New Boston Fund Finds Hospitable Market in FL

Miami, FL (10/16/06) - One of the fastest-growing private real estate, investment, development and management firms in New England has set its sights on Florida and launched its plan to pursue "acquivelopment" through the state.

Acquivelopment is a synergistic relationship between acquisition and development that is key to Boston-based New Boston Fund`s strategy here, said Phillip H. Bakalchuk, senior vice president of acquisitions.

"It`s a unique approach that I don`t think anyone else of any consequential size does," he said.

With partner John Dragat on the development side, the pair jointly pursues acquisition and development opportunities in the office, industrial, retail, multifamily and hospitality sectors.

A case in point is the firm`s recent acquisition of the 246-room Doubletree Club Hotel in Orlando at the northern entrance to Disney World. The facility was purchased in foreclosure from a Midwestern bank by New Boston Fund in partnership with Buena Vista Hospitality Group, a veteran in Orlando hotel management and re-development. It is the first joint-venture partnership for New Boston Fund and Buena Vista Hospitality Group.

New Boston Fund will spend $4.5 million to upgrade the hotel rooms and common areas. The company is also exploring the possibility of converting the Doubletree into a condominium hotel. Renovations are expected to be completed by the end of 2007. In addition to buying assets to operate or reposition, New Boston Fund is looking to build, said Bakalchuk. The company recently announced plans to engage in a preferred equity investment with a partner to develop 187 units of mid-priced luxury condominiums. The development, Gallery Arts Condominiums, will include one-and two bedroom units on Northeast 24th Street near Biscayne Boulevard, just blocks from the new Miami Performing Arts Center, downtown Miami, South Beach, and the new midtown Miami shopping district.

The project is a joint venture between New Boston Fund and HH Development. Total development cost will be $55 million, and the project is expected to be complete by end of 2007.

"With costs being as high as they are, in certain markets the real value proposition is to build," Bakalchuk said.

The Doubletree and Gallery Arts projects aren`t New Boston Fund`s first foray into the Florida marketplace.

"When we went into Florida three years ago, our original move was in office building, Orion Center, in Tampa and an office building (Executive Court at Jacaranda) in Plantation," Bakalchuk said.

Since then, the focus has been on diversifying the company`s portfolio by adding multifamily and hospitality properties, he said, including:
The 181-unit Mediterranea in Miami
The 189-unit Oceans Grand Condominiums in Daytona Beach
The 186-unit Halifax Landing in South Daytona
And the 198-unit Puerta de Palmas in Coral Gables

"When I was brought in to increase our portfolio exposure to rental housing in Florida, where was no rental housing transacting at rates of return that had value to us," said Bakalchuk, a Miami native.

Now, however, the average internal rate of return for the Florida portfolio is around 20%, Bakalchuk said, adding his Cuban heritage and business school contacts have been advantageous in South Florida - not to mention hard work.

"It`s old-fashioned blocking and tackling. It`s relentless cold calling," he said.

Bakalchuk said acquisition and development of more hospitality properties are on the horizon. The company is closing on a 448-unit complex in Tampa.

"Our partners are experts in turning around hotels. That`s all they do. We have another joint venture partner in our Tampa property. Eighty percent of what they do is value-added turnarounds," he said.

According to Bakalchuk, New Boston Fund seeks out "expert local partners" with whom to construct profitable deals.

"(That`s) a partner that`s still young and entrepreneurial - that isn`t going to get bogged down in yesterday`s paradigms. One that has a track record and has the energy and enthusiasm to wake up to a terrible day and still fight it out for another day," he said.

"Some of these guys have bottomless pits of enthusiasm and positive vision. It`s astounding sometimes."

Outside of Florida, New Boston Fund`s largest concentration of properties is in the Northeast, followed by the Mid-Atlantic States, the Midwest and then the Southeast.

Through a combination of private and institutional equity, the company anticipates investing up to $500 million in Florida in the next two years, Bakalchuk said, adding that allocation could be raised or lowered as opportunities present themselves.