Building a successful business is no easy task. Doing it in an industry as competitive as commercial real estate? That’s even more of a challenge. But Brian and Kent Roers have accomplished this with Roers Companies, a commercial real estate investment and development company based in Plymouth, Minnesota, that focuses on multifamily properties.
Business professionals have recognized the Roers’ success. Brian and Kent Roers have been named finalists for Ernst & Young’s Entrepreneur of the Year 2024 Heartland Award. The Heart land program celebrates entrepreneurs from The Dakotas, Iowa, Minnesota, Missouri, Nebraska and Kansas who have built thriving businesses while making a positive difference in their communities.
Roers Companies has done this by building and managing multifamily homes for a wide variety of renters, including those who need affordable housing and those who are renting by choice. There is a shortage of apartment units not only in Roers’ home base of Minneapolis-St. Paul, but across the country. The efforts of companies like Roers Companies are needed to help meet this demand.
Brian and Kent co-founded Roers Companies in 2012. The company today has 13,000 multifamily units built or under construction, $550 million raised in private equity and $2.9 billion in development since its inception.
We spoke with the Roers brothers about the success of their company, the multifamily market in the Twin Cities and the plans they have for the future of Roers Companies. Here is some of what they had to say.
Kent and Brian Roers (Photo courtesy of Roers Companies.)
What had you both been doing before forming Roers Companies?
Brian Roers: We are rural farm kids who grew up in Marshall, Minnesota. We both paid our way through college. Right after school, we experimented a bit with buying single-family homes and running them as rentals. We invested a bit in student housing. We were doing that on the side, though. I was working as a CPA before we started Roers Companies. Kent was working as a certified financial planner.
Kent Roers: Everyone asked us what we were doing with our money. We had some 20 houses around the University of Minnesota. Everyone gave us the same response when we told them that: ‘Next time you get a chance to invest in a rental house, let me know. I’d like to invest, too.’ After you keep hearing that, you start to think, maybe we should set up an investment company of our own.
What jumpstarted our decision to form our own company was in 2011 about two weeks before Christmas my company got shut down. I figured, now is the time to launch Roers Companies. We brought out a product that was we were always looking for, something that was institutionally sized. We pooled together a lot of investors. And it’s just grown steadily over the years.
Why do you enjoy about working with commercial real estate?
Brian: We truly believe, and it has been proven again and again, that the best way to grow wealth with the most tax efficiency is by investing in real estate. That’s what’s at the heart of our business: We sell real estate profitably all while paying less taxes than we’d pay if we were making our money some other way.
How would you sum up what Roers Companies does?
Kent: We are building apartments and offering the opportunity for investors to invest directly in them. They are not investing in a multifamily fund. Instead, we can ask our investors if they want to directly invest in multifamily in Plymouth or Woodbury, Minnesota, or if they want to invest in South Carolina, Florida or Texas.
We bring out seven projects a year to our investors. We have a stable of about 800 investors with whom we work. They get good returns and refer friends and families to us. We also have seven projects a year that we do as a tax credit. By doing this, we provide affordable housing, something that is much needed right now.
Brian: Affordable housing is a big part of our firm. We have 2,500 units of affordable housing under construction as we speak. If we weren’t providing this, that affordable housing wouldn’t get built and people wouldn’t get to live in a quality, affordable property.
To get this affordable housing under construction, we ask for a tax credit from the government in exchange for rent discounts. We are keeping rents at our affordable properties at about 60% of normal rents for the area. We partner with others, too, to create the financing mechanism required to build these properties.
Kent: Building affordable multifamily housing isn’t easy. It takes two to three years to put one deal together.
What other states does Roers Companies work in?
Kent: We are in 15 states. Outside of Minnesota, our primary areas of growth are in Arizona, Texas, Florida, Utah and South and North Carolina. We also do a lot of work in Wisconsin and Montana.
We are always analyzing the best markets for us to expand into. At this point, though, we have no firm plans to expand into other states.
What do you enjoy about working in commercial real estate?
Kent: We get to work with very successful entrepreneurs. You need a minimum of $100,000 to invest with us. You have to be accredited, which means that you must have a net worth of more than $1 million. That steers you toward people who have done well in their careers. Most of the people we work with started their businesses in their own garages and houses, just like Brian and I did. We started in one of the bedrooms of our houses, and now we have more than 300 employees. We help people who might be closer to retirement and are looking for diversification in their investments. They want to invest in a tax-advantaged way. I think helping people meet this goal is the coolest part of what we do.
Brian: I enjoy the positive impact we have on people. It starts first with the homes that we provide. It is pretty incredible that in 12 years we have provided more than 12,400 homes for people. Those homes also provide construction jobs. The financial people, leasing people, contractors … So many jobs go into these housing projects.
We have also helped our team at Roers Companies. We have a program in which our team members can buy shares in our buildings and be partners in our company alongside us. It is gratifying to watch them growth their wealth, learn financial lessons and become leaders. We have people working in positions that they never dreamed of having.
Then there are our investors. They have great expectations from us. They want to grow their legacy wealth that they can pass on to their family or donate.
Kent: The positive impact we’ve had on our employees is rewarding. The employee who leads our construction company is a good example. He started with us two-and-a-half years ago and had no idea he’d rise so steadily to that level. We have hired 80 people in the last two years. We provide opportunities for talented and hard-working people. We are willing to take the risk with our employees.
Why has Roers Companies been so successful?
Kent: It’s our company values. We also have a lot of passion for what we do. I know it is old-fashioned, but we believe in the power of work ethic. We believe that this is a place for people who are willing to work hard. We are willing to give those people an opportunity. We also have an ownership mindset. We want people to work their jobs like they are the owners of the company.
Brian: We also learn our lessons. We have had challenges in the past. The mere fact of overcoming them helped create who we are. We had a couple of buildings in a commodity market that basically tanked. We found innovative ways to make those buildings successful. That is when our growth started, when we began finding ways to overcome challenges. If there is a challenge, we find ways through it. That mindset has helped create the growth velocity of this company.
Why is multifamily such an attractive investment for investors?
Kent: Real estate is a natural diversifier for everyone. Everyone has their 401(k) and IRA. But the money in those is invested primarily in stocks and bonds. People who want to diversify their investments often look at real estate. Now, these investors can buy their own single-family homes and rent them out. But that might be more work than you want to take on. There is less scale with single-family homes. You don’t make as much money. But multifamily? That does provide more scale. It is possible to make more money. It is also an opportunity for investors to diversify.
Are investors returning to the multifamily market now that there is some interest-rate stability?
Kent: There is a housing shortage in the United States. That is the case no matter what interest rates do. Apartment buildings continue to rent out. Some submarkets aren’t doing as well as others. The urban cores of Minneapolis and St. Paul are slower. But our suburban multifamily markets have remained strong. There is strong demand for housing in the suburbs. We opened a property in Maple Grove. It opened at 60% occupancy and grew to 95% within months. There is still strong demand for multifamily housing.
Considering the challenges of high interest rates and construction costs, how is Roers Companies continuing to build new multifamily properties?
Brian: The interest rates don’t make it easy on us. The banks aren’t making it easy for us. But we are looking forward to two years from now when we open these buildings. The demand for these new properties will be intense when we open them in the next two years. That’s what you must focus on.
Kent: We have to bite the bullet now. Yes, it is more expensive to build now. But the rewards will come. When our apartments open two years from now, there won’t be as much competition because construction starts are down so much now. That is when we will benefit.
