How 3 real estate entrepreneurs expanded during slowdown

The Great Recession decimated more than one real estate company, but three would-be local entrepreneurs saw opportunity to start businesses. They took the plunge when the outlook seemed grim. Today, they’re leading some of the Indianapolis area’s most successful development firms. Aasif Bade of Ambrose Property Group, Tadd Miller of Milhaus Development, and Joe Whitsett of The Whitsett Group spoke with IBJ reporter Cory Schouten about their strategies, challenges and the sources of their inspiration.

Aasif Bade made his arrival as a real estate player official when he led an investment team in a $6 million deal to acquire the 16-story art deco gem known as Circle Tower. (IBJ Photo/ Perry Reichanadter)

Aasif Bade, Ambrose Property Group

I’ve always wanted to be entrepreneurial. I remember having a childhood lemonade stand, and a lawn-mowing business. I’ve always had that mind-set. I had an opportunity to intern at Duke, and my mentors were around when Duke was founded. That was what truly inspired me.

Why start in 2008 is probably more a question than anything. It was carefully planned and thought out. There’s no secret the economy was in bad shape. There was no money out there. I viewed it as a perfect time from an individual standpoint: being single with no kids, 26 years old. I could start from the ground floor and build a brand in a slow economy, build a great team, whereas it would’ve been much tougher to do that in 2006.

We didn’t have any problems from the past, no legacy issues with properties bought at the peak like a lot of our competitors. We self-funded with some minor bank loans, about $100,000 total. We’re going to end up 2012 with roughly $50 million of acquisitions, redevelopments and developments for the year. Last year was the first year of developing anything. We’re up to 15 people.

The most nerve-racking part was actually Day 1: Nov. 8, 2008. Despite all the planning and thoughts and imagination and desires, the realities of the market drove me to have a business model allowing for survival in an awful economic downturn. But we made it work, made money every year of existence. I’ve had good success and great relationships.

Something I did not expect was having an identity crisis. There’s a lot of confusion when you’re brokering properties, developing, redeveloping, acquiring properties. I think we’ve kind of resolved that, honed our activities in the last year, realizing we’re not everything to everyone. We’re still doing all those things but have focused and streamlined.

There’s a handful of people who’ve been great mentors to me, a lot of people from Duke. Gene Zink is on our board of advisers. He said to always maintain a great reputation. He was one of very few people who thought it was a great time for us to start. Real estate is a cyclical business, and he’s been through the worst of times and the best of times and he knew that we would survive and come out stronger.

Make no mistake: We have a long way to go before we’re ever talked about in the same circle as Browning and Duke and some of those companies that have been around for 30 years or more. We’re just trying to build great relationships and do great work. The biggest component is having an amazing team around me, starting with my partner Pat. We have a great team of people with a lot of great relationships.

I just have a huge passion for seeing a building or a project come together. I really like the business world, whether it’s an office, even more so industrial or manufacturing, retail or health care.

We’ve contemplated replicating our model in other cities. That’s a few years off at the least. Some of it may just happen when we find the right project to take us to another city. We’ve learned a lot of lessons from other people and don’t want to replicate those mistakes. We don’t want to grow too fast. We want to grow in a steady, smart way.

My advice is to build a team of good people around you, even if it’s just two or three people. It’s a tough business. It makes it easier if you hunt in packs.•

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The Mozzo, a $6 million apartment and retail development along Virginia Avenue in the Holy Cross neighborhood, will be a signature project for Miller. (IBJ Photo/ Perry Reichanadter)

Tadd Miller, Milhaus Development

I knew what I wanted to do since I can remember. I don’t know many 10-year-olds who subscribe to homebuilding magazines or 12-year-olds who ask for a drafting table for Christmas. I think part of it was growing up in a small town [Elwood]. Whenever we would visit Chicago, I was always mesmerized with all the buildings. I never spent any time wondering what I’d grow up to be.

Starting Milhaus wasn’t really my choice. It was a situation based on difficulties in the former partnership [at Kosene]. I was in the position to either start something, or don’t work. There was no plan, there was no goal. I had to figure it out and make something happen or go into a job market with nothing.

It started with me being escorted out of an office. I walked into my law firm to figure out what was next. The next day, we formed a name and set up a website. I was busy trying to figure out what to do as people started calling. It was a very organic, non-organized, figure-out-what-we’re-doing kind of place. It took us until the middle of 2010 to get our business plan and goals finalized.

Some of the best decisions we made were aligning ourselves with the best people, whether it’s CSO Architects or the Glick family. We were able to work really hard and we were able to get mentorship and support from people who knew what they were doing and were willing to put us in our place when needed, and also give us support. The second thing is, take your time. We didn’t go out and get fancy offices and hire tons of people.

