Four Mobile natives set out to buy distressed properties on their home turf and, in a matter of months, raised $61 million to do it. The Gulf Coast Opportunities Fund, formed by Bienville Capital Management principals Ralph Reynolds, Cullen Thompson and Billy Stimpson, along with member Nathan Cox, drew investors from around the world to a bet on the Alabama coast’s recovery.
A fund built on local knowledge
All four partners were graduates of UMS Preparatory School in Mobile, and their combined resumes read like a tour of Wall Street and international real estate. By late 2012, roughly 44 percent of the $61 million had been invested in raw land, beachfront property and subdivision lots, most of it bank-owned or short-sale deals. About $20 million had gone into Baldwin County alone, with the partners also eyeing the Florida Panhandle and the Mississippi coast.
Thompson, 35, who kept homes in Baldwin County and New York, said about 70 percent of the fund’s investors were new relationships drawn from across the globe. The group had aimed to raise $50 million and capped the fund at $61 million even as more investors sought to participate. Cox, who led some 30 tour groups from Mexico to Canada, said nearly everyone who visited ended up investing, floored by the values and cost of living they found.
Bargains at a fraction of peak prices
The fund’s strategy was to acquire quality assets at steep discounts and hold them for the next development cycle. Cox said research showed some targeted properties had fallen 60 to 90 percent from their 2006 peaks, and that he had bought some land at 1995 prices. Every purchase, he said, came with two or three plans attached.
Among the marquee deals, the fund paid $9.7 million for more than nine acres of gulf-front property near the Hampton Inn & Suites in Orange Beach, land that included 855 feet of frontage on the water. That parcel had been part of a 15.8-acre tract, appraised at $154 million in 2007, that was to have become Mandalay, a 500-unit condominium project, before lenders foreclosed in 2008. In a separate transaction, the fund paid $6.15 million for a five-acre lot with 333 feet of gulf frontage in Orange Beach, once slated for a $100 million resort hotel and convention center.
Selling the region as much as the real estate
Reynolds, 50, who split time between Darien, Connecticut, and homes in Point Clear and Magnolia Springs, said the fund had already turned away significant additional investment after reaching its cap. Investors, many of them institutions or overseas buyers, conducted extensive due diligence and visited the coast before committing, with some putting in as much as $3 million to $5 million apiece.
The fund earned early notice from Grant’s Interest Rate Observer, which highlighted Baldwin County’s resilience, noting the county had grown 29.8 percent between 2000 and 2010, far outpacing statewide growth, despite the BP oil spill and hurricanes Ivan and Katrina. “We were selling the area as much as the real estate itself,” Reynolds said. The partners aimed to double or triple the fund’s value over three to six years while targeting an annual return of about 8 percent for investors, confident, as Cox put it, that their timing was as perfect as it could be.