FEATURE ARTICLE, DECEMBER 2005

CONSOLIDATING TO EXPAND
Chicago-area contractors Graycor and Capitol, which have operated under the same umbrella since 2002, have now combined their services to expand their horizons.
Randall Shearin

The market for commercial real estate construction services in the United States has changed with the consolidation of large developers and the regional to national expansion of many developers and retailers. To respond to the changes its clients were going through, Graycor Construction acquired Capitol Construction in 2002 and consolidated the two companies' capabilities, creating a national platform to provide services.

Graycor is building the common area retail space at Forest City Enterprises' The Promenade at Bolingbrook, currently under development in Bolingbrook, Illinois.

One of the key strengths of the union was that Graycor was able to expand its offerings immediately. Matt Gray, president of Graycor Construction, says the two companies were so busy looking at their similarities, it wasn't until after the acquisition that they realized all their differences. In this case, though, the companies' differences were its combined strength. Graycor, for instance, had clients who wanted to build specific product types that it previously had not built.   New employees from the Capitol side of the business, however, had those skills. Spa construction was one product type where this mix was beneficial. Graycor was able to use Capitol's spa expertise to augment construction of hotel projects.  

Graycor's acquisition of Capitol was a bit non-traditional. Since both companies had been around for a very long time — Graycor for 85 years and Capitol for 55 years — they both had very established identities. For the past few years, the united company continued to operate under both the Graycor and Capitol banners. Both companies also maintained their separate offices: Graycor's in Homewood, Illinois, on the south side of Chicago, and Capitol's in Palatine, Illinois, in Chicago's northwest suburbs. Recently, with so much going between the two, the company made a decision to operate together as Graycor.

“We were able to draw the best of what each company had to offer for new jobs,” says Gray. “We're now at the point where it makes sense to go forward as one company with one name.”

Better, Graycor Construction and Capitol Construction are part of the Graycor Companies. The parent company's holdings also include Graycor Industrial Constructors, Graycor Blasting and Graycor International. As a result, Graycor Construction and Capitol Construction add to the capabilities — as well as being able to borrow from them — of the parent company.

Graycor intends to keep both its Chicago offices active. The offices are advantageous from a labor perspective. When the company is seeking construction employees, the company's Palatine office draws from as far away as Milwaukee, while its Homewood office draws from central Illinois and Indiana.

“The offices help us draw the best construction professionals we can find, from Milwaukee to Michigan City,” says Gray. “They also help us serve clients within driving distance to a lot of midwestern markets.”

With the acquisition, Graycor and Capitol were able to combine their supplier and subcontractor networks as well, creating even more efficiencies and capabilities.

“We were really able to expand our knowledge and awareness of some good subcontractors and suppliers who serve the same markets that we serve,” says Gray. “It's just a smaller world.”

One project that Graycor recently completed was the remodel of the Kohler American Club in Kohler, Wisconsin. This spa and hotel complex is the Midwest's only five-diamond resort. The project included constructing a five-level, 15,000-square-foot addition near the Carriage House, as well as adding space on the lower and first levels of the spa. A notable project in the Chicago area is the company's renovation of the historic Wrigley Building in downtown Chicago. The first phase included the renovation of the north and south lobbies, a new entrance, restoration of a portion of the building's limestone façade, and new exterior sidewalks. The second phase of the project, completed this summer, included the restoration of façades along Michigan Avenue and the rehabilitation of the building's signature lighting system. The Wrigley Building renovation was a unified effort for both Capitol and Graycor. Strengths and divisions of each company were used to accomplish the project, with seamless delivery to the client.

Graycor builds all types of projects, from bank branches to movie theaters to shopping centers. Graycor is currently active building Phase II of The Promenade Bolingbrook, a new regional center being developed by Forest City Enterprises, a Graycor client, in Bolingbrook, Illinois. Graycor is constructing the south parcel component of the 1.1 million-square-foot project. Final completion for the project is scheduled for spring 2007.

The company has also built a number of locations for GameWorks across the country. Most recently, it constructed a 40,000-square-foot GameWorks unit at Developers Diversified's The Pike at Rainbow Harbor in Long Beach, California. Graycor has also built units for the company in Minnesota, Ohio and Illinois. Smaller projects, too, are part of Graycor's capabilities.  

“We're a little bit different model than the old school general contractor,” says Gray. “We think that clients today really demand that their construction partners have particular competencies within their specific project types.”

Given the large value of the construction market in the U.S. — approximately $1 trillion annually — contractors today have to specialize and segment. Geographically, the Midwest is still lagging the coasts in the commercial construction arena, according to Gray. California, the Mid-Atlantic and the Sunbelt are seeing a lot more activity.

“There seems to us to be an increase in activity in the Midwest,” says Gray. “It is fairly broad-based, with the possible exception of the housing market, which has consistently been strong. The hotel industry clearly is in a recovery mode. Retail follows housing, so it is definitely on the upswing.”

The consolidation of the two companies has worked beautifully, according to Gray.

“It couldn't have gone more seamless for us over the past few years,” he says. “Now we're at a point where we can really get going.”

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