Opus Group

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Opus Group

10350 Bren Road W.
Minnetonka, Minnesota 55343
U.S.A.
Telephone: (952) 656-4444
Fax: (952) 656-4529
Web site: http://www.opuscorp.com

Private Company
Founded: 1953 as Rauenhorst Construction Company
Employees: 1,400
Sales: $806 million (1999 est.)
NAIC: 23332 Commercial and Institutional Building Construction

Opus Group ranks among the top ten U.S. design-build commercial construction firms. The vertically integrated enterprise operates in the industrial, retail, and office markets. Working nationwide through six independent regional operating companies, Opus builds custom facilities for purchase or lease, develops business parks, and maintains an inventory of space for immediate occupancy.

Simple Beginning/Solid Construction: 1950s–60s

Gerald Rauenhorst founded his own construction business in 1953. The farm boy from Olivia, Minnesota, earned a degree in economics from St. Thomas University in St. Paul, and one in civil engineering from Michigan’s Marquette University, where he taught for a year. Rauenhorst put in another two years as a construction engineer before striking out on his own. His first solo project, which got off the ground thanks to a loan from his brother, was the construction of the Zion Lutheran Church in his hometown of Olivia. Rauenhorst Construction built a number of other buildings for religious organizations during its first years of operation.

In 1957, Rauenhorst moved his business out of the breeze-way of his suburban Minneapolis home into a small Bloomington office building and, by renting out the adjacent office space, established a leasing business.

By 1960, Rauenhorst Construction held a solid position in the Twin Cities design-build market. The next year, two significant developments occurred. One was the completion of the company’s first “turnkey” project: the design, engineering, and construction of a 157,000-square-foot office and manufacturing facility for the Toro Company. Secondly, the company purchased 200 acres of undeveloped land in the southwest Minneapolis suburbs. Shortly thereafter, Rauenhorst contracted to build Control Data’s headquarters on the property and thus launched what would be Rauenhorst Construction’s first business park development, Normandale Center Industrial Park. The growing company built itself new headquarters in 1963 and changed its name to Rauenhorst Corporation in 1965.

Changing Skylines: 1970s to Mid-80s

In the 1970s, Rauenhorst Corporation moved beyond the Twin Cities, opening an office in Milwaukee in 1972 and one in Chicago in 1978. The decade was also marked by the construction of the company’s first office tower. Construction volume for the privately held company was an estimated $75 million in 1977. In addition, the regional developer had more than 500 construction projects newly contracted or in progress, totaling in excess of $250 million. The company concentrated its efforts on smaller growing cities spread throughout the eastern two-thirds of the nation.

A 1970s diversification drive was less successful. Rauenhorst tried manufacturing concrete walls and floor planks as well as fiberglass parts, toys, and heavy equipment. Losing money on such efforts, the company dropped the businesses by mid-decade.

Rauenhorst, meanwhile, had another more engaging concept in mind. He envisioned a suburban development encompassing ponds and green space, commercial and industrial facilities, and housing, all served by a dual roadway system to cut down pollution from exhaust fumes. In 1974, the company broke ground on Opus II, located on some prime property at the convergence of three major thoroughfares less than ten miles from the center of downtown Minneapolis.

Just as the ambitious project was started, an economic recession hit, creating some uneasy days. “As it happened, even the timing worked out to Rauenhorst’s ultimate advantage. The recession reduced the competition for one thing. And more important, when the upturn finally occurred Opus II was well underway and ready to meet the rejuvenated demand for commercial and industrial building,” wrote William Swanson in a 1977 Corporate Report Minnesota article.

About the same time, Rauenhorst delegated responsibility for the real estate and construction ends of the business, in effect moving the company from an entrepreneurial to a corporate structure and creating more time for his many family and community commitments.

Rauenhorst Corporation opened an office in Phoenix in 1980. Then, reflecting the ongoing growth and expansion, the company changed its name to Opus Corporation in 1982. The same year, the company moved into new headquarters located in the Opus II mixed-use development project and purchased a Florida-based construction company, creating a presence in the southeastern United States. During the early 1980s, the company reorganized based on its geographic locations.

Opus Corporation’s entry into the downtown Minneapolis market in 1984, via the development of a 25-story tower, depicted the changes taking place within the company. “Five years ago, the Minnetonka-based firm was known as a builder of sound if unimaginative, one story warehouse, manufacturing plants and office buildings in suburban Minneapolis, Milwaukee and Chicago,” wrote Eric Wieffering for Minneapolis/St. Paul CityBusiness in 1985.

The Minneapolis endeavor, the company’s first speculative project in a highly competitive downtown market, moved the company into a new submarket, an accomplishment Rauenhorst pointed to with pride. In the early 1970s, architects were both derisive and threatened by Rauenhorst’s design-build niche. The developer had moved outside the norm of the day by taking on all elements of a project: finance, design, and construction. But by the mid-1980s, according to a 1987 Star Tribune profile by Sharon Schmickle, the two ends of the spectrum were “barely distinguishable” from one another. Rauenhorst now paid more attention to design, and architectural firms had begun adding engineering and construction services.

“Rauenhorst and company continue to exploit one distinguishing feature of the design-build approach: the ability to move quickly. Opus can start a project as soon as it finds a tenant and finance it later because it maintains lines of credit backed by its real estate assets,” wrote Schmickle.

Founder and Chairman Gerald Rauenhorst was the driving force for his company’s long-term growth as others handled the day-to-day operations. William Tobin served as president and COO. He had succeeded longtime employee and board vice-chair Robert Dahlin.

Mixed Reviews: Late 1980s Through Mid-1990s

By 1987, Opus had created more than 1,000 buildings. Annual construction surpassed $200 million, placing the company among the top 100 in Engineering News-Record’s ranking of leading U.S. contractors.

