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Sunday, 24 July 2016 14:15

Hungry investors seek Grand Rapids housing deals, rankling longtime residents

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As investors flock to new Grand Rapids neighborhoods in search of housing deals, their sometimes aggressive acquisition tactics have become the targets of criticism from longtime residents and community activists. Stakeholders say it’s important for residents to stay invested in the community if they want to be a part of shaping its future. Pictured (l-r): Jonathan Jenks, Sarah Scott and Jamiel Robinson As investors flock to new Grand Rapids neighborhoods in search of housing deals, their sometimes aggressive acquisition tactics have become the targets of criticism from longtime residents and community activists. Stakeholders say it’s important for residents to stay invested in the community if they want to be a part of shaping its future. Pictured (l-r): Jonathan Jenks, Sarah Scott and Jamiel Robinson Photo by Katy Batdorff

GRAND RAPIDS — From an undisclosed $100 million foreign-backed fund to local real estate agents, investors of all kinds are staking their bets on the Grand Rapids housing market. 

The city’s growing population and new job opportunities in industries like technology and health care have proven attractive to developers and investors, who are seeking to deploy capital in a growing number of Grand Rapids neighborhoods. 

Lately, much of their attention has turned to the predominately African-American Baxter neighborhood, south of Wealthy Street. The region has become attractive as the adjacent East Hills area to the north has been built out and as deals have dried up in other parts of the city. It’s a striking about-face for investors after decades of disinvestment in some of the city’s struggling neighborhoods, a move that brings challenges for existing homeowners. 

“All the capital that left is now flooding back in, so the population is vulnerable,” said community activist Jamiel Robinson, the founder of Grand Rapids Area Black Businesses (GRABB). “We have all these competing interests and a limited amount of stock.” 

While Robinson, who grew up near Baxter, and other residents are unsurprised by the new attention their neighborhood is receiving, some say they’ve been taken aback by the tactics of would-be developers and investors. 

Those strategies include soliciting homeowners to sell their properties. Earlier this month, Baxter resident Sarah Scott received a letter gauging her interest in selling the home she’s owned on Thomas Street for the last 14 years. The pitch she and several of her neighbors received promised that a deal for their properties could close in as little as a week or as long as 60 days. 

“It was unsolicited and I read it as a little aggressive,” Scott said. 

The printmaking teacher at Artists Creating Together and tattoo apprentice at Honest To Goodness Tattoo and Piercing told MiBiz that she has no intention of selling her home. She’s not aware of any of her neighbors accepting the offer, either. 

“I’m not interested in taking a buyout,” Scott said. “I’m interested in being in this community and being invested.”

Before throwing the letter away, Scott uploaded a photo of it to her personal Facebook page in a post that received dozens of comments, many describing the tactic as “predatory” and “slimy.” Commentors expressed concern that residents would be lured into selling their homes for well below their fair market values. 

The letters, sent to hundreds of people in many neighborhoods all over the city, came from Geoffrey Meekhof, president of Grand Rapids-based commercial brokerage M Realty Capital LLC

“Lots of people are concerned that there’s something sinister going on,” Meekhof said, insisting that’s not the case. “Some people are against investors coming in and fixing (houses) and selling them for a profit.” 

INVESTMENT STRATEGY

The company sent the letters on behalf of an undisclosed Grand Rapids residential real estate agent working with unnamed investors who are seeking additional housing inventory, he said.

Meekhof and his clients aren’t alone, as many investors are looking for deals in the Grand Rapids market. 

“Grand Rapids as a market is sort of in its infancy as far as where it can and will go,” said Matt Jones, principal of Grand Rapids-based Beacon Realty Group LLC, a commercial brokerage focused on multifamily housing. “I think this market will continue to grow and increase in value. You look at the population growth and who is moving here all of a sudden.” 

For proof, Jones said he’s working with one unnamed Japanese fund that’s looking to deploy as much as $100 million to buy up multifamily real estate in Grand Rapids.

But development in the area has come in a series of fits and starts. As recently as March, Grand Rapids-based Rockford Construction Company Inc. backed away from plans in and around the Baxter neighborhood after a leaked internal document about the projects began to circulate. 

While the document highlighted a number of initiatives geared at offering new housing and commercial options, many residents and stakeholders expressed concern that new investment would lead to displacement of long-time residents. 

M Realty’s Meekhof told MiBiz that his clients see an opportunity to invest in a growing neighborhood, and their solicitation was merely intended to identify people interested in selling. They’re looking to acquire homes in the $60,000 to $100,000 price range, he said. 

So far, Meekhof has yet to finalize any deals in the blocks south of Wealthy Street.

For any homes his clients do end up buying, they expect to invest in renovations and upgrades, Meekhof said, adding that rents would likely have to go up to cover the costs. 

