Real-estate fund suits seasoned investors only

Leery or novice investors can skip this column.

It's about a new fund starting in Richmond for seasoned investors who want to play the real-estate game without the responsibilities of management.

Queenswood Partners, a limited partnership based in Richmond, is looking for minimum investments of $200,000. It hopes to raise $20 million for the first Queenswood Fund.

The money will be invested in properties such as warehouses, apartments, shopping centers and office buildings.

The typical size of each investment will be $1 million to $5 million for three to seven years.

"It will be on a deal-by-deal basis," said John B. Levy, founder of Queenswood Partners and principal of John B. Levy & Co., an investment banking firm.

Once a deal is funded and the project completed, investors will get their money back. Levy said he expects a yield of 10 percent to 15 percent, although the investment is not without risk.

Safe investments, like money markets, yield about 1.5 percent, he pointed out.

When all $20 million is invested, the partnership hopes to start a second fund.

"We're looking for real estate projects with total values of $10 million to $25 million - decent-size projects, not big ones like Short Pump shopping center and not special-use projects like a car wash or miniature golf," Levy said.

The 200-unit garden apartment complex or 200,000-square- foot warehouse would be suitable. Or, for example, a strip mall owner wants to upgrade the property and needs $2 million.

The partnership will focus on projects in the East, such as Raleigh and Charlotte, N.C., Atlanta and Virginia Beach.

It will provide mezzanine debt, which is similar to a second mortgage only without a lien on the property.

"It's riskier than a first mortgage, less risky than equity," Levy said.

The small to midsize commercial real estate market is under served, said Steven Biegler, also a founder of the partnership and principal of Biegler & Associates, a public accounting firm.

"Most mezzanine funds are much larger, typically with minimum $5 million investments," Biegler said. They attract institutional investors.

The Queenswood Fund hopes to attract individual and small institutional investors.

No fee is tied to the initial investment. The partnership will charge a 1.5 percent management fee once the money is invested and an origination fee of 2 percent at the closing of a deal.

"What we bring to the table is 30 years of experience," Biegler said. "Mine is in real estate and accounting. John's is in real estate and lending."

Other founders are Andrew R. Little, principal, John B. Levy & Co., and Julia W. Rogers, principal, Biegler & Associates.

For more information, call Steven Biegler at (804) 288-5888, ext. 306.

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