Tucked away in the trees across from an open field is the headquarters of Bostic Construction Inc. – a Colonial-style house with a design borrowed from Thomas Jefferson. Go inside at 7:00 a.m. on a Sunday morning and you'll probably find company president Mel Morris. Sometimes, he is listening to jazz and talking with family and friends. But most likely, he is just looking for ways to prod Bostic Construction to build apartment buildings even faster than it already does.
Not exactly the scene you'd expect in the sedate, low-key rural McLeansville, N.C., where most people are getting ready to go to church at this time on a Sunday morning. But this is a company that relies on a breakneck pace and razor-sharp efficiency to build a three-story, 24-unit apartment building in 105 days.
When former National Football League (NFL) players Jeff and Joe Bostic started their multifamily business in 1991, creating a faster building system wasn't their priority. But now, more than 10 years later, speed has become a de facto theme for the company.
When Bostic Construction looks for land to develop, it seeks property that is already zoned for multifamily: It takes too much time to change zoning, Morris says.
To keep construction on the fast track, the company builds a model of each type of unit in a warehouse. This not only eliminates waste but also helps nail down processes – so there are no surprises or holdups when construction actually begins. Then, when it's time to build, the company relies on vertical integration – the company's ability to manage both the flow of supplies and the schedule of its subcontractors. Finally, the company preassembles building components, saving the subcontractors' time at the jobsite.
Bostic Construction has used this process as a vehicle for rapid growth during the past five years. In 1997, the company had one employee, Morris, and $3 million in revenue. It now has more than 150 employees and more than $250 million in revenue. After building 672 units from 1992 through 1997, Bostic Construction production took off. In 1998, it built a total of 1,258 units. In 1999, it increased production to 1,875 units. By 2000, its 2,678 units moved the company into the top 10 of Builder magazine's Top 50 list of multifamily builders. In 2001, Bostic Construction stayed at No. 10, building 3,477 units. It followed up with 5,706 units in 2002, moving up to the No. 2 spot.
Of course, its building speed and rapid growth spurt has lead to growing pains – which Morris struggles with as he tries to take Bostic Construction to the next level. While it anticipates maintaining its frantic building pace, the company faces challenges in securing financial partners, continuing to improve its building process, and finding new places to build in a soft economy.
The Need for Speed No situation may be as illustrative of how quickly Morris can deploy the company's resources as its weekly Monday meetings. All of the project managers, major subcontractors, and suppliers walk Morris through each line item of the company's jobs. "It gives us an idea of where everybody will be for the next four weeks," Morris says. "If we have a conflict, I can move people around. For instance, if we have a greater need for carpet at a site in Savannah, Ga., I can move our carpet guy from Calabash, N.C., to Savannah."
Morris can do this because he and Jeff Bostic own two-thirds of Carolina Apartment Products (CAP), its primary supplier, and has longstanding agreements with its subcontractors. During the past 10 years, Bostic Construction has brought on product managers to purchase supplies, such as plumbing, insulation, flooring, hardware, shelving, doors, and stairs, and prepare them for installation. While Bostic Construction is CAP's main "customer," Morris would like for it to sell to more outside builders.
In addition, most of the subcontractors joined the company in the early 1990s, when Morris promised steady work if they agreed to a flat fee. These subcontractors give Bostic Construction predictable costs and allow it to skip the bid process for each job.
However, the company's most valuable asset may be its speed. Because the framers, bricklayers, concrete pourers, and drywall hangers have worked with Bostic Construction for so long, the familiarity leads to speed and efficiency. "These guys are world-class sprinters for us," Morris says. "They have always set the pace. They feed on the volume we provide, and they love knowing where everything is."
Building Models
CAP's role at Bostic Construction goes beyond that of a mere supplier. The partnership allows the company to construct unit mock-ups in a 140,000- square-foot warehouse in Sanford, N.C., which improves efficiency and speed. By building a model unit ahead of time, the company knows the quantity and size of each product it will use. Mock-ups also can reduce errors that may come about in the construction process, such as a framing mistake. "My framer is so fast that he can frame 300 units in three weeks," Morris says. "If there is a mistake, it will be repeated in each unit. If we eliminate mistakes in the beginning, we don't have to go back and fix them. Going back to fix them takes time, something you don't budget for."
Having to assemble a faucet or cut carpet at the jobsite also can slow subcontractors. For example, Bostic Construction uses the measurements from the mock-up to cut each piece of carpet for a project in the warehouse. When the carpet gets to the jobsite, all the installer has to do is lay the carpet in the correct room. "The beauty of it, particularly with something like carpet, is that your carpet installer is not unloading it in the parking lot, cutting it there, and wasting time," says Jeff Bostic, president of Bostic Development and vice president of Bostic Construction. "When you can avoid doing little things like that at the jobsite, it saves you time and money."
