From Sydney to Saudi: EllisDon Gets Around

I have seen the name EllisDon on signs attached to the fencing around the under-construction NSCC Sydney Waterfront Campus but I didn’t actually know anything about the company until this week, when I got interested in it as part of an entity called SHIP.ED which submitted a proposal to develop the Sydney waterfront. (SHIP.ED, by the way, doesn’t actually seem to exist—I couldn’t find a federal registration or a provincial registration in Nova Scotia, Ontario or Quebec)

As you’ll know, if you read my article about that proposal, EllisDon’s partner in SHIP.ED is Sydney Harbour Investment Partners (SHIP), the port development firm established by Albert Barbusci and Barry Sheehy to build a container terminal (Novaporte) and logistics park (Novazone) on Sydney Harbour. Membertou Development Corporation is a SHIP shareholder and the Novaporte page lists EllisDon as a “strategic partner”:

 

SHIP.ED’s waterfront development proposal claims that SHIP, EllisDon and Membertou are in “advanced stages of launching the Novaporte development, on a 2000+ acre site on the other side of the harbour,” although details are scarce and a description of the project ends with:

All pre-development and long-lead permitting is completed and the first phase—[REDACTED].

Basically, as a window into what’s actually happening with Novaporte, the proposal is not particularly useful, but as a starting point for exploring EllisDon, it was perfect.

 

Succession

I’ve admitted recently to being a bit obsessed with the final season of HBO’s Succession, a series about a Rupert Murdoch-type media baron named Logan Roy and his children who are all vying to take his place at the head of the family business; so it won’t surprise you that I read this 2021 Toronto Star interview with Geoff Smith, who took over from his father as CEO of EllisDon in 1996, with Succession on the brain.

Geoff Smith’s father, Don Smith, established EllisDon in London, Ontario in 1951 with his brother, David Ellis Smith. The firm grew to become one of the largest construction companies Canada, responsible for projects like the SkyDome and the Princess of Wales Theatre.

Geoff Smith was one of Don’s seven children and apparently he initially had no interest in the construction industry, telling the Star:

I wanted to be Clarence Darrow. In the beginning, I wanted to be a great — the world’s greatest — lawyer.

(I think the closest Succession parallel would be to the oldest son Connor who runs for president of the United States in season four and captures 1% of support in the polls.) Smith practiced law for eight months and realized not only was he not going to become the world’s greatest lawyer, he didn’t actually want to be a lawyer at all.

So he went to work for his dad, whom he describes as “tough” and “aggressive,” and ended up as head of EllisDon’s Western division at the age of 30 because his father had fired the previous four people in the position and had no one else to send. The two Smiths eventually butted heads and Geoff Smith left, only to return and force his father to retire, after which Geoff and his siblings bought their father out.

A big theme in Succession is that while Logan Roy seems entirely comfortable with his reputation as a villain, his kids generally like to think of themselves as good people.

Smith (who just stepped down as CEO this past April) clearly sees himself as a better person than his father—he describes himself as a “Mama’s boy” and “an unapologetic corporate socialist” off the top of the Star interview, although by the end he’s walking that back pretty energetically:

So listen, I’m not a socialist with a capital ‘S.’ I believe that people should work for a living. I don’t believe in being on the public purse if you don’t need to be…

I’m a free-enterprise guy. If you don’t have a perfect job and you can’t find a perfect job, you need to stick with the unperfect job and work your way out of it.

Perhaps that would sound more coherent if he could pry the silver spoon from his mouth, but he can’t, so he’s just another rich guy who got his high-level corporate job by virtue of being the boss’s son telling the rest of us to work our way out of our “unperfect” jobs and stay off the public purse. (Fun fact: EllisDon is a “leader” in public-private partnerships in this country, a mode of public infrastructure construction that basically allows a corporation to attach a shop vac  to the public purse.)

But there’s more:

I’m an old, classic, small ‘L’ liberal, I guess, but I never have believed, and I still do not understand, why capital rules the day. It’s just money and money isn’t always that intelligent. Where is the morality?

 

Employee-owned

This is a reference to EllisDon’s share ownership plan, introduced by Smith in 2000 when he convinced his siblings, who own the company through a family trust, to “give” 45% of the company to its employees.

I’m pretty sure he meant “sell” 45% of the company to its employees—this 2007 puff piece in the Globe and Mail refers to EllisDon’s “share ownership plan” which it offers to all its “committed” employees and another puff piece from 2011 refers to EllisDon’s plan by the acronym “ESOP,” employee share ownership plan, and tells the happy story of a senior EllisDon project manager in Mississauga who has been purchasing shares since 2005 and has seen their value appreciate by 20% to 25% each year. This has left him “largely at ease that his nest egg will continue to increase in value,” but:

…he’s willing to put in extra hours as an insurance plan, just in case.

“I work on weekends and nights and no one is forcing me to do that. I want to make sure we get the job done because that’s rewarding for me personally, but also for the company’s profitability.”

