Listen to this articleThe Blueprint
- Fountain Real Estate Capital launched in 2020.
- Firm has acquired 1.2 million square feet of industrial space.
- Partnership with Midloch helped drive expansion.
- Wilhelm shares advice for aspiring entrepreneurs.
In late 2019, Mike Wilhelm and Rick Burnton decided it was time to start their own real estate group.
The two had met in the late 1980s, working together at Marquette Banks. Both moved on, with Wilhelm eventually working at CBRE and Burnton moving into investment banking and later running a plastics company.
“Over the course of the years, we kept saying ‘we’re going to do this, we’re going to do this’ and then finally one day in 2019, we’re having a beer at Bunny’s and said ‘I think the time is right. We’re not going to wait any longer.’ And so off we went.” Wilhelm said, recalling fall 2019.
Fountain Real Estate Capital became incorporated on Feb. 27, 2020. Wilhelm, an office broker, said that on March 17, his day job practically disappeared, forcing Fountain to “hit the ground running.”
Six years and 1.2 million square feet of industrial investment later, Wilhelm sat down with Finance & Commerce to talk through Fountain’s founding, its partnership with Midloch Investment Partners and his advice for starting a new company.
This interview has been edited for length and clarity.
Q: What can you tell me about the first six years of running of a company?
A: Rick had the finance background, I had the real estate background, so together we were able to ham and egg it pretty well. But you have to have help along the way. We had some good banking relationships that certainly helped, having all the contact in the network in the real estate community certainly helped, and so when word started getting out that we’re in acquisition mode, our phone started to ring a bit after we closed on our first acquisition. Also, our phone starts ringing, and then leveraging those relationships, it really was a big difference maker for us.
Q: It seems like Fountain and Midloch have formed something of a partnership. Can you talk to me a little bit about how that came to be and what that partnership looks like?
A: Our second acquisition was actually a building right across the street from our first acquisition about six months later. I used to drive past this building all the time, and it was a cool-looking vintage industrial building with clear story windows at the top of the warehouse and good presentation from the street, even though it’s industrial. I drove around it a couple of times on my own, just thinking, “oh, that’s a cool building.”
And then, sure enough, a couple weeks later, a “For Sale” sign in the ground. So we were all over it. During that process of acquisition, we were looking for a JV partner to come along with us. We were introduced to the Midloch folks through a connection I had at Colliers, and they joined us on that one, and we just really liked working with each other. It was a partnership that took off from day one. I think we’ve done seven deals with them over the last six years now. They’ve been invaluable to us from that standpoint.
Q: Can you talk to me about what product you and Rick are usually looking for?
A: We focus on industrial, even though I have a pretty extensive background in office, we’ve tried to stay out of that environment. The office market has gone through some turbulence in the last few years.
There are some tremendous deals out there, but just the capital-intensive nature of that business isn’t really appealing to Rick and me. We focus on industrial. Our typical deal is a value-add component to it. Is there some vacancy? Are there some leases in place that are under market? Do you know what needs to be done at the property to improve it? There are usually one or two aspects that’ll contribute to that, so we look for that, buy a value-add property, execute on a business plan to either lease it up, fix whatever the issue is, and then take it back out to the market.
Q: How are you looking to diversify, if you are looking to diversify further, after this?
A: We will look at a market, take Fort Myers, (Florida) for example: we’ve got a bunch of relationships down there. Friends that have moved down there over the years, and so there’s a fair amount of expat Minnesotans down there. We started going down there, got a feel for the market, the demographics in and around Fort Myers for the last five years have really been off the charts in terms of population growth. When you’ve got that kind of population growth, it’s going to contribute to growth in the industrial market, the infrastructure needs for housing, for autos, for goods and services, and they all need warehouse space to accommodate those, those businesses, those industries. That’s one thing that drew us to the Fort Myers Market, and really a business-friendly atmosphere down there.
St. Louis, that deal was brought to us, and we just saw that as a good opportunity. It was a mirror image of another building we own here locally, same building profile, same sort of rent roll profile, good stable product. Needed some lease up, needed some capitals. That’s what drew us to that one. The brokerage community, if they’ll bring us a deal, and we’ll take a look at it. If we decide we like the location, we like the market, we like the location within that market, and then what’s the plan? How do we execute this business plan to turn it from a value add into a fully stabilized asset?
Q: Do you have any advice for folks who are looking to start a firm like Fountain, looking to run their own startup, that kind of thing? Besides having a beer at Bunny’s and deciding to do it there.
A: A little liquid encouragement never hurt for making decisions like that, but I would say be confident in yourself and your abilities, and don’t be afraid of the unknown.
If you’re getting to that point where you’re deciding to launch a firm of whatever, you’ve probably been involved in that industry — whatever industry that is — for quite some time and you know it. Have faith in yourself, you know what you’re doing, and go out and work. Work at it, hustle, network, talk to people, just use the skills that you’ve already got in your toolbox, and go to work for yourself.
It’s a lot more satisfying. I will tell you that it’s immensely satisfying to work for yourself or with a partner and working on your own accounts and on your own behalf. Much more so than third party, at least it was for me, anyway. I think that was critical, is just having the belief in yourself to go do it and know that you can succeed if you use your skills and your experience and put those things together.
