Craig Stoehr’s eyes are wide open. He, and his partners, have a lot of money to spend, and he is looking for real estate investment opportunities in the Milwaukee area. Last year Stoehr, who grew up in Oconomowoc, and two real estate investors from California, Frank Andrews Jr. and David Stroud, formed Badger Pacific Equity Partners. During the next five to seven years they plan to invest $500 million in equity capital in real estate-related projects, including several in the Milwaukee area.
Badger Pacific Equity Partners has already acquired three Milwaukee area properties and is planning to acquire even more. They will have invested about $10 million in Milwaukee area real estate by June 30, Stoehr said.
Andrews, Stroud and their associated investors accumulated the $500 million in equity capital during about 20 years of investing in real estate in California.
"They’re really keen on the tax deferral," Stoehr said. "They’ve used the 1031 exchanges to defer their income tax over and over to build a substantial portfolio."
Under section 1031 of the Internal Revenue Code, when an investment property or a business property is sold, the owner can use the funds from the sale to purchase a similar property, and not be liable for capital gain taxes on the profit from the sale of the initial property.
Stoehr met Andrews from some friends of his family. In late 2004 he and Andrews began talking seriously about forming a real estate investment partnership. They formed Badger Pacific Equity Partners with Stroud in early 2005.
Andrews and Stroud wanted to invest in real estate in other parts of the country because it has become difficult to invest in northern California real estate, Stoehr said. It can take several years for residential lots to be approved and platted in northern California.
"The opportunities in northern California aren’t as great as they used to be," Stoehr said. "It is also difficult to find available land. So much land has been developed. Prices have gone up."
After living overseas for several years in London, Paris, Dubai, Istanbul and Milan, Stoehr moved back to the Milwaukee area and joined Andrews and Stroud in forming Badger Pacific Equity Partners. Andrews and Stroud wanted him to live in California or Arizona, but Stoehr said he wanted to spend more time with his family and insisted on living here.
"If I’m not going to live in New York, where I lived before, then I wanted to move back to Wisconsin," Stoehr said.
Badger Pacific Equity Partners is investing in real estate opportunities in the western and Midwestern parts of the United States. With Stoehr living in the Milwaukee area, a significant portion of the $500 million they invest will be here.
"The reason we are investing (in the Milwaukee area) is because of me," said Stoehr, who is the managing partner of Badger Pacific Equity Partners. "I think there’s a lot of opportunity here. The Midwest is very stable. You don’t make a killing, but you don’t get buried."
In the group’s most recent Milwaukee acquisition, Badger Pacific Equity Partners acquired a 136-year-old, four-story, 70,000-square-foot building at 625 N. Milwaukee St. They are still trying to decide what to do with the property. The first floor could be occupied by retailers with office space on the upper floors.
Or, a hotel might occupy the building. Badger Pacific Equity Partners wants to develop a boutique hotel somewhere in downtown Milwaukee. They might open a hotel in an existing building, or build a new structure for the hotel, Stoehr said.
"We’re actively talking with several people and actively looking for a hotel operator for the downtown area," he said.
Several hotel development proposals for downtown Milwaukee have been floated in recent months. Weas Development Co. plans to have a Renaissance ClubSport by Marriott hotel in a Third Ward development at the southeast corner of Broadway and St. Paul Avenue. Charlotte-based Ghazi Co. has proposed a 32-story building at Fourth Street and Wisconsin Avenue, which would include a hotel. U.S. Bank and JBK Properties want to have a hotel in the 42-story building they have planned to build just southeast of the U.S. Bank building at 777 E. Wisconsin Ave. The U.S. Bank/JBK project is on hold until they get an anchor office tenant.
Badger Pacific Equity Partners think a new smaller, high-end hotel could succeed in downtown Milwaukee.
"We’ve had a couple of market studies done," Stoehr said. "Milwaukee is not the greatest hotel market. Occupancy rates are low and room rates are low, compared to other cities. But we think there is a market for a hotel in the upper scale category, like the Pfister or Hotel Metro, or a limited service hotel like the Residence Inn (by Marriott), which has done well."
Stoehr and his partners bought the building at 625 N. Milwaukee St. for $2.1 million, or about $30 a square foot.
"You make money in this business when you buy," Stoehr said. "If you buy at the right price, you can’t go wrong. You couldn’t construct this building for $30 a square foot."
The building has been vacant for about three years. Badger Pacific Equity Partners bought it from an Illinois company that had planned to use it for a telecommunications data center, until the dot.com bubble burst and spoiled those plans, Stoehr said.
"Structurally the building is great," he said. "All of the abatement has been done. We just have to get the mechanicals, the electrical and the plumbing put in."
Last year Badger Pacific Equity Partners acquired two Milwaukee area properties.
They purchased the 43,200-square-foot, 106-year-old former Milwaukee Antique Center building at 341 N. Milwaukee St., at the corner of Milwaukee Street and St. Paul Avenue in the Historic Third Ward, for about $1.9 million from The Schultz & Spellman Group LLC.
"In the Third Ward, I think that’s a very good price," Stoehr said. "We thought this was an excellent corner. We knew the Third Ward was on the map, but still has room to grow."
