Bisnow Special Report: How Ryan Cos CEO Patrick Ryan Has Helped Transform The Family Business Into A National Powerhouse
Ryan Cos has evolved from a small retail design-builder to a development and construction firm with an uncommonly broad array of talents. It has put up everything from industrial buildings and federal courthouses to office towers and apartments. It builds ballparks and mid-rise parking facilities. With 11 offices and $1.5B in annual revenue, this family-owned company has become a national powerhouse.
The architect of this dizzying array of activity is Patrick G. Ryan, the third-generation family president and CEO of Ryan Cos. (Here, he's far left with an uncle, Tim, and cousin/former Ryan CEO Jim Ryan.) While other development firms of this magnitude—revenues came in at $1.5B last year—have taken on Wall Street ownership or sold out to professional management teams, Ryan is that increasingly rare example of a private company competing and thriving in competition against deeper-pocketed rivals. “My job is to grow the business and hand it off in healthy condition to the next generation,” says Ryan, 63, noting three younger, fourth-generation Ryans are working at the firm in various capacities. “All the while, I recognize that real estate is a full-contact sport, requiring the very best talent. That may mean that the next CEO here will not be a Ryan. We can accept that.”
What he can’t accept, for now, is the idea of selling off the firm, most of which he controls himself. “If we had an IPO and sold shares to the public, I wouldn’t have a job anymore,” Ryan says with a twinkle in his eye.
It’s a tough job, it should be said, full of ups and downs, though the business trajectory has been unrelentingly upward in recent years. Since the firm hit bottom in 2009, according to Ryan, revenues have been rising at the rate of 20% a year. There may not be another 20% gain in 2016, he concedes, but still there is an assumption inside the firm that no other developer around the country has been growing so fast in the same span of time.
The offices of Ryan Cos US Inc in downtown Minneapolis are directly across the street from the sprawling headquarters of Target Corp (visible here on the left). The proximity is no accident: It was Target that helped launch Ryan’s design/build—and later development—business through the 1960s and '70s onto a national platform. Ryan has erected some 700 projects for Target, ranging from offices and data centers to stores and warehouses, over the past 50 years. As with virtually all department stores of late, Target’s growth has slowed to a crawl. But that hasn’t bothered Ryan, whose clients range from Whole Foods and Cargill to Deere and Ford Motor Co.
Just when the recession of 2008 cut its revenues in half, Ryan zigzagged to new categories such as healthcare and senior living. That has spurred geographic expansion: Ryan now has branch offices in 11 cities around most of the US, save for the Northeast, where the company has historically had virtually no development presence. It employs 48 architects and 1,300 people in all.
Is there a secret to this success? Maybe it starts with Ryan’s base in Minneapolis, home to 19 Fortune 500 companies, many of them expanding rapidly and requiring new real estate along the way. Ryan takes a disciplined approach to its bidding on new projects. First, it wants to be in major growth markets like Chicago, Atlanta and Phoenix. “We will fish where the fish are swimming,” states the 2010 internal strategic plan. Second, the firm stays focused on making a profit. “Our growth is not top-line focused but rather bottom-line focused,” Ryan says.
The current portfolio of projects is impressive. In a multi-use development known as Downtown East in Minneapolis (rendered here), surrounding Target Field, where the Minneapolis Twins play baseball, Ryan has put up twin 17-story office towers for a regional headquarters of Wells Fargo Bank, spanning 1.1M SF in all, set next to a 4.5-acre public park, a parking structure, a 230-unit apartment tower, a new 170-room Radisson Red prototype hotel (opening this fall) and another 170k SF office building to serve as the future Ryan headquarters, valued at $90M. In all, Ryan is investing $750M in Downtown East construction.
The stakes are just as big elsewhere. In partnership with Sunbelt Holdings, Ryan is building the largest office development, called Marina Heights, in Arizona history. Spread over more than 2M SF and 20 acres in Tempe, with an opening set for summer 2017, it will serve as a regional hub for State Farm Insurance. Total construction cost is pegged at $600M.
But perhaps the secret is Pat Ryan himself. He has never taken on the role of dilettante so common in other dynastic private enterprises. At an age when many executives are slowing down and considering retirement, Ryan spends half of each month traveling on the road, meeting with employees and clients around a wearisome schedule. “I’m OK as long as I have my iPhone and iPad,” he says. “Our national president is Jeff Smith, and he travels a lot too. But at some point most clients like to have the guy with his name on the door to be there himself to talk business.”
