Bolour Making Its Bones Doing Things Differently In The Distressed Asset Market

The shuttering of discount retailer 99 Cents Only opened up a world of opportunity for buyers on the hunt for distressed assets. And in Los Angeles, one of the first to snap up a vacated space was Bolour Associates, a Beverly Hills, California-based family office.

One of Bolour's focuses is on value-add properties with development potential, making the $6M purchase during a bankruptcy auction a clear winner. The company made the acquisition in conjunction with a neighboring tenant to control a full city block at Fairfax Avenue and Sixth Street. 

With a historically tight retail market across the country and in Southern California, the property could be leased out to another tenant. But Bolour has other plans in mind that its CEO says exemplify its overall investment strategy.

“When we look at that market today, and we look at the lending environment, the development environment, we’d rather take a different approach, which is we are remodeling the buildings,” company CEO Mark Bolour said.

The catch is that Bolour intends to redevelop the property not once, but twice in the next 10 years.

First, the company will transform the retail space into about five different studio and gallery spaces for artists. About four years in, it will begin the entitlement process to change the property again, this time into a multifamily project totaling about 140 units. Groundbreaking on the second redevelopment is expected in roughly seven years, Bolour said.

With a focus on value-add properties in emerging markets, Bolour has to find ways to mitigate risk and produce income in the short-term while preserving a property’s development potential over a five- to 10-year window. 

“So basically, as a developer or a value-add investor that develops, we’re able to shrink what is a five-year risk period for a lot of people to only about a 24-to-36-month risk horizon for us,” he said. “And it allows us to be more patient to allow the markets to further improve before we break ground.”

Bolour’s position as a family office allows it to be patient. Without shareholders to answer to as a major institutional investor would, the company can take its time deciding where to place money and how to use it.

The company also makes use of its various platforms to test the waters in new markets before jumping in fully. Bolour has a development arm, a private lending business and an investment vehicle. 

The lending business is active in about nine states, with plans to grow that number to 20. The company sees about $20B in deal flow per year on the debt side, Bolour said. 

“We get to know the markets intimately through lending in them, and then very gradually, we start to look to invest in them. Our growth really is just starting as a company, so all of our platforms are going to be easily doubling in size over the next three to five years, and more so on the lending side.”

Bolour recently switched to a private REIT fund structure. The evergreen fund allows investors to keep putting in money, with redemption rights after two years. The fund’s goal is to invest in debt to help developers finance deals, especially in emerging markets, Bolour said. 

Among the emerging markets the company has targeted with its lending platform is Denver’s Lincoln Park neighborhood, where it executed a loan on a multifamily project.

The area is historically industrial, sitting between a major interstate and railroad and light rail tracks. But like many other neighborhoods just outside Denver’s central business district, Lincoln Park has been increasingly developed into apartments or trendy offices. 

While the company plans to grow on all fronts, the debt fund is its priority, Bolour said. 

“Our company’s focus right now is heavily on building the infrastructure out and building out our debt fund," he said. “We’re doing other things, but our debt fund right now is where 70% of our internal focus is, and on growing that platform.”