A Fresh Look at Commercial Contracting
Hunter Parks, the founder of Hunter Companies, saw inefficiencies in general contracting that pushed him to make some changes in the way that construction companies were collaborating with designers and architects. Hunter adopted the design-build project delivery system, looking at things from a pragmatic perspective. We spoke with Director of Business Development Greg Swartzendruber.
Hunter Parks was an engineering major at the University of Iowa and began his career by working for a general contracting company. He saw the flaws in having an architect draw plans before consulting with a general contractor. If the contractor could not build what was designed or could not build it within the specified budget, the two sides squabbled and pointed fingers at each other.
“Hunter realized that things were not being value-engineered or designed properly at the onset, taking into account functionality and not just the wants of the client or even the architectural aesthetics. He was interested in a design-build, and that became his ideology,” explains Greg.
The design-build approach placed an emphasis on increasing efficiency and working from the point of view of the client and their budget to create the desired outcome. Following that, clients wanted options: full ownership, or leasing the space. It made sense that the next step was to self-finance projects and move into property management.
“It began with design-build, then being a general contractor who worked with multiple architects, but came at it from a different angle than most general contractors were. This was with design and working with those architects by having our own in-house design people, structural project management and superintendents,” says Greg.
Options were made available through this method. Hunter Companies can build to suit for the client or offer a property for lease after it is built. Hunter came to the conclusion that the company had to own a certain amount of property to make property management feasible. From there, Hunter Companies became a full-service real estate development firm.
“We are at the point now, since I have been here, where we started to do location intelligence for other companies. Some clients that we have had for a long time and built multiple locations for, now want us to find places for them. So we are acquiring and selling land,” states Greg.
At this point, the company can act as a land broker which allows it to facilitate purchases for its clients or for itself in such a way that capital gains taxes may be deferred under the Internal Revenue Code Section 1031.
“We are trying to value-add every step of the way for the client. We even have retail centers with four to five clients within one building. If we can find a way to offer things such as Wi-Fi and they don’t have to think about it, it just becomes a part of the rent,” says Greg. This value-added approach has been helpful in retaining tenants beyond the initial lease.
When Hunter Companies started in 1998, Hunter Parks saw that those added services were the way of the future. Being a specialist would mean being restricted to one area of expertise. Hunter saw that this was not the best way to do business.
Hunter took the concept of comprehensive service and applied it to eastern Iowa. Not many others were doing it there. “Some people are builders; some are in property management and some are real estate firms that don’t have a general contractor arm. We are trying to cover all bases,” says Greg.
The company is expanding, and that causes a few logistical issues. Skilled labor positions such as welding are in high demand, but there are not enough people coming out of vocational schools, junior college programs or even high school that want that as a profession.
Working with community colleges such as Des Moines Area Community College (DMACC), Kirkwood Community College in Cedar Rapids, and Black Hawk College in Davenport has become a needed element looking towards the future. These offer two-year degrees and associate degrees, to train the workforce.
“We really try to work with junior colleges, but we also do it through the state-funded program. The state is trying to get as many people working as possible. There are a lot of people already working, and it’s difficult to find those that have the skill sets that we need. So, to bring them in and train right out of high school is the way to go,” stresses Greg.
Hunter is building a new campus for Westside Transport, a trucking company. Westside is moving some of its employees to Iowa from Michigan. The new jobs are being run through a new training program with Kirkwood College. It is hugely beneficial, and a lot of that is being picked up by the state.
Unemployment in Iowa is very low, and so the state has come up with incentives on some projects. “The state will sometimes pay for the training of these employees to go along with some tax incentives. Just a lot of flow through to the client, or if we are the one that owns it, then that is something that we would take and apply to our project cost,” explains Greg.
Hunter Companies only works with local suppliers and contractors. This is essential to getting projects done efficiently. It makes for a smooth process during planning and zoning as well as getting permits through the municipal process. It can also improve the chances to acquire incentives.
“We found that it is much more difficult if you are working with a company or people that are not from the local area. If we are working in another state, it would be difficult for us to get traction or support from governments, if we are not using local talent. If there is an economic development group within the region, they are very supportive of that as well, so we try to partner with them – a public-private partnership in any way,” explains Greg.
A first for Hunter Companies will be its foray into the world of casinos. The project is not approved yet, but the state gaming commissions design is done. Hunter has gone through the process locally and owns the ground. The architect is in place, and the renderings are complete, to go along with the financing. It is a partnership that includes the Wild Rose Casino as well as local private equity partners.
“It is an ambitious project, which will be a boutique casino. This is not a standard casino, accompanied by a hotel, multiple restaurants or a golf course. It is strictly a casino, and we are doing that because we want to help rebuild in the downtown Cedar Rapids area,” says Greg.
The purpose of this casino is to enhance the downtown core, not take away from other casinos. The city has been strengthening since the flood of eight years ago, and Hunter Companies has a lot of time and money invested in this project, but the answer will not come until summer of 2017. The concern from the gaming commission is as to whether this casino will take business from any of the other casinos in the area. Studies favor the plan, however, as it seems to have the support of the municipality and should bring more people into the area.
Today, Hunter Companies manages a couple of million square feet of property, which is an optimal amount for the company’s current size. There are a couple of large projects in the works and some potential acquisitions that would dramatically increase the company’s reach, however.
That said, the general focus for Greg and Hunter Companies to sustain long-term growth is to have those build-to-suit projects. The financial backing is not needed, as Hunter is building for someone else.
“You need to have the right mix of self-builds and building for others. Otherwise we can get over financed and stretch ourselves. We need to have the build-to-suit opportunities,” says Greg. Last year, Hunter Companies pulled in $25 million, and the expectation for 2016 is around $40 million with $50 million the goal for next year.