Developing Kansas City: Meet the deal magnet VanTrust

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1 From the Kansas City Business Journal : /31/developing-kansas-city-meet-the-deal-magnet.html COVER STORY: PART TWO OF THREE Developing Kansas City: Meet the deal magnet VanTrust SUBSCRIBER CONTENT: Jul 31, 2015, 5:00am CDT Rob Roberts Reporter- Kansas City Business Journal Twitter LinkedIn Google+ One of VanTrust Real Estate LLC s greatest assets is something it doesn t have: in-house brokers. By using outside brokers for all its commercial real estate development and acquisition deals, VanTrust has been able to turn the brokerage communities in the markets it serves into scouts for its next big deal. We want to be a magnet for deal flow, VanTrust President Dave Harrison said, and clearly our most valued relationship is with the brokerage communities because the vast majority of projects are driven by the brokers. See Also Developing Kansas City: Wheeling, dealing is in VanTrust s blood Developing Kansas City: Harrison lends depth to relative newcomer Developing Kansas City: VanTrust s properties and recent projects The strategy is working, in spades. Harrison said VanTrust leaders might now be looking at 20 deals a week. 1 of 5 7/31/15, 1:54 PM

2 There s a lot of triage going on all the time, said Rich Muller, executive vice president for the firm. We want to see everything and sift through it to find the ones we can add the most value to. Tackling tough jobs VanTrust Real Estate burst onto the scene just five years ago, running on equity from the Van Tuyl family, which had built a multibillion-dollar auto sales empire. Almost immediately, it became one of Kansas City s leading development firms. Now, Harrison said, the firm s goal is to maintain $500 million to $800 million in its development pipeline, and we ll continue to do acquisitions in addition to that. But starting out in 2010, the goal was to complete $50 million to $100 million in development deals and acquisitions annually and VanTrust took a challenging path to get there. Before that first year was out, an investor group led by Cecil Van Tuyl acquired West Edge, perhaps the most snake-bitten real estate project in Kansas City history. Originally slated to house the headquarters of advertising agency Bernstein-Rein, a boutique hotel and other uses, West Edge had fallen into bankruptcy. The project s largely completed, but largely unmarketable, office tower loomed over the nearby Country Club Plaza. VanTrust dismantled the office tower and redeveloped the site as Plaza Vista, a $135 million project that includes Polsinelli PC s new 10-story headquarters, Hotel Sorella and a 940-space parking garage. Plaza Vista was completed in October 2013, four months after VanTrust completed another challenging project. VanTrust had less than a year to complete a $45 million, 200,000- square-foot headquarters for Freightquote pressed by the May 2013 expiration of Freightquote s lease on its previous headquarters in Lenexa. Other developers said it was not possible, said Tim Schaffer, the RED Brokerage LLC principal who served as Freightquote s tenant representative. But VanTrust said it was, and they delivered on their promises. Doing the next project VanTrust is no stranger to building corporate headquarters. It completed AMC Entertainment Inc. s headquarters in Leawood s Park Place development and is co-developing a $140 million headquarters expansion in south Kansas City for Burns & McDonnell. Office projects account for about 40 percent of VanTrust s development work, Harrison said. 2 of 5 7/31/15, 1:54 PM

3 Meanwhile, VanTrust has been able to parlay its entry into the multifamily market, via the recently completed Village at Mission Farms and Highlands Lodge projects, into another 40 percent chunk of its development business. Industrial projects account for most of the remaining 20 percent. Do we want to have the appropriate market share? You bet we do, Harrison said. But when asked how much of the pie is appropriate for each sector, Harrison added, We didn t buy that app. We just continue to try to build our portfolio and résumé by doing the next project and the next project and the next, he said. We re not out there trying to build a monopoly; we just want to pursue the opportunities we think are best for our capital and community. One local real estate source predicted that going forward, VanTrust might ease into less-challenging developments and acquisitions of only established core assets. That caused Muller to bristle. Is that another way of saying we will become less entrepreneurial about what we re doing? he said. That s what it sounds like, and that s not the case. Harrison agreed, saying that being very nimble and entrepreneurial is a characteristic we value immensely, and we re not going to change that. Listen to the dirt VanTrust s local acquisition strategy is evidence of its entrepreneurial streak and the fact that it remains rooted in Kansas City despite increased activity in other markets. Its purchase of the 136-acre Meadowbrook Golf & Country Club in Prairie Village in 2010 was the first example of that strategy, which involves buying high-quality infill real estate and figuring out the best possible reuses later. VanTrust s complex plan for Meadowbrook took until this year to crystallize. It calls for 48 acres of private mixed-use development (single-family, multifamily, senior housing and a hotel), with the tax revenue diverted to finance the city s purchase of the remaining 88 acres for use as a park. Often, as Muller and Harrison put it, they listen to the dirt to determine what type of development suits an acquired site. That was the plan in July 2013, when VanTrust bought the former home of Congregation Beth Shalom at 95th Street and Wornall Road. But in that case, the answer came not from the dirt but from Burns & McDonnell, which was headquartered adjacent to the shuttered 3 of 5 7/31/15, 1:54 PM

