Columbus-based Thrive Companies is one of the busiest developers in central Ohio, adding thousands of residences and tens of thousands of commercial square feet over the last several years.
Thrive specializes in brownfield development, reviving neglected land with imaginative and collaborative communities. From the hip, urban Jeffrey Park in Italian Village to the nature-oriented Quarry Trails just west of the Scioto River, these multifamily developments quickly become iconic – and see rapid occupancy. They’ve built 3,000 units so far and have another 2,000 in various stages of development.
The company often turns to the Finance Authority as an important part of its financing stack. We recently spoke with company President Mark Wagenbrenner and Chief Financial Officer Joel Lilly about their latest projects, how they’ve evolved to meet market needs, what they see for the future, and much more.
The Finance Authority first worked with Thrive in 2007, when you were still known as Wagenbrenner and we were just launching. What prompted the brand change? Did it reflect a different strategy or mission?
Mark Wagenbrenner: We changed the name to Thrive when we knew we were going to grow our operating business. Prior to the name change, we were more focused on acquiring and developing land. Over time, and with Joel and Kevin Zeppernick’s arrival, we knew we were going to grow into something much larger than what we’d been in the past. We internalized our construction and management; today our larger infill projects have expanded to include coffee concepts, food and beverage [amenities], and fitness.
In the end, we knew we were going to grow to become a sizable operating entity. We wanted a name that could confidently promise that effort.
Why expand to include the new operational features?
Mark: We went into those businesses because they were so important to the people living in these communities. Time and time again those features were at the top of the list of what people want. Along with the communities being walkable, well run, and easy to access.
So a very intentional brand and strategic alignment.
Mark: Yes. Also, these days a majority of the work is done by people that don’t have a last name Wagenbrenner. We wanted to honor that.
Joel Lilly: Mark doesn’t always want to be called with questions. [Laughter]
In this tight labor market, has it been a challenge to staff these new operational roles? What are you doing to make sure you have the right talent in the pipeline to serve those needs and new features?
Mark: We rely a lot on our culture. Our leadership is focused on building a fun, dynamic environment, and we hope that’ll continue to attract people in a very competitive market. And, knock on wood, we think it’s working. We’re learning.
It can be challenging to make development numbers work right now. What are some of the creative ways you use to counter price escalation of materials, labor, insurance, and the supply chain?
Joel: It’s definitely getting to be more challenging in terms of supply chain issues, higher construction costs from our subs, just getting manpower on our projects to get them done on time. The interest rates going up are probably more than double than when we closed on loan two years ago. So you start to run out of those dollars and have to supplement those carry costs with more cash in the project.
We leverage our relationship with our subs – they value our pipeline. We’ve got a good three to four years in the pipeline [for them]. But everybody’s trying to maintain their margins right now, and certainly there’s been some rent growth over the last couple years in Columbus. But that rent growth is probably not at a level to handle our extra costs and the extra borrowing costs on these projects.
Banks right now are also wanting to reduce what they give us on the loans, which then requires more cash. It’s all going in the wrong direction. Most of what we do is multifamily development, and it’s very sensitive to people’s income and what they can afford. We don’t want to charge more, but we have to, to afford construction costs. We’ve seen rates go up on rental rates, but we’ve seen construction costs go at a higher rate increase than our rents are, and we can only go so far before projects just don’t pencil out.
So we work together to figure out easier ways to do things. We’ve been doing a lot of value engineering. We’ve come up with a very universal unit floor plan mix that we’ve vetted over the last year and a half. And we’re trying to make all of our projects as consistent as possible, which helps us with pricing, helps our subs know our product and know that we’re going to continue to build similar unit types. So it’s more efficient. And we’re really trying to be efficient with how we stack these buildings on large sites and do things as affordably as we can. It can feel like a losing battle, but we’re powering through it.
You mentioned some floor plan concepts have been vetted and adjusted. It sounds like it is an evolutionary process – build some, see how people react, and make changes, and that creates efficiency.
Joel: We get a lot of feedback from our leasing team. They’re out there in the field, they’re doing tours, they’re getting comments back. We have different unit types for different projects, probably over 3,000 units right now that we have under construction or completed. And when you do walkthroughs, you get those comments – people have their favorite unit types, so we know the ones that do well. So we really tried to only do the units they respond to, and provide a good mix of studios, ones, twos, and threes.
Our in-house architect, Rob Harris, really helps us. The exteriors are usually unique and site specific, but the units make it a lot easier for us to estimate and get our vendors quickly up to speed and price them out for us.
Tell us how partnering with the Finance Authority has helped Wagenbrenner manage those costs.
Joel: There are quite a few programs [we’ve used], like the capital lease structure that helps reduce project costs. A good example is the four-story 121,000 office building that we built in Grandview Crossing, a 60-acre development. Part of the benefit was the savings on the shell, but savings were also realized on buildout, which was about twice the cost of the project. So it really was significant dollars [thanks to] lower cost financing the Finance Authority provided.
Mark: We use the Central Ohio Bond Fund a lot as well. As a percentage of the capital stack, it’s not as significant as other forms of debt and equity, but it’s [value is] the timing. We rely on that upfront. Often it replaces equity and lessens the cost. And it’s upfront, which is super critical. You can really build on bond funds to make these projects work.
