The founder of US construction management company Hill International has admitted he “was wrong” to invest in the failed HillStone housing project in Iraq.
Irvin Richter says both Hill and its partner in the doomed project, South Korean developer TRAC Development Group, lacked experience in what was an ambitious deal.
Hill signed two contracts with TRAC Development Group in 2011, along with its majority-owned subsidiary HillStone International (the minority share is owned by a group of minority partners including US vice-president Joe Biden’s brother James, an executive with Hill’s housing division) to build 100,000 units in an overall 500,000 housing unit project in Iraq.
However, the project never eventuated and Hill was eventually forced to concede an estimated $1.5bn from its backlog in 2013.
Until now, not much has been publicly said by Hill about the failed deal, though at the time it was announced in 2011 Hill said it was contingent on TRAC obtaining financing and government approvals.
“There were not a lot of people on the board, David (Richter’s son and soon to be successor) included, that agreed with my view of the housing market (in Iraq),” Irvin admitted in a wide-ranging interview to be published in Arabian Business on Sunday.
“I thought we had a good chance during a downturn in that market to become a player and I was wrong, so we closed it down.”
He said the project had three major problems. “Number one we had a development partner that wasn’t as experienced in housing as it needed to be. Secondly, we had a partner – the Government – that didn’t have the money at the time… and thirdly we were inexperienced.”
Asked if the company would embark on a similar project under different circumstances, Irvin said he personally would consider it.
However, his son and soon-to-be successor as CEO, David Richter, all but rules it out, saying the company’s success is largely because it has “stuck to our knitting” and focused on its two key service lines of project management and construction claims.
“When you get distracted and you try to become a Jack of all trades, like a lot of our competitors have become, you don’t stay world class and when you’re your best, so we’re going to probably stay focused, but at the same time look for opportunistic ways to expand our client base and our service lines,” said David, who is currently president and chief operating officer of Hill.
David said unlike Libya where it halted work when the Arab Spring uprisings began in 2011, it had never left Iraq. In November Hill signed a $54m consultancy contract relating to the Governorate of Basra 2040 Strategic Plan – taking to 10 the number of contracts it has won in the past three to four years following a six year contract working for the US Army Corps of engineers.
“We see a lot of upside for us in Iraq. We see a growing economy, we see a lot of money being invested in construction growing forward and we’re going to be part of it,” David said.
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