Ryan Companies US, Inc.: Core Values Drive Company’s Success

[ By Ron Derven ]

Sears Centre is a flexible, multi-purpose sports and entertainment venue that occupies 35 acres in PraireStone, an office park surrounding the Sears corporate campus in Hoffman Estates, Illinois.

Minneapolis-based Ryan Companies US, Inc. was named Developer of the Year for 2007 by NAIOP, based on some rather daunting criteria. When one of the judges was later asked why she picked the firm over other worthy finalists, she noted that the company far exceeded the judging criteria, but then she said, simply: “Ryan is the epitome of what a NAIOP member company should be; we can all learn a lot from them.”

Indeed, what seems to drive Ryan Companies’ undisputed financial success, expansion and its commitment to NAIOP and community is its company culture and core values, which the owners go to great lengths to foster and protect.

“The company was started on January 3, 1938, by my grandfather in a small mining town called Hibbing in northern Minnesota,” recalled Pat Ryan, president of the privately held firm. “It began as a lumber and coal business and evolved into a design-build enterprise. As my grandfather sold lumber, customers would ask him if he could identify an engineer or an architect to help them build their house or design their home. By happenstance, he got into the design-build business before that became a defined term in the industry.”

Ryan continues to work closely with The Hartford as it expands across the country. This is the company’s regional office and call center in San Antonio, Texas.

By the 1950s, Ryan had entered the commercial building business and in the 1960s had opened its Minneapolis office. In the early 1970s, it evolved into a development company, which resulted in the 800-plus person, full-service real estate enterprise it is today.

“After my grandfather, a second generation ran the company, including three of my uncles,” Ryan said. “One uncle then left the business. In subsequent years, the third generation took over the firm, including my cousin Jim Ryan, co-owner and CEO, Tim Gray, co-owner and CFO, and me.”

Supermarket Development Begins Path to Success
What propelled Ryan Companies on its path to growth and success began in the 1950s with supermarket development. Coincidentally, it was also about that time that the company’s mettle was severely tested. In south Minneapolis, Ryan built a supermarket for National Foods, a prominent Midwestern supermarket chain. There was a problem with the structure: the sub-soil was not engineered properly and after the building was opened, it started to settle. Unfortunately, it settled to the point that it could no longer be occupied.

Desert Ridge Corporate Center, Phoenix, Arizona, is an example of Ryan’s use of ground leases where land is scarce.

“After trying many solutions,” said Ryan, “my uncles bought the land next door to the building, built another supermarket and moved National Foods into that new building. It almost put our company under but that was a defining moment for us -- you have to operate with integrity. My uncles were men of their word and that is how our company operates today.”

Building Lasting Relationships
Ryan Companies’ mission is to build lasting relationships with customers, subcontractors, vendors, brokers and employees as well as with communities in which it does business. This emphasis on relationships helped the firm expand regionally from its Minneapolis base about 16 years ago with the opening of its Cedar Rapids, Iowa, office. Since then, it has opened three large regional offices in Chicago, Phoenix and Tampa and smaller satellite offices in Davenport and Des Moines, Iowa, and San Diego, California.

Part of establishing ongoing relationships with clients is repeat business, and today Ryan Companies maintains that over 70 percent of its business involves repeat customers. After the south Minneapolis supermarket rebuild, Ryan went on to build no fewer than 50 supermarkets for National Foods over the years.

Ryan built Target’s first store in Roseville, Minnesota back in the 1960s. Ryan continues to work with this mega retailer as the recently completed 2.1 million-square-foot Target distribution center in Savannah, Georgia, demonstrates.

Probably the best example of how Ryan works with its customers is Target Corporation. In the 1960s Ryan built Target’s first store in Roseville, Minnesota. While it continues to built Targets and Super Targets around the country, Ryan’s scope of work for Target has grown as the mega retailer has prospered. Ryan is the developer for Target’s corporate campus in Brooklyn Park, Minnesota. Ryan built the first three properties on the mixed-use campus in 2001 and completed the fourth building in 2006. Target’s distribution network continues to grow and Ryan recently completed a distribution center for the retailer in Savannah, Georgia, with a floor area of over two million square feet. Some of Ryan Companies’ other long-term customers are Starwood Hotels & Resorts, Gander Mountain and The Hartford, among others.

“The first deal you do with a company should be the most difficult,” suggested Pat Ryan. “Once you have done that first piece of business, you both should understand one another. To measure our success, we take a survey of every customer we have and every project we do.”

Ryan Companies sees itself in a service business, not a bricks and mortar business, and counts that as one reason for its high percentage of repeat business. Said Ryan: “Once you realize that you are in the service business, then you ask, ‘How can I ensure that the relationship will be strong 10 years from now?’ The minimum would be to make sure that the brick and mortar are sustainable for that period. What the customer will remember, however, is the personal involvement and how they were treated and what the human dynamic was on that project. That will last a lot longer than their reaction to the brick and mortar.”

