Kraus-Anderson Takes Dramatic Turn Upward

Company weathering construction storm
with smart management, prudent decisions

MINNEAPOLIS, Minn. (July 2010) – It’s no secret that the commercial construction industry has taken a hit during the recent recession. Most major projects have been delayed or put on hold, and others have been cut all together. Kraus-Anderson Construction Company (KA), one of the Midwest’s oldest and largest commercial general contractors and construction managers, has also seen a significant downturn. The company enjoyed annual revenues in 2006 that topped $800 million, up $100 million from the year before. Then came the recession and a decline in its overall business, dropping last year’s revenues to $473 million.

But having remained a construction leader for over a century, KA has survived economic downturns before, including a stock market collapse, followed by the Great Depression. That experience – and wisdom – played a key role in patiently and strategically making decisions, which are paying off today. Over just the last two months, the company signed and/or started more than $372 million in new business – nearly eighty percent of its annual revenues posted last year.

“We did not just hold our breath, waiting for the tide to change,” said Alan A. Gerhardt, KA’s chief operating officer. “Like most other businesses, we had to make some tough choices, including consolidating our four metro-area offices into two, and moving all yard, accounting and IT functions to a single location. But we did not panic. We went on the offensive and marketed.”

Privately held KA has built a century-long history of diverse project work that reads like a “who’s who.” The company has deliberately broadened its portfolio to include multiple sectors, including education, healthcare, senior housing, biotech and life science, technology, government, entertainment, hospitality, retail, industrial and more.

“It was clear that projects in certain industries would remain in a holding pattern, so we directed our attention to those sectors where major construction was more likely,” said Gerhardt. “We maintain extremely strong relationships and deep experience in all corners of construction, and diligently sought out work in growing industries. We had been selected for a number of significant projects but had not yet broken ground. That lead time to sign new projects can take years and we are now seeing the fruits of our labor.”

Gerhardt’s optimism is coupled by an improvement in commercial lending, which positively affects growth for KA as well as in the construction industry. Access to financing has been an issue for clients who wish to bring approved projects to the market.

Just some of the significant projects KA has recently signed and/or started include:

Lead with your strength
Gerhardt emphasizes that a broad construction roster is no different than a diverse financial portfolio. “This strategy has served us well for a century and is particularly prudent today,” he said. While KA is known more for its larger-scale work, the company completes over 200 projects each year that are less than $1 million. “This continued focus has allowed us to sign new business in current and new markets, successfully augmenting our bottom line.” In addition to its solid base in Minnesota with regional offices in Phoenix, Ariz., Madison, Wis. and Kansas City, Kan., KA is currently performing work across the country, including Arizona, California, Florida, Missouri, North Dakota, New Mexico, New York, Oklahoma, South Dakota and Wisconsin.

And while this diversity is paramount, KA is also focused on remaining the leading construction company in the Upper Midwest in three key sectors -- healthcare, education, and senior housing – all formidable growth areas.

Education – KA is currently ranked 15th in the nation in the construction of K-12 facilities by Building Design and Construction magazine, having completed over 233 K-12 projects totaling over $457 million in the past five years. Some of these Twin Cities-area projects include South Washington County, Spring Lake Park and Orono School Districts. The company also continues to serve higher education, including projects at the University of Minnesota, Gustavus Adolphus College, and Minot State University.

Healthcare – KA is currently ranked ninth among the top Healthcare contractors in the U.S. by Modern Healthcare Magazine. KA has completed over 4.7 million square feet of healthcare facilities in the past five years. The company’s experience ranges from major 200,000-square-foot bed towers with state-of-the-art operating rooms, to tenant build-outs of local clinics. Major Twin Cities projects include Regions Hospital’s expansion and the addition for the University of Minnesota Amplatz Children’s Hospital, Fairview. Other projects include Ely-Bloomenson Hospital Expansion in Ely, Minn., First Care Medical renovation and addition in Fosston, Minn, and a five-story, 160,000-square-foot medical office building in Murrieta, Calif.

Senior Housing - Fueled by an increasing demand by an expanding older population for senior housing, KA is positioned to leverage its long-standing experience in this market as financing starts to become available. Currently KA is working on a renovation and addition to Friendship Village in Bloomington, Minn. and The Waterford Health Center in Juno Beach, Fla. The company anticipates beginning the renovation of the Claridge Court in Kansas City along with a senior housing expansion in Green Bay, Wis. for the Oneida Tribe. Initial work will also begin this year on the 253-unit continuing-care retirement community Trillium Woods in Plymouth, Minn.

In addition to its emphasis on growth industries, KA has also been ranked consistently among the top Green Contractors in the U.S. by Engineering News Record and has been leading the charge in sustainable design and construction for the last 20 years. The company has been involved in dozens of LEED projects in education, healthcare, corporate development, and biotech and life science construction.

“Like most businesses in Minnesota and around the country, the past couple of years have been a bumpy ride. We have been there before and we have endured a remarkable chronicle,” said Gerhardt. “Experience is a beacon that has helped us to make prudent decisions. Our history has taught us invaluable lessons in creative problem-solving and smart management. Not only are we financially stable, we in fact have maintained profitability every year during this recession, despite the economic impacts. The result, I am proud to say, is that we are well-positioned for further success this year and well into the future.

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