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Friday, 09 November 2012 08:55

All About the Benjamins: A look inside one developer’s investment playbook

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Derek Coppess, 616 Development LLC Derek Coppess, 616 Development LLC Courtesy photo

GRAND RAPIDS — Developers know the secret to success in their industry is money.

Having enough capital to get a project off the ground requires forging relationships, and in business no one is going to lend any dough to a developer without a track record and proven credibility.

When 616 Development LLC owner Derek Coppess decided that real estate development was going to be his life’s work, he was 20 years old with no track record and hardly a dollar to his name, he told attendees of the University of Michigan/Urban Land Institute Real Estate Forum in Grand Rapids Thursday.

Coppess knew he needed investors so he set out on a quest to raise capital and start building that all-important track record. By the time he was 25, Coppess raised $5 million in capital. From 25 to 30, he raised $20 million in capital. Then, right when it seemed he was on his way to bigger and better things, the recession wrapped its development-crippling hands around the real estate market.

Still, after selling off some previous assets, Coppess found himself sitting solidly with his banks and investors and lucky enough to restructure a lot of his old portfolio through 2007 to 2008.

However, it was establishing the “tribe” mentality to operating his business that brought him the most success, he said.

“People don’t buy what you do, but why you do it,” he said. “Knowing the ‘why’ of what you’re doing inspires leadership, and when you have that ‘why’, that helps attract people to you.”

It took an older generation of investors and developers to help him learn this. Recalling the story of when he first sat down to ask a potential investor for money, what followed was his moment of enlightenment, he said.

“I sat down and had this 10-page, horrific document, and I said, ‘I will pay you X percent on your money,’” Coppess said. “(The investor) said, ‘Derek, I don’t care about 10 percent, I don’t care about 15 percent. Share with me how I’m going to get my principal back.’”

The moment totally changed his perspective on how to approach the asking situation. Instead of trying to tell investors what returns they could expect, Coppess said he started asking investors what returns and structures they needed.

It’s important to be flexible and open to different kinds of financing, he said.

With countless combinations of debt and equity structures to work with, Coppess said development can seem like the Wild West. With his company’s 1 and 7 Ionia project in downtown Grand Rapids – the home of Grand Rapids Brewing Co. and a handful of new apartment units – Coppess said he had nine partners that came together to find a creative solution.

“You have to understand what people like to do and how to work with them,” he said. “Information is so ubiquitous these days, for you to go into a meeting with someone and not know even a little about them, it’s almost irresponsible.”

Read 7032 times Last modified on Friday, 09 November 2012 08:59

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