Great Elm Group Expands Real Estate Enterprise with Monomoy Construction Services

Great Elm Group (GEG) has announced the formation of Monomoy Construction Services (MCS), a strategic move that combines the construction expertise of Greenfield CRE with the civil engineering and land planning capabilities of Monomoy BTS Construction Management. This integration creates an integrated business model in the industrial real estate market, enabling GEG to offer a full-service suite of project management, procurement, construction management, asset management, market analysis, and feasibility studies for its industrial real estate tenants.

Strategic Considerations

The acquisition of Greenfield CRE's assets is part of GEG's strategy to grow its existing real estate franchise by bringing its general contractor partner in-house. Greenfield shares a seasoned relationship with GEG and has detailed knowledge of its development projects and tenant expectations. This unique opportunity enhances the overall Monomoy enterprise in procurement and construction management expertise, enabling the business to focus on construction opportunities for its existing industrial tenant base. The acquisition enables increased fee revenue from construction consulting and build-to-suit projects while lowering in-house execution costs, allowing competitive pricing to further drive business growth.

Management Commentary

Jason Reese, Executive Chairman of GEG, stated, "The Monomoy Construction Services transaction represents a successful outcome for Great Elm’s shareholders. This marks the latest in a series of strategic actions taken to enhance our focus and capabilities across our industrial real estate platform." Chris Macri, President of MCRE, added, "We welcome the Greenfield team as trusted colleagues with whom we have worked extensively. As a combined platform, we intend to pursue a robust pipeline of construction opportunities for our tenants, leading the way for creative real estate solutions in the industrial real estate and development market."

Key Hire

MCS has hired Brandon Finomore, the former President of Greenfield CRE, to lead its construction services business. Mr. Finomore joins Monomoy with over 20 years of real estate development expertise, managing and directing projects across the US ranging from $500,000 to $30,000,000. Licensed as a general contractor with the ability to run projects nationally, Mr. Finomore will work alongside the President of Monomoy, Chris Macri, to carry out Monomoy’s strategic construction initiatives. As part of the transaction, GEG has awarded 276,182 restricted shares of GEG stock to Mr. Finomore that will vest on the 5th year anniversary of the grant date. These restricted shares were granted as a material inducement to Mr. Finomore’s entry into employment with MCS, an affiliate of GEG, in accordance with Nasdaq Listing Rule 5635(c)(4).



Operational Synergies and Cost Savings

The integration of Greenfield CRE's assets into GEG's platform creates immediate operational synergies and cost savings. By bringing a trusted contractor in-house, GEG can potentially reduce construction management costs by 15-25% based on industry standards. This is due to the elimination of third-party markups and streamlined procurement processes. For example, if GEG was previously spending $1 million on construction management for a project, the acquisition could result in savings of $150,000 to $250,000 per project. Additionally, the acquisition enables GEG to capture additional revenue streams through construction consulting and build-to-suit projects, creating multiple touchpoints with tenants and potentially improving tenant retention rates.

Alignment of Management Interests with Shareholder Outcomes

The compensation structure for key personnel, particularly the 276,182 restricted shares granted to Brandon Finomore with a 5-year vesting period, demonstrates a commitment to long-term value creation. At current market prices, this equity grant represents approximately $500,000 in value, effectively aligning management interests with shareholder outcomes. This strategic acquisition marks a significant vertical integration play for Great Elm Group, transforming its industrial real estate platform into a full-service provider. By controlling the construction process, GEG can better manage project timelines and costs, potentially accelerating development cycles and improving returns on invested capital.

In conclusion, Great Elm Group's expansion of its real estate enterprise with the formation of Monomoy Construction Services is a strategic move that enhances the company's competitive position in the industrial real estate market. The integration of Greenfield CRE's assets creates operational synergies, cost savings, and additional revenue streams, while the appointment of Brandon Finomore as the leader of MCS brings valuable expertise and experience to the role. This acquisition aligns management interests with shareholder outcomes and positions GEG as a full-service provider in the industrial real estate market.