Commercial Real Estate

McKinstry’s Moment

By By Jeff Bond March 3, 2009

Amid the sea of people braving the Washington, D.C., cold during Barack Obamas inauguration, stood Dean Allen, CEO of the Seattle-based McKinstry Company.

It was happenstance more than anything else that made his presence possible. Allen, who for months had found his company uniquely and surprisingly tied to the Obama campaign, was planning a family reunion with his two grown children at the nations capital on the week of Jan. 20. So, Allen and his wife, Vicki, decided to take the opportunity to experience this historic moment and, perhaps, take in a ball or two.

But it is also fitting that Allen was able to attend the inauguration. After all, the swearing-in of Obama as president could potentially mean more to the full-service mechanical contractor and engineering company than Allen could ever have imagined.

McKinstry and Obama became inexorably linked after an unexpected visit by the presidential candidate in February of last year before a rally at Seattles KeyArena.

According to Allenwho says, for the record, that McKinstry remains politically neutralObamas advance team had conferred with the staffs of Washington Gov. Christine Gregoire and Seattle Mayor Greg Nickels about the fact that Obama would have some free time before the rally and was interested in touring a nearby business that was involved in the green energy movement. The local democratic leaders offered up the McKinstry Co.

The firm has long been expanding its mechanical engineering business beyond designing and building new electrical and mechanical systems to include managing those same systems once the projects are completed. The idea being that McKinstry can manage all the machines that make a building work through their life cycles, and retrofit those machines and systems as the buildings mature.

This isnt a new idea. Other companies, such as Seattle-based MacDonald Miller, are also using the same techniques. But at the moment, McKinstrys servicing and retrofitting business is in high demand. Its easy to see why. Experts estimate that America wastes between 30 percent and 50 percent of the energy we all use; our concrete, glass and steel fortresses of business are among the worst sinners, squandering about 40 percent of the energy used to heat, light and keep them running.

So, anything companies like McKinstry can do to make systems work more efficiently will save clients energy, money and even reduce their carbon footprint.

It is a virtuous cycle in which all the participants win, Allen says. One of our beliefs is that there is a lot of talk about green, but if you actually want to do something about conserving energy today using current technology, the first place to look is in running buildings more efficiently. The best kilowatt hour your company can buy is the one that it is currently wasting.

Days before Obamas early February 2008 visit, an advance team showed up at McKinstry to scout the site and to perform a security check. On Feb. 8, McKinstry officials, including Dean Allen and his brother, David, received Obama and his entourage at the north end of companys operation in the industrial heart of SoDo.

Dean Allen smiles when he thinks back to the visit, sitting at the conference table in his office, the room cluttered with dozens of engineering project blueprints, as well as memorabilia from his other major interest: life sciences.

Obama started the tour going through the companys huge production shop, a traditional-looking place for any construction company, but perhaps not quite the green image our next president was expecting.

I think he walked in thinking he would be in a technology company, Allen recalls. But instead, he sees welders and pipe fitters working on projects.

The tour guided Obama through McKinstrys various departments, including its health club, which has a basketball court. B-ball enthusiast Obama even shot a few hoops, but theres no word yet if Obama tried a swing on the companys rooftop driving range. Allen says Obama got a sense of the unique culture that makes McKinstry a great place to work.

As is tradition at McKinstry for retiring employees, a jersey was cut out of sheet metal for Obama, who signed it. The metal shirt, emblazoned with the phrase Obama 08, is framed and hangs on a company wall.

Once the tour had ended, Dean Allen didnt expect much more to come from his meeting with Obamathat is until he received a call some months later. It was the Obama campaign saying that the company was going to be mentioned in a 30-minute infomercial scheduled to run a few weeks before the election.

It definitely appears that the McKinstry Co. profoundly impressed the man who would soon become the 44th president of the United States. In the nationally-televised, 30-minute special, Obama promised to use companies like McKinstry as a model for the nation, because of its ability to create good jobs, conserve energy and save its customers money.

Allen says that when he saw the special, he was stunned and shocked … but happily shocked.

It was a surreal kind of a moment, he remembers. The thought that the president of the United States would think of us as an example for the country. I was very proud for our staff to receive such recognition. Then I thought that we better get to work. We have something to live up to.

Following the half-hour special, McKinstry was deluged with e-mails and phone calls from clients, friends, well-wishers and the curious wondering just what was this company that had made such an impact on Obama. Allen has even acknowledged that the company is still in contact with the Obama administration, offering research and advice on strategies for the stimulus package.

The association with the worlds most popular politician is the gift that keeps on giving for McKinstry. Allen was a hit on the Fox Business channel, where his ironic wit showed through. He described himself as Dean the Plumber, from Seattle, taking a good-natured jab at Republican candidate John McCains famed supporter, Joe the Plumber. Hes been interviewed by various publications and McKinstrys energy-saving systems have been featured on a number of spots on National Public Radio.

Still, such unexpected fame appears to make Dean Allen a bit uncomfortable. In interviews, he tends to downplay himself and stresses that McKinstrys award-winning workplace focuses on putting its employees first. Dean and his brother David, who is executive vice president of marketing, have always held that the main aim for McKinstry is to serve its 1,800 employees, who are now spread across offices from Denver to Seattle.

