COVER STORY, JULY 2004

LAYING THE FOUNDATION
Midwest contractors emphasize the importance of a strong business model.
Leslie Harrison

Although the economic environment has been stifled by recession since September 11, 2001, the economy is showing slow, but steady, signs of improvement – especially in the construction market. Saved from the same fate as the depressed job market by low interest rates, construction growth is booming, and the demand for healthcare-related projects and retail centers is on the rise. How have major construction companies in the Midwest been affected by this change in focus?

Fogel-Anderson Construction Company

Martin Fogel founded Fogel-Anderson Construction Company in 1915 with his son, Paul Fogel. Originally known as Fogel and Sons, the company’s initial purpose was to provide construction services to the burgeoning Kansas City area, says Doug Fogel, vice president of Fogel-Anderson Construction Company Oscar Anderson, a future namesake, joined the firm in 1922. The company was renamed Fogel Contracting Company in 1942. In 1953, Paul Fogel sold his interest, and the company was renamed Fogel-Anderson Construction Company.

Primarily servicing Kansas and Missouri, the company is licensed to operate in Arizona, Colorado, Illinois, Indiana, Iowa, Oklahoma and Nebraska. “Through the years, the focus has been on timely and cost effective construction services,” Fogel says. Fogel-Anderson is known for building retail, office, industrial, hotel and theater facilities, as well as other specialty venues. Some of its current projects include two Lowe’s Home Improvement Warehouse locations, one Wal-Mart and several big box retail projects. “We are perceived as a big box retail provider,” he says.

One project worth noting is the Blue Ridge Bank & Office building in Independence, Missouri, which was completed last February. This $13 million Blue Ridge Bank development, which is located on Interstate 70 and M-291, encompasses 120,000 square feet on 6 acres and, according to Fogel, is a good representation of the Fogel-Anderson standard.

“We believe that providing the client service beyond his expectation should be our goal,” Fogel says. To do so, Fogel says the company must have quality people to work with and quality communication.

“Also, we stress our participation in traditionally non-general construction activities with developers,” Fogel explains. Fogel-Anderson takes part in the site selection, design team selection, financing and Pro Forma development, risk analysis, life-cycle system selection and post-construction warranty monitoring on all projects.

This determination and goal setting has paid off for the group. They have received numerous awards for their hard work, which includes the 2002 Project of the Year award for the Veterinary Specialty and Emergency Clinic in Overland Park, Kansas.

Graycor Construction Company

Chicago-based Graycor will complete work on the emergency department at St. Alexius’ Medical Center at Hoffman Estates by next spring.

Since its inception in 1921 as Chicago Concrete Breaking Company, Graycor Construction Company has evolved into a full-blown construction venture. The company received its first break in 1926 when it was hired to demolish a railroad retaining wall situated along Grant Park in Chicago without interrupting train service. Upon completing the project, Chicago Concrete Breaking Company earned the reputation for taking on complex jobs. “Wanted—a hard job” soon became their motto.

The company became more involved in construction, specifically building mills, during the next few decades. In 1982, it purchased Inland Construction Co. and began concentrating on commercial construction. Today, the company is divided into two groups, Graycor Construction Co. and Capital Construction Co. “We’ve recognized the need within the market for two different types of construction,” says Matt Gray, president of Graycor and Capital Construction Co. “Graycor’s niche is serving the larger, more complex projects while Capital’s focus is on smaller projects with shorter construction time,” he says.

Graycor, who has evolved from the days of sandblasting and demolishing buildings, today is involved in a variety of commercial building, such as retail, office, entertainment, cultural, educational, hospitality and healthcare facilities.

While hotel construction is down in the industry, hotel renovation is up. Graycor took note of this trend, recently completing renovation of the 34-story Marriott in San Francisco and currently renovating the Key Bridge Marriott in Washington, D.C.

Sega Gameworks, a 40,000-square-foot facility featuring two restaurants, sports bars, bowling alleys and a variety of games and attractions in Long Beach, California, is another one of the company’s recently completed projects. Restaurants with game components, like Gameworks, are growing in popularity, while, at the same time, the need for more and improved healthcare facilities is on the rise. “As the population ages, facilities that serve our older communities [are becoming more prevalent],” Gray says. Graycor’s Smith Crossing in Orland Park, Illinois, a 274,000-square-foot continuing care retirement community (CCRC) scheduled to be completed next year, will feature independent living apartments, assisted living apartments, nursing units and more.

The St. Alexius’ Medical Center at Hoffman Estates in Hoffman Estates, Illinois, a $32 million project started in June 2001, is almost completed. Graycor is providing construction management, including pre-construction services for the 38,400-square-foot addition to the fourth, fifth and sixth floors, as well as completing the first phase of an addition to and renovation of the hospital’s emergency department. Scheduled for completion by the end of this year, the three-story addition to the Alexian Brothers “Alexian Brothers Behavioral Health Hospital” adjacent to the Saint Alexius campus will bring additional beds, as well as additional outpatient and support capabilities, to the hospital.

