes it a good bet compared to projects in Asia and India where growth is higher but so is risk.

And while U.S. housing construction is in the doldrums, other sectors are steaming ahead. Interest in U.S. manufacturing is up as the low dollar is making U.S. goods more competitive, Hazelton said. In particular, China, India and the Middle East are clamoring for industrial machinery made in America, Canada and Western Europe. Other growth sectors include infrastructure spending by federal, state and local governments.

Energy is likely to be of interest in the coming years, he added, noting that while power plant construction may trail off, grain silo construction may boom if corn-based ethanol continues to expand.

And hospital construction, up 17 percent this year, is expected to grow by about 8 percent or more annually in the next several years, Hazelton said. The population is aging and they are not aging where they live, he said, noting that older people tend to move to the sunnier South and Southwest. We are building hospitals at a pretty good clip.

In South Florida, Community Asphalts Halley is waiting to see if the firm has been shortlisted for the I-595 project. He expects to find out by early December. Still, he knows that while having OHL at their back gives Community Asphalt more opportunities, it also means they are now playing in a bigger sandbox. Before, we were competing with local Florida companies and now we are competing with international firms, he said.