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Friday, 31 August 2018 20:22

BUY LOCAL: New REIT targets $90M fund for West Michigan deals

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In its first deal, Grand Rapids-based REIT Blue Point Equities acquired a 49-percent stake in the 137,000-square-foot American Seating Park. The company, which includes executives from Third Coast Development, plans to invest around $90 million in the local market by attracting interest from local and national accredited investors. In its first deal, Grand Rapids-based REIT Blue Point Equities acquired a 49-percent stake in the 137,000-square-foot American Seating Park. The company, which includes executives from Third Coast Development, plans to invest around $90 million in the local market by attracting interest from local and national accredited investors. PHOTO: NICK MANES

A recent investment in a Grand Rapids office complex could serve as the template for what executives hope will become a new platform for West Michigan real estate investment.

Blue Pointe Equities LLC, a Grand Rapids-based commercial real estate investment fund established last year, along with executives from Third Coast Development LLC, have formed a new partnership to build a localized network of commercial real estate investors, MiBiz has learned.

The new privately-held real estate investment trust (REIT) hopes to bank on the growing localism trend by targeting accredited investors — both within and outside the region — who want to be part of the area’s burgeoning commercial real estate market, but participate with more than a passive investment.

“There’s nothing like bringing (an investor) to town and letting them physically touch a building they own,” said Dave Levitt, one of three co-principals with Third Coast. “This gives people the opportunity. It’s not some amorphous national REIT that owns 1,200 fast-food restaurants all across the country. It’s really focused — particularly this first fund — on investment properties that are based in West Michigan.”

Levitt said the new partnership offers many possibilities for attracting new investors to Third Coast’s existing projects, many of which could be rolled into Blue Pointe’s fund. It also could help identify other acquisitions and provide an exit for Third Coast’s existing investors.

If the partnership decides to start a development fund, future Third Coast projects could in theory get a boost from Blue Pointe funding, Levitt said. However, the partners say they have worked to create a wall between the two companies.

Andrew Visser, managing partner of Blue Pointe, said the group plans to target acquisitions ranging from office, retail, industrial and multifamily properties, adding that family offices and institutional capital — both locally and nationally — are considering investments in the fund.

DOING DEALS

In the REIT’s first deal, Blue Pointe has taken a 49-percent stake in the American Seating office condominium complex on Grand Rapids’ northwest side, according to executives. The 137,000-square-foot office complex has been fully occupied for four years, according to Chris Beckering, managing partner of American Seating Park LLC, the majority shareholder for the property.

Beckering, who also serves as executive vice president at Grand Rapids-based construction management firm Pioneer Construction, said some prior investors in the project had been looking for an exit. The Blue Pointe fund offered a natural fit, he said, adding that it provides an “excellent vehicle” for attracting new investors to the region’s commercial real estate market.

The terms of the Third Coast investment in Blue Pointe Equities were not disclosed. A federal securities filing shows Blue Pointe hopes to raise $32 million in equity, which would be part of a fund of around $90 million, executives said.

“It sounds like a lot of money, and it is, but in West Michigan you can fill up a $90 million fund fairly quickly,” Levitt said. “It’s not like it’s hard to find the assets we want to put in there, so it’s just a matter of the time to raise the money.”

As part of the deal between the two organizations, Third Coast principals Levitt and Brad Rosely will become partners at Blue Pointe. Third Coast principal Max Benedict will take on the role of co-managing partner with Visser.

REITS GET ACTIVE

REIT activity across the country has been on the rise in recent years, according to a second quarter report from the National Association of Real Estate Investment Trusts (Nareit).

The August report determined that cash flow from operations grew by 5.5 percent in the last quarter, hitting $16.4 billion, a cumulative increase of 55 percent over the last four years.

The Nareit report called those figures a “healthy pace of growth,” but also noted that from 2014 to 2017, the sector expanded at a rate of 20 percent or higher.

In recent years, REITs have also shown a greater interest in the Grand Rapids market, as MiBiz previously reported. The investments have spanned the range of local real estate sectors, with multifamily apartment buildings, industrial projects and medical office buildings all in the mix.

Visser and other real estate executives are quick to note that Grand Rapids and other tertiary markets present a greater value to investors than top-tier markets.

“(On) the coasts, the cap rates and the values are maxed out at this point in time,” Visser said. “They’re looking for these tier two and three regions where they can find value. This vehicle will allow them the access, if you will. And it’s not just institutional money, but down to the individuals.”

Ultimately, the executives believe they can leverage existing interest in the West Michigan market to attract more potential investors.

“One of the other reasons why we loved what (Visser) was doing is the national spotlight that Grand Rapids is getting right now,” said Benedict, adding that many national REITs may own one or two properties in West Michigan, but often investors want an option more deeply tied to the region.

“When people are reading these headlines, for them to say, ‘Man, I want to get into West Michigan,’ and this one REIT has one of their 300 properties there — that’s not the exposure they want,” Benedict said. “They believe in the area and this allows them to jump in.”

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