By Liz Wolf
MNCAR Focus Newsletter
As Eagan-based KW Commercial Midwest continues its aggressive growth in the commercial real estate brokerage business, it has now launched a formal partnership with St. Paul-based Suntide Commercial Realty Inc. The new partnership combines Suntide's commercial services with KW Commercial's team in an effort to expand Suntide's property management and construction divisions. "People have described Suntide as a hidden giant so we really want to get the word out" about their services, says Mike Cylkowski, KW Commercial Midwest's director of sales. "We expect this arrangement to benefit everyone involved," Cylkowski said in a prepared statement. "Suntide will see explosive growth in management and construction while KW Commercial Midwest will walk into a high-profile portfolio of office buildings." Suntide owns a roughly 1-million-square-foot portfolio including the Court International Building, Broadway Place East and West, and Broadway Ridge. KW's Director of Commercial Service Jeff Hart and KW's Director of Office and Special Use Kevin Peck have taken over as lead leasing agents for Suntide's portfolio.
KW Continues Its Growth
Cylkowski helped launched KW Commercial in 2010 and has since had a hand in recruiting brokers across all sectors. "We pretty quickly started to grow with a pretty solid core group of guys, and the next thing you know we had a group of five and now we're up to 39 brokers," Cylkowski says. Cylkowski adds that the company is carrying roughly 16 million square feet of inventory across all product types. One primary reason for the solid growth, according to Cylkowski, is its broker compensation model. "We have a very attractive commission structure and brokers are given a lot of autonomy and flexibility," he says. KW's platform is set up so that brokers keep 100 percent of their commission after reaching a cap. "Traditional commercial real estate brokerage, in theory, would have a lot of infrastructure, a lot of support people, a lot of marketing staff," Cylkowski says. "We on the flip side say, 'It's your business. We're going to provide you with all of the tools necessary to run your business, but we want you to run it like a business, and for that, we're going to take a very small amount.' The maximum amount that the brokers would typically pay in any given fiscal year is $30,000. They reach that cap and they truly keep 100 percent of the rest of their commissions."
KW Looks to Add Property Management
A couple years into the business, KW Commercial started looking into adding a property management arm and considered bringing it in-house. That changed when Cylkowski was introduced to Suntide. "We started to develop a relationship and decided to come up with a fairly unique referral-based fee structure where we would refer them properties to manage and they would pay us an ongoing monthly referral fee," Cylkowski explains. "That was attractive. Instead of bringing it in-house, we thought, 'Alright, they already have a great established company.' They were looking to grow their third-party portfolio, so we started that relationship in 2012-13. Fast forward and we probably referred about 10 buildings."
That Leads to New Formal Partnership
As of Jan. 1, Cylkowski says Suntide has a new ownership structure in place. Barb Schuba is Suntide's director of operations, and Max Currie is the company's head of construction. They formally partnered with Cylkowski to help grow their construction and property management businesses. Suntide offers full-service construction, specializing in tenant and building improvements. They also incorporate green and energy-efficient systems. "Suntide is recognized as being exceptionally energy efficient as far as their buildings are concerned, which helps keep operating costs down," Cylkowski points out. For example, their Broadway Place West in Northeast Minneapolis has the lowest energy consumption of all office buildings in Minneapolis that are 100,000 square feet or larger.
Update on Suntide's Portfolio
KW Commercial is now leasing the Broadway Place East, Broadway Place West and Broadway Ridge portfolio, which is where Be the Match previously was located. "They left and built their own building so we have a fairly large vacancy, but we've had a lot of activity and are on the cusp of announcing some bigger deals," Hart says. Meanwhile, Suntide/KW Commercial has plans to retrofit an old warehouse that sits across the street from Suntide's Court International Building in St. Paul into funky office and tech space. The warehouse, called "The Case Building," is at the intersection of Interstate 94 and Highway 280. Hart says the warehouse is approximately 174,000 square feet and ceiling heights range from 13 feet to 18 feet. "Because it's such a large building, we have existing skylights and will add others to bring natural light in," Hart says. "We will pop in a common corridor down the middle to make it kind of like a Paris streetscape. We're marketing it to large users to kick off the project, and we have a couple of prospects... We want to get companies that appreciate the uniqueness of the building - from general office users to creative-type companies like advertising agencies and PR agencies as well as tech companies." Hart says for today's businesses, it's all about attracting top talent and catering to the millennials in the workforce. "[The Case Building] is right on the Green line and the bus line and right near the University of Minnesota, so for the attraction of employees it's fantastic," Hart says.
From a marketing perspective, Cylkowski says KW Commercial wants to get the word out about Suntide's services. "We looked around at how do we get in front of the people we want to get in front of?" Cylkowski says. "It made a lot of sense when we started looking at all of the services offered through the Platinum Membership including serving on panels, the Golf Tournament and MNCAR Expo, and all of those things that we definitely want to be involved in." Cylkowski also likes the ability to feature a "couple of cool projects every day" that they're working on under "Featured Commercial Real Estate Listings" on MNCAR's website. Hart currently serves as chair of MNCAR's Expo committee and on the Golf committee. "Talking about the value for our dollar this has made sense," Hart says. "To get out in front of who we want to get out in front of, we thought it was the avenue and the best bang for our dollar. We will have a booth at the Expo, which is fantastic because that's a really big opportunity for us to showcase what we have and what we're doing."