Foundation to redevelop Danville buildings

Danville’s River District has quickly become an appealing place to live, growing from a population of 400 to more than 2,000 in the last 3½ years.

New residents have been attracted by the revitalization of the area. In the past four years, public and nonprofit organizations have invested approximately $30 million in the River District while private investment has totaled more than $100 million.

The Danville Regional Foundation wants to continue this momentum. In January it launched a real estate investment fund aimed at redeveloping underutilized buildings in the area.

The $10 million fund will acquire property in the River District, which “has within it about 4 million square feet of underutilized space, much of it sitting in old warehouses,” says Karl Stauber, the foundation’s president and CEO.

The foundation is partnering with Danville-based Watershed Ventures, a real estate development and investment firm, to manage the fund.

The idea for the fund originated about four years ago when the foundation began looking at new opportunities for its $217 million endowment. It decided having its own real estate fund made sense.

The foundation previously had invested in a national distressed real estate fund focused on the large metro areas around the country. “We worked on the idea for four years. We looked at models around the country,” Stauber says. “We wanted to make sure it was legal and prudent from an investment standpoint.”

The foundation decided that Watershed would be able to provide the “vision, innovation and experience” needed to advance the revitalization project, Stauber says. As part of its responsibility, Watershed will identify and secure properties, plan for their development and attract developers.

“They will bring us a proposal about making an investment, and we will review it,” Stauber says. “Unless we disagree, the investment will be made. We look forward to seeing the ideas they bring to the table.”

About half of the $10 million fund during the next 10 years will be used in acquiring properties. “It will probably take Watershed about a year to do the property acquisition component,” Stauber says.

The remaining $5 million is allocated to short-term, high-interest-rate mezzanine loans (similar to a bridge loan) to developers who want to “come into the market to help move their projects forward,” Stauber says.

During the past nine months, Watershed has secured about 475,000 square feet of space in the River District, including the Belk Leggett Building and the Imperial Mill.

“By investing in local real estate we believe we can generate market-rate returns and help drive the redevelopment of the River District,” Stauber says.