Cover Story: In just 6 years, NorthPoint soars well beyond industrial

NorthPoint Development won’t be the only Kansas City-area company to eclipse 1,000 employees when it hits that mark later this year. But it certainly will have become one of the fastest to get there.
 
Founded by CEO Nathaniel Hagedorn in February 2012, the Riverside-based company has ridden a wave of industrial development successes in 11 states while building its workforce from its original eight to more than 800.
 
“We’re the second-largest privately owned industrial landlord in the United States,” said Brent Miles, NorthPoint’s vice president of economic development.
 
That claim is based on the roughly 48 million square feet of industrial space NorthPoint has developed at local sites, such as 5-year-old Logistics Park Kansas City in Edgerton, where NorthPoint is more than halfway toward its goal of developing 17 million square feet, plus markets nearer its satellite offices in St. Louis, Cincinnati and Chicago, and cities throughout Texas and Florida.
 
Using a multiplier of one job per 1,000 square feet of industrial development, Miles estimated that the tenants that have occupied space in the industrial facilities NorthPoint has developed have created about 48,000 jobs.
 
“What’s also pretty amazing,” Hagedorn said, “is that on the industrial side of our business, the U.S. had net absorption of about 200 million square feet last year. We did 12 million (in industrial leasing); that’s 6 percent of the U.S. industrial market. And the thing is, we were basically in tertiary markets.
 
“We’re just breaking into Dallas and Chicago. We’re not in Atlanta or the Inland Empire (in Southern California). The only primary industrial market we’re in is northeastern Pennsylvania.”

 
Expanding the scope
 
NorthPoint’s success hasn’t been limited to industrial development. It has parlayed its work with industrial and multifamily projects into new business units specializing in senior living, self-storage, cold storage, freight forwarding, architecture and, most recently, civil engineering.
 
Part of that diversification thrust, Hagedorn said, comes from the company’s desire “to get behind big things that kind of blow us like a tumbleweed in the right direction.” That includes the retiring of millions of baby boomers, which is driving NorthPoint’s Stonecrest Senior Living unit, and e-commerce, which is driving much of its industrial development.
 
“Eight percent of U.S. retail sales are online today,” Hagedorn said. “They say it’s going to get to 50 percent by 2040 or 2050, but I don’t think it’s going to take that long.”

 
Meanwhile, NorthPoint also is relying on some old-fashioned values — the company’s five core values — to drive its expansion.
 
An example of that occurred as Memorial Day approached last year at a site near Wilkes-Barre, in a northeastern Pennsylvania industrial market where NorthPoint has spread its development wings.
 
There, NorthPoint already had finished its job of building an 840,000-square-foot distribution facility for Chewy.com, the Florida-based retailer of pet food and other pet-related products that has become one of the fastest-growing e-commerce companies on the planet.
 
Chewy.com had set a go-live shipping date of the day after Memorial Day for its new facility. But it still had to equip the facility and had procured its vendors on the data, material handling and inventory management side late in the game.
 
“There was this huge rush once the building was done,” NorthPoint COO Chad Meyer said, “and it was pretty clear they were not going to hit their date.”

 
Until NorthPoint stepped up.
 
With Meyer and Eric Watts, NorthPoint’s project manager for northeast Pennsylvania, leading the effort, NorthPoint pulled in 140 electricians from job sites nationwide to help Chewy.com get the facility wired and stocked in time for its desired launch date, Hagedorn said.
 
Going that extra mile, he said, helped NorthPoint land two more development jobs — in Phoenix and Ocala, Fla. — from Chewy.com, making it one of the developer’s many repeat clients.

 
Building a reputation
 
Tim Conder, a senior project manager with General Motors Co.’s real estate division, said GM has become NorthPoint’s biggest repeat client in spite of the automaker’s tendency to rely on bids over reputation.
 
“There are naysayers, especially at a company the size of General Motors, who say we should be bidding everything out, every single time,” Conder said. “I understand that; I mean, competition’s healthy. But there are some times when I’m comfortable enough with NorthPoint that I don’t do that.

