Daniel Stern, a partner in Lormax Stern Development, recalls his first time with Grand Sakwa Properties. “We were both looking at the same piece of land, and instead of bidding against each other we decided to become partners.” That 1992 collaboration resulted in Northville Village Center, a Michigan strip/power center that includes a Barnes & Noble, PetSmart, Pier 1 and smaller retailers.

The buddies launched the latest chapter of their relationship in April, when they announced a $250 million private equity fund. While the individual companies will continue ground-up development (Stern estimates that the two portfolios total 8 million square feet) the fund will be devoted to acquisitions of existing properties. Several purchases are in due diligence, and the fund will be fully invested within three to five years.

With the exception of the far West, all parts of the Lower 48 are under consideration, and Stern says that urban in-fill sites will be a major thrust. He cites Detroit as an example of the opportunities being sought: “Very densely populated, and there's almost no retail to speak of in a three-mile ring. And if within that dense population the incomes are good it creates very strong opportunity.” Redevelopment isn't out of the question, as both Grand Sakwa and Lormax Stern claim experience in retenanting properties, as well as converting dead malls and other retail properties to more relevant uses.

Grand Sakwa's internal team will manage the fund's properties; the two companies employ a total of 35. Stern adds that the fund will likely follow the participating developers' tradition of holding properties for the long term.

Although Stern does not name the investors in the fund, he says that KeyBank Real Estate Capital “plays a large role in it.” That Cleveland-based entity will also act as a preferred lender for properties acquired by the fund. Grand Sakwa is based in Farmington Hills and Lormax Stern is located in West Bloomfield, both in Michigan.