Photo courtesy of Marcus Partners
Levi Reilly
Partner and head of development, Marcus Partners
Age: 46
Industry experience: 20 years
Marcus Partners is flush with capital that it’s deploying across the Eastern Seaboard, including a focus on housing and industrial developments. The Boston-based developer closed its Marcus Capital Partners Fund IV in 2022 after receiving $650 million in investments, surpassing its original $500 million fundraising target. The company broke ground this year on the first phase of a two-building, 400,000-square-foot logistics development at 2 Commerce Drive in Tyngsborough and a 304-unit apartment complex in North Attleboro. Levi Reilly plays a leading role in helping the firm identify promising development sites and acquisitions.
Q: How much will Marcus Partners invest from its Fund IV, including leverage?
A: It’s done on a project-by-project basis, but the average is probably 50 percent across our portfolio, so you might have a doubling of that for total acquisitions. We generally pride ourselves on being synergistic and we are trying to go with opportunities in industrial, small-bay logistics, manufacturing and housing.
Q: How does the 2 Commerce Drive in Tyngsborough project reflect the state of the suburban industrial market?
A: That is a speculative, built-to-suit opportunity for high-bay logistics space, and we are under construction now. We are taking a little bit more of a measured approach, but that is a location we feel pretty good about. The north market just hasn’t had as much supply as the south market. We’ve been building on spec and once we see some traction, we might start another [building]. The south market has a bit more supply, so there needs to be more absorption before you’ll see new construction.
Q: Do you focus more on multifamily acquisitions or development?
A: It depends upon the geography. In the Southeast, we are buying existing assets. In the Northeast region, which has been a little more supply constrained, we are performing more ground-up. Sometimes we are the lead developer or general partner, and other times we are giving people capital and we are the silent partner or the limited partner in the development. We are looking at a variety of product in that strategy. We are actually working on an underutilized, [undisclosed] office asset in the Boston area. Given the dislocation, there are some opportunities there. For a very long time, there was a bid-ask gap. In the current ownership structure, we’re starting to see that come back together. That’s unlocking some transactions. It’s an as-of-right project, which is pretty unusual. A lot of the commercial assets were built adjacent to transit, so depending upon where the MBTA Communities [districts] are, there could be some good synergies between underutilized commercial assets and where the towns would like to see the new housing.
Q: What about investments in office buildings?
A: We are not there yet. We are starting to see some people jump back into that. New York is obviously doing it well ahead of us. They are building spec office. We are seeing more investors ask us about that space. We think there is more absorption that needs to happen before we would play in that sector. That was a big part of our firm for 20 years, and we feel very comfortable there.
Q: Are you exploring joint ventures with developers of approved projects that haven’t been able to get financing, such as in multifamily?
A: Yes and no. A big piece of our business is coordinating with sponsors and looking for opportunities to invest where somebody is shovel-ready, has secured the entitlements and ready to move into vertical construction. Oftentimes a developer is selling a site because there may be an existing challenge with it. The capital markets are pretty efficient in Boston. Institutional capital wants to be in this space. If they are not able to find capital for it, usually there’s an issue.
Q: What’s the history of 582 Kelley, the North Attleboro site on Kelley Boulevard where you broke ground this summer on a 304-unit apartment project?
A: It was an opportunity we found and brought to the city. It was proposed under a Chapter 40R [smart growth district] structure in partnership with the city and with the state. The state brought forward a MassWorks grant. We expect to deliver the first units in August of next year.
Q: What’s the next step to encourage housing production beyond MBTA Communities?
A: It’s a timely question. I spent time on the governor’s Unlocking Housing Production commission, and if you step back and look at it on a very high level, the most important thing we can do is try to put housing where we already have invested in the infrastructure. A lot of the places where we have not just mass transit and roads but water and sewer, commuting and social patterns in your community: That becomes my north star.
The challenges are zoning and land use, but there are some small moves that we could do around changes to wetlands standards. Having a single standard across the state would be very helpful in streamlining efficiencies and ensuring the environmental policies aren’t used as an exclusionary tactic. Streamlining the energy codes into a single energy code also would be very helpful. There need to be real conversations about regional planning. In Massachusetts it’s challenging. Home rule gives communities the right to create their own zoning.
Q: The state Executive Office of Housing and Livable Communities is finalizing regulations to implement Chapter 40Y, the Starter Home law. Do the requirements of 1,850 square-foot maximum home size work financially for developers?
A: We are working on a couple of early opportunities where we would propose that. One of the housing strategies is in the single-family rental space. It’s not as common in New England, but more common in the Southeast. If we are building single-family ranches with bedrooms on the ground floor, specifically for empty-nesters and seniors – when you couple that with the potential renter demographic of young families, without the burden of a down payment or maintenance, we get excited about these projects. We think of these as multigenerational communities.
Because we will be renting these, they tend to operate more like multifamily properties. That’s why Chapter 40Y is a great overlay. The economics work. We are building these at a very similar pricepoint to traditional multifamily units. The rents are pretty in line with traditional multifamily units. You need to find areas that work for it, but in a lot of places there are land sites that are adjacent to existing single-family neighborhoods. These are gentle density projects that would fit in well in the context of an existing neighborhood, in places where traditional multifamily wouldn’t be a good fit.
Editor’s note: This report has been updated to reflect that Marcus Capital Partners Fund IV closed in 2022.
Reilly’s Five Favorite Off-the-Beaten-Path Alaska Destinations
- Snug Harbor Outpost
- Seldovia
- Lost Lake Trail
- Resurrection Trail
- Train to Whittier and a fjords cruise
