NorthPoint Development coming on strong in KC industrial and apartment market

There’s a toy airplane tacked to a world atlas on the wall of NorthPoint Development’s office following a path from Kansas City to Bora Bora, the fabled South Pacific island resort.

It’s Nathaniel Hagedorn’s way of tracking his 5-year-old company’s financial progress. As its net worth grows, the plane creeps closer to its destination. The 32-year-old executive’s plan is to take his entire staff to Bora Bora when that goal is met.

The plane is about one-third of the way there — although Hagedorn won’t disclose his company’s financial details.

“I think we can make most of our staff millionaires, which would be awesome,” he said.

That might not be hyperbole.

After getting his start helping Charles Garney develop Briarcliff in the Northland, Hagedorn and NorthPoint have grown rapidly since 2008, partnering with BNSF at its huge intermodal project near Edgerton, building industrial space in Riverside and the Fairfax area, and the first to construct housing at the Village West development near the Kansas Speedway.

The firm already has broken ground on a 500,000-square-foot distribution center at Logistics Park Kansas City, the BNSF intermodal project; recently landed a Chinese automotive parts factory for the Riverside Horizons Business Park; and recently landed its first tenant for the Fairfax property, the site of the old GM plant before it was demolished.

Inergy Automotive Systems, a French firm that manufactures fuel systems for General Motors and Chrysler, plans to build a $30 million facility there that will employ up to 90 people.

Blending a mix of humble background and a straightforward business approach that appeals to some deep-pocketed local investors, Hagedorn and his mostly 30-something management team have quickly become major players in the world of industrial and apartment development in Kansas City.

A scrappy crew

“One characteristic of the company is we’re pretty scrappy, young, energetic guys,” Hagedorn said. “We all are from lower income backgrounds with no sense of entitlement. We hustle deals and don’t take anything for granted.”

Doug Bach, the Unified Government deputy administrator for economic development, said NorthPoint had exceeded expectations on both its projects in Wyandotte County, the apartment development at Village West and the industrial work on the 80-acre Fairfax site.

“We’ve had a great experience with them,” Bach said. “They’ve already doing a couple of nice projects, one them industrial that we have high expectations for, and we truly believe they’re the company that will make it happen.”

On this particular day, hot dogs and beer, rather than dreams of Polynesia, were more on the minds of the 35 employees at NorthPoint’s offices in the Village at Burlington Creek shopping center near Missouri 45 and Interstate 29. The staff was preparing to take the afternoon off for a Royals game.

Outside the office window, construction is nearing completion on a 298-unit luxury apartment development that is part of NorthPoint’s vision of making Burlington Creek, formerly Tuileries Plaza, into a round-the-clock mixed use development. A similar 306-unit luxury apartment is underway in Village West across 110th Street from CommunityAmerica Ballpark.

Hagedorn came to Kansas City from St. Louis to attend the University of Missouri-Kansas City. He originally aspired to be a physician but wound up in business school. After graduating in 2001, he started working with Garney, who started developing his pioneering 600-acre Briarcliff housing, office and retail project in the Northland in 1989.

Briarcliff beginnings

“Nathaniels’s participation in developing Briarcliff made it much more than it would have ever been without him,” Garney said. “His enthusiasm and sales ability were crucial in our success.”

Hagedorn praised Garney as a non-traditional developer who relied more on his vision for a property than traditional real estate business practices. In 2008, a new venture was formed called Briarcliff Realty with Hagedorn owning 80 percent and Garney the remaining 20 percent.

With the country entering a full-blown recession that hit real estate particularly hard, it seemed to be poor timing, but Hagedorn saw opportunities. Having Garney’s financial resources helped too.

“It sounds counter-intuitive with the broader market not good, but the opportunities to buy real estate at a discount were tremendous,” Hagedorn said.

In 2010, Briarcliff Realty began work on a 263-unit apartment project called Briarcliff City Apartments. It was Hagedorn’s first residential development.

“It was scary starting a project in the depths of the recession, but we took that leap, got favorable construction pricing, and it was hugely successful,” he said.

With the profits from the sale, Hagedorn bought out Garney’s 20 percent share and struck out on his own. He began raising capital from local business people and families that were impressed with his knowledge and attitude of treating investors as equals in any deal.

“Our philosophy is that real estate is straightforward, don’t over-complicate it,” he said. “Our interest is aligned with investors. We only make money when investors make money. We don’t take out big fees.”

Among his financial backers are TradeBot Properties, an entity controlled by the Cummings family, owner of TradeBot Systems and founder of the Bats Stock Exchange; Brandmeyer Enteprises, controlled by the Brandmeyer family; Jim Ferrell of Ferrellgas; and Northwestern Mutual.

“Nathaniel is a wonderful person, and it starts with the way he approaches projects, very analytical and disciplined,” said Kerry Bush, real estate director for Brandmeyer. “He’s an innovator. He sees a better way to build and what people want.

“We’re appreciative of our relationship with him. We’re investors, but he makes us a partner.”

Eric Buer of TradeBot Properties said, “They’re young and hungry, and we like that.”

“They’re not a one-sided shop in how they approach investors and tenants. They want everybody happy and that sets them apart.”

