35 Years of Excellence – and Counting

Fiduciary Real Estate Development

Fiduciary Real Estate Development, Inc. (FRED) is a property management, leasing, construction, and development company in Milwaukee, Wisconsin that has steadily built a successful business based on quality. Now the firm has taken an even larger step forward…

When Business in Focus last featured FRED in November 2018, the company had just merged a small entrepreneurial development company called HSI Properties LLC into its operations. HSI Properties was also based in Wisconsin, and known for award-winning industrial, office and multi-family developments. It also provided development, consulting, investment, management and brokerage services.

Since the merger, FRED has been busy building a stronger, farther-reaching and even more customer-centric business.

Merging and moving
“We have now doubled our development ability by adding Tony (DeRosa) and his team and their capabilities,” says Brett Miller, President and CEO of FRED. “We also have 800 units under construction and we’re on the verge of another thousand units getting into the ground this year.”

The company’s portfolio today, which includes projects that are both in the ground and under development, is just under 7,400 units. Staff numbers have grown to 325, shared between locations in Milwaukee, Kenosha, Madison, and a few properties in the Green Bay market.

“One of the results of the merger between Fiduciary and HSI Properties is that it gives us the ability to extend the reach of our development capabilities,” says Tony DeRosa, Vice President of Development. Those development capabilities include moving into the state of Illinois.

Breaking new ground in Illinois
“We broke ground in August of last year on a 300-unit suburban garden-style apartment development in a suburb of Chicago called West Dundee, which is about an hour’s commute from the city,” says DeRosa.

“It’s typically a market that has been under-served with multi-family development over the years, and we were able to identify a hole in the market where there exists a lot of pent-up demand. We are now under construction, and we open up our first building in the spring of this year, and will complete the project in spring 2021.”

The firm also has two projects in the planning stages in other suburbs of Chicago, with a goal of having from three to five more projects, totaling roughly 1500 units in that market. “Certainly a significant portion of the growth over the last year and a half, and the growth we have projected in front of us comes from the merger with HSI,” says Miller.

“Adding another development platform, basically doubling our development pipeline and our development ability, certainly helps, but our traditional development platform with our partner Craig Raddatz continues to generate two to four projects a year for us as well. So it’s just taken the ability to do two, three or four projects a year to three, four or five – or maybe six – projects a year.”

Introducing Seasons
With the acquisition also came a focus on a new property development model. FRED is currently introducing a product line of two story garden-style apartments with direct entrances that it has branded the “Seasons” line.

“It took us a long time to come up with a branded name for the product,” says Miller. “We landed on Seasons because, when you think about the concept of it, it can have an appeal to just about anybody wherever they are in their stage of life, or their stage of career, or where they might want to be from a housing perspective.”

“We like to say that we lease to anybody from age 22 to 82 and everybody in between, and in this product [we] will because it has the feel more of a single-family home than an apartment,” adds DeRosa.

Simpler and faster
Historically, both HSI and Fiduciary, as developers of multi-family units, would identify the best sites on the market and start from scratch with their architects and planners, and then come up with a development plan that would fit that property.

“It would be a unique project and we would go through the whole process of designing it and costing it out and working through the approval process,” explains Miller. “A very creative process but also a very time-intensive, and a little riskier to go through, so with our Seasons line, we’ve simplified our development philosophy, and we are out looking for sites that fit that line.”

Currently, the team is in various stages of sourcing, developing, completion and leasing of the Seasons line in suburbs of Oak Creek, Milwaukee, and in the city of Madison. “That’s allowing us to ramp up on the growth side of our business,” says DeRosa. “Now we can look at opportunities and determine very quickly whether they fit our model or not, so it’s a very disciplined approach to development. It allows us to manage our risk a lot better, but also gives us a higher probability of putting ourselves on the ground on these projects.”

“Our plan, particularly with this new Seasons brand, is to get outside of our traditional Wisconsin markets and to focus on those mid-metro suburban areas in markets that have been under-served with this product,” says Miller.

The firm will also be breaking ground on a new 100-acre mixed-use development in the next 12 months in Pleasant Prairie, between downtown Milwaukee and the Illinois-Wisconsin border. This project will feature 300 market-rate apartments, a senior-housing component, and a significant commercial component that will include retail and medical offices.

Thriving through challenges
Ultimately, the company’s goals moving forward are simple. “The philosophy of our development program is, let’s do the things we can do very well and do them better than anybody on the market, rather than trying to do a whole bunch of different things well,” says DeRosa.

As always, with the successes of the real estate development industry, come the challenges, and those challenges are very similar to the last time we spoke to Miller.

“Continuing to attract and retain talent, in particular on the property-management side of the business, in a very competitive employment environment is still a factor,” he explains. “We all know that the unemployment rate in the U.S., and particularly in the Wisconsin area, is at an historic low; it’s almost 100 percent employment, so there’s pressure there.”

There is also the matter of increasing construction costs, so the cost of developing has an impact on new builds. “A lot of these markets have become ultra-competitive,” adds DeRosa. “So it’s a function of, ‘how do we get the best site possible and how do we create or generate a competitive advantage so that we’re not building the same thing as that guy down the road?’”

Controlling the cycles
The team understands that the business they are in is a cyclical one, and at some point there will be a slow-down in the economy and the housing market; as such, they are focusing on properties that will perform well in a downturn – properties that are “better located, better built, and better managed.”

“That’s our philosophy,” says DeRosa, “making sure we accomplish all three of those to put us in a good position for when that slow-down may occur.”

The other challenging factor for the firm is ensuring it always has the best people on its management team. “The biggest challenge in any environment is surrounding yourself with good people, and as I sit and look at the executive team I have now, it’s the strongest executive team I’ve ever had in this business. It rivals any team that you can find in the competitive markets we’re in,” says Miller. “That’s another thing I’m very proud of; I’ve got a great group of leaders here in the business.”

Going for goals
One consistent thing about FRED is that once the team is focused on its goals, it doesn’t let up, and with HSI joining the team, that resolve, and the value the company offers, should only grow stronger.

The two together are greater than the sum of their parts. “When you take Fiduciary and you add HSI, you don’t equal Fiduciary, and you don’t equal HSI. Together we equal something better,” says Miller.

“The end result is that everyone’s better,” adds DeRosa.

Both men agree that even though they were successful in their own wheelhouses, they were reaching limits as to where they could go, and that without each other’s organizations they might not have stepped outside their comfort zones to look at products and areas never considered before.

In December 2019 the whole team took the time to celebrate the company’s first 35 years in business, and used it as an opportunity to really embrace what the next 35 years are going to bring. It seems clear that this unified and evolving team will be stronger for its new-found flexibility and appetite. So expect FRED to move radically in pace with the demands of the market and do all the right things for its clients, employees, and investors.

September 20, 2020, 3:59 PM EDT