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Colorado Real Estate Journal – November 16, 2016

by John Rebchook

Tim Walsh, who 10 years ago founded Golden-based Confluence Cos., grew up mostly in the Middle East and in Europe.

His father was in the military and served in World War II, the Korean War, was stationed in Benghazi during the Arab-Israeli Six-Day War and served in the Vietnam War.

Walsh, a West Point graduate, followed his father’s footsteps to a certain extent.

They both were officers in the Army, as well as engineers by training.

“I always wanted to be an engineer,” Walsh said.

“I enjoyed seeing things getting built and building things. Because my dad was a product of the Great Depression, he never threw out anything. There was nothing he couldn’t fix.” Together, they would rebuild engines and put on additions to houses where they lived, said Walsh, who can speak conversational German, Arabic and Turkish. He was stationed in Turkey and other countries during his eight years in the Army.

He not only got a taste for construction from his father, but also learned a number of lessons from West Point and the Army that have served him well as a principal of a company that survived the Great Recession and has completed or is underway on more than $700 million in developments, mostly apartment communities, from Louisville to Castle Rock.

Since 2010, Confluence has completed 21 residential multifamily projects in the Denver area. Together, they have more than 2,100 units.

It also has five other projects planned or under development.

Walsh’s military background instilled in him leadership and decision-making skills, as well as the ability to multitask.

“At West Point, you always had more work to do than you had time, so you learned to focus on what was most urgent,” he said.

His training also taught him how to think strategically and not just on the task at hand.

“One of the decision-making skills we learn is to process information,” Walsh said.

“So if you only have 80 percent of the information on hand, you are confident enough to make a decision.” Even if it is not the “absolute correct decision, you have the confidence and knowledge that you can adjust course” as more information emerges.

That came in handy following his decision to leave a successful career at M.A. Mortenson Co., where he was in charge of such high-profile construction projects as:
• The Broadmoor Hotel renovation and expansion in Colorado Springs;
• The Cherry Creek North Clayton Land development, which includes the Janus Capital world headquarters and high-end retail;
• The Denver Art Museum expansion; and
• Work at the University of Colorado Health Sciences Center projects at Fitzsimons and at Stapleton.

“I always wanted to be an entrepreneur and run my own company. When I launched Confluence in June 2006, everything was booming. Nothing but blue skies, right?” As we all know, the clouds already were forming for the Great Recession, which cast a dark shadow on real estate markets in Denver and nationwide.

“Fortunately, we had the Four Seasons (construction) going on,” Walsh said “That was a great project and sustained us through the recession.”

After the Four Seasons Hotel Denver opened, he had an opportunity to build more of them, back in his old stomping ground in the Middle East – Walsh was living in Saudi Arabia in 1975, when a West Point cadet spoke to his eighth-grade class. That planted the idea in his head of attending the U.S. Military Academy.

He would later achieve a presidential appointment to West Point from Ronald Reagan. He also received a master’s degree in engineering from Stanford. Soon after graduating, the downsizing Army was offering incentives to leave the service, so he left.

“I had to pay back the $19,000 in tuition to the Army for Stanford. It seemed like a lot of money at the time, but now seems like the bargain of the century.” After Stanford, he built a number of “clean rooms” for tech giants like Intel in California and worked on the Monterey Bay Aquarium Research Institute before taking a job with Mortenson, which had just launched an advanced technology group.

At Mortenson, he worked on a big project in Boston, as well as doing a stint in Brazil, before he was transferred to Fort Collins to work on a project for Hewlett-Packard. When that wrapped up, he moved to Denver, where he grew the division four-fold.

A pivotal moment for his company came in 2010, after visiting sites in places like Abu Dhabi and Dubai in the United Arab Emirates on behalf of Four Seasons, he decided: “I did not want to be another Mortenson and get a fee for building projects. I wanted to develop and build projects for our own account.”

Upon his return to Denver from his Middle East scouting trip for the Four Seasons, his first order of business was to lay off his entire 16-person project management staff, with the exception of Matt McBride, who now is a partner at Confluence along with McBride’s brother, Mike, and Tony DeSimone, a fellow West Point grad.

Confluence now employs about 50, evenly divided between the construction and property management companies.

Laying off people as he pursued developing and owning projects that he built was tough.

“A leader has to make tough decisions to stay afloat,” Walsh said. “A lot of companies suffer by not making those decisions soon enough.” Going out on his own was actually less risky than building projects for others, he said.

When you are constructing projects for a fee, you do not have control over the architects, or the developer, he noted.

“You don’t know if the developer is doing shady stuff or how secure their financing really is,” he said.

At Confluence, his idea was to be “vertically integrated,” from soups to nuts.

He will find the dirt, get it rezoned and platted, get the construction loan and typically refinance it with a 15-year loan from a life insurance company once its built and stabilized.

Confluence’s equity comes from about six high-net-worth families in the Denver area. Typically, two or three of them will invest in each of his developments.

Initially, he was thinking of hiring an in-house architect.

Instead, he uses Dan Craine of Craine Architecture for all of his design work.

Walsh said it is valuable to work with the same architect, as Craine understands Confluence’s standards and goals.

“We develop everything with the idea that we will own it for at least the next 15 years,” Walsh said, although he added there is always an option to sell a project and deploy the proceeds on another development.

Recent developments underway include the $60 million mixed-use Riverwalk at Castle Rock and a $12 million high-end, for-sale condo development at the El Jebel Shrine at the Willis Golf Course in northwest Denver.

Confluence also has started construction on The Lydian, an eight-story mixed-use development at 26th and Welton streets, in downtown Denver’s historic Five Points neighborhood.

“We’re building things with lasting quality,” Walsh said.

“We’re building to own, while merchant builders are building to sell,” he said.

In 2011, they found an 8.5-acre site that was walking distance to downtown Louisville.

“There hadn’t been a new apartment building in Louisville in 20 years,” he said.

“It was a real bootstrap operation,” Walsh said.

“We went to a lot of lenders and we were rejected by a lot of lenders” before U.S. Bank agreed to provide a loan.

“U.S. Bank really believed in us,” he said. He has used U.S. Bank, as well as FirstBank, on a number of his other developments.

He also received equity from a couple of the local investors on that deal.

“We haven’t used any institutional groups yet” for equity, he said.

He looks for sites that are not on the radar screen of big players.

“I don’t want to be competing against guys building high-rises by Union Station or in the central business district” for towers that must charge sky-high rents.

Rather, he has found sites in Louisville, Lakewood, Five Points, Castle Rock, Arvada and elsewhere where we can build communities that “the masses can afford.”

When not working, he likes to do anything outdoors, including golfing, hiking, downhill and cross-country skiing, running and biking.

“I’ve probably done Ride the Rockies 12 times, the last five times with my son,” who is now 19. He also has a daughter who is a senior in high school.

He hasn’t been turned off to travel, after growing up as an Army brat and moving around a lot.

He takes regular three- or four-week trips with his children and wife of 27 years.

They’ve been to Asia, with stays in China and Japan, and have taken an extended road trip though Spain and the coast of France. They are planning a trip that will take them to Greece, Croatia, Austria and Germany.

Given his background, Walsh could have planted his development roots anywhere.

“I really like Colorado,” he said. “It’s a great place to raise a family. People are really warm and friendly and accessible here. “And, it’s a great place to do business. Having worked in the Boston area, that is a really challenging area to get anything done because of the bureaucracy and unions there. It was really refreshing to move to Colorado from Boston.”