Archive for the ‘Investment Property’ Category
I never took much time to explore Keystone Opportunity Zones–Pennsylvania’s program of tax abatements for those who invest and develop in certain economically depressed neighborhoods. The main reason it’s taken me this long is because I couldn’t think of a decent title for the post–until now. (On a side note, we’re just a couple weeks away from Biggie Smalls’ birthday, so the title is especially fitting. Rest in peace, Biggie.)
Okay. Keystone Opportunity Zones.
The KOZ program started in the late 90s under Pennsylvania governor Tom Ridge. Legislators were looking for ways to spur economic and development activity in cities and neighborhoods suffering from the various symptoms of economic decline: real estate vacancies, unemployment, population loss, crime and blight, etc. As one of the Rust Belt states, Pennsylvania (despite many vibrant industries like healthcare, pharmaceuticals, education and technology) has its fair share of dilapidated former industrial parks and similar sites.
The premise of a KOZ–and the related Keystone Opportunity Expansion Zone (KOEZ) and Keystone Opportunity Improvement Zone (KOIZ)–is fairly simple: encourage developers and businesses to invest in a designated, distressed area and reward them with decreased (or eliminated) state and local taxes. Read the rest of this entry »
The Urban Land Institute’s reports aren’t just well-researched and informative; they’re colorful, too (a big plus for someone like myself, who reads tons of these things). As they have for similar reports, the ULI teamed up with accounting giant PwC to survey and analyze industry sentiment affecting real estate investment in Europe. This report, Emerging Trends in Real Estate – Europe, 2013 (click for PDF), includes a list of 7 general issues affecting Europe’s CRE market and investors’ attitudes toward these conditions. It isn’t a Top 10, but close enough… Here are the Top 7 Attitudes Affecting CRE Investment in Europe:
- London is overheated and overpriced (Agree: 44%)
- London is fairly priced as a safe haven (Agree: 28%)
- The crisis in southern Europe represents a great buying opportunity (Agree: 53%)
- Investment in southern Europe should be avoided until markets stabilize (Agree: 41%)
- European prices will be stagnant for the next five years (Agree: 44%)
- The U.S. represents a more attractive investment relevant to Europe (Agree: 33%)
- Asia represents a more attractive investment relative to Europe Agree: 43%)
I’m sure CRE professionals in Europe have plenty of other attitudes, too. Attitudes like, I hope Real Madrid plays better than they did in the last match, or, Let’s go mess with these American tourists! Or anything else people in Europe think about. Read the rest of this entry »
Not all pension funds are equal. Just consider this list of the Top 10 largest pensions in America: all but two–IBM and General Motors–are public funds. We see a great disparity between the state and federal pensions and the majority of private (single- or combined-employer) pensions. This difference may account for levels of risk, whether we’re talking about an annual loss or all-out failure. However, though private pensions in the U.S. don’t draw from nearly as many salaries as their public counterparts, they do have one advantage over their larger peers: non-capital alternatives.
Take a look at this fascinating New York Times article published last weekend. It explore an unusual method by which cash-strapped companies pay into their employees’ pension funds: substituting capital with large amounts of whatever commodity the company owns, makes, or sells. As a result, some private pensions hold very unusual assets, such as:
- $92 million worth of cheese (40% of a dairy company’s inventory)
- Two million barrels of whiskey
- Obscure real assets like water rights in a desert, a slaughterhouse, and oil wells
- A brewery, tree farms, golf courses, spas
- and even a lien on an airport terminal
Value is value. Since employees and fund managers are ultimately interested in steady returns, it may not matter how conventional an investment may be. If a well-aged cheese or whiskey fetches a nice profit a year or two from now, that’s what counts. Read the rest of this entry »
We’ll specialize in urban infill developments, with a particular focus on residential and mixed-use properties. It will be the most environmentally friendly REIT ever. While others may develop properties to achieve the LEED Platinum certification, my REIT will take greenness to a whole new level: our properties will be made out of plants!
If I call my company “Chia REIT,” will that get me in trouble with the people who do Chia pets?
Of course, energy efficiency and environmental impact have become important concerns in many commercial real estate sectors. Green development is not only appealing to potential tenants, but may offer some (long-term) economic benefits as well. It’s gotten to the point that residential developers are now specializing in luxury homes with absolutely no carbon footprint. Even drug store chain Walgreens has gotten in on this by developing its own net zero location.
