Construction, Real Estate, and Small Business & Startups

616 Development learns from mistakes

CEO admits he was ‘disconnected’ during company’s rapid growth.

June 16, 2017
| By Pat Evans |
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Heading into 2017, Derek Coppess knew there would be a change at 616 Development.

The change came fast this spring, as 616 partnered with Mount Pleasant-based KMG Prestige Inc. for backend operational support and “right-sized” its staff, trimming from nearly 30 employees to fewer than 10. The staff restructuring also resulted in the loss of former Director of Development Jeff Olsen and Director of Community Relations Monica Steimle-App, the firm’s first employee.

“I knew something was going to happen this year, we were growing and growing and stabilized and we could see how we were planning out,” said Coppess, the firm’s founder and CEO. “It became clear if I were to get back into development, we’d have to restructure some things.”

616 Development’s growth came fast, with three large projects — 616 Lofts on Michigan, 616 Lofts on Monroe and 616 Lofts on Alabama — coming online within months of each other and stifled the development pipeline coming up. As the projects came online, staff at the company ballooned. Once those projects were stabilized and online, the team wasn’t fully needed, Coppess said.

Since 616 Development’s founding in 2011, the company has built a portfolio of seven communities and more than 300 units, but with a major focus on market-rate housing. The city’s relatively recent clarity on a vision for affordable, workforce and senior housing plays a part in 616 Development’s transition, as well.

“Eight years ago, everyone was excited about market rate, and we built and built and I think they appreciate that,” Coppess said. “But now there’s an emphasis on different asset classes that we’re not currently equipped to get into if we wanted to.”

As Coppess met with mentors, a connection was formed with KMG Prestige, and the opportunity for the property management firm to come into the backend and support 616 Development as a brand came into being. KMG Prestige manages more than 25,000 apartment units nationwide, including a large amount of affordable housing units.

KMG Prestige also provides economies of scale to help lower prices and offers “some financial benefits,” Coppess said.

The transition will be seamless to company stakeholders while making 616 Development more efficient operationally by “backing up the back of house,” Coppess said.

“I didn’t even know it was an option, that this was possible, it’s truly an entrepreneurial journey,” he said. “I started spending time with KMG and learned how much I didn’t know about certain aspects and they have 40 years of operational experience and philosophically love the community creation model and think we can carry that into different markets and asset classes.”

The move allows Coppess to move back into the front line and into development, which is where he said he and Olsen began to trip over each other. Olsen has since moved on to work directly with Celebration Cinema’s development team, as it continues forward with the proposed Studio C! project in downtown Grand Rapids, Coppess said.

Steimle-App is the new director of property management at Rockford Construction.

Coppess said 616 Development helped with the vision of Studio C! and hopes to collaborate on the backend of the project once it’s finished. The partnership will, however, allow the developer’s other pipeline projects to move forward, as well.

The projects include two buildings in the Creston neighborhood and one on Wealthy Street.

He will now focus 100 percent on development.

“It frees me up to push the projects quicker,” he said. “We can also look at our pipeline and say, maybe that should be (a) different asset class.”

With projects possibly moving to varying asset classes, 616 Development also will begin projects in new markets, including another Michigan city announced in the next few months, Coppess said. Grand Rapids also will be home to the company, but Coppess said his focus was lost in all of the projects during the past few years.

“We want to develop appropriately here and not too much or too little,” he said. “I wasn’t in a position to see real clearly, even a few months ago of what we should or shouldn’t do. It’s part of our responsibility to know that and work with the community to understand that, and I got disconnected from that.”

Coppess said he’s a big believer in seven-year cycles and this was a change that was needed at 616 Development. He said through the fast growth of the company, there were times he should have been paying closer attention, especially as the growth began to flatten.

As he moves away from the transition, he’s coming to terms with the staff that had to be cut. He acknowledges the company might have grown too fast, resulting in the right-sizing, but he’s happy many of the former employees are “landing in good, healthy spots,” as they start new chapters in their careers.

“I don’t have a lot of regrets as to how fast we grew,” Coppess said. “It’s just part of the learning process and having to constantly learn and innovate. It’s like we have this beautiful baby and however it happened, we have this beautiful baby.

“We’ve learned, and now we’re in a great place and we don’t have to grow as fast.”

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