Private equity in West Michigan

We are not required to put capital into a property type because it fills a slot in an allocation. The work falls into five areas that often overlap.

Real estate

Commercial property is the core of what we do, from leased buildings held for income to properties that need renovation, leasing or a new use. Our investments include industrial buildings in Kentwood and Caledonia, a renovated office building on Cascade Road SE and a redeveloped commercial building on Michigan Street NE. More on how we invest in commercial real estate.

Real estate-backed businesses

Some opportunities begin with the company inside the building. We evaluate operating businesses where the property is a meaningful part of the picture, and we have invested in the business side as well as the property side. Carbon River holds a convertible debt investment tied to SnackCraft, the snack manufacturer that occupies 4444 52nd Street in Kentwood, and an ownership position in Sportstats Performance, an event timing company.

Sale-leasebacks

A business that owns its building can sell the real estate and stay in place as a tenant. Carbon River acquired the Caledonia headquarters facility of Opus Packaging Group and leased it back to the company. We explain how we think about sale-leaseback transactions in detail, including when one may not be the right tool.

Recapitalizations

Sometimes the asset is sound and the capital around it is the problem: a partner who wants out, a loan coming due, or equity tied up in a property that the owner needs elsewhere. We evaluate recapitalizations of properties and of operating companies with meaningful real estate, and we are willing to invest in different parts of a capital structure. Carbon River's mezzanine debt investment, for example, is a loan position and not a direct holding of property.

Special situations

Complex ownership, underused property, or a transaction that does not fit a lender's or a buyer's standard box. These take more time to understand, which tends to thin the field. More on special situations and operating companies.

Investment decisions at Carbon River are made by its three principals, and each of them has done the work the decisions depend on.

Bradley Rosely and Max Benedict both started in commercial brokerage at SJ Wisinski and Co., now NAI Wisinski of West Michigan, before moving into development. David Levitt came to real estate from corporate finance, with an MBA in finance and strategy from the University of Michigan's Ross School of Business and earlier roles at BP and Steelcase. Max leads deal flow, acquisitions and underwriting, and has been closely involved in securing the public incentives that several Third Coast projects relied on.

Brokerage teaches you what tenants will pay for and what they will not. Development teaches you what things cost and how long they take. Corporate finance teaches you how a business owner looks at a balance sheet. An investment committee that holds all three views can test an assumption from more than one side before any capital is committed.

The people who evaluate an investment before acquisition remain involved after closing. Full biographies are on the team page.

Local knowledge is an easy thing to claim, so here is where ours comes from.

Grand Rapids

The principals have worked the Michigan Street corridor northeast of downtown for most of Third Coast Development's history. Third Coast built 545 Michigan Street NE, led the Mid Towne Village redevelopment and the Hampton Inn and Suites that anchors it, and delivered Diamond Place, a mixed-income apartment and retail project further east on the same street. 833 Michigan Street, a Carbon River investment, sits on that corridor: a commercial building redeveloped by Third Coast together with the adjacent Lumberyard Lofts, using Tax Increment Financing from the City of Grand Rapids and a Community Revitalization Program award from the State of Michigan.

Elsewhere in the city, Carbon River's investments include American Seating Park, the historic factory campus on the West Side, and 4500 Cascade Road, a multi-tenant office building that Third Coast renovated in 2020.

Kentwood and the south Kent County industrial market

Two Carbon River investments sit in Kentwood's industrial corridor. At the 60th Street Warehouse, Third Coast Development handled site selection and acquisition, entitlements, design coordination, construction management, tenant negotiations and the capital structure, with Pioneer Construction as general contractor. Leases with Proper Beverage Co. and Trane were signed before the building was delivered. At 4444 52nd Street, Third Coast acquired an existing industrial building, renovated it, negotiated a long-term lease with SnackCraft and structured the public incentive package that supported the company's expansion into the United States.

A few miles south, in Caledonia, the Opus Packaging sale-leaseback added a manufacturer's headquarters facility on Southbelt Drive SE.

Beyond Kent County

Third Coast Development has delivered build-to-suit distribution buildings for SRS Distribution in Grand Haven and Kalamazoo. Outside West Michigan, Carbon River sponsored an investment in a former big-box retail building in Burton, in Genesee County. We invest in West Michigan and in select markets beyond it.

Why it matters to an investment

Municipal processes differ from one community to the next. Entitlements, industrial development districts, tax abatements under Michigan's PA 198 and tax increment financing all run through local boards and staff, and a plan that depends on them needs a realistic view of timing and likelihood. The principals have taken projects through those processes in Grand Rapids and Kentwood.

Brokerage relationships matter because many of the opportunities worth seeing are never widely marketed, and because a broker decides who gets the first call based on who has closed before. Lender relationships matter for the same reason: a bank that has financed your last several projects underwrites the next one with more context. Long-standing relationships across brokerage, development, lending and business ownership give us access to opportunities both on and off market.

Every investment moves through five stages, and the principals are involved in all of them.

1. Source. Relationships, and a willingness to look at situations that are complicated or need to move quickly.
2. Underwrite. We begin with the downside: asset quality, basis, cash flow, tenancy, market, capital needs, financing and the ways out.
3. Structure. The capital structure should fit the investment, whether that means conventional acquisition financing, a sale-leaseback, a joint venture or another form of debt or equity.
4. Execute. Leasing, construction, financing and redevelopment, managed by people who have done them before.
5. Realize. Hold, refinance, recapitalize or sell, measured against the original thesis.

More on each stage of our approach.

For many privately held companies the building is one of the largest assets the owners have, and it gets less attention than the business inside it. For an investor who understands property, that is useful in four ways.

First, the real estate can be valued on its own. What the building would rent for, what it would sell for empty and what it would cost to replace are questions with answers that do not depend on the company's forecast.

Second, the building says something about the business. Whether the space suits the operation, whether there is room to grow on the site, and what it would cost to move are all visible to someone who knows how industrial and commercial buildings work.

Third, property creates structuring options. The business and the building can be owned together or separately, financed together or separately, and a sale-leaseback or a recapitalization can move capital from one to the other.

Fourth, property is a backstop. If the business underperforms, a functional building in a good location can be leased to someone else. We underwrite that case first.