These efficiencies can add up over time. In fact, one of the company's investors, Ken Brown, marketing director of Carpets of Georgia Inc. and American Home Showplace, both in Dalton, Ga., thinks these efficiencies will help the company, at least temporarily, survive in a weaker economy. "With its cost efficiencies, it has turned multifamily building into a science," he says. "While some people may need a 90 percent or 95 percent occupancy to get a good return, Bostic Construction can still get a good return on lower occupancy because they build so efficiently."
When the different components of the company's organization – vertical integration, mock-ups, and preassembly – are added up, it can mean noticeable time savings in the construction process. A good example of this is in Auburn, Ala., where it is building a 192-unit off-campus student apartment. Framing began in late April, and the project should be finished in late July. "Ordinarily, this will be a 12-month job, but we can do it in five months," Morris says.
This process has helped the company earn confidence of its long time associates in the financial industry, such as Central Carolina Bank (CCB), the company's primary bank since 1991. "Bostic Construction has systems in place where it can build cheaper than the typical builder," says Al Garvey, commercial real estate manager for CCB. "This certainly helps it cut down on its carrying costs and build quicker."
Growing Pains Still, Morris knows the company can make improvements to its building process. For one thing, he would like to do a better job scheduling jobs so that resources are more evenly distributed. "I think we can improve communication among CAP, the subcontractors, and ourselves," says Michael Rogers, the general manger of Bostic Construction. "We have a tendency to pile our resources on four or five jobs and leave the others without their fair share."
Challenges extend past construction and into finance. For instance, the company is beginning to outgrow some of its initial banking sources. From the beginning, Bostic Construction has worked with small local banks, like CCB. But as the company grows, it needs larger lines of credit than these individual financiers can provide. To solve this problem, Bostic Construction is trying to establish relationships with bigger banks – the company currently does some business with Regions Bank, Key Bank, other large Southeastern institutions.
"Smaller banks have challenges with funding capabilities," says Jen Stephens, CFO for Bostic Construction. "We have tapped out a lot of these sources. Trying to build relationships with larger banks and bigger investors can be quite a challenge to get them to understand our product and how we work."
The company also courts smaller, private investors as it partners. Many are former athletes or businessmen with connections. The company hasn't needed to go to mezzanine-level capital sources because many of these people, such as Brown, have deep resources and longstanding relationships with the company. Brown, who started following Jeff's and Joe's careers while they were on Clemson University's football team, actually started out as a vendor 10 years ago before deciding to invest three years ago.
Along with his father-in-law and two brothers-in-law, Brown has invested in eight properties under the name Hennan Brown Properties LLC, and feels like the group's money was well spent, even in a shaky multifamily market. "We won't go into business with just anybody," he says. "We need a high level of trust and great communication, and Bostic Construction gives us that. We are sold on Mel Morris and Bostic Construction because they do what they say they can."
It's exactly this kind of reputation that has helped Bostic Construction grow so dramatically during the past five years. Combine this with its vertical integration and unique building process, and you have a company that poised to continue expanding. "The last four years have been our foundation," Morris says. "The foundation has been built. If we keep going at this pace, there are only a couple of other builders in the country ahead of us. It puts us in a very select group."
From the Gridiron to the Boardroom In his football career, Jeff Bostic was a member of one of the best and most famed group of offensive linemen in National Football League (NFL) history. Known as "The Hogs," Jeff and his Washington line mates paved the way for the Redskins to win three Super Bowl titles. But when the time came for him to hang up the cleats, in 1993, he had an opportunity waiting for him – a multifamily business with his brother Joe, also a NFL offensive lineman, in their hometown of Greensboro, N.C.
After Joe retired from his 11-year football career in 1989, he took the contractor's exam. The brothers wanted to build and own multifamily properties. "We got into this business because of our parents," Jeff says. "My dad used to buy houses, fix them up, and rent them. He was the person that really directed us in that area." However, to be successful on this new playing field, the brothers needed a voice of experience.
In 1991, a mutual acquaintance introduced the Bostic brothers to Mel Morris, an independent contractor at the time. The brothers hired Morris, now president of Bostic Construction Inc., on a fee basis to build their first 11-building apartment complex in Greensboro. The company budgeted $875,000 per building for that job, and Morris ended up finishing the job for about $480,000 per building. The brothers made about $6 million on the apartment after selling it.
By 1997, the brothers and Morris had built three apartments and were on pace to follow their plan of building one or two apartment communities per year. Then something unexpected happened. People, including the brother's football acquaintances, began coming to the company wanting to make deals. "After we finished our first couple of jobs, everybody was asking if we would build for them," Jeff says.