Smith says the family ended up much better off by selling 45% of the company than if they’d retained 100% ownership, in fact, he’s quite adamant in his interview with the Star that they didn’t transfer the ownership stake because “it was the right thing to do” but because it was:

…a very … I’m going to say, intelligent, free-enterprise move…We gradually let the employees take it. And everybody made out like a bandit.

In 2020, Smith announced that:

Starting March 1, EllisDon will gradually buy out the Smiths’ stake in the company while the employees’ ownership will increase to 100 per cent over several years…Shares will continue to be offered to employees every year and loans will still be offered on an interest-free basis. Shares will always be purchased and sold at book value…

I have had a great deal of difficulty finding any testimonials to employee-ownership from actual EllisDon employees. There’s the senior manager in the 2011 Globe and Mail article, and an anonymous “Toronto manager” in the 2007 article (who says owning 45% of the company is “neat” and “does draw you in a bit more in watching what you’re doing, and ensuring there isn’t waste”) but most of the praise for the ownership structure seems to come from the top.

And this September 2022 Globe and Mail article really raises questions about how employees view the plan, given EllisDon was reporting “astronomical” turnover:

EllisDon employs close to 4,000 people. A third of the company’s work force is unionized. According to [senior vice-president of people and culture] Paul Trudel, EllisDon has had to hire new employees at the top of the usual salary range just to get people to accept jobs – and as a result, baseline salaries for existing employees have to be raised as well to prevent them from leaving for other employers.

This reminded me of something I’d read in that 2011 Globe and Mail article—Stephanie Milliken, principal at Vancouver-based Milliken HR Consulting, told the paper that “share-purchase plans only really tempt workers when they serve as an add-on to an already competitive compensation package.”

Trudel told the paper in 2022 that EllisDon was:

…taking proposals from insurers for a better employee benefits package that will ultimately increase total compensation, even if it is not in the form of a base salary hike. The construction company is also looking to offer better top-up pay for parental leave.

“We already give employees a solid benefits package and shares in the company. But to compete in this market, we are going to have to do more,” he said.

It’s difficult to evaluate anything involving a privately held company so I’m just going to say that the jury is out on EllisDon’s “employee-owned” status.

 

Absolutely fabulous

One thing do know about EllisDon is that Spiro Trifos’ plan for the Sydney waterfront is unlikely to strike it as outlandish because EllisDon is active in Saudi Arabia, and you don’t know from outlandish until you’ve discovered the Saudi Arabian “giga-project.”

Listening to critics savage such projects—all part of the Kingdom’s “Vision 2030” to “grow and diversify” its economy—has become one of my favorite pastimes and the reason why I know so much more than I should about things like Crown Prince Mohammed bin Salman’s Neom, a US$500 billion project involving, as the BBC enumerated:

Glow-in-the dark beaches. Billions of trees planted in a country dominated by the desert. Levitating trains. A fake moon. A car-free, carbon-free city built in a straight line over 100 miles long in the desert.

So imagine my surprise in discovering that EllisDon lists one of these Vision 2030 projects in its portfolio, the Diriyah North District:

 

Although it chooses to illustrate it this way:

This is a US$63.2 billion project to turn the historic city of Diriyah, located west of Riyadh, into a “showcase” for “Saudi Arabia’s 300+ years” of history through:

…an engaging and inspiring set of heritage, hospitality, education, retail and dining experiences for residents, tourists and frequent visitors. The new global landmark, Diriyah, will be created in a Najdi architectural style and showcase authentic Saudi Arabian environments.

According to CNN, the first phases of the master plan opened at the end of 2022:

…including the At-Turaif World Heritage Site with new galleries and museums that chart the history of Diriyah, along with remnants of city walls, royal palaces and mosques.

There is also “a collection of dining venues,” but the plans are far more ambitious than “a few restaurants and museums”:

Some 38 new hotels and resorts will be opening in Diriyah, including properties by big-name brands such as Ritz-Carlton, Park Hyatt and Raffles, alongside six museums, 26 cultural attractions, more than 400 luxury and lifestyle outlets, and over 100 souqs and bazaars.

Six parks will span 2.6 square kilometers, filled with tens of thousands of trees and traversed by trails and pathways for walking, cycling and horseback riding.

 

Desert walrus

EllisDon has also helped build the world’s largest aquarium, SeaWorld Abu Dhabi, scheduled to open on the 23rd of this very month and home to 68,000 sea creatures, including dolphins but not orcas. The facility is divided into eight “realms” including an Arctic realm, complete with walruses, puffins and sea otters, and an Antarctic realm featuring six species of penguins plus a play structure for small children and two restaurants, just like the real Antarctica.

All this in a country whose high temperature today will be 41 degrees Celsius.

 

Hotel from Atlantis

EllisDon played an “integral” role in the project management and construction management of Dubai’s Atlantis The Palm Hotel and Resort on Palm Jumeirah, one of three artificial islands off the coast of Dubai described by National Geographic as “playgrounds of the uber-wealthy,” “gated and moated communities offer[ing] security and exclusion from the rest of humanity.”

