Oregon

Gorman & Co. founder looks to future by naming new CEO

Written by Larry Avila of the Wisconsin State Journal

Gary_Gorman

OREGON — Gary Gorman recognized that for the development company bearing his name to continue without him someday, he needed a leadership transition plan to ensure its future.

In mid-March Gorman & Co., which he built from a one-man operation from a basement office in summer 1984 to a company with about 250 employees and operations in five states, announced that plan. Gorman will transition the daily management of the company to Brian Swanton, the Arizona market president who will take over as CEO on Jan. 1. Gorman will still be involved with the business as chairman of its board.

Gorman, who has not determined a retirement date, said announcing a leadership succession plan now was the responsible thing to do.

“I’ll still be very involved in the company, but I’ll be less involved in the day-to-day side of things starting Jan. 1,” said Gorman, 61. “I don’t consider this retiring at all, but when you grow a business to a certain level, and when (the owner) gets over 60 years old, people do start to ask, ‘What’s next?’

“I wanted to get ahead of that question. I wanted to have input on (the future of the business) as opposed to someone else making that decision somewhere down the line.”

In the beginning

Gorman & Co. specializes in housing developments from affordable housing to upscale condominiums, and does more than $100 million in business annually. It employs about 250 people and has operations in Milwaukee, Phoenix, Chicago, Miami and Denver.

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Gorman & Co. also has been very active in Madison.

The company’s recent projects include the Union Corners development continuing to rise at East Washington Avenue, Milwaukee and Winnebago streets. The company also was involved in converting space at the Bishop O’Connor Catholic Pastoral Center, a former seminary and home to the diocesan headquarters, to apartments now referred to as Holy Name Heights.

Before he got into housing development, Gorman practiced law for about four years.

“The basement office where I started my business was torn down long ago,” he said. “When I look back on it, I never expected the company to grow to the size it is today.”

Tom Capp, the current chief operating officer who will become vice chairman of the board on Jan. 1, joined Gorman about 22 years ago and led the company’s expansion outside Wisconsin, most recently to Illinois.

“We have deep roots in Wisconsin and we’ll always be a Wisconsin-based company,” Gorman said.

He said Swanton, who has grown Gorman & Co.’s business in Arizona for the past eight years, is ready for a larger role.

Gorman said establishing the future leader of the company well before his retirement also ensures to future investors the firm will be around to see projects through and it also helps in the recruitment of new employees as it looks to expand into new markets.

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“Yes, I want to ensure the company continues after I’m gone, but what it’s really about when a company actively is recruiting young people that have options and they see the CEO of our company is a guy in his 60s, they may not consider us,” Gorman said.

Gorman said moving the company forward will take new thinking.

“It took a certain skill set to grow the company from zero to $100 million,” he said. “To get to that next level, it will take someone who may be better at systems and monitoring metrics, and I think Brian has the skills to continue growing the business.”

The future

Implementing a transition plan while an owner still will be involved in the business is a sound strategy, said Sherry Herwig, director of the Family Business Center at UW-Madison.

“It lets employees know that during the transition there will be some consistency and continuity,” she said. “When the new leader takes over, the employees can take comfort knowing the person who had been leading the company all along, will be there and be part of the decision-making process.”

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Gorman said his company’s success has been built through recruiting good people who could develop markets familiar to them.

“What I hope to see is the company experience steady but not rapid growth because companies that are the highest risk are start-ups and those that grow too rapidly,” he said. “In terms of the transition and working with Brian, I plan to work with him so he understands what he’ll have to do to be the CEO versus just being a market president.”

Gorman said once the company’s daily management is transitioned to Swanton, he will focus on special projects including finding ways to approach building projects more cost-effectively.

“I’m feeling good and I’m healthy,” Gorman said. “I’m still really interested in this business and frankly, I don’t want to retire.”

The Diversification Strategy: Tom Capp and Gorman & Company Develop a variety of projects, Tap Different Funding Sources

Tax Credit Advisor, August 2014

The way that Tom Capp and Gorman & Company, Inc. approach the development of multifamily rental housing, historic preservation, and mixed-use real estate projects is to always be on the lookout – for new opportunities, funding sources and lessons.

“We really consider ourselves community developers as much as we do multifamily developers,” says Capp, the company’s chief operating officer. “We don’t go out and pick a site and say, ‘Hey, let’s go develop a project there.’ The vast majority of our developments have been identified as community priorities by the city, a significant nonprofit, or a housing authority.”

Company Background, Geographic Focus

Based outside of Madison, Wisc., Gorman & Company employs 235 people nationwide, owns and manages almost 4,000 housing units, and manages about 1100 units for other owners. The firm was established 30 years ago by CEO Gary Gorman, a former lawyer who represented developers and syndicators. Capp, born and raised in Chicago, joined the company 20 years ago from a planning and government background, starting as director of a real estate development, and then moving up to executive vice president and later to COO. While primarily a development outfit, the vertically-integrated firm also has in-house construction, architectural design, property management, and asset management divisions.

“As our development leadership takes a project through from beginning to end, we have all of those functions at the table,” says Capp. “That’s our business model. We try to capture the strengths of the integration of all of those elements and the histories and lessons learned in each of those areas.”

