Rick Baier is the “B” in CBC Real Estate Company and is one of the partners at US Federal Properties. Under these two companies, Baier has become one of the top medical and federal property developers in the country, developing 150 million square feet each year. Recently at a Kansas City chapter meeting of CCIM, Baier shared details on the companies’ latest activity and shared his insight on a host of local issues.
On teaming up with Dan Carr
Earlier in his career, Baier had a six-year stint at CB which ultimately led to him becoming managing director of the firm for a period of time. He describes his first day there.
“I sat down at my cube and there was a guy named Dan Carr who sat beside me,” Baier said. “I left the office, came back and dropped a case of beer between us, and we started talking. Within two weeks, we forged a development partnership to develop real estate together.”
Baier soon became managing director of the firm’s local operations, with the agreement that he’d be able to develop property for his own portfolio on the side. Soon, that situation became sticky as Baier started competing with CBRE’s national clients.
“We tried a few mouse traps to allow us to continue to develop property while I was running CB and finally, we threw in the towel,” he said. “We made it easy and left, picking up our team of 6 to 8 people, and started what was at the time called BC Development Company.”
Soon, Bill Crandall became the C of CBC, Kevin Kelly was added as CFO, and Cathy Baier took the helm as a USFP partner. Today, USFP is the developer of all government-related projects, while CBC handles everything else.
On his ‘lean and mean’ team
All in all, Baier’s team consists of fifteen people in his office, including property managers.
“We run pretty lean and mean,” he said, “and we’re a big believer in outsourcing.”
When the team has a deal in another city, it will hire a local construction manager, but one of the partners will be in charge of the project and fly to the site nearly every week. Typically, each project is assigned two principals – one as the lead and the other as a backup.
“It’s interesting how our portfolio has been split,” he said. “Kathy takes everything in the southeast - Florida, Florida, and more Florida – whereas Dan, who likes skiing and wine, takes everything from the Rockies to the west coast. I’m left with Grand Rapids, Michigan and Montgomery, Alabama and everything else in the center of the fairway.”
On going public
In 2010, Baier and his partners decided to try to take USFP public.
“We went all the way through pricing day and didn’t like the pricing we were given on Wall Street,” he said. “Our investment brokers kept telling us to go ahead and take the deal anyway, but we told them we had a backup play. They didn’t believe us.”
The team ultimately walked away and the next day, sold $200 million worth of GSA deals. Those deals closed 45 days after the team walked away from the public offering.
“That was an expensive loss. We probably had $5 million invested in it, but big picture, it was probably the smartest thing we ever did,” Baier said. “We were priced at $20 a share, and as slow as the GSA and VA has been in awarding deals, we would have been clobbered in quarterly earnings calls. So it’s a very good thing that we walked.”
USFP has formed a property management division which has roughly 3 million square feet under management in 25 states. That team manages all of USFP’s properties. Recently, however, USFP beefed up its portfolio after forming a relationship with a Connecticut-based equity fund three years ago, when USFP sold that fund a handful of its VA projects.
“They, in turn, over the last few years have acquired VA properties from other developers who won those deals. When they acquired those, they canceled the property management agreement with that developer and gave it to us, so we’ve picked up another 1 million square feet over the last six to nine months of VA projects around the country,” Baier said.
Northland Innovation Campus
Currently, the team is filling out the Northland Innovation Campus, a new $20 million Class A office building in downtown Gladstone, Mo. Currently, the building houses the North Kansas City School District which has 60,000 square feet, and Northwest Missouri State University, which has 20,000 square feet. The fourth floor still has about 9,000 still available. With tenant improvement currently underway, the first phase of the project is set to open in August in line with the district’s fall opening. The team on that project includes Hoefer Wysocki Architects, McCownGordon Construction, BHC Rhodes and Henderson Engineers.
USFP also has about 20 VA projects in the bidding process. As one of the top five VA developers in the nation, Baier is hopeful that his team will win a handful of those projects.
On government bidding
Baier said his team is successful largely thanks to a strong relationship with Kansas City-based Hoefer Wysocki Architects, which completes much of USFP’s federal projects around the country. Why? He holds up a 500-page binder to demonstrate.
“This is just our initial submission for a VA deal to hopefully make the shortlist,” he said. “There are two or three more volumes of that involved and probably $150,000 worth of labor and printing that goes into one of these. We only have three contractors we can use because we simply can’t educate a contractor in every market to figure out how to bid on these. For a contractor not familiar with government work, they’re not going to be able to figure it out, or they’ll make a fatal error.”
On development incentives
Baier has a warning for those entering the dialogue on development incentives: “Unless you know all the facts about a real estate deal, you have to be careful about the opinions you make.”
Case in point: The team’s Northland Innovation Campus was developed in a public-private partnership with the City of Gladstone in which the team received an array of incentives, bringing the rent down to $18 per square foot on a triple net basis.
“Major incentives were associated but that’s the only way it would have happened,” he said. “In downtown Gladstone without incentives, how would you ever get a $30 per square foot rental rate to work?”
The team also received incentives on its first major retail project, Liberty Triangle. Ten years after the project was award Tax Increment Financing, it’s finally generating revenue.
“We’re finally getting our checks as of January 1, exactly on its 10th anniversary,” he said. “You read so much about incentives and whether we should have them or not, but I’m telling you, this thing didn’t make a nickel for ten years and had it not been for TIF, it wouldn’t have happened.”