Every Monday afternoon at 4 o`clock, those responsible for the varied projects that Stein & Co. is developing or managing meet in chairman Richard Stein`s office, in the AT&T Corporate Center that Stein built, and go over with a fine-toothed comb the week`s progress.
”I want to know the schedules, where we are, the minutiae, all the details,” said Stein, who keeps the meetings plugging for 2 1/2 hours or more. ”This gets in your blood. You hate to give it up.”
For most developers, the unmatched thrill of erecting a new building, especially an office building, is an elixir they are not going to taste in the foreseeable future.
But for Stein, the well still contains a few draughts. Even in a disheartening real estate market that has proved withering for many firms, Stein & Co. has proved adept at winning development contracts, mostly through public sector competitions.
”This started as a sole proprietorship, a typical kind of developer story,” Stein said. ”But we always had a tendency to do government work, we were even in FHA housing years ago, and to go into competitions. I don`t know why.”
Among the public projects Stein has been involved with: The firm is the developer arm of the team that won the contract for the expansion of McCormick Place, it is the owners` representative in the development of the new West Side Stadium for the Bulls and the Blackhawks, it served as the tenant rep for the Chicago Transit Authority`s lease renewal at the Merchandise Mart, and Stein developed the new federal office building downtown.
”There are a lot of developers who went broke, are going broke or will go broke. And for many it is through no mistake of their own,” Stein said.
”But we still have development capacity and the things we are doing are development.”
And that makes Stein unusual, especially among the once-mighty cadre of developers who specialized in the downtown office high-rises that are now so overbuilt in most cities that it will be years before another is put up.
Many development firms have been forced to shift the emphasis of their business away from new construction, according to a survey of more than 500 of the nation`s leading developers by the Urban Land Institute.
For 133 of those firms, the changes they had made in the nature of their operations in the last year were described as significant.
Even though it has been able to keep its fingers in the development pie, Stein & Co. has also had to make moves to adapt to the changing, and often more hostile, environment.
”It was clear that you couldn`t keep the pace of the `80s going forever,” Stein said. ”So about four or five years ago, we started a conscious effort to build up and do the things that were allied with our strengths.”
Stein still has successful competitors who have made moves of their own. U.S. Equities Realty Inc., which was the developer member of the Harold Washington Library team, likes to go after projects of the same caliber.
”Like everybody else, we were concerned about the long-range prospects of development,” said Robert Wislow, U.S. Equities chairman. ”So we began to pursue other areas that could keep our development group going.”
That Stein respects Wislow`s abilities was evident last fall when he attended a seminar on public/private development during ULI`s fall meeting in Washington, D.C., at which Wislow was a main presenter.
Another major downtown developer of the 1980s, The John Buck Co., finds itself in the redevelopment business today, having been hired by Sears, Roebuck & Co. to direct the massive renovation of the Sears Tower. Buck has also diversified by quietly amassing a major property management portfolio.
”Some of it was luck and some was in the way we were selective in our strategy to build one project at a time. But through the last several years as the business has changed, we`ve grown from 110 employees to 140,” said Richard Abraham, a principal with The John Buck Co. who oversees the Sears redevelopment project.
”We haven`t concentrated on the public sector, though. Stein has created a niche in that market and is doing a good job with it,” Abraham said.
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There are Chicago development firms that have disappeared. Fifield Companies earlier this year effected a merger with Frain Camins & Swartchild, essentially bringing to the deal only the management assignments on several of the buildings it had developed.
And Oxford Realty Corp., which started as a co-developer with Zeller Realty Corp. on the One North Franklin project, was not around for the ribbon cutting to mark the opening of the project this winter. Zeller and lender Barclay`s Bank effectively ousted Oxford from the deal.
Kenneth Sheetz, who headed Oxford, has folded the firm and signed on as executive vice president at Lincoln Properties` corporate services group.
”I could have kept Oxford going,” Sheetz said. ”But then I`d still be just a small player crippled by the way real estate is going.”
The depressed real estate market has been one reason for the large number of restructurings at real estate firms. But the growing influence of pension funds and insurance companies on the business is also having a large effect on the organization of today`s real estate companies.
”The focus is on the institutions. They own a lot of real estate and they are going to own a lot more,” said William McCall Jr., of McCall & Almy, a Boston real estate consulting firm.
”Over the years, developers have been product-oriented. But when you go to the institutions, you have to be service-oriented,” McCall said.
Stein had been observing the changes in the real estate industry for several years and thinking about how best to position his company to take advantage. In mid-1991 Stein announced a major management reorganization to implement its new strategy.
”We wanted to establish an operating company that could provide services and provide them without me. We wanted a company that wasn`t dependent on me- in real estate especially a firm revolves around one person because it is highly entrepreneurial-and wasn`t dependent on speculative development,” he said.
Former president Richard Hanson was named vice chairman to continue his work with chairman Stein in strategic planning, capital development and new business initiatives. Hanson had come to Stein in 1984 after 17 years at the accounting firm of Coopers & Lybrand, where he was chairman of the firm`s national real estate group.
”Within the industry there is a lot of chaos. But out of chaos comes a new order,” Hanson said. ”Somebody`s going to have to be around with the skills to assist the users of real estate. What I`m going to do is figure out the applications, figure what the new real estate industry is all about.”
Julia Stasch, formerly executive vice president, was elevated to president and chief operating officer.
Stasch worked her way to the top from the ground up after joining Stein in 1976, when the fledgling company had just four employees. She is credited with being the architect of the firm`s business development strategies for women and minorities, programs that have won honors and helped win valuable project competitions.
Stasch sees her job as president involving four main areas: guiding the continued evolution of the company into a service firm, strengthening the company`s internal organization, increasing Stein`s civic involvement and keeping the whole thing flexible enough to respond to changing marketplaces.
”Richie Stein walks into a room and 10 people are buoyed by his presence. That`s what real estate entrepreneurship is all about,” Hanson said.
”What we`re doing now is crafting that entrepreneurial mentality with the professional services demanded by real estate users,” said Stasch. ”For our firm, it doesn`t matter where real estate goes. We will be in a position to pick our spots.”
Another insider, Michael Szkatulski, formerly senior vice president/
development, took over as executive vice president.
But Stein has gone outside its own organization in the last few years as well. Van Pell, who served from 1986 to 1989 as executive vice president of Baclor Co. and worked for two years on his own in Louisville, was named executive vice president and chief financial officer late last year.
”Some of what we have done is by design and some just happened,” Stein said. ”But the key decision was to invest in staff. We`ve added a lot of high-powered and talented people.”