When Emre Uralli cashed out all of his real estate investments in 2007, he followed his gut in thinking the real estate market was overheated.
He was right.
His next move? Find a market that has a tremendous upside and low cost of entry, blow into town and start buying up the place.
In the past three years, he has purchased the former Detroit Free Press headquarters building and the David Stott Building in Detroit; and two weeks ago, he put in an offer to buy the Penobscot Building.
For a Florida investor with no other ties to Detroit, Uralli said the city stood out as the best value play he could find.
“These are buildings that were built in the 1920s, and I’m buying them for less than what it cost to build them at that time in history,” he said. “There is no better value anywhere in the world. And that’s why I’m here.”
As an investor in town since 2008, he’s been slowly moving his operations to the area. His umbrella investment firm, Luke Investments, remains headquartered in Fort Lauderdale, but Uralli has since moved his family to Grosse Pointe.
Backed by a group of investors from Fort Lauderdale, as well as his own investment capital, Uralli wants to amass a portfolio that exceeds 2 million square feet in the coming years.
His first acquisition was the former headquarters for the Free Press at 321 W. Lafayette, at close to $2 million.
He’s following a plan to redevelop the vacant 16-story building into a mix of retail and residential space. The plan has been moving slowly, but he has picked up incentives for the $50 million project.
Of the $28.6 million in incentives, the Free Press building project has been approved for state brownfield tax credits, tax increment financing and state historic tax incentives.
The David Stott Building, at 1150 Griswold St., is also moving along.
Uralli owns it after purchasing the $700,000 loan against the building. After foreclosing and paying all the back taxes and bills, he’s spent more than $1 million to create the Skybar lounge on the first floor. His sequel to the bar, a 33rd-floor high-rise space, has yet to receive final occupancy permits from the city of Detroit but will be open this year.
Other than operating the 41-story building as a nightclub, he’s started a marketing campaign for its office space.
It’s a unique space because the 5,000-square-foot floor plates mean a small tenant can have 360-degree views of Detroit, said Ryan Snoek, a broker with Farmington Hills-based Friedman Integrated Real Estate Services representing Uralli.
At an asking rate of $12.50 per square foot with two free months of rent for every year of a lease term, Snoek said the space is priced against some of the cheapest space in Detroit.
“There aren’t many skyscraper options that can cater to a small-sized tenant,” he said.
Uralli will continue to build an office portfolio if he acquires the Penobscot Building, which the Horsham, Pa.-based lender Capmark Financial Group has been marketing for sale since October.
His plans for the iconic 1 million-square-foot building would be to consolidate the tenants into one portion and then shut down the rest of the building to reduce operating costs until a more profitable use can be found.
Despite the risks of Detroit real estate, Uralli is positioning himself to make money from the investments, said Paul DeBono, a vice president with Southfield-based brokerage firm NAI Farbman.
“At the prices he’s paid, he should be able to make money on his Detroit investments,” said DeBono, who follows Detroit deals. “The risk is that with those low prices, buildings like these have issues. And those issues are not typically cheap to take care of.”
Uralli has so far done a good job of maintaining the buildings he has purchased, said David DiRita, a principal with the Detroit-based development firm The Roxbury Group.
“As a property owner, I have respect for how he’s administered the short-term challenge of maintaining these buildings while working through a long-term development plan,” he said.
DiRita, who was once a tenant in the David Stott Building, said the building is actually cleaner today than it was when it was an operating office building.
Uralli delights in taking guests through the vacant floors of the David Stott Building and then comparing that space to the posh 33rd floor. He boasts about the crushed-velvet couches and white leather chairs that his wife chose, and he talks up the long-term plans for a members-only club in the space.
Looking outside of the building, there’s room for both an optimistic view and a pessimistic view. Sitting on the city’s Capitol Park district, the small square looks like a bomb went off, leaving vacant buildings behind.
But, at the heart of a city-led marketing campaign to find a developer for three of the other buildings, Uralli takes the positive view on the neighborhood and the city.
“There’s nothing but upside here,” he said, pointing to the vacant buildings. “These are amazing, historic structures. Buildings like this will never be built again. We’re going to bring them back, and with them, the city is going to come back.”
-Daniel Duggan, Crain’s Detroit