Insights: East Michigan | Business Spotlight | Fall 2017

REDICO: revitalizing Detroit through real estate development

Ariel view of Detroit
By Heather R. Johnson

Some of the country's most successful companies – Nike, Amazon and Apple, to name a few – have placed big bets on a market before it blossomed.

Detroit-based REDICO (Real Estate Development and Investment Company) did the same, betting on its home city at a time when other companies were leaving to do business overseas. In the early 2000s, REDICO held a consultant role for the development of Compuware's world headquarters, Detroit's first new single-tenant office building in many years. The 15-story, $350 million development brought additional office, retail and restaurant space to downtown and was pivotal to the revitalization to come.

Rather than bypass the Motor City, like other companies, REDICO helped spur its renaissance.

“We were a bit of a contrarian in that regard,” says CEO Dale Watchowski. “We bet on the city of Detroit very early.”

REDICO offices
REDICO's Detroit, Michigan offices
(Photography by Tom McKenzie)

Diversity at the core

Although REDICO has its roots and its heart in Detroit, it invests in and develops properties across the United States. Since real estate developer Robert Sosnick founded the company more than 50 years ago, REDICO has acquired or developed large commercial properties in Chicago, Miami and Honolulu, among other markets. REDICO's ambitious approach prioritizes diversification in property types, employee skills and geography. In 2008, it acquired an interest in American House Senior Living, adding yet another element to its portfolio.

Unlike many real estate developers, which focus on one or two property asset classes, REDICO's business includes office, retail, medical, industrial, sports and entertainment, and research and development parks. Recently it has branched into mixed-use spaces, allowing it to use its connectivity and other experience to execute complex development strategies.

“We buy large tracts of land where we can go vertical with a variety of different properties,” Watchowski says. “Typically, a land developer would break it off. We can acquire and develop the land and bring in retail, hotel, multifamily and other components that would be part of a mixed-use development.”

REDICO assigns a team of real estate professionals with diverse backgrounds to oversee each property type.

“Our founder instilled a culture of hard work,” Watchowski says. “He also allowed employees to get valuable experience in a variety of activities, so we have well-rounded real estate executives and we eliminate silos in the organization. Teamwork and a commitment to getting the job done has led us to where we are today."

REDICO's diversity helped it overcome what some experts call the worst financial crisis since the Great Depression. Again, the company hedged a bet that worked in its favor.

While most office developers slashed operating budgets, REDICO invested in property improvements.

“We offered a better customer experience and we serviced our customers extremely well,” Watchowski says. “We were putting money into properties at a time when others were pulling back, but our thought was that people would want to be in a REDICO building because of the level of service we provide and the quality of management we offer.”

It worked. The company’s portfolio expanded and its properties maintained high occupancy rates. Currently, REDICO maintains a 92-plus percent occupancy rate in all its properties.

Developing the heartland

Every year, REDICO’s executive team revisits the strategic plan and makes decisions as to where to invest, Watchowski says. Recently, they decided to put their attention back on Detroit and the Midwest.

Founder Robert Sosnick's daughter, Karen Sosnick Schoenberg, is part of that team. Now principal and board member for the company, she oversees the firm's strategic direction and risk management. REDICO bases its current “Heartland Strategy” on returns — property in the Midwest is less expensive than on the coasts — as well as previous successes.

“We believe the Midwest is coming back in a big way,” Watchowski says. “Many manufacturers that have historically done business offshore are coming back to the United States. And in the Midwest, there's a very dedicated and talented workforce that we believe companies have an opportunity to capitalize on, so we want to capitalize on that.”

In 2015, REDICO, with fellow local developer Peter Cummings and New York City-based HFZ Capital Group, acquired two of Detroit's most iconic buildings: The Fisher and Albert Kahn buildings, both historic structures that had been sitting virtually dormant.

“Our decision to acquire the buildings had a lot to do with our commitment to the city,” Watchowski says. “We didn't want those buildings to go to the wrong type of owner.”

REDICO sold its interest to Cummings not only to make a profit, but because of that same commitment.

“We knew Peter would be a great fiduciary for the buildings,” Watchowski says. “He'll bring those buildings into the form they really deserve.”

REDICO's Midwest expansion also involved growth of American House Senior Living from several Southeast Michigan locations to a multi-state brand that includes communities throughout the state, as well as in Illinois and Florida. It also plans to continue growing in Florida to take advantage of the state’s growing snowbird population of Midwest transplants.

REDICO employees
CEO Dale Watchowski and REDICO employees
(Photography by Tom McKenzie)

Passion for community

REDICO's forward-thinking attitude and willingness to explore new avenues have helped it become a nationally recognized real estate development and investment firm. The company has stayed committed to its East Michigan community even while expanding to markets as distant as Hawaii.

For REDICO, Huntington – which continues to operate from its founding location in Columbus, Ohio -- was a natural fit as a banking partner.

“At a time when it was difficult for a developer-acquirer to find capital, Huntington was there,” Watchowski says. “And they have served us well for many years.”

Watchowski says Huntington Senior Executive Vice President Sandra Pierce has been essential to REDICO's growth. “She's always looking out for us as a customer,” he says.

Another reason for Huntington and REDICO's compatibility is their mutual passion for their communities. In East Michigan, Huntington has launched programs that teach business basics to young people and partnered with dozens of local and regional charities. It is also the No. 1 Small Business Administration lender in the state, something that hasn't gone unnoticed by Watchowski.

“As a company that's philanthropic, you want to see your bankers doing the same,” he says.

“We try to do things better. We stick to the basics: operate well and care for the residents and customers very well.” –Dale Watchowski, CEO, REDICO

Strategic growth

Businesses that take big risks face big wins and big losses. REDICO placed its bets strategically, anticipating growth years before it happened, and came out a winner. Taking calculated risks is an common trait in successful entrepreneurs. In 2015, American House Senior Living received Ernst & Young's Entrepreneur of the Year Award, while REDICO had received it in 2006.

The company invested in senior housing before the baby boomer population aged into independent and assisted living, and the market followed. It also invested in Detroit and was a catalyst for Detroit’s renewal.

For REDICO, the key to success was balancing a tendency to arrive early to market with a focus on operations, Watchowski says.

“We didn't just grow the business organically,” he says. “We found companies to partner with or to acquire that had been in the business and that were operators. Often, the market catches up to us and becomes more competitive. We try to do things better. We stick to the basics: Operate well and care for the residents and customers very well.”

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