When people refer to Kansas City’s Big Three commercial development firms, they often use the first names of their leaders: Kenny for Block Real Estate Services, Dave for VanTrust Real Estate and Nathaniel for NorthPoint Development.
Nathaniel Hagedorn, founder and CEO of Riverside-based NorthPoint, hates that.
“If I hadn’t founded it, I don’t think I could even get a job at this company today,” Hagedorn joked. “Honestly, the success we’ve had has been completely the result of our team; I’m just a small part of it.”
NorthPoint is a team of 67, including about 15 with ownership stakes. It has developed and manages 2,000 multifamily units and 8 million square feet of industrial space. The company also owns 1,700 acres of undeveloped industrial land, representing 24 million more square feet of future development, and is developing industrial projects in 10 states.
No matter how hard he tries to deflect attention, Hagedorn can’t erase his status as a legend in the Kansas City commercial real estate industry. That’s just what happens when a 34-year-old and his startup firm rack up $1 billion in development, including some of the region’s highest-profile projects, in three short years.
Gib Kerr, a DTZ vice president who has worked in commercial brokerage for 28 years, said he’s witnessed only one rise as meteoric as Hagedorn’s … er, NorthPoint’s.
“The only one that might be comparable would be Larry Bridges (of Executive Hills Inc.) back in the 1980s,” Kerr said. “Of course, Larry had Frank Morgan as his capital source.”
Hagedorn has Dave Cummings, CEO of Tradebot Systems Inc., and a handful of other local ultrahigh-net-worth investors funneling millions of dollars of equity into NorthPoint deals.
“We’ve been blessed with awesome financial partners and terrific municipal partners,” Hagedorn said, again glad to deflect credit. He also credited powerful business partners, such as General Motors and BNSF Railway, that have spurred NorthPoint’s recent emergence as a national player.
NorthPoint President Chad Meyer, agreed: “There’s no way a company could go from zero to where we are today without everybody (at NorthPoint) firing on all cylinders” to build successful partnerships and projects.
“But he’s being humble,” Meyer said of Hagedorn. “We all know a lot of the success comes topdown, too. Nathaniel’s brilliant and the hardest-working individual any of us have come across. And his willingness to give ownership in the company to the top performers has allowed us to get the top people from their respective industries into the company.”
Fixing what’s ‘broken’
Buoyed by its all-star cast, NorthPoint has achieved much of its success through its role as a “value-add developer” — buying distressed properties and applying capital, effort and ingenuity to turn them into profitable projects.
“I’d say the more broken it is, the more it’s got ‘NorthPoint’ written all over it,” Hagedorn said.
The Power & Light Building in downtown Kansas City is a prime example. NorthPoint is in the midst of a $63 million project to convert the historic office tower into 258 apartments and build an adjacent garage wrapped by 52 apartments and retail space.
To make the project possible, NorthPoint had to win approval of a complex incentive package that includes a tax abatement and tax-increment financing revenue generated by surpluses from a 10-year-old TIF plan originally passed for the redevelopment of the Hilton President Hotel.
NorthPoint’s investors kicked in $17 million, allowing it to pay cash for the building and minimize debt.
“A lot of talented, really smart developers tried to make that project work for years and were not able to,” said Kerr, the DTZ broker who sold the Power & Light Building to NorthPoint. “Nathaniel and his team figured it out in a matter of weeks.”
Hagedorn credited Mark Pomerenke, the NorthPoint vice president who heads up multifamily development.
“The guy’s unbelievably brilliant,” Hagedorn said. “I think he scored perfectly on the ACT, and he graduated at the top of his class at Notre Dame with an electrical engineering degree. Without Mark, we wouldn’t have been able to figure it out.
“It’s a tough project, and that’s why it was there — other people couldn’t figure it out.”
Another broken project recently allowed NorthPoint to enter the booming York, Pa., market. It boasts a 3 percent industrial vacancy rate, half of Kansas City’s rate, and last year absorbed 15 million square feet of industrial space, three times what the Kansas City market absorbed.
To enter the market, Hagedorn said, NorthPoint bought a former Harley-Davidson manufacturing facility with environmental challenges and dismantled it.