Opus decentralized in 1988, forming a holding company, Opus U.S. Corp., for the regional operating companies. Mark Rauenhorst, son of the founder, was named president and COO of the holding company in 1990. The younger Rauenhorst joined Opus in 1982, after earning a degree in finance and an M.B.A. and gaining seven years of work experience outside the family business. Opus further decentralized operations in 1990 by creating Opus Architects and Engineers, Inc. as a subsidiary of Opus U.S. Corp.: the entity provided architectural and engineering services to affiliate companies.

“Rauenhorst describes the overall operation as ‘opportunistic,’ adding that ‘we are always looking for the right opportunity for development,’ “wrote Barbara Knox for Corporate Report Minnesota in 1990. Speculative industrial development represented a major piece of Opus U.S. Corp.’s business. Keith Bednarowski served as chairman and CEO of the company, which was based in Minnesota but operated primarily outside the state.

Opus weathered a late 1980s industry downtown and in 1991 ranked among the top 15 developers in the U.S., producing a combined construction volume of more than $300 million. The company received its industry’s highest honor in 1992: Developer of the Year by the National Association of Industrial Office Properties (NAIOP).

Nevertheless, Opus faced challenges in the early 1990s. Internally, the company was moving toward the succession of one generation of leadership to the next. Three of Gerald Rauenhorst’s sons, including Mark, held top management positions. Externally, the Tampa and Phoenix markets were in a downturn, prompting workforce layoffs in those regions. A new affiliate, Opus Investments, Inc. was formed to acquire, develop, and remarket distressed properties. The Chicago market, on the other hand, was growing, and Opus had long-established customers and a high rate of repeat business.

In 1995, the National Real Estate Investor ranked Opus the nation’s largest developer, based on 8.3 million square feet under construction nationwide. Gerald Rauenhorst, over four decades, had guided his business from a one-wheelbarrow operation to a national design-build and real estate concern. His accomplishment was no small feat in an industry hit by four or five downturns during his many years in business.

Company Perspectives:

The Opus Group is a full-service real estate developer, offering the disciplines of architecture, engineering, development, construction, property management, leasing and finance under one roof. Opus’ design-build approach offers imaginative design, development expertise, emphasis on quality, commitment to on-time and on-budget construction, and sound financial strength and flexibility to clients nationwide.

In fact, during the 1990s Opus was still feeling the pinch of the late 1980s Minneapolis office glut. Wieffering wrote for Corporate Report Minnesota in 1995, “Gerald Rauenhorst made his name and fortune in the suburbs southwest of Minneapolis by guessing where the people were going to be, and buying land in advance of their arrival. Once he brought his company, Opus Corporation, to downtown Minneapolis in the early 1980’s, he applied the same strategy. Though the results have so far been mixed, it’s one reason why Opus owns more potential development sites in downtown Minneapolis than anyone else.”

In 1998, Opus lost a two-year legal battle with the city of Minneapolis over some of that property. The city condemned an Opus-owned site on the Nicollet Mall for a subsidized development slated to be built by a competitor.

Concurrently, Gerald Rauenhorst prepared for his eventual exit from the business—something he’d been planning for since the mid-1980s. In addition to bringing in the best personnel he could find, Rauenhorst added four outsiders to the seven member board of the holding company and relinquished more control to the management team lead by Bednarowski. In a 1996 Star Tribune article Sally Apgar reported that Bednarowski was “also charged, say insiders, with helping to educate the next generation.”

Construction Ahead: Late 1990s into the 21st Century

As a merchant builder, Opus had sold almost everything it built. During 1998, the company changed gears, raising nearly $250 million from investors for two real estate investment funds. “‘It’s an unbelievable mechanism,’” Tom Crowley of Chicago-based Heitman Financial told Dirk Deyoung in a 1999 Minneapolis/St. Paul CityBusiness article. “Opus is already one of the most respected, well-capitalized developers in the nation. Now it’s building a ‘great machine’ that can efficiently swallow, digest and eventually divest the huge volume that it manufactures, he said. ‘It’s a perfect strategy for Opus.’”

On another front, Opus pushed to win more national accounts. Local or regional projects compromised much of the company’s business due to the limitations of its decentralized structure. A national accounts group was created in the late 1990s to pursue clients, pull together resources from the regional offices, and assist the regional companies in taking current customers to the multiple development level.

Gerald Rauenhorst retired as chairman of the company in 2000, although he remained on the board of directors. Bednarowski succeeded him as chair, and Mark Rauenhorst was named president and CEO. National Real Estate Investor had named Gerald Rauenhorst one of the 40 most influential people in real estate in 1998, and over the years, Rauenhorst had received frequent recognition for his principled conduct in business and for his contributions to his community.

The organization Rauenhorst built planned to develop more than 28 million square feet of new commercial space in 2000, ranging from speculative and build-to-suit office buildings to distribution and warehousing facilities, retail complexes, and institutional facilities. Opus had completed about 1,800 commercial projects in more than 35 states. The independent operating companies included: Opus East, Opus North, Opus Northwest, Opus South, Opus West, and Opus National. All in all, the company appeared well prepared for the winds of change certain to again buffet the real estate industry.

Principal Subsidiaries

Opus East L.L.C.; Opus North L.L.C.; Opus Northwest L.L.C.; Opus South L.L.C.; Opus West, L.L.C.; Opus National, L.L.C.; Opus Architects & Engineers, Inc.; Opus Properties, L.L.C.; Opus Northwest Management, L.L.C.(Minneapolis); Opus North Management Corporation; Opus West Management Corporation; Normandale Properties South Corporation.