What other advantages has it provided?
Joel: It allows us to build our developments at a faster clip. If we didn’t have that lower-cost financing on infrastructure, large site development would happen at a much slower pace. And frankly, if that happened, that would force us to put more density on these sites at the expense of the green spaces. We couldn’t afford to build a three-acre park. By having the Finance Authority provide this bond financing for us, we can provide a lot more amenities and the green spaces that we think are important to our sites.
We know you as a hometown developer and that you’ve taken on some environmentally challenging redevelopment projects. Have you brought that offering to other markets?
Joel: No, not yet.
Mark: We’ve looked quite a few times, and have come close, and then deals have happened for us here closer to home. We’ve all raised families here, some with kids still at home – the younger groups coming up behind us. So it’s an incredible blessing not to have to live on the road. Nothing like putting your head on your own pillow every night.
Joel: I totally agree with Mark. We’ve got a great skill set with our brownfield remediation background and experience, and think we’re about as good as anybody out there doing it. And I think we’ve got some great examples: Quarry Trails, Grandview Crossing, Jeffrey Park. I think it says a lot about us as a company and how we do things with these large sites.
Mark: We’ve been really fortunate. We’re not opposed to new markets but haven’t had a need yet.
With the development of Carmenton at Ohio State, OSU’s huge new hospital, and Intel, thousands of jobs are being created and all those people will need places to live. Thrive is at the forefront of meeting that need. How many units have you built at this point, and how are in the works?
Joel: It’s changing every day, but I would say that we have close to 3,000 right now either completed or will be nearing completion here in the next six months. And with the starts over the next 12 months we anticipate, hopefully with the market working with us and not against us, it will push us toward 5,000 units total once completed.
It will take us another couple of years to complete that pipeline. We have a lot in Columbus, enough to keep us busy for the next three or four years or beyond. Sometimes these projects take longer, but we keep plowing forward. Our target is pushing towards 1,000 to 1,200 units a year of new startups.
Are there any projects right now that you’re especially proud of?
Joel: We’re proud of everything that we’re doing, obviously. Jeffrey Park’s very mature. Quarry Trails and Grandview Crossing stand out right now. Grandview Crossing, I think, is unique and special. Both were brownfields, and Grandview Crossing has great class-A office space. It’s probably the biggest class-A office lease to happen in the last three or four years in Columbus. And it truly has a mixed use component. We’re going to have a market there and 1,300 units or more of residential. And then Quarry Trails, with the connection with Metro Parks, having a mix of homes, condos, rentals, and office space…everyone that visits the site can’t believe this is in Columbus.
Mark: To have all those ingredients come together is special. What makes it truly unique is the public-private partnership with Columbus and Franklin County Metro Parks. Executive Director Tim Maloney and his team have been great. It’s not too often to see a public organization shape, embrace, and execute on a shared vision so bold. They are great partners and that’s made it really special.
[The Finance Authority, along with three other Ohio Port Authorities, issued over $16 million in 30-year term tax-exempt bonds at a blended rate of 2.58% for the Quarry Trails project. The financing supported Phase 1 of the construction of $30 million in public improvement construction, including a community center, roads and entryway, parking lot, bridges, environmental and site work, engineering, architectural, plans and permitting, legal, greenways, and developer fees.]
Was there a model for Quarry Trails? We’ve never seen anything like that locally. Have you seen it elsewhere?
Mark: We did look at other places like Seaside, Rosemary Beach, and other areas of Florida. [We looked at those areas] for proportions and luxury homes because we knew we needed to make it work. We carried a lot of the infrastructure, the roads and everything on the backs of development, so the Parks Department could spend their money on the park. Having greenways at the front door of these units is just something you don’t see here in Columbus. Almost like pocket parks on every block. We kept the garage doors on alleys so you won’t see them. It’s the culmination of a lot of different views.
We know you’re enthusiastic about Rapid 5. That organization has seen some changes – can you give us an update?
Mark: I was just on a call with the executive committee meeting. Interest in the organization grew almost too quickly. Amy Acton and Jennifer Peterson put us miles ahead with public awareness and enthusiasm around the Rapid 5 vision but we needed to slow down and shape a detailed Rapid 5 Plan. The Board has been creating detailed inventories of potential lands along our 5 rivers, shaping a Rapid 5 organizational structure that best accommodates fostering those lands into the public realm and organizing specific projects along our rivers that will serve as blueprints for future projects. All of that has been happening under the tireless leadership of our Board President, Keith Myers. We have been so fortunate to have the sustained support of our funders. The Board formed search committee is actively in the process of finding an executive director that we hope to announce this year with some good news about a leading gift from a corporate partner.
Is it still reflective of the original goal – to put every central Ohio resident within a mile of an outdoor opportunity?
Mark: Yes, connectivity to all those rivers, floodplains, and the lands around them. It’s already exciting. We can’t wait to build a blueprint on how to execute these outdoor amenities. We’re excited. A lot of work to do, but our board’s great too. Through that transition, not one person has stepped back [from] the board. We’re building it to last.