Graycor’s other projects include retail spaces such as The Limited, Victoria’s Secret, BP gas stations and CVS/pharmacy.

“Our success is measured by our ability to be a strong partner to our clients,” Gray explains. In the near future, Graycor aims to become the preferred provider of its current client base while continuing to add additional clientele. Long term, the company is striving to attract, retain, motivate and develop those within the organization who will be the leaders of the future.

Rockford Construction

Grand Rapids, Michigan-based Rockford Construction will complete the 200,000-square-foot Student Housing 2004 for Grand Valley State University in Allendale, Michigan, next month.

In 1987, Mike VanGessel and John Wheeler established Rockford Constuction in Grand Rapids, Michigan to practice general construction and construction management. Since that time, Rockford Construction has provided construction services to those in the Grand Rapids area and throughout the Midwest. “What we brought to the marketplace is a service that is an extension of [our client’s] company,” says Mike VanGessel, president of Rockford Construction. “People found trust in our ability to be challenged.”

The types of properties Rockford Construction builds cover a broad spectrum. “We’re very active with university, institutional and retail work,” VanGessel explains. “We’re seeing more emphasis on educational and institutional buildings as industrial construction is down.” Although new construction in the industrial market is on the decline, VanGessel expects to see a rise in industrial remodeling, as well as urban renewal, as more people move back into the cities.

Also on the rise is the demand for on-campus housing due to an increasing number of students entering college. Rockford is nearing completion of the $25 million, 200,000-square-foot Student Housing 2004 project for Grand Valley State University in Allendale, Michigan. Student Housing 2004 will be completed next month when construction is finished on the second building.

Rockford is known for being a turnkey company since it will own the building, lease it and partner with the client to help manage the building. This approach makes the transaction as seamless as possible. “We’re focused on servicing those clients immediate needs and turning over successful projects for the year,” VanGessel says. Long term, the company hopes to continue growing geographically and expand its already growing departments.

Arco Construction

St. Louis-based Arco Construction is building WetLab, a $5.5 million, 51,776-square-foot research facility for Linco Diagnostics in Missouri Research Park in Weldon Springs, Missouri.

In St. Louis in 1992, Dick Arnoldy and Jeff Cook joined their talents and their names to form Arco Construction.

While their business model may have shifted in the last 12 months due to the economy, the pair still maintains a core base of design-build in building warehouse and manufacturing facilities, retail spaces, multifamily housing, car dealerships and assisted living facilities. “We’re a very adaptable company and can adapt our system to any industry,” says John Komlos, vice president of business development. “We’re most known for building warehouses, but in the next 5 years we may be known for building retail and assisted living facilities.”

Komlos says the secret to Arco’s success is the employees. With a low turnover rate, Arco is able to forge lasting relationships with its clients and, in doing so, garner customer satisfaction. “Our short-term goal is to keep existing clients happy,” Komlos says. “[In the] long term, we want to provide financial and professional success to our employees and continue to grow other markets.”

When the company began in 1992, its main emphasis was building in the commercial and industrial markets. Arco has since expanded to include multifamily structures, retail and office facilities, as well as other unique projects such as WetLab, the $5.5 million, 51,776-square-foot state-of-the-art research facility for Linco Diagnostics and Missouri Research Park in Weldon Springs, Missouri. The company completed construction last month.

Duke Construction

Duke Construction is a construction company and real estate investment trust founded in 1972 by Phil Duke, John Roseborough, and John Wynne in Indianapolis. In the late 1970s, Thomas Hefner, Gene Zink and Gary Burkin joined the management team to take Duke to the next level of full-service developing, contracting, leasing and property management. The original partners were bought out in 1986, and the company went public in 1993 as a real estate investment trust, which is where it stands today.

Duke Construction’s reputation lies on its history of building office and industrial facilities, such as the recently completed $30 million, 1.1 million-square-foot distribution center for Case New Holland in Duke’s Lebanon Business Park in Lebanon, Indiana.

“Most of our portfolio includes office and industrial buildings, but our retail end is growing,” says Steve Kennedy, vice president of construction. One of the company’s major retail projects is Algonquin Commons, a 450,000-square-foot lifestyle center in Algonquin, Illinois. The $30 million project is being developed by Cincinnati-based Jeffrey R. Anderson Real Estate and will be anchored by Galyan’s, Borders Books & Music and PetSmart. The project is scheduled for completion in October.

“We’re a traditional real estate operator,” Kennedy says. “We build-to-suit, as well as operate as a construction company.” Kennedy cites their strong customer satisfaction mentality as the key to Duke’s success. “We design and manage the building, as well as act as property management,” he says. “Overall, it’s been a successful system.”

In the future, Duke plans to stay focused on construction and broadening the types of projects they’re involved in. “We’ve evolved. We’re doing more medical, retail and hotel buildings,” Kennedy explains. Since expanding into Dallas and the Southeast, Kennedy expects Duke to expand their horizons by cultivating a deeper penetration into those markets.

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