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Sunday, 25 June 2017 20:00

GR nonprofit housing group in talks to acquire 177-property portfolio

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Chicago-based RDG wants to sell the 177-property portfolio of residences it owns in West and Mid-Michigan, including this house on Quimby Street NE in Grand Rapids. Inner City Christian Federation, a Grand Rapids-based nonprofit housing developer, is negotiating to buy the portfolio in a deal some sources said was valued at $16 million to $20 million. Chicago-based RDG wants to sell the 177-property portfolio of residences it owns in West and Mid-Michigan, including this house on Quimby Street NE in Grand Rapids. Inner City Christian Federation, a Grand Rapids-based nonprofit housing developer, is negotiating to buy the portfolio in a deal some sources said was valued at $16 million to $20 million. PHOTO: MIBIZ STAFF

GRAND RAPIDS — A local nonprofit real estate developer is in talks to acquire a large West and Mid-Michigan residential property portfolio from its current out-of-state owners, MiBiz has learned. 

Inner City Christian Federation (ICCF) of Grand Rapids could soon close on a deal with seller Residential Dynamics Group LLC (RDG) for a group of properties concentrated in the Grand Rapids, Wyoming and Lansing areas, according to multiple sources familiar with the negotiations. 

ICCF President and CEO Ryan VerWys confirmed the nonprofit real estate group is in negotiations to acquire the portfolio, but declined further comment citing the sensitive nature of the ongoing talks. Brett Moore, principal with RDG, a Chicago-based investment group that quietly amassed the portfolio in the wake of the Great Recession, declined to comment for this report, citing company policy. 

City leaders, the Kent County Land Bank Authority and other nonprofit housing organizations have been involved in discussions about the transaction, but sources say ICCF will serve as the lead party in any acquisition. 

While the deal had yet to be finalized at the time this report went to press and could still fall through, community stakeholders believe a transaction could mark a critical inflection point for the local housing market. 

The reason: Many of the homes within RDG’s portfolio are located in neighborhoods largely populated by African Americans and Latinos, and the deal would place the properties under the ownership of a community-driven nonprofit. In recent years, institutional investors have increasingly turned their attention to the Grand Rapids housing market, which faces what many have described as an affordability crisis.

“We realized it would be extremely detrimental if those (houses) were sold to someone who only has a profit motive,” said David Allen, executive director of the Kent County Land Bank Authority. “The minute it came to my attention, I immediately reached out to executive leadership (at the city) and said, ‘We have to do something.’” 

Allen also serves as a City Commissioner for the third ward in southeast Grand Rapids, where many of the homes in RDG’s portfolio are located. He directed all further questions regarding the negotiations to VerWys at ICCF. 

An offering memorandum obtained by MiBiz lists RDG’s portfolio as including 177 properties with a total of 211 residential units. It indicated the owners were interested in selling the portfolio in its entirety or in chunks. 

Commercial brokers in the Los Angeles and St. Louis offices of CBRE Inc. are marketing the portfolio on behalf of RDG. Ryan Moore and Matt Bukhshtaber, two CBRE brokers working on the project, declined to comment for this report. 

Two sources familiar with the negotiations put the acquisition price for the whole portfolio between $16 million and $20 million, but another source called those figures inaccurate, declining to elaborate further. 

The offering documents never specifically mention RDG as the portfolio’s owner. However, multiple sources independently confirmed the authenticity of the memo and that RDG owns the properties in question.

Additionally, the documents describe the portfolio as 95-percent occupied, with more than half of the properties receiving upwards of $10,000 in improvements. A professional management firm currently services all the properties, according to the memo. 

“A portion of these assets have below market rents and leases that hold the landlord responsible for utilities, which is not typical in the state of Michigan. An incoming investor will have the option to increase rents and reduce operating expenses as leases expire,” according to the memo.

A QUESTION OF ACCESS

Amid escalating rents and a dwindling stock of affordable housing, Grand Rapids’ civic and business leaders have started to pay attention to the hot-button issue, with special attention to improving access for low-income residents. 

Locally, the housing problem continues to become more acute. A recent study released by San Francisco-based Apartment List found that median rents for a two-bedroom apartment in the Grand Rapids area have increased 1.4 percent so far this year.

An April Michigan Radio report found that between 2008 and 2016, more than 6,900 homes in Grand Rapids went through the foreclosure process, and 45 percent of those units are now investor-owned.

Grand Rapids Mayor Rosalynn Bliss has been working to finalize the details of a “multi-faceted approach” for the city to address the issue.

“(M)y belief is we won’t address the affordable housing crisis with one solution,” Bliss told MiBiz for a previous report. “It’s got to be a multitude of solutions in order to have impact. So we need rental property owners, developers, nonprofit organizations, banks all around the table to have a positive impact.”

Other local municipal executives agree with Bliss and note that having homes under local control could go a long way toward helping working families. 

“The concern is … this kind of faceless management between the people who own the homes and the people who live there,” said Suzanne Schulz, planning director for the City of Grand Rapids. “That makes it hard for people struggling to pay rent or who have an unforeseen circumstance. With the housing market we have today, there’s not a lot of room for empathy.” 

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Nick Manes

Staff writer

nmanes@mibiz.com

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