Dan Gilbert, owner of Rocky substrate and founder of Quicken Loans, has long been the dominant investor behind the resurgence of downtown Detroit. That doesn’t mean, however, that others aren’t investing in Michigan’s largest city.
Take Brad Foster. The 28-year-old founder and president of Grosse Pointe, Michigan Financial foster, is also quickly becoming a major investor in the Detroit area. He previously owned 10 buildings in the Detroit area before purchasing the 28-story 211 tower in downtown Detroit in October.
This is the first building in downtown Detroit that Foster Financial has purchased. Likewise, it is the first time that the 211 Tower, developed in 1961, is sold.
What about Foster? He says this is just the start of the investments he plans to make in downtown Detroit.
“Obviously, due to the pandemic, business in downtown Detroit has suffered setbacks. But we think downtown has a bright future, ”said Foster. “Once people get back to work, I think the momentum we saw in downtown Detroit before March will pick up where it left off. Even now, if you go to dine in downtown Detroit, you see people sitting outside and eating. There is more action here than what you say in March or April. If this continues, it shouldn’t take long to bring the level of activity in downtown Detroit back to where it was before the pandemic. “
Foster Financial has partnered with Tribus de Grosse Pointe to purchase the 450,000 square foot 211 Tower building. Jerrod Wigal of Cushman & Wakefield marketed the building. Mike Lemon, director of a Detroit-based commercial lender District capital, closed the financing of the transaction.
Foster Financial plans to invest more than $ 10 million in renovations over the next two years to Tower 211. That’s good news for the building: the common areas and building systems for the tower are currently outdated. Foster said he plans to upgrade the building from Class B to Class A with the renovations planned by Foster Financial.
“There hasn’t been a lot of love or updating in Tower 211 recently,” Foster said. “We can step in and turn this property into a Class A building. There is so much potential here. The lobby has 25 foot ceilings. There is glass from floor to ceiling. There are a lot of cool features with this building that need to be showcased. “
Immediate plans call for a new security office so visitors and building workers feel safe, Foster said. Foster Financial will also bring new furniture. Tower 211 includes 7,000 square feet of dining space spread over three areas. Foster plans to hire a restaurateur.
“There are a lot of people in this building and there is nowhere to eat,” Foster said. “CA will help. We hope to breathe new life into the lobby and the building.
Closing a major real estate transaction is no easy task in the midst of a pandemic. COVID-19 has slowed commercial real estate activity and has also scared off many commercial lenders. District Capital, however, made the numbers work.
Kevin Kovachevich, director and founder of District Capital, pointed out three reasons the search for funding for the deal was so difficult: First, the deal took place in downtown Detroit. Second, the case involved an urban office tower. And finally, there is COVID-19.
“It was one of the most difficult transactions I have ever been involved in,” Kovachevich said. “This is the first sale of a major building in downtown Detroit since the coronavirus. These are tough times to finance commercial real estate. Whenever there is uncertainty, lenders tighten up. It is the natural reaction to uncertain times. Lenders are becoming hyper-selective.
Kovachevich said District Capital has launched a wide net to find funding for the 211 tower deal, seeking funding from New York to California. The company even spoke with Sovereign Wealth Funds. Kovachevich said many of the lenders that District Capital would typically go to were out of the market.
Unsurprisingly, District Capital received many “no” s when seeking funding. But in the end, District Capital succeeded in obtaining lists of competitive conditions. Finding the right lender then came down to a certainty of execution, Kovachevich said.
“This certainty of execution is what drives us,” he said. “You can always get a quote from someone. But a quote alone is not worth the paper it’s written on. Ultimately, the loan must be closed. For us, it’s about choosing a lender that we know is going to perform, that we know is going to deliver.
District Capital eventually worked with a lender with whom the company had already concluded several transactions. The lender has carefully reviewed the deal, said Kovachevich, the lender’s credit and arrangements manager who blessed the deal from the start. It made a difference.
“We knew it would be a challenge, but we also knew we would find options,” Kovachevich said.
The future of Tower 211 now looks bright. Foster Financial focuses on the building’s available catering space. Plans call for a cocktail bar, a restaurant concept with an outdoor patio, and a take-out coffee shop operated by Detroit’s CoffeeHaus.
These amenities would also attract neighbors to Tower 211, including employees of the WPP advertising agency who work in the newly renovated Marquette building and VentureX, a co-working space next to Tower 211.
“Tower 211 will integrate a great mix of public and private tenants,” said Doug Noble, partner at Foster Financial. “While there are secure government agencies that will inject an extra level of security into our building, Fortune 500 companies will also be happy to call 211 home. “
CBRE ‘s Brendan George and Jasper Hanifi will take care of the marketing and leasing of the offices in Tower 211.
“The building is a Detroit landmark,” said George. “This is a great option for tenants who want to enjoy the benefits of a trophy class building in a prime CBD location. The iconic nature of the building as well as upcoming renovations will make Tower 211 a must-see for potential tenants in the region.