At Ryan, moreover, no family member has taken that business for granted. Ryan’s son Michael is an architect and runs the design department. Niece Molly Carson is VP of the Phoenix office and nephew Tim Ryan is a construction manager in Seattle, where the company is building a new 500k SF headquarters for Group Health Cooperative along with two more office buildings of 150k SF each with Prudential Insurance as a partner. The three members of the fourth generation range in age from their mid-30s to mid-40s.
Each Ryan, just as Pat himself did, must work someplace else for at least three to five years before coming to the firm for a job. “We make it clear that the business is not here to support the family. The family is here to support the business,” Pat says.
Ryan was founded in 1938, not in Minneapolis but farther north in the iron ore mining town of Hibbing, when James Henry Ryan—Pat’s grandfather (pictured)—bought a lumber business and called it Ryan Lumber and Coal. He was joined by his son, Francis, Pat’s uncle, who left a promising career at Firestone Tire and Rubber Co. In those days it was common for lumber merchants to carry on sidelines as contractors to ensure demand for their product. And so James and Fran, knowing nothing about construction, built their first house in Hibbing for the princely sum of $4,500. Eventually James’ other three sons, one of them Pat’s father John, also joined the enterprise.
Hibbing, today a town of 16,000, is most famous as the place where Robert Zimmerman, who later changed his name to Bob Dylan, grew up (the second most famous alum is probably Kevin McHale, the Boston Celtics star basketball player in the 1980s). Dylan was born three years after Ryan’s founding, and his family lived just a block from where Pat Ryan grew up, though the latter, a dozen years Dylan’s junior, was too young to know him. Pat got a degree in finance in 1974 from the University of St. Thomas and later on a law degree from William Mitchell College of Law. (Chief Justice Warren Burger went there.) Pat didn’t travel far—both schools are in St. Paul.
With no intention of joining his family’s company (here), Pat Ryan went to work at Coldwell Banker, as CBRE was then known, selling commercial real estate in Minneapolis. But as older family members retired and died, he was induced to come aboard in 1983 as a VP. Two years later he took the title of president, working together with his cousin James, the CEO, closely for the next 24 years until Jim’s death in May 2009.
Together the cousins accomplished far-reaching changes at Ryan, a small concern with all of $25M in revenues in 1983 and a reputation mostly as a designer and builder of industrial buildings and subsidized multifamily housing around Hibbing and the rest of Minnesota. First, they moved the official headquarters to Minneapolis to be closer to Target and other big clients. Second, they moved the firm beyond building to also developing its own real estate.
The timing was good. Speculative industrial buildings with multiple tenants were coming into vogue, replacing the build-to-suit structures that had been common. Ryan proceeded cautiously into spec in high-demand markets like Chicago. Many early spec developers ended up flaming out in the recession of 1991 and later. “We have always been a conservative player in an aggressive industry, which is why I’m still around today,” Pat says.
The ratio nevertheless tipped further than the family wanted, as development by 1990 came to represent 80% of revenues, with the other 20% mostly involving third-party construction. Pat and Jim made some hard choices. “We decided that at last half our business should be third-party construction,” Pat recalls. “There is less margin in that kind of work but it’s more sustainable.” That caution proved important when the recession of 2008 hit.
More hard choices came around 2009 and shortly after. After the death of Jim that year, an uncle, Russ Ryan, died at age 89. A few years later Francis, the uncle and family patriarch, died at the age of 98. Through a series of buy-sell agreements Pat was able to buy out the Ryan stock held by most of his relatives.
The new CEO decided to keep the firm on a conservative path. One focus would be build-to-suits for clients like Wells Fargo and Toro Corp. Ryan is building a 600k SF office campus, for instance, for the software giant Oracle Corp in Austin, TX.
Second, the firm has resigned itself to a future with fewer retail storefronts. To replace some of the shop building, Ryan has aligned itself more strategically with retailers. It is building a 600k SF distribution center for Whole Foods in suburban Chicago, for example. It has been involved in remodeling older stores for Publix in Florida. And it’s found occasional opportunities in still-strong niches such as outlet stores: It’s building the 300k SF Outlets of Des Moines in Iowa (rendered). It’s also found opportunities to link up with Amazon, constructing a 1.1M SF fulfillment center for the online retailer in Ruskin, FL.
