- July 9, 2009
In the Loop
commercial real estate by Jean Gruss | Editor/Lee-Collier
Developer John Madden pioneered a Denver suburb and transformed it into a high-tech hub for major corporations. Now he's planning a major technology park in Southwest Florida.
It's probably an understatement to say John Madden isn't fond of government.
So why did the Denver developer sign a deal with the Lee County Port Authority to develop a technology office park on land at Southwest Florida International Airport?
"I didn't, Steve did," Madden laughs, pointing to his son-in-law, Steve Brown Jr., sitting across the couch at his Captiva Island home. Brown is Madden's vice president of project development
"The toughest thing today is politics," Madden says. "Dealing with government is the toughest thing for me."
But the airport deal offers Madden an opportunity to establish an insider's presence in Fort Myers. He's hired Owen-Ames-Kimball Co., the well-connected Fort Myers commercial builder that has managed multiple projects at the airport. Longtime Fort Myers architect William Mudgett will also be working on the design, Madden says.
Madden's advice for anyone who wants to work in partnership with government: "Get local people involved." Madden says he learned that the hard way in Detroit, where he built the headquarters for Rockwell Automotive downtown in the 1980s. Politics there forced him to eventually sell the building to a pension fund.
"I would have looked at the political scene," says Madden, reflecting on the development. "My read was so wrong."
To be sure, Fort Myers isn't Detroit. But John Madden Co. was the only developer to respond to a request for proposal from the port authority to develop an office park on a portion of the 750 acres it owns on the north side of the airport.
If anyone can pull it off, it's John Madden (no relation to the football announcer). His experience in Detroit notwithstanding, Madden isn't wrong very often.
He opened up new areas of southeast Denver to development and has built over 10 million square feet of commercial space for companies such as Prudential, Chevron USA, Allstate Insurance and Equitable Real Estate. That's roughly equal to 175 football fields. The company recently signed a deal in Denver to house the corporate headquarters of Newmont Mining, one of the world's largest gold-mining companies, in a $160-million building he started on spec.
An avid art collector, Madden spares no expense. He hires world-renowned architects to design his buildings, which feature art inside and outside and materials such as marble from Italy. Photos of a Madden building called Harlequin Plaza are on display in the Museum of Modern Art in New York City.
Madden has an almost sixth sense for whether a project will succeed, says his son-in-law. "He's an information sponge," Brown says.
Mr. Madden meets Mr. Steak
Madden's accomplishments can be traced back to his initial success in his hometown of Omaha, Neb., and a meeting with Mr. Steak.
Madden had his room picked out at the University of Michigan's law school when he had a change of heart and went home before the first day of class. "I went into the family insurance business," he recalls. Most of his customers were contractors, so in 1963 he decided to try his hand at development.
He didn't start small. The first building he developed totaled 600,000 square feet, enough space to fill 11 football fields. The Insurance Exchange Building in Omaha filled with tenants right away. After several more successful buildings, Madden started looking further afield in booming Colorado.
Enter Mr. Steak, a Littleton, Colo.-based steakhouse chain that was struggling financially. Madden found out the chain owned a two-mile stretch of land southeast of Denver along Interstate 25. Development hadn't reached out that far, but Madden had a hunch that one day it would. He pledged his insurance firm to buy the land and borrowed $20 per square foot for what became called Greenwood Plaza.
The bet paid off. Shortly after Madden bought the land for 50 cents a square foot, the giant construction-materials company Johns Manville Corp. relocated its headquarters there from New York and became a tenant. When he started leasing space at Greenwood Plaza, rents were $7.50. Today, they're $33.50 per square foot.
In 1973, Madden got out of the insurance business and sold the firm his grandfather had started. He remembers calling the firm shortly after the sale and a new receptionist didn't recognize who he was.
The success of landing Johns Manville, one of the Berkshire Hathaway companies controlled by Warren Buffett, opened up a new area for development in southeast Denver.
Before John Madden arrived, Greenwood Village was a tiny town on the outskirts of Denver. Today, the town has 13,000 people and the median income there is $116,147, according to the latest census figures.
Madden used his success in Denver as a springboard for development in other states, including California and Arizona. He also had some setbacks, such as the Rockwell tower in downtown Detroit. "You're never going to be a 10," Madden says. "Ted Williams batted 400."
The Rockwell deal occurred in the late 1980s, just as the commercial real estate market was suffering one of its worst recessions. When he refused to let politics influence his choice of partners on the project, the city gave a competitor a sweetheart deal and he lost one-third of his prospective tenants.
"We got through by working our ass off," Madden recalls. "We learned that if you need money to get bailed out, you probably sell assets...people want your best assets," he says. "We marshaled our earnings and got smooth."
Financing a project is always tricky. Now, that's even more difficult with the credit markets in turmoil. From one week to the next, for example, the benchmark interest rate for commercial real estate loans dropped two percentage points. But an even steeper drop in interest rates may not provide the liquidity Madden and others need to keep developing.
"Will we be able to get credit even if the federal-funds rate is at 1%?" he wonders.
Madden tries to keep things simple. Before the housing boom and subsequent bust, he explored branching into residential development. He spent $50,000 on focus groups and "it got so complex we didn't do it." Looking back, it's a good thing he passed on the idea.
Madden attributes the success of his buildings to the relationships he's forged with others. "You tie up with the cognoscenti," he says.
Among the cognoscenti are a handful of commercial real estate brokers he considers "straight shooters" and who will bring new tenants. He keeps the relationship with them professional, treating them fairly on commissions but not getting too chummy. "Don't drink with them, but don't beat them up," he counsels.
Do the same with contractors and architects. For example, Madden has always hired builder Peter Kiewit for his projects out West. "What you have to get is a partner with constructive criticism," he says.
Most recently, Madden developed Palazzo Verdi, a $160 million office project 15 stories high. "We started that without a tenant," Madden says. It was fully leased by the time the speculative building got its construction permit last July.
Such calculated risk-taking is nothing new for Madden, but it shows his knack for being at the right place at the right time. He concedes this much: "At the end of the day, I've probably been ... lucky."
Airport deal cleared for takeoff
The current glut of commercial construction in Southwest Florida doesn't worry John Madden or his son-in-law, Steve Brown Jr.
Both men are confident the technology office park they're going to build on land owned by the Lee County Port Authority near Southwest Florida International Airport will attract some big names in the life sciences and technology. The office park they plan to develop will be called the Madden Research Loop.
"There will be pioneers," Madden says. "They'll come."
They're already here, except most of them are on vacation. Madden should know; he hobnobs with some of them on Captiva and Sanibel islands, where he's had a home for the past 20 years.
The idea is to build the kind of top-notch office space that appeals to Fortune 500 CEOs whose companies are headquartered in northern states but who winter in Southwest Florida. It will be a place they can bring their clients during the winter months.
Most of the office space in Fort Myers now isn't suitable for that caliber of tenant, Brown says. What's more, the location at the airport will be convenient for executives to meet clients who fly in for meetings.
Initially, Madden plans to build 275,000 square feet of commercial space on 24.6 acres with an option to develop another 120 acres on land the airport owns north of the airfield. Construction will begin later this year.
Company. John Madden Co.
Industry. Commercial development
Key. To become a successful developer, it's key to be loyal to honest brokers, architects and builders.