 
“They’ve been consistently coming in on time and under budget. They’re very customer-oriented, and they always say, ‘We’ll earn your business’ — and they do — on each project.”
 
Conder was reluctant, for confidentiality reasons, to recount the ways NorthPoint had gone above and beyond during the half-dozen jobs it has completed for GM. But, without offering details, he noted that the company “went beyond the boundaries that any developer I’ve ever been involved in would go to” in completing a deal last year in Arlington, Texas.
 
There, NorthPoint bought most of the 83-acre former Six Flags Mall site for development of a 1.4 million-square-foot GM supplier park. Cinemark USA brought a lawsuit that delayed the project, accusing NorthPoint of trying to put Cinemark’s Tinseltown theater out of business at the mall site before its lease was up. And not surprisingly, that’s not the only recent pushback NorthPoint has received in an industry that generates significant truck traffic and hulking concrete structures.
 
Last year in Edgerton, residents complained about an annexation request from NPD Management LLC, a partnership Hagedorn manages, that will expand industrial development to 575 acres near their homes. And last month in Elwood, Ill., a Just Say No to NorthPoint effort was credited with blocking annexation of 675 acres for the firm’s proposed 2,200-acre warehouse development.

 
Meanwhile, however, NorthPoint has been able to build strong and profitable partnerships thanks to the first of its core values — Put People First — which is based on a belief that “the relationships with our customers, employees, and investors are our most valuable assets.”
 
NorthPoint takes its guiding values seriously. According to its website, “our core values not only set the foundation of our culture but guide us in every one of our business transactions.”
 
It’s a concept that Hagedorn borrowed from Koch Industries Inc., the highly diversified multinational corporation based in Wichita.
 
“We had what we called our guiding principles when we first started,” Hagedorn said. “But I didn’t feel they were actionable. Then I had dinner one night with Bill Hanna, who was the president of Koch Industries. And I asked Bill, ‘How have you built your business?’ He pulled out of his wallet a laminated card that had the Koch core values on it.
 
“I don’t even remember what they were, but he said, ‘We have these core values, and we expect our entire team to live by these, whether they’re producing paper or processing oil.’ I was so inspired by that that the next day, we called in every one of our employees, which then numbered about 50. Our core values — those things that were helping us build an incredible company that our customers, employees and investors loved — all came from those employees. And then we distilled them into these five key concepts that have made us successful in the past and are going to make us successful in the future.”

 
Sticking to its core
 
Besides putting people first, NorthPoint’s core values tell its workforce — from entry level to C-level — to take ownership of every situation, to do the right thing every time, to maintain financial discipline and to live generously.
 
“Whenever we get to an inflection point, where we could do this or we could do that, we ask whether the answer is consistent with our core values,” Hagedorn said. “And if the answer is that it’s consistent, then that’s the path we take.”
 
That method has helped NorthPoint reach decisions regarding everything from 2015 and 2017 trips to Bora Bora to reward key employees, to the alignment of the company’s expertise with customer needs.
 
The latter started early on at NorthPoint, which began assigning Meyer and other licensed engineers as project managers to help with the design of complex industrial facilities while driving out unnecessary construction costs.
 
“When you think about it,” GM’s Conder said, “using engineers to do a lot of their project management in this industry is brilliance.”
 
Conder also congratulated NorthPoint on its virtual integration of new businesses and services, one of which is helping development clients make wise decisions regarding labor.
 
“When you have an unemployment rate of 3 percent around the United States, labor is going to be a constraint that all of our clients are talking about,” Hagedorn said. “We could tell them, ‘We can build you a warehouse and save you 12 cents on rent.’ But that doesn’t matter because only 4 percent of the cost to operate a warehouse is in rent. That 4 percent is how I make my money, so it’s important to me. But transportation and labor represent 80 percent of my clients’ cost to operate a warehouse. So I’d better be a partner with expertise and solutions to help address those customer needs.”

