Trump is getting involved in Opportunity Zones, and experts think that’s a good thing

Opportunity zones have become the darling of real estate investors since their adoption last year, but the still-under-the-radar program is poised to receive a lot more attention, and possibly scrutiny after it was promoted in the Oval Office last week.

President Donald Trump’s signing of an executive order to push more federal resources into the Opportunity Zone program is a step in the right direction and could bolster the little-known tax incentive program and the distressed communities that benefit from investments, experts said.

“I think investors in the marketplace are going to be excited that there are going to be a number of new federal benefits aligned to these zones,” Develop founder Steve Glickman said.

Glickman is a former Obama administration official and one of the original architects of the Opportunity Zone program, which was enacted as part of the Tax Cuts and Jobs Act of 2017.

“Frankly, these zones need a lot more than private capital,” Glickman said. “They need infrastructure investment, they need to deal with crime, workforce training, and other strategies and dollars. Opportunity zones were always meant to stimulate that kind of holistic activity not just on a federal level, but on a state and local level.”

Erik Marks, a Seattle-based commercial real estate attorney and founder of Opportunity-Funds.com, a website that tracks opportunity zone funds and designated areas, said the executive order still does not address the current shortcomings and problems that are present from people trying to do opportunity zone deals now.

“I think the regulation may be useful, but this is not a problem-solving regulation,” Marks said. “I don’t know what his strategy is, but I think when there are opportunity zone successes, he has a clear opportunity to put himself and his Cabinet at the locations for the photo opportunity. I don’t mean to say that in a derogatory sense … This is to make sure [everyone knows] he’s still part of it.”

For the past year, the at-first unheralded Opportunity Zone program, passed last year as part of Trump’s $1.5 trillion Tax Cuts and Jobs Act, has flown under the mainstream radar.

The program’s goal is to generate economic development in the form of the redevelopment or the development of market-rate housing, affordable housing, new offices, retail buildings and businesses in these communities.

 

 

Read more on Bisnow

 

 

Oakland may require landlords to retrofit seismically unsafe apartments

Oakland may soon require hundreds of old apartments to be seismically retrofitted in an effort to prevent a mass collapse of buildings in the next big earthquake.

The retrofit rules would apply to soft-story residential buildings: multiunit, wood-frame structures with weak first stories built before 1991. An apartment with garage parking in the ground floor or street-level retail could fall into the targeted category.

Such buildings are prone to collapse during earthquakes, when the combined weight of shaken upper levels becomes too much for the vulnerable first story, as Loma Prieta proved in 1989 and Northridge in 1994.

“You look at photos of (San Francisco’s) Marina District after ’89 — quite a few buildings looked like three stories when they used to be four,” said Thor Matteson, a structural engineer of the Bay Area firm Quake Bracing.

Oakland is believed to have more than 24,000 housing units in 1,400 to 2,800 soft-story buildings, defined as those with at least five units and two to seven stories, according to city estimates. The first step of the ordinance proposed by City Councilman Dan Kalb and Mayor Libby Schaaf involves finding out which buildings must be retrofitted and which are exempt, such as those that have already completed the work.

Building types would be divided into three tiers, and each category would be on a different timetable. Owners would have four to six years to complete the retrofit work.

Read more on the San Francisco Chronicle

City passes plan for new SoMa homes

The San Francisco Board of Supervisors passed a sweeping, years-in-the-making plan to transform Central SoMa, potentially bringing thousands of new homes and tens of thousands of jobs to the area, and ending nearly a decade of wrangling over the ambitious package of zoning changes.

The city defines Central SoMa as the area south of Market Street, north of Townsend, and squeezed between Second and Sixth.

It’s a space that includes the San Francisco Museum of Modern Art (SFMOMA), swaths of low-income housing, nearly 30 landmark buildings, the Flower Mart, and, soon, a stretch of the Central Subway along Fourth Street.

The Central SoMa Plan changes zoning and height limits throughout the neighborhood to encourage more growth, more density, and more diversity of use in future development and redevelopment.

