Dan Gilbert, owner of Bedrock and founder of Quicken Loans, has long been the dominant investor leading the resurgence of downtown Detroit. This doesn’t mean, though, that others aren’t investing in Michigan’s largest city.
Take Brad Foster. This 28-year-old founder and president of Grosse Pointe, Michigan-based Foster Financial, is quickly becoming an important investor in the Detroit area, too. He had already owned 10 buildings in the Detroit area before buying the 28-story 211 Tower in downtown Detroit in October.
This is the first downtown Detroit building that Foster Financial has purchased. Just as notably, this marks the first time that 211 Tower, which was developed in 1961, has been sold.
And for Foster? He says this is just the start of the investments he plans to make in downtown Detroit.
“Obviously, because of the pandemic there have been setbacks to the activity in downtown Detroit. But we feel that downtown has a bright future,” Foster said. “Once people get back to work, I think the momentum that we saw in downtown Detroit before March will pick up where it left off. Even now, if you go out to dinner 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 get the activity level in downtown Detroit back to where things before the pandemic.”
Foster Financial partnered with Grosse Pointe-based Tribus to purchase the 450,000-square-foot 211 Tower building. Jerrod Wigal of Cushman & Wakefield marketed the building. Mike Lemon, a director with Detroit-based commercial lender District Capital, closed the financing for the deal.
Foster Financial plans to invest more than $10 million in renovations during the next two years at 211 Tower. That’s good news for the building: The tower’s common areas and building systems are currently outdated. Foster said that he expects to boost the building from Class-B to Class-A status with Foster Financial’s planned renovations.
“There hasn’t been a lot of love or updating in the 211 Tower 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 floor-to-ceiling glass. There are a lot of exciting features with this building that need to get shown off.”
Immediate plans call for a new security desk so that visitors and workers in the building feel safe, Foster said. Foster Financial will also bring in new furniture. 211 Tower features 7,000 square feet of restaurant space spread out over three areas. Foster plans to bring in a restaurant operator.
“There are a lot of people in this building and there’s nowhere to eat,” Foster said. “This will help. We are hoping to bring some new life to the lobby and building.”
Closing a major real estate deal is no easy task in the middle of a pandemic. COVID-19 has slowed commercial real estate activity and has also scared many commercial lenders away. District Capital, though, made the numbers work.
Kevin Kovachevich, principal and founder of District Capital, pointed to three reasons why drumming up financing for the deal was so challenging: First, the deal was taking place in downtown Detroit. Secondly, the deal was for an urban office tower. And finally, there’s COVID-19.
“This was one of the most difficult deals I’ve ever been involved in,” Kovachevich said. “This is the first sale of a major downtown Detroit building since the coronavirus. These are difficult times to be financing commercial real estate. Any time there is uncertainty, lenders tighten up. That is the natural reaction to uncertain times. Lenders become hyper-selective.”
Kovachevich said that District Capital cast a wide net to find financing for the 211 Tower deal, searching for financing from New York to California. The company even talked with Sovereign Wealth Funds. Kovachevich said that many of the lenders District Capital would usually go to were out of the market.
Not surprisingly, District Capital received plenty of “no”s while searching for financing. But eventually, District Capital was able to nab competitive term sheets. Finding the right lender, then, came down to certainty of execution, Kovachevich said.
“That certainty of execution is what drives us,” he said. “You can always get a quote from someone. But a quote alone isn’t worth the paper it’s written on. At the end of the day, the loan has to close. For us, it’s about choosing a lender that we know is going to execute, that we know is going to deliver.”
District Capital eventually worked with a lender with which the company had already done several deals. The lender vetted the deal thoroughly, Kovachevich said, with the lender’s head of credit and originations giving his blessing to the deal upfront. That made a difference.
“We knew it would be a challenge, but we also knew we would find options,” Kovachevich said.
The future for 211 Tower now looks bright. Foster Financial is focusing on the building’s available restaurant space. Plans call for a cocktail bar, restaurant concept with an outdoor terrace and a grab-n-go cafe operated by Detroit’s CoffeeHaus.
These amenities would also attract 211 Tower’s neighbors, including workers at ad agency WPP who are working in the newly renovated Marquette Building and VentureX, a co-working space next door to 211 Tower.
“211 Tower will incorporate a great mixture of public and private tenants,” said Doug Noble, partner at Foster Financial. “While there are secure, government agencies in place that will instill an added level of safety in our building, Fortune 500 companies will also be excited to call 211 their home.”
CBRE’s Brendan George and Jasper Hanifi will handle the marketing and leasing off office space at 211 Tower.
“The building is a Detroit landmark,” George said. “It is a great option for tenants looking to enjoy the benefits of a trophy-class building in a prime CBD location. The iconic nature of the building along with the coming renovations will make the 211 Tower a must-see for prospective tenants in the area.”