And when touring McKinstrys SoDo facility, the managements focus on the employees becomes clear. It shows in the space and money that the company has lavished on its employees, building the expansive health club, on-site delicatessen, rooftop barbeque facility and, yes, the driving range.

Dean Allen is fond of saying that the corporate culture at McKinstry has a special vibe, in which the company is a very happening place within an odd vanilla wrapper, full of hard-working and passionate people.

He relishes the companys move toward new and interesting technology. Standing within its Knowledge Response Center, Allen looks at a bank of large screens that allow engineers to monitor thousands of building systems, from a small store in Texas to a skyscraper in Seattle, all in real time. If there is a malfunction, the systems will e-mail the monitoring center and the engineers can troubleshoot the problem remotely, saving time and money.

One screen shows the airflow and temperature inside a server farm somewhere in Central Washington. On another screen is a three-dimensional drawing of an air-conditioning unit inside a large building; a third shows the power consumption rates over the last year for another facility. If a buildings power consumption suddenly increases, the change can often signal a problem with the system.

Of course, McKinstry has been doing this kind of monitoring for years. But in the last decade, such work has become an increasingly large part of the firms revenue stream.

Today, about half of the companys $400-million annual revenues come from managing and servicing building systems and retrofitting old equipment. And this sector of the business is only expected to grow as companies look for ways to save money, cut their energy usage and squeeze more life out of mature buildings and equipment.

The other half of the companys revenues are generated from its original roots of designing, engineering and constructing facility systems, such as air conditioning, fire prevention and all the duct work that snakes above your head or below your feet in your office.

What is today known as McKinstry Co. dates back to 1934, when George Allen and Merrill McKinstry worked for Bellevue-based W.E. Beggs Co. When the owner, William Beggs, died unexpectedly, the two remaining executives changed the firms name to the McKinstry Co. and re-launched the business in June of 1960 with six plumbers for commercial and residential jobs.

Originally focused on plumbing and piping, McKinstry began to expand its services, pioneering the idea of both designing and building mechanical systems. In 1971, Merrill McKinstry died, leaving George Allen as the sole owner.

As a kid, Dean worked for his father, digging ditches during summer breaks. But he wasnt very interested in the family business. His focus was on medicine and life sciences. In the late 1970s, Dean Allen graduated magna cum laude from the University of Washington with bachelor of science degrees in biochemistry and psychology.

But before pursuing graduate school, Deans father suggested he come and work for McKinstry and save money. Dean never quite made it to graduate school.

I found out that construction was really fun and that McKinstry was a great little company, Dean Allen says.

George Allen died in 2004, but not before seeing McKinstry grow into the states largest mechanical contractor, which offered a full line of services, from designing to engineering to constructing systems. It had also become a local leader in managing and retrofitting building systems. McKinstrys portfolio of projects includes Amazon.coms headquarters, the Fairmont Olympic Hotel and Qwest Field.

While such services as managing a facilitys energy use seem like no-brainers today, Allen acknowledges that talking building owners into the servicing and managing of their systems was a struggle.

We built this system when it wasnt hip to be in the business of conserving energy, he says. It was also difficult to get started because the Puget Sound region has some of the cheapest kilowatt prices in the country. We honed our skills in the toughest market there is.

Those skills are now proving successful in other markets around the country as McKinstry opens offices in Denver and Minneapolis.

This expertise in retrofitting also helped McKinstry land a federal contract that may potentially be the companys biggest in history. And no, it didnt come from Barack Obama. The 10-year contract was actually announced by the outgoing Bush administration and could be worth up to $5 billion for the firm. On Jan. 2, McKinstry was named one of 16 service companies that the U.S. Department of Energy has identified to help construct and retrofit federal buildings to meet goals for energy efficiency, water conservation and renewable energy use. The Department of Energy is seeking to reduce its energy use by 30 percent.

Under the terms of the contract, McKinstry will design, construct and obtain all necessary financing for certain federal projects and the agency involved will pay for the work over time from the money it saves from reduced energy and utility bills.

As he sits amid various papers and projects in his office, Dean Allen says he never regrets his decision to begin work at McKinstry 32 years ago and forego a career in health care, partly because hes been able to pursue other interests. While hes involved in various conservation projects and is a major basketball fan, his main outside interest remains the life sciences.

In fact, he spends about one-third of his time working with various health care groups. Not only is he a board member for PATH, the nonprofit organization that is working to improve the health of people around the world, he also sits on the boards of the Seattle Biomedical Research Institute and Global Partnerships.

Allens interests have also been embraced by his children. His son, Matthew, is a shooting guard for the Swarthmore Garnets and his daughter, Teryn, is a graduate of Georgetown University and is involved in international health initiatives. She returned at the beginning of this year from a working trip to South Africa.

As for the future, Allen expects to continue innovating at the company. While most construction firms anticipate 2009 will be a down year, he believes McKinstry will continue growing as more companies look for ways to save money at their facilities. He also promises to continue to push McKinstrys boundaries.

I think of it more as experimenting than risk-taking, Allen says of McKinstrys new initiatives. It is illogical to do the same things over and over again. Weve tried to stay on the leading edge, while doing our best to avoid the bleeding edge. Weve crossed that line occasionally, but I think well be just fine.

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