Although Bostic Construction was taking off, Jeff found that he was not that involved in the company because he was living in Washington and focusing on television commitments. He sold his partnership to Morris in 1999, which gave Joe and Morris each 50 percent ownership. In 2001, Jeff decided to come back into the business, buying 20 percent of the company from the partners.
Jeff's reappearance provided the rapidly growing company with even more momentum. He took a sales role with the company, closing six deals in the Atlanta area. "Jeff is a great salesman and a strong spokesman," Morris says. "He enjoys selling our company to banks and equity investors."
And the banks and equity investors enjoy working with Jeff. "We will go in for a visit and talk with the banks for about two minutes about the deal," Morris says. "For the next 25 minutes, people want to know more about the Super Bowls than 148 apartment units."
With Jeff as the deal maker, Morris continued growing the construction operation. However, Joe was not comfortable with this growth. "Joe enjoys doing one or two deals," Morris says. "He liked the way it was in the early 1990s." Earlier this year, Joe retired from the company selling his 40 percent to Morris and Jeff. Morris now owns 67 percent of Bostic Construction, while Jeff owns 33 percent.
Despite owning the bulk of the company, Morris has no desire to change the name. He says the brothers' reputation is too valuable. "Their reputation of being honest and doing what they said was a big help," Morris says. "Its certainly easier to brand a name that's already known. We get a lot of mileage out of the Bostic name."
Developing New Markets Mel Morris and Joe and Jeff Bostic originally had a simple plan for their business – build apartments within five hours of Greensboro, N.C. However, as Bostic Construction Inc. built apartments faster and faster, the distance grew to eight hours. Now, the company is building in Auburn, Ala., which is about eight and a half hours away. From 1992 through 2002, Bostic Construction built 99 percent of its units in North Carolina, South Carolina, and Georgia. But that number has dropped to 82 percent in these three core states.
There are two main drivers behind this expansion – its saturation in the Carolinas and Georgia, and its shifting niche, which is caused by a soft economy for market-rate rentals. After building almost 15,000 units over five years in the Southeast, it's easy to understand why the company is looking for other places to build. "The bigger we get, the more territory we need to cover," says Wink Hamill, development manager for Bostic Construction. "We have done so much in [our original markets] that we need to push into new markets."
The shakiness in the North Carolina economy may have been an even bigger factor pushing the company into new territories. As financing market-rate units became more difficult, it began moving into active adult condominiums and off-campus student housing. "The market-rate stuff is getting soft, and we can't continue to just build in Charlotte, N.C., Atlanta, or Raleigh, N.C.," says Morris, the president of the company. "That's the reason we went to student housing. It was very easy to transition our market-rate product to student housing."
While the transition in the construction processes was easy, there are more land constraints to deal with in student housing. Though North Carolina has a fair number of colleges and universities, it's a finite number, so Bostic Construction is looking towards the Midwest. "Finding sites for student housing is the hard part," Morris says. "They have to either be near the university or close to a bus line."
Though the active adult senior market is growing, it also presents challenges. For instance, the company needs to build its active adult communities near resorts, golf courses, or bodies of water to attract residents. Even then, these older residents can be a little tougher to please than the 18-year-old college freshman. This forces the company to focus a bit more on quality, which lengthens the construction cycle. For instance, student housing may take four months to build, while an active adult complex will take 12 months. The company also will have certain subcontractors specialize in just the condo projects because of the attention to detail that they require. "The seniors are more demanding," Morris says. "They have higher expectations."
The Game Plan For Bostic Construction Inc., building a three-story, 24-unit apartment building in about 105 days is typical. To keep to its schedule, the company has agreements with its subcontractors that guarantee the subcontractors continuous work with the company if they agree to Bostic Construction?s schedule. Work is scheduled for every day: This timeline highlights some key days.
- Day 1: Set corners
- 5-6: Pour foundation
- 13-14: Backfill/prep slab
- 16: Pour slab
- 18: Frame first floor walls
- 23: Frame second floor walls
- 26: Frame third floor walls
- 27-30: Roof
- 31-33: Shingles
- 34-38: Rough HVAC and siding
- 36-43: Rough cable, phone, and electric
- 36-42: Brick veneer
- 45-51: Insulation
- 48-50: Sidewalks
- 56 Drywall finish and hang
- 65-67: railings
- 71-72: first paint
- 77-79: Install cabinets, interior trim, doors
- 81: HVAC, plumbing, and electric final
- 87-90: Final inspection, second painting
- 95-100: Install carpeting
- 101-103: Punch list
- 103-105: Final clean
- 105: Owner walkthrough