After September 11, 2001, two Minnesota-based corporate pilots, Kyle Smith and Reggie Reed, concerned about the uncertainty of the airline business, decided to diversify their incomes by investing in real estate. Recognizing that off-campus student housing had taken hold at many Southeastern campuses, they suspected the same thing could be done in the Midwest. Focusing on their home market of Mankato — home to Minnesota State University (MSU) — Smith and Reed began by purchasing small single-family properties and flipping them. In 2005, they partnered with two other investors — Michael Sather and Kyle Smith’s brother, Landon Smith — and created Tailwind Group to invest in larger student housing projects. The partners all had other jobs at first, but that quickly changed when they purchased a 400-bed apartment community in Mankato.
In 2008, the company partnered with another local developer to build College Town Mankato, a 456-bed cottage-style student housing project close to the MSU campus. From 2008 to 2016, the company continued to develop properties and grow its management business in Southern Minnesota, adding some retail and commercial properties. During that time, the company also developed The Quarters, a large student housing complex across the street from College Town in Mankato, and several retail and office properties in the city.
With MSU’s enrollment stable at around 15,000 students, Tailwind realized that having nearly 2,000 beds in the market, plus over 900 beds owned by American Campus Communities, combined with the scattered site beds by other off-campus owners, the Mankato market was pretty full. In 2016, the company turned its attention to other markets. The company purchased a student housing community near the University of Northern Iowa in Cedar Falls from The Scion Group. The company also purchased land in Iowa City near the University of Iowa for development and acquired a turnaround project in East Lansing, near Michigan State University. In Iowa City, the company developed an 892-bed project called The Quarters at Iowa City. By the end of 2017, the company had nearly 5,000 beds under management in four separate university markets.
“Then, the wheels kept spinning,” says Brandon Smith, the company’s vice president of operations and development, who is a cousin of Kyle and Landon Smith. “We hit a pretty big growth spurt in which we acquired several assets that were turnkey and built two more ground-up projects.”
In 2018, the company built The Quarters at Ames, a 518-bed project near Iowa State University , and acquired The Quarters at Bloomington, a 477-bed project near Indiana University, in addition to The Quarters at East Lansing Cottages, built on the additional land near the company’s original acquisition in the market. In 2019, the company opened another development project, The Quarters at Vermillion, a 496-bed project near the University of South Dakota.
Today, Tailwind Group has 20 properties on 13 campuses in nine states, with a total of 8,500 beds owned. Including its other assets, the company has $550 million of assets under management and annual revenues over $50 million. The company’s portfolio is an even mix of core acquisitions, turnaround projects and new developments, says Brandon Smith, adding that the company also has 1,000 beds under development and continues to actively seek projects for its acquisitions pipeline across the country.
As Tailwind’s portfolio has grown, so has the company, which has steadily added people to its staff. In 2014, the company had less than 10 employees. Today, it has 150 employees. In 2020, the company added Lane Gravley as president to oversee its day-to-day management. Gravley has 25 years of executive leadership in various industries.
“Our original four owners are true entrepreneurs,” says Brandon Smith. “We’re at the stage now where we have to apply structure and systems to our business.”
The company has spent the past year building out a senior leadership team, headed by Gravley, to take the company to the next level as a full-service real estate developer, owner, and manager.
Tailwind has made culture a focal point. Putting people first and creating a family-like environment has enabled it to attract and retain employees, says Smith.
“We have a culture in our corporate office that extends to our sites,” says Smith. “Our leadership team cascades our culture down to our regional teams and site level teams. We want to make sure that our onsite teams are not treated any differently than our corporate teams. We have a strategic vision and goal, whether you are onsite in Michigan or whether you are a VP in the corporate office. It takes a lot of communication to do that. Luckily, we are not so big to where we cannot visit everyone on a regular basis, even during COVID times.”
Tailwind has been able to hire several key employees who came along with acquired assets. Many of those employees have been able to move up in the organization because of its growth.
In seeking acquisitions, Tailwind looks for value creation. The company has had success with acquiring properties built in the early 2000s that needed renovation and has done several full-scale renovations on such properties, replacing flooring, kitchens, and bathrooms, then enhancing the properties’ exteriors as well.
Tailwind believes it has had success because it prefers to be in the center of country. Whereas many investors have targeted the “smile” states — the band stretching down the East Coast through the Gulf States and to Arizona and California — Tailwind has targeted the Midwest and South. Its headquarters in Minnesota and the owners’ familiarity with Midwest markets make that a strong territory for the company.
In addition to owning a number of properties in Minnesota, Michigan and Iowa, the company also owns an 868-bed property, The Grand at Rum Creek, near the University of Alabama in Tuscaloosa, and a 544-bed property near Oklahoma State University called The Quarters Stillwater.
Tailwind also has several developments underway. It recently broke ground on a new student housing project in Lincoln, Nebraska, about a mile from the University of Nebraska campus. In downtown Iowa City, home to the University of Iowa, Tailwind is developing a full city block, including an 11-story student housing property, which should break ground by the end of 2020. The company also owns land in East Lansing, adjacent to one of its existing projects, where it plans to break ground on a new project in spring 2021.
“Our 10-year vision is to steadily grow our portfolio while maintaining an outstanding workplace culture,” says Brandon Smith. “The key for us is to grow in a way where we can scale our operation while continuing to operate with the mentality of a smaller, nimble business.”
— Randall Shearin
This article was originally published in the November/December 2020 issue of Student Housing Business magazine. To subscribe, please click here.