 
Meyer said NorthPoint is working with a Fortune 50 company in Texas that has a $120 million facility operating at only 60 to 70 percent capacity because it lacks access to an adequate labor pool.
 
“They’re actually terminating a lease and moving into a park of ours because we’ve shown that it would give them the ability to staff their warehouse operation six times over,” he said. “It’s not the most ideal location for them from a logistics standpoint. But their comfort over the availability of labor is driving their decision to move.”

 
Adding tech capabilities
 
NorthPoint’s expertise in labor and site-location analytics had an unusual origin: the self-storage business that the CEO’s brother, Ben Hagedorn, began helping build a couple of years ago.
 
“We originally set a goal of 25 (self-storage facilities),” Nathaniel Hagedorn said. “Now, our goal is to have 40 open, under construction or going through entitlement before the end of the year. That will represent a $410 million investment in self-storage.”

 
The Beyond Self Storage business involves new, three-story, climate-contolled infill facilities — a departure from the sprawling assemblages of garage doors that mom-and-pop self-storage owners generally operate in fringe locations.
 
“But the innovation, I would say, isn’t in the building design,” Nathaniel Hagedorn said. “The innovation was how Ben understood the market.”
 
Ben Hagedorn, who initially required a week to analyze a potential self-storage location, has developed high-tech site-selection programs that can complete that task in five minutes.
 
“Ben has been able to super-fine-tune the supply-demand fundamentals to the self-storage market,” Meyer said. “But he’s also learned to apply that data to other markets, which has given us a tremendous edge across our entire company.”
 
To maximize that edge, NorthPoint recently made two key hires: the top site-selection and top labor-analytics experts in the country, Nathaniel Hagedorn said.
 
“These guys are not cheap,” he added. “That’s a big investment for our firm. But this is what makes us different. We have different conversations with our clients because we’re actually solving the problems of our clients.
 
“We went through a strategic planning process last year, and the new goal we set as a company was to become a world-class real estate investment platform driven by data.”

 
Growing the family
 
As vice president of asset management, Kelly Clark is responsible for oversight of NorthPoint’s managed real estate holdings, which total in excess of 40 million square feet even after Ares Management LLC’s purchase last year of a majority stake in 10 fully leased buildings at Logistics Park Kansas City — a NorthPoint liquidity event estimated at $330 million.
 
Asked whether her role was becoming daunting, Clark said the firm’s multiple business units actually had made it easier to grow and more exciting to manage.
 
“We’ve had a lot of growth with our senior communities over the past year, and each community employs almost 80 when fully staffed,” she said. “So we add employees in big tranches when we’re opening new communities.”
 
Meanwhile, NorthPoint’s tendency to live by the Golden Rule (see Core Value No. 3) has generated a lot of repeat business throughout the rest of its units, Clark said.
 
Besides General Motors, big-name clients have included BNSF Railway, Amazon, Wal-Mart, Jet.com, Grainger, United Parcel Service, Caterpillar, Kubota Tractor, General Electric and Spectrum Brands.
 
As with Chewy.com, satisfied customers often take Northpoint to new markets. But the goal isn’t to conquer the world, the company’s founder said.
 
“We’re a value-add company,” Hagedorn said, “and we go wherever we feel like we can get the highest risk-adjusted returns on our investment.”
 
That investment — now about $1 billion a year — has helped establish a status quo of about 12 million square feet of industrial development annually.

 
But increasing development output isn’t a NorthPoint goal, either.
 
“For myself, Chad and the rest of our leadership team,” Hagedorn said, “it’s about having fun and having a really positive impact on people’s lives.”
 
Thus, in celebrating his 37th birthday recently, Hagedorn looked around at the company he built and had an emotional moment.
 
“I came into the room where they had a nice cake and everyone sang ‘Happy Birthday,’ and then I looked around at all these people I just love,” he said. “The cream rises to top at NorthPoint, which is a true meritocracy, and to see all these people engaged, happy and growing was wonderful.”
 
– Rob Roberts
 
Kansas City Business Journal
 
Date: April, 27 ,2018
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