Ryan’s Midtown Exchange is a 1.1-million-square-foot historic mixed-use redevelopment project in Minneapolis, Minnesota.

Adapting to Market Conditions
A challenge for all companies in the commercial real estate business is to adapt to rapidly changing market conditions and cycles. Ryan accomplishes this in a number of ways. Its core focus is office, industrial and retail. To that it has added hospitality, medical office buildings, multi-family construction (condominium apartments) and both vertical and horizontal mixed-use, in suburban and urban locations.

Ryan Companies is focusing on mixed-use projects to serve a variety of needs, including making use of increasingly limited land, while meeting users’ requirements for convenience and local resources.

One project that Pat Ryan is especially proud of is Midtown Exchange, a $1.1 million historic mixed-use redevelopment in Minneapolis. The structure formerly had been one of 10 massive Sears retail and distribution centers built in the 1920s around the country. The Art Deco structure sat vacant from 1994. Ryan Companies won redevelopment rights in 1994 and implemented a highly complex program for the largest redevelopment project in the city. The site was converted into more than 400,000 square feet of office space, retail, incubator offices and a rich variety of multi-family. A 136-room Sheraton Hotel is connected by walkways.

Ryan Companies also broke ground on a number of other mixed-use projects in 2007. Its biggest mixed-use/redevelopment project by far is TCAAP-Arden Hills, a 585-acre former ammunitions production facility owned and operated by the U.S. Army. Ryan recently secured exclusive development rights from the City of Arden Hills. This is the largest and most complex suburban land development project in the Twin Cities in recent years. When the project is completed, it will include 2,200 residential dwellings, 875,000 square feet of retail and mixed-use space, 575,000 square feet of industrial, 1.2 million square feet of office and 235 acres of park area, wildlife corridors and water features.

Randall Crossings in Elgin, Illinois, is a 70-acre master-planned business park which provides flexible industrial spaces ranging from general industrial and manufacturing to distribution and office space. In addition, the park provides build-to-suit opportunities from 25,000 square feet.

Ryan Companies has also branched out into other businesses. It has become involved in the bio-fuels business, a hot business in the Midwest. Through a company called Vision Fuels, Ryan plans to develop, design and construct three 110-million-gallon-per-year ethanol plants in Iowa. In land-constrained markets such as Phoenix, Arizona, Ryan Companies has developed an expertise in ground leases. It has developed and built 10 ground lease projects over the past 12 years.

Ryan Companies has strategically pursued land positions and opportunities that support the development of medical office buildings and medical facilities. It has also developed an expertise in historic preservation.

One of its most outstanding adaptations to changing market conditions has been the implementation of its Workforce Inclusion Initiative to bring more women and minorities into the construction business. Ryan wants to help establish new companies to have a sufficient workforce in the future. Thus, the primary goal of the initiative is to increase the dollars subcontracted to minority and women-owned businesses. Ryan has also entered into strategic partnerships with a number of construction industry groups to increase the number of women and people of color in the construction industry.

A member of Company A Marines out of Camp Pendelton, California, about to deploy to Iraq, shares a moment with his daughter at the NAIOP March 2007 dinner.

Commitment to NAIOP
A central critera for the Developer of the Year Award is a company’s commitment to NAIOP. In this area, Ryan Companies has had an outstanding record. By one recent count, 39 people from Ryan are members of NAIOP in various chapters around the country.

“NAIOP is the strongest industry organization in the country,” said Pat Ryan. “It is great for bringing people from various areas of the real estate business together. In the Twin Cities, for example, NAIOP has educational meetings almost every month. The people of Ryan Companies--it is by no means a top down mandate--are very involved in NAIOP. They have stepped up because they feel good about NAIOP and want to participate. We have two members on the national board. They did that of their own volition. That has occurred because those individuals, those professionals, wanted to be more involved in their respective chapters and then moved up through the ranks.” Pat Ryan is particularly proud of one NAIOP program that Ryan Companies helped get under way: “When Kent Carlson, president of Ryan’s Southeast Division, was president of the NAIOP Minnesota Chapter, he initiated a program that measured the efficiencies and competitiveness of every community within the major metropolitan area. Within this program, a matrix measures taxes, other city fees, turnaround time for plan submittal review--all of it. It has become a model within NAIOP and cities are using it to learn how to become more development-friendly.” Carlson won a national award from NAIOP the year this program was initiated.

One of the most heartwarming programs involved Ryan Companies and the San Diego Chapter of NAIOP. Ryan vice president of development Matt Reid is chair of that chapter’s community involvement committee. As an initiative of this committee, NAIOP San Diego adopted members of Camp Pendleton’s Marine Special Operations Company A to help support them and their families as the Marines deployed to Iraq.

At a March 2007 dinner event, members of NAIOP met the Company A Marines and their families and gathered information about what might help these families most while they are separated. Based upon what they learned at the dinner, NAIOP members compiled a list of useful items to send to the Marines throughout their deployment, as well as ways they could help the families back home.

