How 33 Realty Learned From Its Mistakes In The Downturn To Thrive In The Boom
Nietzsche famously said, “That which does not kill us, makes us stronger.” Eric Weber can attest to that.
Weber graduated from the University of Illinois with a degree in accounting. His friend, Drew Millard, earned an engineering degree from U of I. In 2007, the pair partnered on their first real estate investment, a three-flat apartment building. Shortly thereafter, the market collapsed.
“We felt that we could be DIY. Instead, we were absolutely crushed and made all kinds of mistakes,” Weber said.
But lessons learned from those mistakes set Weber and Millard on a journey to where they are today — the driving forces behind 33 Realty, a full-service real estate firm with over $120M in investment sales last year.
Millard, bored with his job as a civil engineer and with fewer projects as construction slowed during the downturn, founded 33 Realty in 2009. It initially focused on leasing luxury apartments, and later added property management duties. Weber stayed at his CPA job during the first few years and helped Millard during his off hours, before joining 33 full time in 2012 in time to help establish the firm’s construction and investment brokerage arms. Their big break came from a community lender looking to invest $10M in distressed properties on the South Side.
Weber and Millard had no experience in a deal of that size, but realized they had learned enough through trial and error to create a good opportunity for rapid, sustainable growth. The firm’s four service lines were generating income as the market began to recover, and Weber drafted a countercyclical business strategy built on scale and intended to weather future downturns.
The pair also realized they needed to delegate some of their responsibilities, and named Susan Beyler as chief operating officer and partner.
With leasing and property management, 33 focuses on small to midsize apartment buildings ranging between 30 units and 300 units. The owners of larger buildings have budgets to keep on-site managers. Smaller building owners need to be more nimble, which allows 33 to fill a need to meet tenant demands.
Weber said the key to 33's success in property management is to constantly interview and hire people, as it is a people-based business.
Cubed Construction, 33's construction arm, focuses solely on multifamily renovations and commercial build-outs. Weber said the firm loves tackling light multifamily renovations on a high volume basis: It averages 30 to 50 renovations a month, at around $15K to $20K per unit. Weber found there is no competition in this area and that the buildings are always needed. He said buying bulk materials and having a dedicated labor force helps with the costs. If the construction cycle slows, 33 can shift the workers to the property management arm.
The commercial build-outs add flexibility to 33's business model.
The real test for 33's business strategy may be on the horizon. The signs of a downturn in Chicago real estate are starting to reveal themselves, and Weber said 33 is ready for that possibility. The firm's distressed real estate services arm is still active, while other firms have shut theirs down. Weber said 33 is aggressively organizing marketing and touchpoints to reach servicers, hedge funds and hard money investors for representation. Weber said 33 intends to seek out larger distressed portfolios and he believes its experience from the previous downturn and existing relationships will allow it to capitalize on any disruptions in the market.