By Tim J. Randall
The best method to achieve success in business is to find a partner who has a different skill set that is complementary, according to Issamar Ginzberg, a Brooklyn-based strategy adviser. In the catalogue of commercial success, many such examples exist: Bill Gates and Paul Allen, Steve Jobs and Steve Wozniak, and Bill Hewlett and Dave Packard. In the sphere of multifamily development, this partnership principle is best limned by the union of dynamic enterprises Kitchell Corporation and Mark-Taylor Residential, Inc.
From its inception in 1950, the Kitchell Corporation has built a portfolio of core businesses: Kitchell Contractors, Kitchell Capital Expenditure Managers, and Kitchell Development Company; as well as ancillary operations: FDI Planning Consultants, Hardison/Downey Construction, and American Refrigeration Supplies. For decades, these operations provided service across a myriad of commercial real estate construction, development and management platforms with a notable exception of multifamily. The firm considered entering the arena for years, but it wasn’t until the economic landscape following the real estate downturn that it elected to adapt its business model to include multifamily development.
In 2010, Kitchell Development Company President Jeff Allen and Director of Development Ryan Cochran began allocating time and resources to entering the market. The Kitchell development arm began its exploration amidst properties that were part of its investment holdings.
“There were properties we had that were slated for retail development, yet in 2010 nothing could get done in that space,” Cochran says.
With the economic realities presented on retail properties, the team looked to rezone these parcels to multifamily, due to the much stronger economic opportunity such a change would offer.
A company with the resources and assets of Kitchell would undoubtedly find the inclusion of multifamily in its portfolio a straightforward proposition, yet Cochran indicates the task was more involved than expected. In an effort to better leverage its resources and gain multifamily development expertise, Kitchell decided to evaluate potential multifamily development partners.
After speaking with multiple apartment entities, Cochran says Kitchell was “extremely impressed” with Mark-Taylor, which has more than 16,000 units to its credit.
“Mark-Taylor is an ideal partner for us,” Cochran says. “Their industry knowledge, their track record and their business philosophy is a great complement to what we bring to the table with our financial strength and development history.”
To extend the metaphor, Warren Buffett had found his Charlie Munger.
The collaboration began with a Kitchell parcel at Baseline and Rural roads in Tempe. In the summer of 2011, the joint venture broke ground on the San Marquis apartments, a 224-unit build, which opened in May 2012. Concurrently, the partners announced a second project; the 383-unit Parcland Crossing, located at south Loop 202 and Alma School Road in Chandler. The two ventures had an estimated cost of more than $75 million, and for San Marquis the build was the first multifamily project in Maricopa County in more than two and a half years.
In the collaborative spirit of complementary skills, this duo utilizes its core competencies to drive an economic division of labor. While Kitchell and Mark-Taylor are involved in the acquisition and entitlement process, “once the shovel is in the ground” Mark-Taylor’s takes oversight.
Mark-Taylor is the general contractor and has a subsidiary company that handles the architecture. Upon opening for leasing, Mark-Taylor’s property management company, Mark-Taylor Residential, takes over the on-site responsibility. As projects are completed and stabilize, the firms work in tandem to contemplate their final direction: sale and divestiture or long-term hold and operate. These decisions are made on a case-by-case basis.
“The two companies are philosophically very similar in their approach to the business.” Cochran says.
The partnership has three new projects slated for 2013, including the Tempe-based San Sonoma – a 590-unit development located on 30 acres near Warner Road and Priest Drive.
Furthermore, Cochran says there are burgeoning opportunities ahead in multifamily as well as mixed-use developments. San Dorado will be a new retail and luxury apartment master-development near Tucson, at 10706 N. Oracle Road in Oro Valley. The property will have a 274 unit multifamily community and an exclusive shopping complex. Mark-Taylor will lead the team’s efforts on the multifamily development; Kitchell will develop the shopping complex.
As with all great partnerships, each plays to their strengths to produce a winning formula; count Kitchell-Mark-Taylor on the list of exceptional business alliances.