I always intended I would get a shot to run a business. It wasn’t something where I had an urge to own a company someday. It was very much I wanted to do development work and I knew I would have to take an active role. I never intended for there to be a Milhaus, but I was stuck in a situation I was no longer welcome. So now I never intend to be anywhere else.

The real reason we were able to come out swinging is, we didn’t try to generate fees to survive. We were focused on being developers. You don’t just give up on your business when times get tough. Stay focused on what you are. We have 1,000 units under construction right now. We didn’t chase all kinds of lines of businesses. We stayed within our core.

I’ve been pretty blessed having been in a business and done pretty well, so I had some capacity to cover the initial startup. We also have some very strong high-net-worth relationships. We have raised or committed almost $140 million since 2010.

We’re not looking to become some giant business. We have a great culture, a great group of people, and we really believe we’re doing great projects. We’re not going to go head-to-head in the suburbs just to drive unit count. Bank One was not an easy project, but it’s going to be a trophy for us. We’re doing custom-designed, integrated projects. We really want to do stuff we’re going to be proud of in 25 or 50 years. I see us being a boutique Class-A, for-sale, for-rent, high-density multifamily group.

The biggest shock I had was, I was always under the belief if you had the money, the projects would come in the door. I spent the first 2-1/2 years commuting to New York City, sometimes four times a month, knocking on every door, until somebody bought my Midwest Indianapolis story. My belief is that Indianapolis is one of the best cities in the country, and my pitch was, ‘Look, you guys are missing it. You are chasing deals where everybody and their brother is competing.’ It was like finding a needle in a haystack to go with Indianapolis for a little better yield.•

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Joe Whitsett is most proud of his 86-unit apartment project known as 1010 Central, which incorporates a three-story 1895 warehouse that once housed Central Restaurant Products. (IBJ Photo/ Perry Reichanadter)

Joe Whitsett, The Whitsett Group

My son, Tony, had graduated from college. He wanted to work in the industry and it gave us an opportunity to do something together. I thought even in a weaker economy it would be a fine business move. We were very fortunate. I had built some relationships with investors and bankers over the years. Even in the worst of times, they stuck with us—BMO Harris in particular and City Securities.

When people say to me jokingly that I picked a bad time to start a development company, I say, ‘Not really.’ One of the primary reasons it didn’t worry me is affordable housing has always avoided the cyclical ups and downs of the economy. To everyone’s surprise, it was more than an average recession. It had a big impact on the affordable-housing industry.

We were fortunate to have the capital needed to jump on some properties we never could’ve gotten for those prices outside the Great Recession. Now we have to avoid doing anything stupid, and we’ll be OK.

We have a log cabin on our property that we built years ago. That’s where we started the office. We had no overhead, no assistants, no salaries. Just a copier and a printer. We stayed there two years. When we felt we had to hire somebody, we moved down to the Circle Tower building.

The bailouts and stimulus, I can’t complain. When the recession hit, the federal government started pumping out a lot of stimulus money, and a lot of it went toward affordable housing. We had a lot of shovel-ready projects. We had five or six projects teed up and ready to go. They all went. Normally, you wouldn’t expect all your deals to get going. I will say our company and the state have been very good stewards of that money.

The management of apartments and affordable housing in general has been more difficult than we expected. The turnover has been high, and it’s just a lot of work. The finance side has been very good. One thing that did surprise me is how quickly the market came back when the economy recovered. For about a year now, the affordable-housing market has been very strong.

I hate to say it, but when I went to law school, I really never thought I’d practice law. I had much more interest in the business side of business than the legal side. But I fell into some positions that I enjoyed. And I stayed. But as time went on, I got that desire back to be in business instead of practice law.

I always pride myself on learning from other people’s mistakes. When I practiced law, I tried to pay attention to what was going wrong. I always say I’m very conservative with my approach to the development business. Which may be seen as an oxymoron—but we’ve certainly been willing to walk away from deals that didn’t work. Don’t try to grow too quickly. It is a marathon, not a sprint.

Our five- to 10-year plan is, we’d like to be very active in Indiana, and we’d really want to be developing in at least four other states. Not necessarily contiguous. We’re doing both affordable housing and market rate, and doing adaptive reuse of old buildings. To do that, you have to spread out a little bit. We have about 18 complexes we own and operate and have developed another six for other people that we manage.

It sounds kind of funny, but we really enjoy the finance side of it. I’ve always enjoyed the numbers side of these transactions. The historic part is fun, too. I really enjoy taking old buildings and bringing them back to life. I’ve always lived in old houses, and I’ve always loved old cars and old boats.•