Meritex CEO Paddy McNeely says focusing on developing warehouse projects and securing essential businesses as tenants has helped the 104-year-old family-owned company thrive amid the coronaÂvirus pandemic.
McNeely, nearing two decades as CEO of the company his grandfather founded, said the Minneapolis-based real estate investment and management firm is among those benefiting from strong demand in industrial real estate. Surging e-commerce sales, manufacturers re-shoring operations and companies maintaining more domestic stock to avoid supply-chain disruptions are contributing to that demand.
While Meritex continues pursuing purchase opportunities in several markets, its investments in developing properties have been prominent in its resilience, McNeely said. Meritex, typically a long-term investor, is developing two projects in Kansas City and another in Atlanta. The company has 52 employees, including 32 in the Twin Cities, and also operates in Charlotte, N.C., Columbus, Ohio, Dallas, Houston, Indianapolis, Phoenix, Minneapolis and St. Paul.
Eighty percent of tenants are considered essential businesses in sectors including logistics and warehousing, food, durable goods, housing and health care, according to a customer survey Meritex did in late June and early July. Most expect to need the same space or more as a result of the virus outbreak.
McNeely, who joined Meritex in 1991 after 10 years in banking, recalls cutting grass, painting fences and cleaning out boilers for the company as a teen.
Today McNeely is the only one of six siblings active in the business. They became primary owners in the early 2000s, ushering in a new management team with McNeely as CEO and a new, diversified business strategy. A fourth-generation family member works in investments.
The company's "secret weapon," McNeely said, is the independent board of directors his father formed in the early 1990s.
Q: How has Meritex changed over the last century?
A: My grandfather was a warehouseman. He leased space in a very large building in St. Paul that had rail access. Eventually he became quite successful and grew what was a nationwide business in the teens, '20s, '30s, '40s and '50s. Eventually the business transitioned from a user of space to an owner of space but always focused on warehouse space. Today we own space, we lease space, we manage space and develop warehouse product.
Q: How did that transition take place?
A: It was a decision that we made in the early 2000s. We decided we needed to build a business platform that could grow probably on a nationwide basis and that had a classic investment portfolio. We became a research-driven, highly disciplined investor in multiple markets at many different properties. We had a significant concentration in Minneapolis and St. Paul when I became CEO in '01. Seventy percent of our assets were here and almost 50% of our revenue came from three tenants. Now the Twin Cities is a market for us but it's one of nine. We've gone from a handful of tenants to over 400.
Q: What is the board of directors' role?
A: Strong governance is a key to our family ownership structure. They're a majority of independent directors on the board. That helps assure highly professional management, a robust strategy and a vision for the future.
That kind of governance, similar to a public company, has helped the family understand what the board can do and how the board can help the family achieve its longer-term objectives. The board has helped me and the management team and the whole employee base refine our strategy and keep the business vital and provide really good long-term thinking.
Todd Nelson is a freelance writer in Lake Elmo. His e-mail is todd_nelson@mac.com.