Varied experience

Hagedorn has assembled a team that includes Chad Meyer, president and COO, and Brent Miles, vice president of economic development. Miles brings development and political experience to the firm. He was formerly the director of Wyandotte Development Inc., the county marketing agency, and before that led planning and economic development for Riverside.

Meyer, 39, was developing industrial real estate in Kansas City for ARCO Construction of St. Louis. He joined NorthPoint last year after meeting Hagedorn while ARCO was building the first industrial building in Horizon industrial park in Riverside.

Riverside had been seeking a developer to fulfill its vision for the 260-acre Horizon site for more than 10 years. The property along the Missouri River is at Interstate 635 and Missouri 9, close to the Argosy Casino. The vision was for millions of square feet of industrial and office space, but nobody had been able to pull it off.

In 2011, Riverside put out another request for proposals.

Hagedorn, who by this time had renamed the company NorthPoint, came back with a different plan. Rather than ask the city to build the streets and other infrastructure needed to develop the site, the company would invest its own cash for improvements in return for options on the development sites.

“It allowed the city to leverage private capital,” Hagedorn said.

Since then, more than 1.3 million square feet of industrial projects have gone up in the Horizons Business Park. The latest was announced in April, when Yanfeng USA, a Chinese firm that manufactures interior trim components for GM plants, announced it was putting a $45 million project there that will employ 263 people.

“They’ve done a phenomenal job,” said Mike Duffy, Riverside director of community development. “They are very aggressive and attuned to the market, and we have a strong partnership.”

After striking its development agreement with Riverside, another opportunity came up for NorthPoint when the Tuileries Plaza shopping center became available. The project had been completed in 2005, but its owner got into financial trouble having spent almost $40 million developing it.

Hagedorn paid $13 million to acquire it.

“It had good bones, but it was in a bad financial basis, and we bought it in the bowels of the recession,” he said.

Village ventures

The development was renamed Village at Burlington Creek, and with the savings on the purchase, NorthPoint was able to offer more competitive rents. The project also was re-oriented to appeal to a neighborhood market rather than its previous effort to be a regional destination.

After starting construction of the apartment project at Burlington Creek, NorthPoint had a brief foray into its only office development to this point, helping Mosaic Life Care, a subsidiary of St. Joseph-based Heartland Health, develop eight medical clinics, most of them in the Northland.

It’s next big venture was the Village West apartment project.

Village West, the area near the Kansas Speedway, had been a huge retail success, and new projects including the Sporting Kansas City soccer stadium, CommunityAmerica Ballpark and Cerner Corp. office development, where 4,000 employees eventually will work, had rapidly made it a blend of uses.

What was missing was residential.

“It felt like an area that was so underserved,” Hagedorn said. “Nobody knows how deep the residential market is, but we felt the first couple of projects would do well.”

Work on the $30 million luxury apartment development began earlier this year and the first building is expected to be completed this December.

The company returned to industrial development in April when it reached an agreement with the Unified Government and the federal agency in charge of disposing surplus property, known as RACER, for the 80-acre site where the old Fairfax GM plant was once located. It was demolished in 1987 after a new facility was built nearby.

The property was well served by utilities and had railroad access, and the county envisioned it as continuing as an industrial site. Bolstered by its credentials developing the Horizons industrial tract, NorthPoint was chosen to be the firm to pursue what is being called the Central Industrial Park.

The county hopes that over the next 10 years it will be the site of 1 million square feet of industrial projects employing up to 2,000 people.

“We had a vision of manufacturing and industrial projects, and we’ve got our first letter of itnetn to build a new manufacturing builder for a GM supplier,” Hagedorn said, referring to Inergy Automotive Systems.

Thinking big

The biggest industrial project, however, was yet to come.

BNSF railroad had been working to develop a 1,000-acre intermodal project near Edgerton that was expected to dramatically boost its ability to haul freight from the West Coast and reload it on trucks for distribution throughout the country. The Logistics Park Kansas City’s first phase called for 8 million square feet of distribution space.

The Allen Group of San Diego had been selected in 2006 to build the warehouses and distribution centers, but had encountered financial problems with its real estate holdings in the Dallas area.

“The were not in a position to expand or do speculative projects, and we had the staff and the financial ability,” Hagedorn said. “They wanted an aggressive partner to build buildings and take care of their needs.”

In April, a new deal was announced that made NorthPoint the lead developer and relegated the Allen Group to be a passive investor. NorthPoint promptly announced the start of construction on a half-million square-foot building that’s expected to open when the BNSF intermodal facility is completed this fall.

“Nathaniel has assembled a team at NorthPoint that brings all the needed capabilities for a development the scope” of Logistics Park Kansas City, said Darrell Coffey, BNSF director for strategic programs and economic development.

“NorthPoint goes beyond real estate and development, and incorporates logistics and public-private partnerships that are so important for the success of 21st century logistics park developments. We are very impressed with their abilities.”

Moving forward, Hagedorn said his firm’s goal is to continue to pursue apartment projects locally and perhaps expand regionally to Omaha and Des Moines. As for industrial development, NorthPoint would like to build on its relationship with major companies such as GM and BNSF and go nationwide.

It’s still a long way to Bora Bora, but Hagedorn is confident the plane has plenty of fuel.

“The thing I’m most proud of is the teams we’ve built,” he said. “We’re as strong on the industrial side as any in Kansas City.”

read the full article >>