Nelson father-son duo plans to maintain Eastern Market’s identity
Sanford Nelson has had a two-year crash course in Detroit commercial real estate, with the result being a 142,500-square-foot Eastern Market portfolio quietly acquired over the last 18 months.
Son of millionaire serial entrepreneur Linden Nelson, the 29-year-old has his eyes set on a $20 million effort to buy and improve no fewer than 11 properties in the country’s largest public food market. The plan could balloon to $100 million or so, depending on what the father-son team, along with their other investors, do with the properties, including mostly vacant land, they have assembled in that time frame, Linden Nelson said.
The portfolio includes perhaps two of the most well-known buildings in the food district: The building that houses Supino Pizzeria and Russell Street Deli, as well as the Bert’s Warehouse building to the north on Russell Street.
While real estate investors have steadily streamed into Eastern Market in the past several years, including a New York City-based company that earlier this week Crain’s first reported is planning a large-scale mixed-use development across a block and a half of Adelaide Street nearby, it’s important to the Nelsons and their investors that the food district maintain its identity.
Sanford, who went to the University of Colorado at Boulder and then the University of Michigan, says Eastern Market can’t turn into a homogenized, watered-down version of itself, as food districts in other major cities have been developed beyond recognition.
“Our biggest thing is our commitment to maintaining what Eastern Market is all about,” said Nelson, whose company is called Firm Real Estate LLC, based in Detroit.
“It can’t become like some of the other food districts in this country like the Meat Packing District in New York or the Fulton District in Chicago, where it has been redeveloped to the point where the food industry really no longer even exists there. That cannot happen and will not happen in Eastern Market.”
Dan Carmody, the president of the Eastern Market Corp. who has been working with the Nelsons on honing their plan, agreed.
“We are painfully aware that other food districts like Eastern Market have disappeared when a tsunami of real estate investment popped in,” he said.
In the last 18 months, Sanford and Linden Nelson and their investors have been buying Eastern Market properties, creating a portfolio of more than 140,000 square feet.
The Nelson duo’s effort comes with the backing of some big names in Detroit business, all of whom have an equity stake in the project Sanford Nelson says will keep current retail and restaurant tenants in their buildings and give them the opportunity to expand, as well as recruit new niche businesses.
Others involved include: Don Foss, the billionaire founder of Credit Acceptance, considered the first company to offer subprime auto loans; Marvin Beatty, a Detroit developer who is also chief community officer for Greektown Casino-Hotel; and Larry Mongo, the owner of Cafe d’Mongo’s Speakeasy on Griswold Street downtown.
“I was born and raised in Detroit,” Foss, who was not made available for an interview, said in a statement provided to Crain’s. “It’s great to see all the activity happening in the city, and I am excited to invest and be a part of the revitalization effort.”
Beatty confirmed Foss’ and Mongo’s investments in the project. The precise terms of the business structure were not disclosed. He said he has known Linden Nelson for about 15 years and the two have been talking about doing business together for about a decade.
“Late ’16, mid-2016, we really started looking at the possibilities and trying to identify where our target area would be and what kind of things,” Beatty said. “We’ve been talking, and we see some great opportunity in areas that others have not yet saw as a real opportunity and we are going to pursue some of those.”
Sanford Nelson said he first got interested in real estate when he moved to downtown Detroit 4 ½ years ago.
“I began following the progress of various projects around the city and educating myself on the ever changing market conditions in various neighborhoods around Detroit,” he said.
“What ultimately sparked my desire to pursue real estate development was that I realized as a developer, one can create opportunity for others, be it opportunity for someone to find a place to live, or an opportunity for small-business owners to find space and launch their concept. As a developer, it’s very fulfilling for me to be a part of that solution and to cultivate opportunity that will help foster growth in Detroit.”
While larger development plans could be on the horizon, first things first, the Nelsons said in their unassuming office tucked behind an L.A. Fitness gym that Linden Nelson developed at Maple and Crooks roads in Troy.
The office, with its single glass door, opens to what ends up being a cavernous gallery of art, cars and movie props.
They both said the first step in their project is to bring the Eastern Market buildings they own up to snuff, addressing deferred maintenance. Once that happens, a better determination will be made about whether and how much new space to build.
Work on the vacant buildings is expected to begin immediately now that the Rocky Investment Co. deal has been finalized. The time frame for completing the rehabs varies, Sanford Nelson said.
“But within the next few months, some of the more immediate maintenance issues will be completed,” he said.
Partnership with Bert
The sale of Bert’s Warehouse, 2727-2739 Russell St., marks the end of a grueling few years for the business. In 2015, it was put to auction twice, where it fetched a high bid of $2 million the second time around. It never actually sold, however.
Sanford Nelson stressed that he and his investors do not own the restaurant, but are merely owner Bert Dearing’s new landlord.
The Bert’s Warehouse sale was first reported by The Detroit News on Wednesday evening. Sanford Nelson said a $1.6 million sale price the newspaper reported was “not accurate.”
“We did not buy Bert’s. Bert owns Bert’s,” he said. “We partnered with Bert to acquire the property. It is a privilege for us to be partners with a true Detroit icon. That Bert chose us to be his partner speaks to the friendship and trust that has formed between myself, Jai Lee (Bert’s son), Bert and my father.”
“I chose the Nelsons to be my partner because they are good people,” Dearing said in a statement to Crain’s. “We share the same vision, the same dreams, and we are both passionate about food, art and music. The Nelsons have a lot of great projects in the works and we are excited to be a part of it. We are looking forward to the future.”
Sanford Nelson was having a difficult time getting his foot in the door with the Russo family, which owned the eight-building Rocky portfolio he wanted to buy. As hard as he tried, he wasn’t making any headway in reaching the family about a deal.
“We needed a tenacious broker,” said Linden Nelson, a 1998 Crain’s 40 Under 40 honoree who made what was then a $100 million fortune in the 1980s and 1990s after selling Ford Motor Co. on a detachable key ring for valet parkers.
That broker was longtime family friend Steve Gordon, founder and president of Southfield-based Signature Associates Inc.
“He couldn’t get anywhere,” Gordon said of the younger Nelson, adding that the father-son team and their other investors have “several other properties” under contract. “These Rocky sellers have been approached by everybody and got very comfortable with this buying group, and it could have been done on a handshake.”
Carmody sees the Nelsons and their investment group as a boon for Eastern Market in the near and long-term future.
“They are bringing a lot of energy and the work so far that they are talking about doing fits with our strategy for what needs to happen where it stays about food and is a place where everybody is welcomed and is a place that supports independent small businesses,” he said.
And in spite of a tough go at the beginning, Gordon is optimistic about the future of the food district with the Nelsons and their investors owning a large chunk of it.
“They are going to change the landscape of Eastern Market for the positive,” Gordon said.
Posted By: Crain’s Detroit Business on July 15, 2018. For more information, please click here to read the source article.
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