Among the more notable projects Beaver Builders has been involved with is 50 Milk St., a 21-story Class A tower in Boston’s Financial District.
In a move that seems to buck industry trends, two veteran Bay State general contractors are joining forces, with Peabody Construction Co. of Braintree reportedly about to take over Newton-based Beaver Builders.
Details of the deal remain sketchy, both in terms of financial arrangements and leadership structure for the combined entity. Peabody President Ted Fish did acknowledge that “we are working on something,” but declined to provide additional information regarding the agreement. Beaver Builders President Leonard Rudofsky did not return phone calls by Banker & Tradesman’s press deadline.
According to a source familiar with the companies, however, the principals have signed a letter of intent formalizing the effort to unite the two firms. As for Peabody acquiring Beaver, an executive of a competing company maintained that “it’s not a rumor; it’s a fact.”
Both Peabody and Beaver are established contractors in the Greater Boston market. Peabody has been in existence for 110 years, and is now operating in the fourth generation of ownership. During its 50 years in business, Beaver has completed more than 40 million square feet of commercial construction throughout New England. The company has worked on such local projects as the 347-room Westin Hotel in Waltham, the One Brookline Place medical building in Brookline; and 50 Milk St., a 21-story Class A tower in Boston’s Financial District.
Peabody, which is in the process of building a new headquarters for itself in Braintree, also has a diverse resume of projects. Along with office buildings, academic and multifamily assignments, the company’s portfolio includes the $68 million expansion of the Boston Medical Center, the award-winning restoration of the Boston Public Library and a new minor league baseball stadium in Lowell. Peabody is currently in the midst of building the new Basketball Hall of Fame in Springfield, with a completion date slated for next year.
Consolidation of the construction sector has been sporadic in recent years, with the larger players leading the expansion charge. Such manifest destiny was underscored locally when Beacon Construction Co. was taken over in 1997 by Skanska, an internationally known contractor. Also, last summer, Kennedy & Rossi became the Northeast headquarters for Linbeck Construction Co. of Texas. The Hub features several homegrown firms with a national presence, including Perini Construction Co. of Framingham and Modern Continental Enterprises of Cambridge.
Even in the face of such hefty competitors, however, much of Boston’s contracting sector remains in the small- to medium-sized level, with the bulk of the companies heretofore having resisted the temptation to be bought out or purchase other firms. One source said it appears Rudofsky is simply looking for a way to cash out of his operation after building it into a regional success.
Peabody, on the other hand, likely is seeking a place to invest capital after several successful years, the source speculated. Along with a slew of strong professionals at Beaver, the company’s expertise in retail construction appears to be a good addition for Peabody, according to the source. Beaver’s cadre of retail projects includes the 1.7 million-square-foot CambridgeSide Galleria in Cambridge, the 400,000-square-foot South Bay Center in Boston and the Worcester Common Fashion Outlet mall in Worcester.
Beacon Skanska President James M. Becker said he believes there is no overall movement of local contractors merging or being bought out by competitors, but noted there is always a need for such firms to prepare for the inevitable day when the reins of power must be handed over in some fashion. Companies such as A.J. Martini of Malden and Peabody Construction, for example, have been passed on to other family members, but Becker said that is not always an option.
“Every contractor needs an end game,” he said. “It becomes a question of, ‘What do you do to get your money out?'”
Typically, Becker said, there are more construction companies looking for buyers than vice versa, helping to limit the number of deals completed. The intense nature of the contracting world makes “passive ownership” difficult, he said, meaning construction companies are usually only purchased by other construction firms.
The marriage of companies such as Beacon and Skanska is a product of the industry’s globalization on the upper end, Becker said. Beacon had been a division of Beacon Properties Corp., which was spun into a real estate investment trust in the mid-1990s. In order to reach the next level, he said, the company had to look for a substantial partner. Beacon is now affiliated with the world’s third largest building contractor, said Becker. Perini, meanwhile, has annual revenues that usually exceed $1 billion, while Turner Construction Co. reported revenues of $44 million in the first quarter.
The reluctance among regional companies to team up does not appear limited to New England, with a recent study commissioned by the Associated General Contractors of America indicating a dearth of deals across the country. The survey, conducted by Deloitte & Touche, indicated that more than seven in 10 contractors consider mergers or acquisitions among the least likely strategies they will use when trying to increase market share. Relatively stable economic conditions were cited as the chief reason that most firms are continuing to operate on their own.
Whether the favorable climate of the past eight years will continue locally is increasingly in question, however. Although there are several commercial projects in the pipeline, and institutional work remains plentiful, the slower economy and upheaval among technology companies has put a number of sizeable projects on hold. By one estimate, as much as $500 million worth of projects locally have been put on the back burner in recent months.