Alastair Bonnet, a professor of social geography at the University of Newcastle, told the magazine that islands like Jumeirah “have a deleterious impact on the environment”:

The dredging required to build them destroys marine life; their construction impacts on local erosion and deposit patterns so that rivers silt up or beaches wash away; and the amounts of sand needed to shore them up or provide the concrete atop them is “a terrible trade which is despoiling the planet”, he says.

EllisDon’s description is more positive, the Atlantis, it says, is:

…an internationally-acclaimed multi-faceted themed resort development on the Palm Jumeirah in Dubai. The development consists of a five-star hotel with more than 1,500 rooms, a large convention centre with over 24,500 square feet of meeting and ballroom space, 6,000 square feet of retail village and a 525,000 square foot water park. Other amenities of the resort include a private sea beach, pools, spa and fitness centre, restaurants, bars and nightclubs, fully equipped children’s play area, marine exhibits, tennis courts, running tracks and surface and underground parking.

EllisDon, according to its website:

…managed several key packages from design and tendering stage through to and construction, testing and commissioning and handover. We successfully managed the complicated Contractor package interfaces and coordination with the Consultants and other trades in order to achieve a quality final product which was delivered on time and on budget.

 

Migrant Workers

This seems like a good time to say something about the nature of the construction industry in the Middle East’s Gulf region, which includes Saudi Arabia and the UAE.

There are an estimated 30 million migrant workers in the region, most in low-wage construction or domestic labor jobs. Revelations about the brutal conditions such workers were subject to during construction of the venues for the World Cup in Qatar led to calls for change, but as Brooke Sherman of the Wilson Center (a US public policy think-tank) wrote in this June 2022 article:

Reform remains elusive as powerful private sector employers stand to profit from cheap imported labor – a critical commodity for fueling post-Covid growth. Yet mounting criticism over unfair practices is forcing authorities to make difficult policy decisions regarding the future of its workforce.

Since the first oil boom of the 1950s, Gulf countries have sourced foreign labor for large-scale infrastructure projects to accelerate economic development. Today, migrants account for an average of 70 percent of the employed population in Gulf Cooperation Council (GCC), and over 95 percent of private sector workers in Qatar and the United Arab Emirates.

Sherman explains that the Khafala system, the framework that defines the legal status of most migrant workers in the Gulf region, ties workers to one employer, lowers labor mobility and depresses wages. But the system also raises “deep-seated humanitarian concerns” as:

Employers frequently withhold compensation and food allowances, confiscate workers’ passports, require them to work overtime without compensation, and prevent them from leaving their residences outside of work hours.

In 2020, Qatar became the first country to allow migrant workers to quit or change jobs, Kuwait and Saudi Arabia followed with similar measures:

…although only after the employee completes one year of work. As of 2021, migrant workers in all GCC countries except Saudi Arabia can leave the country without explicit permission from their employer.

A 2022 study (Vital Signs: The deaths of migrants in the Gulf) compiled by FairSquare Projects, a London-based migrant rights organization, and NGOs from Bangladesh, India, Pakistan, Nepal and the Philippines (all sources of migrant labor in the Gulf) found that up to 10,000 Asian migrant workers die each year in Gulf countries and 50% of these deaths are never explained.

There’s more, but you get the idea.

 

Gated Communities

EllisDon is also getting in on the action in Egypt, another hot bed of Middle Eastern construction, where it is providing project management services for the Cairo Festival City (CFC) Gateway Office.

CFC is a gated community—one of many in the Egyptian capital—developed by the UAE-based Al-Futtaim Group Real Estate in the wake of the 2011 uprising that ousted President Hosni Mubarek. According to EllisDon, CFC features:

Egypt’s first combined indoor-outdoor retail and entertainment development with spectacular luxurious residential communities, prime office spaces and internationally renowned hotels, schools and international automotive showroom parks, all set within a secure and beautifully landscaped environment.

Cairo has a population of 20 million and since the 1970s, the government has tried to encourage residents to live in purpose-built “Desert Cities” to ease congestion and reduce the burden on the city’s infrastructure.

USA Today reported on the phenomenon back in 2014, mentioning Cairo Festival City by name and explaining that:

The desert enclaves date to the late 1970s with the start of Egypt’s New Towns Program, which sought to disperse a ballooning population — now estimated as high as 20 million in Greater Cairo — from stressed points along the Nile.

Yet the majority of Cairenes are discouraged from moving to the new towns since private housing there is unaffordable and public housing units are lacking infrastructure and are remotely located, said David Sims, author of Understanding Cairo: The Logic of a City Out of Control.

Urban development expert Amir Gohar told the paper the desert cities, of which there were 23 at the time:

…are mostly serving a certain niche or layer of the society — mainly the upper class and people with jobs and people who can afford long, private mortgages while they should instead accommodate and serve a wider range of citizens, especially the classes that constitute the majority of Egypt’s population and housing problem.”

Meanwhile, nearly a third of Egyptians live in poverty and as of March, annual headline inflation (the raw inflation figure expressed through the Consumer Price Index) stood at 31.9% while core inflation (CPI minus volatile components like food and energy) had “skyrocketed” to a record 40.26%.

As Geoff Smith himself might say:

Where is the morality?