4 synagogue site and wanted to expand. Other value-add properties VanTrust has purchased without clear uses in mind include a former Sprint Corp. facility at 6666 W. 110th St. in Overland Park, the former CenturyLink headquarters buildings at Interstate 435 and Nall Avenue in Overland Park, the Great Mall of the Great Plains in Olathe; and the Traders on Grand office tower in Downtown. Last year, VanTrust also bought a portfolio of four former DST Systems Inc. properties just south of the Country Club Plaza. They include the 12-story UMB building at 4900 Main St., where VanTrust is headquartered; a largely vacant four-story office building at 4901 Main St.; and a retail strip and development site near the $40 million 51 Main mixed-use project that VanTrust recently completed. The perfect mix Meanwhile, VanTrust is helping Union Station Kansas City Inc. determine how to redevelop a large surface parking area north of Washington Square Park and working on plans for East Village with Swope Community Builders. VanTrust agreed nearly two years ago to co-develop East Village, a mixed-use development conceived of a decade ago for eight blighted blocks on Downtown s east side. We re now on (redevelopment) version No. 44, or whatever it is, Harrison said. But we re advancing the ball toward figuring out exactly what that thing looks like. East Village would be one of those developments that Harrison terms long-gestation projects. We don t want just a bunch of really giant projects with long gestation periods, he said. We want to have a good balance between larger projects and smaller projects with shorter gestation because the shorter the gestation, the less at risk you are to market conditions changing. Managing risk is one ingredient to staying on top of the development market, Harrison said. But there are other considerations. For anyone to have a sustained presence as a development player in this or any market, you ve got to have capital, and you ve got to have the right human capital, he said. You can have all the capital in the world, but if you don t have the right people, discipline, management and fundamentals, you won t keep that capital for long. Muller said Harrison has spent his first five years at VanTrust assembling and training the right people and building a platform capable of delivering quality projects across multiple markets simultaneously. 4 of 5 7/31/15, 1:54 PM

5 That platform is now sturdy, stable and reliable, and we ve got our rhythm, Muller said. In other words, the message to development world is: Look out for VanTrust. VanTrust Real Estate LLC Leadership: Larry Van Tuyl, sole owner; Dave Harrison, president Founded: 2010 Development volume: VanTrust plans to maintain $500 million to $800 million in development projects in its pipeline. Equity sources: Most VanTrust projects are self-funded by billionaire owner Larry Van Tuyl, who recently sold the nation s largest privately held auto dealership group, Van Tuyl Group, to Berkshire Hathaway. VanTrust occasionally teams with joint venture partners, as it is with Burns & McDonnell on the engineering firm s $140 million headquarters expansion. Employees: 40, with a little more than half of them in Kansas City Office locations: Kansas City; Columbus, Ohio; Phoenix; Houston; and Dallas. VanTrust is looking for an additional office location in north-central Florida. Sectors: Office, industrial, multifamily, retail, institutional, government, hospitality and recreation. Hood-ornament projects: Plaza Vista, the $135 million development that includes Polsinelli PC s headquarters and Hotel Sorella; the Village at Mission Farms and Highlands Lodge, two projects that launched VanTrust into multifamily development; the 51 Main luxury apartment and retail project; the $20 million AMC Theater Support Center and other commercial and multifamily at Leawood s Park Place; and the $45 million Freightquote headquarters, which was ready for occupancy just 13 months after its site was selected. Local developments sold: VanTrust sold the office tower component of Plaza Vista last year for $104 million. In June, Park Place Partners announced the $126.5 million sale of the retail and office portion of Park Place in Leawood; VanTrust was an equity partner in that development. Rob reports on real estate and development. 5 of 5 7/31/15, 1:54 PM