Herman/Stewart found its niche in the retail and restaurant construction industries early on and soon realized hospitality was also a good fit. The company continues to look for new opportunities.

Herman/Stewart Construction and Development Inc. began with a partnership formed in 1990. President and CEO Ray Herman and his long-time friend and business associate, George Stewart, decided to combine their expertise in retail leasing and construction.

Initially, Herman explains, they wanted to work exclusively for publicly traded, growing retailers and restaurants. “We used our contacts from our past to get our initial jobs,” he explains. “I had been the president of a construction company out of Columbia, Md., for five years, so I already had experience running a commercial construction company.”

Unlike the work he had done in the past, Herman explains, the new company's projects were aimed toward building relationships.

“We wanted to basically work repeatedly for the same client, go up their learning curve and be there by the second project,” he says. “By then, we knew the client's threshold or their patience level. Publicly traded retailers and restaurants are some of the most demanding clients in the construction world today.”

Growing Quickly
Herman/Stewart began with projects in Maryland but was quickly working wherever retailers asked it to go.

“We went where they went,” Herman says. “We had to get licensed in all those places. We are currently licensed in 44 states. We're a national contractor.”

The company's early client list included NordicTrac, Value Merchants, J. Crew, Mrs. Field's Cookies and Everything's a Dollar, it says. As it became more established, Herman/Stewart began doing larger jobs for publicly traded companies.

Its packages included national retail roll-outs with 30 to 100 stores. “Imagine trying to build 100 stores in one year,” Herman says. “We did national roll outs for AT&T, Johnny Rockets, California Pizza Kitchen, Everything's a Dollar, Speedo, Discovery Zone and many others. “This gave us a real national presence and a national subcontractor base.”

Silver Lining
According to Herman, the company took advantage of the recession of 1990 to bring the best people on board, and most of them have remained on staff. “A lot of people would criticize a start-up during a recession,” he says. “We looked at it as an opportunity. Fast forward to today - it's hard to get people now.”

In 1994, Herman/Stewart began doing ground-up constructions and base buildings. It began building hotels, shopping centers and freestanding restaurants.

The company divided its operations into three divisions - retail roll-out, restaurant and hospitality.

“This was a way to organize our company around three primary vice presidents,” Herman says.

“We then introduced a level of middle management in order to grow ourselves to the next level.”

Doing it Better
The company's first hotel client was Marriott International. “Building for Marriott legitimized us in the industry,” he notes.

“We now do over $80 million a year in hotels. We build for every major chain in the country, including Hilton, Holiday Inn and Sheridan.” Herman says the company's experience in retail prepared it for its many hospitality projects.

“We took, from our retail experience, the intricacies and demanding quality that retailers require and applied that to the hospitality industry,” he explains. “The industry had basically been shortchanged. A lot of contractors were doing substandard work in that industry. Our clients were telling us this, and we knew we could do better.”

Herman bought out George Stewart in 1998 and Stewart went on to pursue opportunities in real estate development. “It was at that point that I empowered my middle management even further, giving them additional responsibilities,” Herman states

Today, Herman/Stewart has more than 120 employees and expects revenues of $150 in 2006. Recently, it expanded its project range to include assisted living. “We see a lot of opportunities in assisted living, and also in hotels,” Herman emphasizes.

The landscape of the hospitality industry has changed in recent years, he says.

“You could be working for a franchisee and also working for corporate,” he explains. “Basically, there's a difference in how you approach those two clients and the services each of them might need.”

He says Herman/Stewart considers itself a low-risk solution to its clients' construction needs.

“In our 15 years, we've never defaulted on a contract,” Herman notes. “Our company has many employees who have exceeded 10 years of service. We have no debt and a bonding capacity in excess of $60 million. We pride ourselves on repeat clients, and I think one of our primary strengths is meeting clients' budgets through careful analysis of design and utilizing value engineering to reduce a project's overall production cost,.”

The Herman/Stewart reputation itself is an advantage over the competition, Herman says.

“That is exemplified in how we view and treat our employees and our ability to retain employees.”

Empowered Culture
Herman/Stewart's culture is based on the accessibility of middle and upper management, Herman explains.

“Our people are empowered to make decisions,” he says. The company uses an incentive-based compensation and benefit program, Herman adds.

“I think that our ability to put the right overall team on a project doesn't necessarily burden any one team player,” he explains. “We also have really strong accounting.”

Herman says the company's employees are dedicated self-starters who are committed to their clients and to Herman/ Stewart. “They realize the value of repeat clients and repeat business,” he says.

“We're trying to integrate younger people into our company so that we can have a continuation strategy. But - at the same time - it is difficult to attract young people to this business.

“We have recruited at some of the major universities that have building and construction programs.”

New Trends
Over-budget projects have become a trend in the industry, Herman says. This trend is due to the escalating prices of commodities and labor as well as other demands on the industry, including the results of natural disasters such as Hurricane Katrina.

“The projects that were budgeted a year ago are clearly over budget,” he says. “A general contractor has to get in there on each project and work closely with the owner to mitigate.

“When a client initially brings a project to our office, their budget doesn't usually match what's currently going on in the industry.”

Herman/Stewart does not work on design/build projects. Herman says design/build is rarely used in restaurant, retail and hotel industries because most clients use prototypes with limited variations. “Their buildings are part of who they are - part of their image - so they don't rely on design/build,” he says.

“Herman/Stewart does have longstanding relationships with architects, engineers and subcontractors who are leaders in their industries or areas of expertise.”