Badger Pacific Equity Partners plans to spend about $2 million to redevelop the building, Stoehr said. The façade will be restored and all of the windows will be replaced. The building will be converted to retail, office and residential space. Stoehr will live in a penthouse on the building’s top floor, which will have stairs leading to an entertainment area on the roof of the building. The project is expected to be complete by Labor Day.
The building is being gutted to a white box level. Once complete there will be 5,800 square feet of retail space on the first floor, 6,000 square feet of office space on each of the second, third and fourth floors. Stoehr’s penthouse condo will have about 2,000 square feet of space. The remaining space on the top floor could be used for residential or office space. The basement has 5,000 square feet of space, which could be used for a restaurant. The office space in the building might be sold as office condos.
The views from the building will be a major selling point. Tenants will be able to see the Calatrava addition to the Milwaukee Art Museum from the second floor and up and they will be able to see Lake Michigan from the third floor and up.
Also last year, Badger Pacific Equity Partners and a group of local investors took over management of the Milwaukee Mile racetrack in exchange for 9.5 acres along Greenfield Avenue that they will develop.
Currently they are seeking proposals from architects and site planners who would create specific development plans for the property next to the race track. The development will include a hotel to support the Wisconsin Exposition Center at State Fair Park and the Milwaukee Mile, Stoehr said.
He is also talking to Scott Acker, who owns a Quaker Steak & Lube restaurant franchise in the Madison area, about opening a location at the Milwaukee Mile. Quaker Steak & Lube is a motor-sports themed restaurant chain.
In addition, Badger Pacific Equity Partners has signed a letter of intent to purchase a 1.3-acre property on the east side, which Stoehr declined to name. The property currently has some retail tenants, he said.
They plan to hold the property for now, and do a redevelopment project sometime in the future, Stoehr said.
"It’s a great piece of property," he said. "It’s in a great location."
Badger Pacific Equity Partners is focusing its real estate investments on the western half of the United States. But, the group has also invested in the parent company of Shompole, a luxury African safari resort in Kenya. Andrews found out about Shompole while he was on safari.
"We invested in the parent company of the resort to help the business expand," Stoehr said. Typically when people go on safari in Africa they travel on a seven to 10-day circuit and stay at two or three different places during the trip, he said. Badger Pacific Equity Partners hopes to eventually help build another African safari resort on a beach, to add another stop on the safari circuit.
Stoehr himself is no stranger to global travel. At 38 he has seen much of the world during his short, but accomplished career.
He earned his bachelor’s degree from the University of Minnesota in 1990 and then went to Marquette University Law School for one year. Then he transferred to Northwestern University Law School because he wanted to work for a Wall Street law firm and felt they would not hire him out of Marquette.
"I was determined to go to New York and work for a Wall Street firm," he said. "That was right after the movie Wall Street had come out. I had dreams of working on those types of deals."
After graduating from Northwestern in 1993, Stoehr spent less than a year with Winthrop, Stimson, Putnam & Roberts, a Wall Street law firm.
But Stoehr said the pace there was too slow for his liking, and he then went to work for the New York office of Latham & Watkins LLP, one of the world’s largest law firms. Stoehr advised on billions of dollars worth of transactions specializing in the telecommunications, media, technology, hospitality, leisure and energy industries. Stoehr worked at Latham & Watkins for about six years.
One of the partners at the firm was the president of the U.S. Soccer Federation and was also the chairman and chief executive officer of the 1994 World Cup, which was held in the United States. Stoehr helped plan the 1994 World Cup.
Then he moved to Paris to work on an international soccer-related marketing project undertaken in connection with the 1998 World Cup in France. Stoehr negotiated sponsorship and endorsement deals with a number of international soccer stars including Pele.
Then Stoehr returned to New York until he left Latham & Watkins in 1999. He created an online media and retailing company focused on international soccer. After about 18 months he sold it to a United Kingdom-based firm.
For the next two years Stoehr was the managing director of the Class 1 World Powerboat Championship, the premier international powerboat racing championship. He lived in Istanbul, Milan and London during that time.
Then he spent a year working in Dubai as the co-chairman of Grand Prix Worldwide Limited, a Formula 1 auto racing sports marketing agency.
At the end of 2004, Stoehr’s world tour ended and he returned home to Wisconsin. He is a member of the board of directors of Oconomowoc Manufacturing Corp., which manufactures ball bearings and motion-related products, and is owned by his stepfather, Don Sydow.
Stoehr said he wanted to return home to be closer to his family. He wanted to spend more time with them, including his stepfather who had experienced some heart problems and his nephews.
"I can’t say there’s anybody I know who had as good a time as I did (working overseas)," he said. "But when you get older and you start to think about (family) stuff."
Craig Stoehr
Co-founder and managing partner of Badger Pacific Equity Partners
Age: 38
Hometown: Oconomowoc
Milwaukee area properties:
- Milwaukee Mile, West Allis, 10 acres mixed-use development planned
- Former Milwaukee Antique Center, 341 N. Milwaukee St., Milwaukee
- 625 N. Milwaukee St., Milwaukee
