Peaks and Valleys

How did Michigan office and resort owner Mike Biber and his banking team see the global financial meltdown coming two years before anyone else?

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In the fall of 2006, Michael J. Biber, managing partner of a diversified Brighton real-estate company, assembled his banking team at Ireland’s Dromoland Castle following the Ryder Cup golf matches. Feeling uneasy about the booming economy in the United States, Biber and his management contingent wanted to review all aspects of the company’s portfolio in an intense, two-day summit.

The result: Despite the global economic meltdown in the fall of 2008, Biber’s commercial real-estate and recreational businesses across Michigan and around the country — Osprey Management Co. — are not only flourishing, but Biber and his team are aggressively cashing in on bargains in the troubled marketplace.

In fact, while many other real-estate companies are striving to hold their own, Osprey Management is coming off record 2008 results, with $90 million in revenue generated from nearly 5 million square feet of commercial real estate it owns and operates in Michigan, Florida, and North Carolina, as well as eight top-notch golf courses in the Great Lakes state. “We see this year as one of great difficulty, but a year of great opportunity, and we’re preparing for both,” Biber says. “We had the best year we ever had in 2008, and 2009 looks like we’re going to have a better year.”

But it hasn’t been easy maintaining momentum. “We have our share of doom and gloom here, for sure,” he says. “It is very hard right now. It’s very, very hard.

You have to work hard for everything. But we’re fortunate to have a lot of good properties, and very good people. We have gone through our cost-cutting. We cut many millions of dollars from our budgets to adjust to the world. The reality of the world today is cost-control, cost-containment, and being more efficient.” 

The corporate fortune Osprey enjoys today is intertwined with Biber’s passion for golf. Biber, 64, learned the game from his father, a professional golfer who taught him about business. One lesson was to continually examine a company’s business model in relation to the local and national economy. That constant review process, conducted even in the best of times, led to the Dromoland diversion. “We took steps at that meeting that allowed us to avoid the tumult you see today,” he recalls. One of those steps was to get out of 250 million dollars’ worth of commercial-backed mortgage securities.

“We went from short-term to fixed debt,” Biber says. “We decided that the financial market was just too uncertain. We agreed the times were too good and there was a lack of appreciation of risk. People were paying huge amounts of money for things we didn’t see value in, and we saw that across the board. When I tried to find out what commercial debt obligations were being put into securitized form, it didn’t make sense to me. Even the bankers sat there and said, ‘This is going to end, and it’s going to end quickly.’ We changed our borrowing formula, changed our acquisition formula, and we hunkered down for hard times.”

Stabilizing the company’s debt proved providential. “As a result, we have a little less pressure than a lot of our compatriots do,” he says. “Our earnings and sales are up, but we still have an awful, awful lot of pressure to perform and to maintain. Money we used to borrow from the banks we now take out of cash flow, and that is just hard — but thank God our operations have improved. Our EBITDA (earnings before interest, taxes, depreciation, and amortization), believe it or not, is up 8 percent this year. Our funds from operation (the performance gauge for real estate companies) are up about 10 percent.

“Our properties division is functioning much better than can be expected in a difficult market,” Biber adds. “Lear Corp. (a large auto supplier in Southfield) is one of our tenants, and we’re still sorting through their bankruptcy. But we had planned on that, so we’re hoping that it will not have a major impact on our operations regardless of what they do.”

Biber says the Osprey Opportunity Fund the company started early last year proved to be fortuitous. “We are buying mortgage debt in the marketplace. We’ve done two major acquisitions, about $50 million. That, for us, is a big deal,” he says.

The company also is gearing up to take part in the U.S. Treasury Department’s program to partner with private investors to buy up bad assets from struggling banks. Under the so-called PPIP (public-private investment program), the Treasury is putting up $75 billion to $100 billion and will team with private investors to buy troubled assets from banks while backing loans and guarantees. “We’re out in the marketplace right now putting together a fund with third parties,” Biber says.

The Osprey story began 12 years ago when Biber and Mike Cottrell, the company’s chief financial officer, launched the company in the basement of a former flower shop in Brighton. “My wife found the building, an itty-bitty white building, about 2,000 square feet, at Main and Grand River. She said we should buy it, even though everyone told her it was haunted by a ghost,” Biber recalls. “We paid $300,000 for it and thought we were going to go broke. At the time, we were in a little bit of a recession, but we took a chance.”

The ghost may have proved to be a lucky charm. “Mike and I convinced each other that late at night we could see the ghost over where the dishwasher was,” Biber says. “The first year our gross revenue was about $1 million. We wanted to make about $180,000, and we wound up making $300,000.”

Another lesson gleaned from his father: Look for bargains rather than focusing on trophy properties at peak prices. That led to a flurry of purchases of eight distressed golf and ski properties at auction in the past five years — including the venerable Otsego Club & Resort in Gaylord — which has propelled Osprey’s recreation division into second place behind Boyne USA Resorts as the state’s largest golf club operator.

While Biber and Cottrell are Osprey’s established hands, Biber credits the company’s success to a close group of talented young managers, including his sons, Jason and Adam. The Young Turks, as he refers to them, are empowered to make tough decisions and can bypass Biber’s wishes — as long as they have a better idea and can defend their decision.

Another core reason for the company’s success, he says, is the 35-year association he enjoys with four families of investors — closely held partners who provide financial support for the company’s initiatives.

While the company still owns the flower shop, Osprey now operates from a 30,000-square-foot sleek glass and stone building that’s nestled next to a lake and woodlands at Brighton’s north end. “The building was run-down when we bought it, and the guys in construction wanted to tear it down and rebuild. I argued that we should renovate it to show (clients) what we can do with a crummy building, and for once I got my way,” says Biber, feigning frustration with his Young Turks.

The Osprey building is a daily testimony to the company philosophy of identifying distressed properties with potential that can be purchased for the right price. Once it secures a property, Osprey improves or rebuilds it into a profitable entity. That’s the formula it has used on office buildings it manages in Troy as well as in Sarasota, Tampa, and St. Petersburg; and in Charlotte, N.C.

Despite Michigan’s economic challenges, Biber believes the state is fertile ground for commercial real estate. One such opportunity was Osprey’s purchase of the Troy Officentre three years ago, a collection of three five-story interconnected buildings offering a combined 730,000 square feet of space at Big Beaver and Livernois. “It’s turned into one of my favorite acquisitions, and it represents a real commitment to Michigan and the opportunities that Michigan gives us right now,” he says.

Among the latest tenants is Kelly Services, which leased 30,000 square feet, while another building is home to the Michigan Golf Hall of Fame. Biber adds the company plans to make another acquisition in Troy shortly, and is eyeing Ann Arbor for future expansion.

On the resort front, Osprey’s move into golf and recreation may have been preordained, considering the game is a part of Biber’s DNA. His father, Walter Biber, was a longtime Michigan PGA professional and retired after 30 years as the head professional at the Kalamazoo Country Club. “Golf has been very, very good to me and my family,” Biber says. “Golf put food on our table, put our entire family through college, and allowed my dad to retire a successful man.”

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