The concept of “biophilia” adds a new dimension to a property’s place in the environment by merging man-made structures with natural elements like vegetation and abundant daylight. If you take a look at the image below, you’ll see a rather extreme example of what biophilic design can look like. While this approach may sound like something they invented at last year’s Burning Man, there are some practical benefits to buildings and cityscapes that incorporate elements of the natural world. In addition to its energy conservation, biophiles argue, these designs may have workplace productivity and psychological benefits–not to mention increased market value. Read the rest of this entry »
The U.S. has long been a popular target for CRE capital from other countries. Even though individual markets like London are perennially popular, the U.S. seems to hold the most opportunities for international investors (at least according to AFIRE‘s international investor survey). When we consider the relative stability of the U.S.–and particularly the various asset classes in its gateway markets–it’s no surprise. The recent global economic crisis, from which we’re still experiencing aftershocks in one form or another, may actually be one of the conditions spurring foreign institutions to invest within our borders. The general decline in real estate values has created new opportunities for yield in CRE’s nascent recovery.
One of the biggest investors in U.S. real estate is our neighbor to the north. By and large, Canada avoided the wrath of 2008-09′s economic crisis (at least someone was making good financial decisions…), but its economy, however solid, still needs new investments. Real estate is a fairly limited asset class in Canada; there are only so many opportunities within its borders. So where should Canada’s REITs and intitutional investors deploy their capital? The U.S. is an obvious choice.
When my daughter Catherine was just over a year old, she placed the frame of a United States foam puzzle over a Dr. Seuss book and exclaimed, “Look Daddy! I made a city!”
I’m not saying the evolution of America’s middle market is going to be that fast or that simple, but the growth in South Dakota (were I live) and of the Midwest in general has been both exponential and inevitable.
With both coasts of the country growing on top of themselves, it’s only a matter of time before increasingly mobile generations drive an economic overflow into the middle of the country (as earlier generations did when they moved to America from the Old Country). After all, you can’t have sprawl into the ocean.
Another driving force behind the Midwest’s growth is what I like to call “The Delaware Factor”: the creation of a tax-friendly environment for corporations. The opportunity to thrive in such a place will lead corporations, even Fortune 500 companies, to relocate their corporate headquarters and attract other businesses for the same reason. This creates more jobs, more rooftops, more retail, and finally, more advanced medical and educational development (take note, Obama).
In the last three years, the population of Sioux Falls alone has gone from 75,000 to almost 180,000. From 2010 to 2011, the departures and arrivals from the airport (which you pull into like a lifestyle center) doubled, prompting the construction of two additional terminals and an initiative to establish Sioux Falls as an international hub. In the first quarter of 2012, the number of flights has already doubled the total amount of flights in 2011. Read the rest of this entry »
Secondary markets host plenty of economic and real estate activity, but much of this progress fails to gain national attention. I’m sometimes puzzled by the bandwagon mentality that brings real estate investment to a select few gateway markets. New York, San Francisco, and Washington, D.C. certainly offer great stability and high demand, but what about yield? What about new opportunities?
Some are beginning to look more closely at secondary markets in their search for yield. Some are beginning to challenge the notion that investment capital should only flow to the so-called “safe harbors.” With some searching and a little creativity, one may find a strong value-add opportunity in a market with higher cap rates or older inventory.
To discover a market’s CRE opportunities, we have to look to its overall economic activity. What industries are growing? Which submarkets offer the best opportunities? Is the market bringing in more professionals, students, tourists?
Atlanta, Georgia is a perfect example. Atlanta is one of the biggest and most prominent cities in the South, yet its real estate market has languished behind others in its recovery from the recession. In fact, a Jones Lang LaSalle report listed Atlanta as one of the “Top 10 Hospitality Markets in which to Sell.” This shows how crucial tourism will become to Atlanta’s growth.
Last fall, I discussed a new attraction coming to Atlanta: the College Football Hall of Fame. Such a unique, nationally known attraction is essential to a market’s ability to attract residents, visitors, and capital.
The challenge, as always, is funding. Read the rest of this entry »
At the end of last year, Colliers released a detailed report on the state of America’s retail real estate (click for PDF), including market-by-market data and predictions for the growth and evolution of the sector. Naturally, a great deal of the study looks at the relationship between brick-and-mortar and online retail, and how the latter will influence the market for traditional retail properties. Colliers includes a list of estimated store openings, organized by company, for retailers with the highest number of openings in 2013.
Here are a few of the stores–all restaurants of one kind or another–expected to open new locations this year:
- Buffalo Wild Wings (105)
- Chipotle (165-180)
- Dunkin’ Donuts (330-360)
- McDonald’s (220)
- Qdoba (70-85)
- Panera (115-125)
- Starbucks (300)
- Pizza Hut (150)
All of these numbers are Colliers’ estimates. And yes, Yum! brands’ (NYSE: YUM) Pizza Hut does indeed have 150 potential openings for the year. These brands, along with dollar stores and drug stores, are among North America’s fastest-growing retailers. This, I suspect, tells us a lot about where the retail real estate sector is headed. Read the rest of this entry »