Joint Ventures For example, ContraVest mitigates risk by having the proper financial structure. “Our properties aren’t overleveraged. We have very strong financial partners who also underwrite our deals,” says Ogier. The company also avoids risk by working in large metro areas that have a diversified economic base, with a strong employment base and an influx of new residents.
When developing properties for its own account, ContraVest uses a joint venture structure, not only to alleviate the risk but also to provide capital for the project. Typically, joint venture deals consist of ContraVest providing the development expertise and securing the construction financing, and the joint venture partner providing the equity financing. “We guarantee the cost and on-time construction, and we have a management obligation for the property,” explains Ogier. “Our main role is to bring the project to reality and to create the highest possible return for our investors.”
Case Pomeroy continues to do deals with ContraVest because they continue to make money, but money is not the only determining factor. Relationship and communication also are important to the company. “[ContraVest] tells us the good news and the bad news when it happens,” says McNeill. “If you’re in the real estate development business, you always have problems. The key is how you manage those problems. A lot of partners will hold back and try to solve [the problems] themselves. ContraVest is very good at bringing up the issues and resolving them on a timely basis.”
And it does so for both its joint venture partners and its third-party clients. For example, if there is faulty workmanship at a property that ContraVest developed, the company will go back and fix the problem at its own expense, regardless of whether it was ContraVest’s fault or a subcontractor’s mistake, says McDaniel.
In addition, the company is known for sticking to its original deals and not adding more expenses to the final bill. “Ogier is not a fast buck artist,” explains William Ingraham, vice president and CIO at GDC Properties Inc., a third-party development client of ContraVest. “We’ve always found that he’s a man we can count on to do the right things under difficult circumstances.”
For example, ContraVest put a bid on a construction project that it thought needed a mechanical system which required a 10 SEER system. When Contra-Vest got the job, its team realized that the plan needed a 12 SEER system, explains McDaniel. “We took our lumps, recognized we missed it and paid what we had to,” he says.