He says the future of the company will include growth with current and future clients as it maintains an “impeccable reputation for quality and delivery.” Additionally, he notes, there is a trend toward turnkey project development.

Herman says the construction industry is becoming more complex in terms of sophisticated building designs and complicated permitting and inspections.

“The business is far more complex than it was 20 years ago,” he says. “That creates the need for smarter people. We see this thing going on and on and on, and things are much different than they used to be. A lot of it has to do with the jurisdictional authorities regarding code and project approvals.” It's all more demanding and more rigorous.

Betting on Success
Herman/Stewart recently completed the Hilton Gardens on the beach in Kitty Hawk, N.C. The $16 million project was built in approximately 15 months with an architect and engineering team the company has worked with eight times in the past. It is currently renovating the Golden Nugget casino and hotel in Las Vegas. The casino was purchased by one of the company's longstanding clients. “They came to Herman/Stewart due to the relationship and difficulty in construction in Las Vegas, where we had previously built restaurants,” Herman explains.

“The town is union and most construction is expensive. Most of the designs are very sophisticated, complex and upscale.”

The Golden Nugget is a phased, open remodel project, he explains. “That essentially amounts to the most difficult kind of project,” he says. “We are renovating while keeping all, or at least most, of the aspects open. It won't be complete until 2007.”

Landry's Restaurants Inc., one of the nation's largest casual dining and entertainment companies, acquired Poster Financial Group Inc. (PFG) in September 2005. The acquisition included The Golden Nugget hotel-casinos in Las Vegas and Laughlin, Nev.

“We hope to revitalize downtown Las Vegas with our transformation of The Golden Nugget, much as we have helped revitalize downtown Houston with our aquarium, hospitality and restaurant concepts, ” Tilman Fertitta, president and CEO of Landry's, said in a statement. “We've also played the primary role in the development of the NASA/Clear Lake area with the Kemah Boardwalk in Kemah, Texas.

“The Golden Nugget is a strong foundation for our emerging gaming division, and we look forward to introducing the brand into other markets as time goes on,” he added.

Landry's says it plans to build on The Golden Nugget's tradition of dining excellence by adding two of its established signature concepts: Vic and Anthony's, a world-class steakhouse; and Grotto, a trattoria-style restaurant featuring fine Italian dishes. Landry's operates 28 different restaurant brands and is the nation's second-largest developer of aquariums.

Landry's says it is a leader in the meeting, convention and event industry, with a state-of-the-art beachfront convention center in Galveston, Texas, and unique meeting spaces incorporated into each of its entertainment complexes, such as the Downtown Aquarium properties in Houston and Denver.

Landry's also operates several hotels, including Inn at the Ballpark, a boutique luxury hotel across from Minute Maid Park, home of the Astros, in Houston, and Boardwalk Inn, a waterfront boutique property, on Kemah Boardwalk.

Other Herman/Stewart hotel projects have included:
· Marriott Residence Inn
· Marriott TownePlace Suites
· Marriott Springhill Suites
· Hawthorn Suites Ltd.
· Homestead Village Inc.
· Hyatt Hotels & Resorts
· Fairfield Inn
· Holiday Inn
· Comfort Inn
· Courtyard by Marriott

Herman/Stewart's restaurant clients have included:
· California Pizza Kitchen
· The Chart House
· Chili's
· Daily Grill
· Damon's Ribs
· Hard Rock Cafe
· Joe's Crabshack
· Macaroni Grill
· Maggiano's
· On the Border
· P.F. Chang's China Bistro
· Katy Mills
· The Cheesecake Factory
· Opry Mills

The company has worked with retail clients such as:
· AT&T Wireless
· Barnes & Noble
· Blockbuster Video
· Borders Books
· Eckerd Drug
· Fila
· Filene's Basement
· Fresh Fields
· Gap
· HMV Records
· J.Crew
· Speedo
· Staples
· Urban Outfitters
· PetsMart

Adding to its Portfolio
Herman says the company's first Marriott hotel paved the way for all the hotel projects that followed. “Herman/Stewart knew how to build, but Marriott taught us how to build hotels,” he emphasizes. “They had standards and experience. They took us up the hotel learning curve.

“In hotels, you have to separate the rooms from the common areas, from the site, in terms of the management and scheduling,” he adds. “Hotels have to follow a specific sequence for completing their interior or the project will be a disaster. It can't be haphazard - you have to have a succinct plan and all the trades have to follow it.”

Most limited-service hotels are finished from the top floor down and from the center out, he explains.

“It's imperative to have the shell complete and dried in areas where winter or weather is a concern,” he notes.

“This enables you to complete the interior despite the inclement weather, and to be productive during that time to meet the scheduling demands.”

Hotels are different from shell buildings, Herman says, because every square inch of the building is finished.

“A shell building is basically an empty void,” he says. “This is a more intricate process - more detailed.

“The end-user will ultimately experience every square foot of the building, so the quality level throughout must be consistent. Many of the brands will require a very demanding standard of design and quality to be consistent throughout the entire project.”

On the Fast Track
The company has completed fast-tracked retail projects for clients such as Gander Mountain. It recently built a 65,000-square-foot store for the outdoor retailer in 70 days.

“We successfully got a permit in one week, commenced construction and turned it over to the owner in 70 days,” Herman explains. “We do a lot of fast-track projects.”

It has also done several food courts for six of the Mills Corp.'s malls. These food courts include up to 20 different food concepts in one project.

To date, Herman/Stewart has completed more than 1,000 projects, the company says.