Community Support
Ryan Companies’ social consciousness and community support programs are extraordinary. The Ryan Foundation was created to identify and support projects on a large scale and to support employees’ community involvement projects. Ryan contributes dollar for dollar to all charitable and non-profit organizations its employees support. Overall, Ryan Foundation contributes 10 percent of company profits to community projects -- this year, Ryan revenues will break the $1 billion mark. In addition to committing funds, Ryan allows employees to contribute five percent of their work time to volunteer efforts, in addition to providing some structured community support activities.

Ryan Des Moines—A group of Ryan employees participate in an extreme makeover of a local free clinic.

Some of the larger programs that the company is involved with have implications well beyond specific communities, such as: Spring Point Project. The Spring Point Project is a non-profit organization created to develop premier resource animals for clinical trials of piglet islet cell transplantation. The project is seeking to expedite the development of protocols for effective islet transplantation to treat diabetes. Pat Ryan, a member of Spring Point’s board, became involved when he heard about the exciting results that Dr. Bernhard J. Hering, MD’s research had produced. His team has shown that piglet islets can cure diabetes in monkeys—that is only one step from humans. The next step is to design and construct a Phase I/Phase II FDA-regulated research facility to breed and raise “clean” piglets for human clinical transplant trials.

A group of grass-roots “venture philanthropists,” including Pat Ryan, formed Spring Point Project to solve the problems of piglet islet supply. Both Pat and Jim Ryan have made generous donations personally and the Ryan Foundation has donated the entire design and construction fee for the FDA facility.

Phillips Neighborhood. Ryan Companies Midtown Exchange project was constructed in the Phillips neighborhood of Minneapolis. Because this project has had such a powerful impact on the community’s economic and social recovery, Ryan wanted the progress to continue. Jim and Pat Ryan and Tim Gray all agreed to make this neighborhood a focus of the Ryan Foundation. While Midtown Exchange was under development, two projects came to the attention of Ryan Companies. First, a group of Jesuit/Catholic church officials and educators were considering the Twin Cities’ area for a Cristo Rey Jesuit Network school and Urban Ventures was trying to get its Colin Powell Youth Leadership Center off the ground. Cristo Rey provides college preparatory education for urban youth with limited educational opportunities. Graduation rates are an astounding 98 percent; 96 percent go on to college. Urban Ventures Leadership Foundation is a faith-based organization focused on helping community residents and businesses develop their assets and capacity.

Ryan Minneapolis—Office raised $306,687 for the United Way in 2006. An office bike race event was held to raise money.

Ryan got involved in discussions with both groups about their facility needs and developed the idea of combining facilities. Ryan donated the design and construction fees along with a significant donation from the Ryan Foundation. In addition, Ryan Companies’ owners and their wives have been instrumental in leading a building and operations fundraising efforts. When completed this year, the school will house 125 students from grades 9 through 12 and offer programs to 25,000 neighborhood children and parents. Ryan and Urban Ventures are joined by more than 20 businesses committed to hiring Cristo Rey students—part of the curriculum at the coed school. Ryan is working with other business leaders in the Phillips neighborhood. One project it is working on is the Native American Center. The Phillips Neighborhood has the highest concentration of Native Americans than any other city in the U.S.

Supporter of arts and scholarships. Ryan is also a strong supporter of the arts and offers the Ryan Endowed Scholarship annually to graduates of Minneapolis North Community High School who are accepted and enrolled at the University of St. Thomas in St. Paul, Minnesota.

Ryan Companies’ Future
Ryan Companies undertakes an annual strategic planning session during which it looks out three to five years. “Historically, we have grown at about 15 percent per year,” said its president, “although we are not driven by top-line performance. Our market expansion is driven by our existing customer base. I would not be surprised to begin development overseas in the not-too-distant future.”

The Ryan Endowed Scholarship is awarded annually to graduates of Minneapolis North Community High School. Lia Xiong, a scholarship winner, visits Ghana, Africa as a part of a study abroad program.

Ryan will also open three new full-service offices providing construction, development, design, engineering and property management to serve the entire country. Ryan Companies US, Inc. today is a far cry from the business Pat Ryan’s grandfather opened in 1938, but one that he would undoubtedly be quite proud of. By Ron Derven, contributing editor of Development.

“The first deal you do with a company should be the most difficult,” suggested Pat Ryan. “Once you have done that first piece of business, you both should understand one another. To measure our success, we take a survey of every customer we have and every project we do.”

Ryan contributes dollar for dollar to all charitable and non-profit organizations its employees support. In addition to committing funds, Ryan allows employees to contribute five percent of their work time to volunteer efforts, in addition to providing some structured community support activities.

“Historically, we have grown at about 15 percent per year,” said Pat Ryan, “although we are not driven by top-line performance. Our market expansion is driven by our existing customer base. I would not be surprised to begin development overseas in the not-too-distant future.”