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These investors see untapped real estate opportunity in Buffalo Niagara

Bob Richardson and Therese Fuerst believe there isn't enough capital available locally to fund all the potential development possibilities.

So they're trying to do something about it.

The duo are partners in Blue Cardinal Capital, a new real estate private-equity firm in Buffalo designed to pool investment dollars from wealthy individuals, families or organizations to fund new developments.

The goal is to ensure that the project pipeline continues to grow, while filling in gaps in financing and coordination where local developers aren't willing, able or available to pursue new ideas. At the same time, they hope to eventually open up new chances for smaller, more "retail-oriented" investors to get into the action through their firm's funds.

"One of the challenges in this market is the lack of capital," said Richardson, the firm's managing partner. "Private developers in the past provided the necessary capital, but with the pace of things happening now, that can't continue. ... There's lots of opportunities that are going unfilled because there isn't a developer who focuses on those opportunities."

Richardson and Fuerst wouldn't reveal how much money they've assembled so far. But the firm is already off and running with its first investment and project, as an equal partner in a multi-million-dollar venture with Uniland Development Co., where Fuerst – the investment firm's senior partner – used to work in public relations alongside the Montante family.

In this case, as with other projects it plans to pursue, the company would largely act as a limited, silent partner on deals, leaving the real estate work and day-to-day management of projects to the developers it will team up with. But it still plans to take an active and equal role in financing and proposing projects, with each new real estate venture involving a separate investment fund.

"There was a real need for something like this in real estate private equity," said Richardson. "We have a group of really great developers who have survived 40 years of downturn. They have a model that works for them, and they are very disciplined. Private equity can fill the gap where others don't have the appetite to pursue something because it doesn't fit their model."

Uniland announced in late September that it would purchase 20 acres of "prime commercial real estate" at the intersection of Elmwood and Hertel avenues in North Buffalo. The developer, which already completed the purchase of the first nine acres for $5 million, is buying the properties from longtime Buffalo businessman and real estate investor Frank Deni and his family.

Much of the land is vacant, except for some dilapidated buildings, a former gas station that is now a brownfield site and a burnt-out building on one parcel. That, together with its location in the midst of commercial districts on both bustling streets, makes it a valuable opportunity for redevelopment as one of the few large blocks of land still available in that part of the city.

Uniland identified Blue Cardinal as its partner on the project, after discussion began last December.

"We didn't want to be behind the scenes," Richardson said. "They're the developer. We and our investors rely on them to manage it on a daily basis. But we're an equal partner financially."

He said the team has some "ideas" for a mixed-use development on the site, but nothing "set in stone," and there's lots of clearing, cleaning and site preparation work to do first. In the meantime, though, company officials wanted to let the public know what was happening and start engaging the community early.

"We've been pleased with the outpouring of support there," Fuerst said, referring to block club and other groups that she said have been supportive on social media. "They've been so hungry for something there."

Uniland to redevelop 20 acres in North Buffalo

Meanwhile, Richardson said they've started working with other local real estate developers as well, and there are two or three additional investment funds that should "come together" by March 2018.

Additionally, he said, Blue Capital can participate in development from the other side. Right now, the firm is mostly getting involved in financing projects early on, in the conceptual stage, but many proposals never come to fruition, and it doesn't control what comes its way from developers. But private-equity firms can also work in reverse, by identifying a need or opportunity, acquiring properties and then engaging a developer to work on their behalf.

The firm is already working on two such ventures, one in Western New York but outside of Buffalo and the other in Canada. Richardson would not be more specific on the locations, citing a desire not to drive up real estate prices while they're still assembling property. But his staff is also evaluating other possibilities around upstate New York, he added.

"This has legs," he said. "We're going to do some pretty significant things, and I like to think we're going to punch above our weight. It'll be unexpected."

Richardson is a longtime banker and businessman, who spent a dozen years at M&T Bank Corp. in Buffalo from 1993 to 2005. The Syracuse University graduate started M&T's asset-securitization program and a procurement program, as well as helping to launch M&T Credit Corp. He also worked on the mergers and acquisitions team for 17 partial or completed deals.

After he left M&T, he became a consultant for a Bentonville, Ark.-based firm that worked with Walmart's electronics business, but he was still based out of Buffalo. He also chaired Infotech Niagara, and later teamed with former Evans Bancorp Chief Financial Officer Gary Kajtoch to form New Buffalo Capital as an investment firm. When the pair split last April, they dissolved New Buffalo, but Richardson kept the separate Blue Cardinal, which already housed his real estate activities.

Fuerst is a veteran communications professional who began her career as a television reporter before switching to public relations for the City of Buffalo and E-3 Communications. She later worked in communications roles for Buffalo Niagara Enterprise – now Invest Buffalo Niagara – and then for HealthNow New York, Uniland and the Buffalo Niagara Partnership before striking off on her own two years ago. She still runs Fuerst Consulting separately but joined up with Blue Cardinal in April.

Blue Cardinal is already registered with the U.S. Securities and Exchange Commission, allowing it to seek out investors. But real estate investments are usually limited to "well-heeled" and "accredited" investors through private equity because of the risks and lack of liquidity inherent in buying and owning property. Even so, he said, they hope to broaden their reach in the future.

The new firm employs 10 support and operations staff, but is seeking to hire more investment professionals. The partners are also planning to open a Canadian version of the firm shortly to capitalize on cross-border possibilities, and will identify three other U.S. cities that fit their model over the next four to five months, with a goal of expanding there in the near future.

"Lessons learned here can be applied elsewhere," Richardson said.

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