The company currently focuses its development in Wisconsin, Illinois, Florida, Arizona, and – new this year – Colorado. In addition to the Wisconsin headquarters, the company has a satellite office in each state (Chicago, Phoenix, Miami, Denver) run by a market president who finds and develops projects in the state. They receive full support from what Capp calls “the mother ship in Wisconsin.” The market presidents, experienced and well-regarded in their states, generally come from the nonprofit housing or housing authority worlds. “Our market president is often the most respected developer in their state,” says Capp. “They take a deep dive in their state, and their integrity is unquestionable.”

Gorman & Company’s projects are primarily infill developments, mostly in urban areas, and frequently in “challenged” neighborhoods. “The lion’s share of what we do is multifamily housing,” says Capp. “And within that space, a large percentage is either workforce housing or low-income housing tax credit developments.” The company has completed about 80 LIHTC projects to date.

In addition, the company develops market-rate housing, commercial, and mixed-used projects. In many cases, the firm utilizes federal—and sometimes also state—historic tax credits, alone or in combination with housing tax credits.
A number of its affordable apartments target local artists and contain live/work units with studio space as well as galleries.

Variety of Projects

A major community development and revitalization project is The Brewery in Milwaukee, Wisc., a redevelopment site near downtown that once belonged to the Pabst Brewing Company. Gorman & Company is methodically developing projects from the 26 historic buildings and sites that were part of the brewery complex. These projects include a mix of historic rehabilitation and adaptive re-use of some of the existing buildings, along with demolition of others followed by new construction. “We committed to the city and other players, before the recession, to play a significant role in redeveloping that area,” says Capp.

The two projects completed so far are:

Blue Ribbon Lofts, a 95-unit mixed income apartment development financed largely with federal low-income housing and historic tax credits.
The Brewhouse Inn & Suites, a 90-room boutique hotel and restaurant funded partly by historic tax credits and by equity raised from Chinese investors under the federal EB-5 program.

Currently under construction:

• A 60,000-square-foot office building funded by equity raised from Chinese investors under the EB-5 program;
Frederic Lofts, a modern-design, 100-unit market-rate apartment project funded with direct equity investments from a Chinese development firm that Gorman & Company met while raising EB-5 funds in China. Capp says the market-rate development will provide a “new kind of hipster housing in this part of downtown.”

Elsewhere, Gorman & Company is developing:

Lion’s Ridge Village Apartments, in Vail, the firm’s first project in Colorado. This involves the construction of four new apartment buildings with a total of 114 units located on part of a 10-acre site occupied by an existing apartment complex purchased by the town of Vail. The town is providing the land through a 50-year ground lease. Seventy percent of the new apartments will be workforce units, deed-restricted as housing for employees of local businesses, including the local ski resort.
Coffelt-Lamoreaux Park, Phoenix, Ariz. In partnership with the Housing Authority of Maricopa County, the company is redeveloping and converting 296 units of public housing to assisted rental housing under the federal Rental Assistance Demonstration program, using federal housing and historic tax credits and tax-exempt financing. The firm has a master development agreement (MDA) with the housing authority to redevelop all of its public housing.
Paradise Pointe Senior Residences, a new 46-unit LIHTC development for seniors in Monroe County in the Florida Keys, Gorman & Company’s third tax credit project in the Keys.

Examples of mixed-use projects completed by Gorman & Company include:

Villard Square, in Milwaukee, containing 47 apartments on three floors above a new 20,000-square-foot city library. The apartments were designed as “grandfamily” housing for grandparents raising their grandchildren.
Grand River Station, in La Crosse, Wisc. This new construction project combines a city transit center with 72 affordable and market-rate apartments. The development also includes 20 for-sale condos on upper floors as well as retail stores and gallery space at the ground level.

“In the last few years, we’ve had pretty good luck in mixing uses in different ways,” says Capp.

The COO says the company is stronger and different than it was five or six years ago as a result of changes made in response to the recession. According to Capp, the firm used to tie its fortunes largely to low-income housing tax credit development. During the downturn, it decided to diversify both in the types of projects it develops as well as the funding sources used.

One new source has been foreign investor capital procured though the EB-5 program. This program fast-tracks the issuance of visas and ultimately green cards to foreigners (and their families) who invest $500,000 or more in specific projects or businesses in the U.S. Solicitation offerings to foreign investors must be made though federally designated regional centers. Gorman & Company has successfully raised EB-5 capital for two projects so far and anticipates more going forward. In fact, the company has established its own EB-5 regional center to expedite the process of raising foreign investor capital for real estate projects in Chicago, Milwaukee, and other parts of Illinois and Wisconsin.

Love for Development

Capp, an affordable housing veteran, continues to enjoy being a developer.

“I came into the development side from the planning and government worlds, which I loved. But there you do policy work and plans. You often don’t see real tangible results.

“What I really love about our role as community developer is getting to creatively devise how to build something that ends up being tangible. Once it’s built you are able to kick it and take your kids by it.”

Capp also relishes improving the lives of the residents of the company’s developments. “When you meet somebody who lives in quality housing that they never had an opportunity to have before, that’s very satisfying,” he says. “I love the very real effects you have on peoples’ lives.”