“We’re going to redevelop the site with a 700,000-square-foot spec warehouse,” Hagedorn said. “We wouldn’t have been able to meet our return requirements if we’d have just gone and bought a greenfield site.”
Spec, or speculative, projects are built before a tenant is signed.
NorthPoint took a similar tack when it recently decided to establish a presence in the St. Louis market. After a developer defaulted on a $31 million loan financing development for the 1,500-acre Hazelwood Logistics Center project, NorthPoint bought the note for $9.2 million and foreclosed.
A couple of years ago, before NorthPoint became a national development force, it took on another broken 1,500-acre project locally: Logistics Park Kansas City, a now-booming developing near BNSF Railway’s $250 million intermodal hub in Edgerton.
NorthPoint was selected as the master developer for the project after its predecessor, The Allen Group, got overextended during the recession. It didn’t have the assets required “to make some vertical development happen quickly — meaning (speculative) construction,” Edgerton City Administrator Beth Linn said. “NorthPoint did.”
NorthPoint has completed 3 million square feet of buildings at Logistics Park KC since being selected master developer in 2013.
Being a value-add developer also has taken on a secondary meaning at NorthPoint. In that sense, “the value orientation means reducing our customers’ total cost,” Hagedorn said
Brent Miles, the firm’s vice president of economic development, has done that by helping NorthPoint negotiate more than $100 million in incentives for clients, Hagedorn said. Meyer has added value for clients by leading a contingent of engineers who serve as project managers, he added.
The company recruited Meyer in 2012 while working with ARCO National Construction Co. Inc. on NorthPoint’s first industrial building in Riverside Horizons. He has since been joined by a number of electrical, civil, geotechnical and industrial engineers.
On a complex, fast-track project, Meyer said, “having those engineers help design and drive unnecessary cost out of the building has proven to be a notable value for a lot of our clients.”
Another NorthPoint principal who adds value for clients is Patrick Robinson, a vice president who has headed up development at Logistics Park KC.
Robinson has been able to attract firms with large shipping requirements to the park by showing them how much they can save in short-haul trucking costs, called drayage. According to Robinson, a company that locates in Logistics Park KC can save $117 a container versus a company 20 miles away. That translates to $585,000 in annual savings for a company using 5,000 containers a year, he said.
By delivering such big savings and big projects, NorthPoint found itself on a fast track to $1 billion in development. And according to Hagedorn and his team, they’re not planning to let up on the throttle now.
Key principals: Nathaniel Hagedorn, CEO; Chad Meyer, president/COO; Brent Miles, vice president of economic development; Patrick Robinson, vice president of development; Mark Pomerenke, vice president of operations; Brett Grady, CFO; Kelly Clark, director of property management
Roots: In 2008, Hagedorn, then a project manager at Briarcliff Development Co., and Charles Garney, founder and CEO of that firm, launched a division called Briarcliff Realty to tackle projects outside the 600-acre Briarcliff mixed-use development. As anticipated, Hagedorn bought out Garney’s stake in early 2012 and changed the name of Briarcliff Realty to NorthPoint Development.
Development volume: In the three years since its founding, NorthPoint has completed more than $1 billion worth of development.
Equity sources: NorthPoint has raised $130 million through two industrial investment funds and has teamed with joint venture partner Northwestern Mutual Life Insurance Co. on projects totaling $63 million. But most of its equity comes from the families of a handful of high-net-worth individuals, including Dave Cummings, CEO of Tradebot Systems Inc.; Jim Ferrell of Ferrellgas; and Joe Brandmeyer, founder of Enturia Inc., a Leawood-based company purchased for $490 million by Cardinal Health Inc. in 2008.
Employees: 67, including about 15 with ownership stakes
Offices: Riverside and St. Louis
Sectors: Multifamily and industrial projects are the focus. However, one of NorthPoint’s first projects was the revitalization of the Tuileries Plaza, a Northland shopping center rebranded as the Village at Burlington Creek.
Hood-ornament projects: The Village at Burlington Creek and Residences at Burlington Creek; Village West Luxury Apartments; historic Power & Light Building apartment conversion; Logistics Park Kansas City, a 1,500-acre development in Edgerton; Riverside Horizons Business Park
This is the third in a three-part series on the Kansas City area’s top three developers.