Buoyed by the newly expanded Panama Canal, Pat Ryan is looking forward to big cargo ships bypassing the West Coast and docking in emerging ports such as Tampa and Savannah, GA. He’s opened a Tampa office and intends to grab a fair share of the warehouse-building work that ought to follow in the Southeast. Build-to-suit proceeds elsewhere: The firm is building a 144k SF warehouse for client Cadence Premier Logistics in the Chicago suburb of Naperville. It’s also building a new processing plant for the Little Potato Co near Madison, WI. When finished next year, it will comprise 130k SF and provide jobs for more than 125 workers. Spec construction remains on the agenda, with Ryan finishing up work in January on a 246k SF industrial building at its Randall Crossings Business Park in Elgin, IL, for client Molto Properties, which will be tasked with finding tenants.
It’s only in the last half-dozen years that Ryan has pushed into healthcare and senior living. The firm has recently acquired a couple of sites in suburban Chicago with plans for medical facilities. Meantime, it’s gone on a senior living construction tear, commencing work on facilities with 150 residences and more in Cedar Rapids and Iowa City and in Hernando, FL, with partner Grand Living, based in the Minneapolis suburb of Excelsior. It’s also the developer of three of its own-brand Clarendale senior living communities with partner Harrison Street Real Estate Capital of Chicago, the latest announced to go up with 184 residences in Hendersonville, TN. The construction value on that one is pegged at $40M.
A year ago, Ryan opened the 7,200-seat CHS Stadium in St. Paul for the St. Paul Saints Double A minor league baseball team. It was a challenging ordeal for the firm, requiring the remediation of chlorine solvents, coal tar and lead from the site’s previous use as a manufacturing center. Solar power, no sure thing in the northern latitudes of Minnesota, provides a significant percentage of the stadium’s electricity. An expensive stormwater collection system was installed featuring sand filtration to prevent the run-off of water from the stadium into the adjacent Mississippi River. The ballpark actually meets Minnesota energy standards drafted for the year 2030. The design has won awards from several different architectural organizations.
Outside of Minneapolis, Ryan is an infrequent investor in urban cores. It recently erected an 11-story office tower for CRST International in Cedar Rapids, IA, for instance. At 112k SF and $37M, that’s a nice size project for the firm. There are exceptions, however. Ryan is a partner with Lincoln Property on a 31-story, 373-unit apartment tower in Chicago’s wealthy Gold Coast neighborhood, valued at more than $100M and slated to open next year. (Here's its topping off ceremony last week.)
There is some risk in all this. Dozens of new apartment projects have been going up in Chicago, leading to rising fears that the sector could be overbuilt by 2017. In Kansas City, Ryan is partnered on a project to remake the downtown Commerce Tower, a landmark 31-story building that will ultimately get 355 apartment units in a city not known for vibrant downtown residential demand. Meanwhile, Ryan is now ranked as the No. 2 commercial builder in the Phoenix area, a market known for seesawing demand.
Some of the risk has popped into view belatedly. Not long ago Ryan acquired 11 acres in Oak Brook, a wealthy suburb of Chicago, with plans to develop a $70M office and medical campus. Not long after, McDonald’s Corp announced plans to vacate its nearby headquarters and move to Chicago’s downtown. Now Ryan will be challenged to market its own project against the McDonald’s space that will be looking for tenants. So far the firm says it hopes to push ahead anyway.
Pat Ryan is likely to be around for the fruition of that project. He has no plans to retire anytime soon, he says. Away from the office, his life is a swirl of charity work. He’s been a board member of the Children’s Hospitals and Clinics of Minnesota and a past president of the Children’s Cancer Research Fund as well as co-chair of the Spring Point Project, which is focused on finding a cure for diabetes. He’s also worked with Catholic Charities. He may be proudest of his work as the founder of the Cristo Rey Jesuit High School in Minneapolis, an inner-city college-preparatory school for underprivileged children that has crafted an enviable record in sending 18-year-olds on to college.
The nerve center of the firm is a five-man executive committee, with Pat as the only Ryan represented, making all decisions on capital allocations. As a private company, it’s no surprise that the decisions come quickly. After some four decades in the real estate industry, Pat has good instincts on where he should lead the company next. And he wants the next generation, which he calls 4-Gers, to be involved. “At some point I’d like to see one of our 4-Gers become the head of this company,” he says. “The goal is to preserve Ryan as a family business.”