Orion Construction makes another move
Highly active company publicly debuts a new entity this week.
Not pausing for a timeout after its recent Arena Place, Hotel Double Tree and Eastown Flats projects, its fresh partnership with Detroit builder Walbridge, and the hiring of a new marketing director in Corey Bixby, Orion Construction is unveiling a brand new service this week.
The local builder, which was founded by Gary Postma and John Boonstra in 2000, recently created a new division called Orion Real Estate Solutions.
“Since Orion’s inception, we’ve had our eye on real estate development. We knew that with the right experience and a shared vision between our partners, Orion could build a successful construction firm and nurture an emerging real estate solutions company, as well,” said Postma.
“With our 15-year anniversary on the horizon and strong position in the marketplace, we knew this was the right time to officially launch Orion Real Estate Solutions.”
The purpose of ORES, as it’s referred to around the office at 32 Market Ave. SW, is to provide pre-development planning, programming and financing for property owners interested in undertaking a commercial or residential project. The new entity also can analyze a client’s holdings when a construction project isn’t in the works.
“More and more owners have been seeking services that we promote at Orion — things like hands-on involvement from our partners, comprehensive services, and a sense of security and accountability that our clients can count on,” said Postma.
ORES has been set up to take a planned development all the way from its conceptual stage to its ribbon cutting, including the priceless element of finding and signing tenants. To borrow a time-honored retail phrase, Orion executives see the service as “one-stop shopping” that fills a void in the market, which has changed dramatically over the past five years.
“After the recession, the real estate world got killed. First off, the rules changed, and then I didn’t think there were any rules in regard to what values were there: appraised values, real values and the way the lenders looked at it,” said John Wheeler, Orion president, who oversees ORES with Postma.
“Kind of coming out of it in 2011 and 2012, there was a lot of confusion out there in regard to building projects, creating values and getting some things stabilized. It really made us rethink the whole built environment.”
Wheeler said the new reality involves much more than drawing up a project, meeting with a lender and getting financing that covers about 90 percent of the building cost. It now requires a developer to first identify a need and then figure out how to fill it. And filling it now almost always requires financial help from the public sector.
“Take a MSHDA-financed deal, a HUD deal, or a public-private partnership. I never heard of those things 10 years ago, and now that’s about all you see. It’s complex. It’s a very complex environment out there right now,” said Wheeler.
“Orion Real Estate Solutions came out of this complexity. We’ve got some clients that are saying, ‘We’re not sure how to do this anymore.’ We’ve spent more and more time with clients who are evaluating their portfolios and figuring out how to get things financed.”
Wheeler said ORES goes beyond putting together the usual pre-construction plan, a stage that ends when a developer has found the financing so construction can start. He said the new service begins a few analytical steps before a client even enters the pre-construction phase.
“We’ve got a couple of clients that we flat out told — which flies in the face of a builder — ‘Don’t do this project,’ because it wasn’t going to make any money and it might have actually lost money,” he said.
“Basically, we’re providing a service where we can not only look at construction costs, architectural fees, land planning, the zoning and the financing, but also the long-term life of a client’s vision of a building. Are they going to hold it for five years, then flip it? Well, they might not get their money back. Is it a 30-year, long-term hold? Well, then we can match it up with life-insurance money.”
After looking at the needs of clients and the current, somewhat confusing, state of the market, Wheeler said he and Postma decided ORES would become a separate entity, making it a division of Orion Construction rather than a sideline service.
The reason behind that step is Wheeler said that some of their clients don’t have construction-related issues attached to their projects. For instance, he said ORES was doing a complete analysis of all the real estate a large corporate client holds. The purpose is to determine which properties should be held and why, and which should be sold and for how much and to whom.
“We’re sort of providing a 40,000-foot view of big portfolios for people and then sitting down with them in their boardrooms. So we’re finding ourselves being hired by large clients that have big portfolios — and for two of them, there isn’t a build job,” said Wheeler.
Of course, Orion Construction could end up with some building projects down the road through the contact ORES has with clients who currently don’t have one on their agenda.
“It’s not a huge profit center or anything,” said Wheeler of the new firm. “But it allows us to get our foot in the door to take what we do know and give that advice in kind of an ever-changing world of construction financing, long-term holds and real estate, etc.”
Wheeler said he and Postma didn’t see a lot of risk in creating ORES. In fact, Wheeler told the Business Journal the new entity strives to eliminate risk and called it a risk-aversion company.
“It helps people to understand the risk of where they stand,” he said. “I look at this as one step that I think everybody should go through before they launch something out there, by getting it analyzed.”
Wheeler said ORES is working with clients on four “solid” projects right now, and Orion may become a partner in a few of those. “Yes, we’re busy, and we’re looking at quite a few new deals.”