“You fix (a house up) and if you charge $1,000 per month you’re displacing (people),” he said. “I don’t know how to fix that and it’s a real problem.” 

While solicitation letters may make for a time-saving and cost-efficient way of gauging potential sellers’ interest, some sources questioned the tactic, noting that residents may regret being swayed by the promise of a quick payout. 

“The old saying was ‘buyer beware’ and now I think it’s ‘seller beware,’” said Rachel Lee, director of the East Hills Council of Neighbors

Residents in the East Hills neighborhood have also been targeted with letters from brokers and real estate agents seeking property deals. 

“East Hills probably has one of the most competitive real estate markets in the city,” Lee said, adding that many houses on the market sell above asking price in a matter of hours or days after they go on the market. “I think (sending letters) is just another way agents are looking for houses for sale. But people feel a little insulted.” 

LOOKING AT OPTIONS

While the letters may be targeted at owners, sources note that potential sales could also have an impact on the area’s rental market, which is already experiencing significant spikes in rates.

“For families whose incomes are relatively fixed, to have rent increase 50 or 60 percent over a two- or three-year period, that’s a significant challenge for them,” said Jeremy DeRoo, co-executive director of LINC Community Revitalization Inc., a housing and neighborhood development organization particularly focused on areas around the southeast side of Grand Rapids.

Recent market statistics from real estate research firm Zillow demonstrate the rapid increase in rents in the Baxter neighborhood. According to a report released by the firm in May, Baxter rents have appreciated 17.4 percent on an annual basis. The Zillow report also notes that the average rent in the city of Grand Rapids stands at $1,159, up 8.1 percent on an annual basis. 

Driven by the strong demand, developers continue to announce plans to add to the housing pipeline, including concepts for significant affordable developments along Eastern Avenue south of Wealthy Street, right on the edge of the Baxter neighborhood. 

According to documents filed with the Michigan State Housing Development Authority (MSHDA), both LINC and the Inner City Christian Federation have proposed separate projects less than two blocks apart along Eastern Avenue. 

The two developers plan a total of 138 units, with 124 units financed with Low Income Housing Tax Credits (LIHTC), the MSHDA-administered financing investors typically use to develop affordable housing projects. 

MSHDA’s latest round of LIHTC funding, which was announced after this story went to press, did not allocate funds for either project. 

More than 50 projects statewide are competing for approximately $11.9 million in LIHTC funds. 

Combined, LINC and ICCF have requested more than $2.8 million for their projects.

[RELATED: Four West Michigan developments get state funding for affordable housing]

LINC’s DeRoo told MiBiz that areas like the Baxter neighborhood are gravely in need of more affordable housing options such as those proposed by his organization or ICCF. Traditionally, the state has passed over neighborhoods like Baxter when making LIHTC allocations because it prefers “well-established, high-opportunity neighborhoods,” he added. 

“The question is how do you respond and what do you need to do differently in a strong market compared to what the market has been,” DeRoo said. “It’s always worth asking who is not benefitting from these situations and making sure that renters in these areas are not being disproportionately hurt and forced out of a neighborhood where they want to stay.” 

MAINTAINING OWNERSHIP

While greater inventory of affordable housing may be needed, some southeast area stakeholders say they’re working on more systemic issues such as creating greater opportunity for jobs, entrepreneurship and wealth creation for residents of the predominately African-American Baxter neighborhood.

For Robinson and fellow community activist Jonathan Jelks, who also hails from the Baxter neighborhood, it’s an issue of equity and one of history. 

Spurred on in large part by a Forbes report that named Grand Rapids one of the worst cities in the country for black people in terms of access to jobs and homeownership, Jelks and Robinson have started their own economic and business development organizations, including the Midwest Tech Project and GRABB, respectively. 

“It’s about looking at people in the neighborhood and how do we create wealth and opportunity through ownership, whether that’s ownership of a business or ownership of residential property, because gentrification is happening,” Robinson said.

Both Jelks and Robinson say they tend to view the changing neighborhood through a historical lens, wherein money is starting to flow back into cities after decades of disinvestment as developers have started to turn to impoverished neighborhoods for opportunities. 

While Grand Rapids’ southeast side features a mix of homeowners and renters, Jelks said it’s the property owners who can have perhaps the greatest impact on the sustainability of the neighborhoods. 

“For the African-American community who have ownership (of a home), we want to encourage them to not trade food for oil,” Jelks said. “That means you have an investment that will be worth a significant amount of money and will increase in value. It’s important for the community to be educated and know the worth of that investment.” 

Read 10781 times Last modified on Monday, 25 July 2016 09:10
Nick Manes

Staff writer

nmanes@mibiz.com

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