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Close-up: Derek Davis

Founder instills entrepreneurial spirit into DavisReed Construction

Derek Davis, president and founder of DavisReed Construction, describes his company as fast-moving and adaptable, creative and quick thinking, with a more relaxed culture and an emphasis on the individual. If that sounds more like a startup than a general contractor with as much as $300 million in revenues, it’s by design.

Davis set up his company, which this year celebrates its tenth anniversary, to operate like a nimble boutique firm — not small, he explained, but focused. The company chooses a relatively small selection of projects to work on each year, largely in the hospitality arena but also including education, municipal and health care sectors.

“What clients tend to know us for is a smaller feeling company that can provide general contracting for medium to large size projects — as opposed to a smaller group of guys doing smaller projects,” Davis said.

Rather than having a structure where delivery is broken up among predevelopment, business development, preconstruction, estimating, operations, preplanning and then physical construction, DavisReed puts a group manager in charge of delivery from start to finish. This type of process works well for bigger, more complex projects, he said, and is the reason why within its first year, the company had a $150 million backlog.

“It’s a very entrepreneurial company. We have an emphasis on the individual. We create groups that have their emphasis, whether it’s lease-leaseback, hospitality, municipal work or alternative delivery. We want those individuals to work as business units,” he said. “We have these leadership groups in different market types, but they pool the resources of the company at the peaks and valleys of the delivery process.”

Derek Davis

This accomplishes two things, he said. First, it allows people to work in a collaborative way. It also intensifies the training process, which is more like a mentor-protégé relationship than by-the-book training.

The company’s culture, he said, rallies around leadership, and emphasizes the individual.

“There are people in our industry that are built that way. They want to have autonomy; they want to be very self-directed but want the canvas of a strong financial company that they’re affiliated with.

“We have excellent insurance coverage, a good strong balance sheet and carry lot of infrastructure in financial and risk management resources that our people need to do a very diverse range of projects. Our smallest project is less than a million, and our largest project was a $700 million joint venture. That’s an extremely diverse profile.”

Some of the company’s local projects include the Hotel Solamar downtown, the Wyndham Oceanside Pier Resort, the Sheraton Carlsbad Ranch Resort Hotel, and Marina Gateway Plaza in National City. Other clients include JMI Realty, Starwood Hotels and Resorts, and the city of Coronado.

Born and raised in Florida, Davis, 47, moved to San Diego right out of college to begin his career. He worked with Roel Construction (now Suffolk-Roel) for 15 years, and became an executive vice president and shareholder.

He founded DavisReed Construction in 2002 as an affiliate of E.E. Reed Construction, which has offices in Texas and Washington, D.C. DavisReed is independently held with its own culture and leadership structure, but uses the Houston office for accounting services to share overhead costs and leverage buying power with all the other affiliates.

DavisReed has additional offices in Sacramento, Palm Springs, Phoenix and Los Angeles.

Though the company is diversified now, it wasn’t always that way. In the beginning, DavisReed concentrated on large hospitality and casino projects.

At the start of the recession in 2007, it became clear that the hospitality and gaming markets would take a big hit.

“We didn’t see the signs until it was kind of right in our face,” Davis said candidly. “Lehman went down in 2008, and we were on one of their projects,” he said, referring to the Ritz-Carlton Rancho Mirage in Riverside County. Lehman Brothers was the main source of financing, and construction stalled when it went under. Davis said work on the hotel is scheduled to resume in September.

“In my professional life, I’ve had the developer go down, and completed the project for the bank. But it’s a whole different thing when the bank goes down. These things happen quickly; we were called to action quickly, so we started to diversify the company,” he said.

DavisReed started a group with a strong emphasis in the lease-leaseback delivery method for school districts, and also ventured into the design-build market.

The company tried diversifying into the military sector, but had a difficult time breaking into the market. It began a mentor-protégé program with an Anaheim company but found minimal success.

It has also diversified its work within the hospitality sector, completing renovations, tenant improvements, meeting space expansions and guestroom makeovers. In addition, the company does construction on spas, golf facilities and restaurants.

Davis said the hospitality market is improving, and is looking as though it may return to normal soon.

“It’s been tougher to find the same revenue levels as we’ve had in the past, but I believe we’ve built a much stronger, and stronger diversified company in the process,” Davis said. “As things ‘normalize’ in the next 24 months, I’m really very optimistic.”

DavisReed has 42 employees companywide excluding field labor, with about half of those located at the San Diego office. Current projects include two border crossing facilities at Otay Mesa and Calexico, renovations on the W San Diego hotel downtown, a boathouse and club facility for the city of Coronado, and a fire station and administrative facility in El Centro.

-Klam is a San Diego-based freelance writer.

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