The final passage came as no surprise, after lawmakers unanimously voted in favor of the Central SoMa Plan the first time it came before the board in November.

But the ramifications of the proposal—which took eight years and ran over 1,600 pages in its final form—are so potentially profound as to generate an air of drama about the final vote all on their own.

 

 

Read more on Curbed SF

 

 

What Google’s San Jose project means for downtown

For years, much of the area around Diridon Station has been a neglected jumble of grimy auto body shops, vacant lots overgrown with weeds and shabby warehouses.

Google — whose plans face a critical City Council vote Tuesday — is expected to transform some 50 acres into a mix of offices, shops and restaurants connected by pathways that wind through parks and plazas filled with public art. Steps away, Diridon is set to undergo its own renovation and become the only place in the Bay Area where BART, Caltrain, Amtrak and high-speed rail converge.

It’s a tall order. But if the tech giant succeeds, the project could transform a downtown that has struggled to rebound from sprawling development in the 1950s and 1960s, when city manager Dutch Hamann rapidly annexed land at the city’s fringes while neglecting its urban core. When it’s complete, the area could support more than 25,000 workers, a 65 percent increase in the number employed in the core of the city today.

For longtime restaurateur and downtown business owner Steve Borkenhagen, Google’s foray into San Jose might finally spark the kind of urban rejuvenation he’s dreamed of for decades. For Kathy Sutherland, a nearly 40-year resident of the Delmas Park neighborhood in the shadow of the proposed development, the project brings both the long-sought possibility of a vibrant neighborhood and the fear of displacement. And for the urban studies theorist Richard Florida, the project is less personal but no less important — a chance for a major American city to finally get redevelopment right, to provide an antidote to the debacle of the Amazon HQ2 rollout.

It will be years before any such dreams or fears are fully realized, but the sale of more than $100 million dollars of city land — expected to be finalized at the Tuesday council meeting — sets the stage for planning and development to begin in earnest after months of closed-door talks and speculation about the biggest thing to happen in San Jose in generations.

 

 

Read more on the East Bay Times

 

 

A sample of SF waterfront redevelopment concepts

The Port of San Francisco’s “request for interest” for 14 waterfront structures within the Embarcadero Historic District is an outgrowth of a larger effort to update the port’s Waterfront Land Use Plan.

That effort began in 2015 and should move to environmental studies next year. The goal for the requests is to try and begin making plans to revive specific piers, so work could begin soon after an update is approved.

Respondents include restaurateurs seeking space, cultural entrepreneurs, and developers or design firms eager to take part in future projects. The full set of 52 responses can be found at www.sfport.com, but here are six examples that show the range of ideas.

 

Read more on the San Francisco Chronicle

 

 

New effort to push more housing near transit stations by setting state rules

A state bill to allow dense housing near transit stops, alleviating long commutes and coaxing people out of cars, never made it out of committee last session. But backers think the mood has shifted enough in the housing debate to try again.

“I think the political climate is changing,” said state Sen. Scott Wiener, D-San Francisco. He’s the lead sponsor of the More HOMES Act — HOMES stands for Housing, Opportunity, Mobility, Equity and Stability.

“In talking to my colleagues, there’s more support than there was earlier,” Wiener said.

The new iteration, SB50, prevents cities from restricting density within a half mile of a major job center or transit hub, such as a BART or Caltrain station. It raises height limits to 45 feet, about four stories, within a half-mile of the station, and 55 feet or five stories within a quarter mile. It also eliminates minimum parking requirements for new developments, a move that the Board of Supervisors is contemplating for San Francisco.

Those provisions are less dramatic than what Wiener proposed in SB827, his first attempt at statewide zoning reform. It would have barred cities from rejecting four- to eight-story apartment or condo buildings near transit nodes.

Wiener’s first measure laid bare an ideological divide in a state struggling with soaring rents, jammed freeways and a paucity of housing. The crisis has pushed people farther from jobs, forcing them into wildfire zones or soul-grinding commutes, Wiener said. But it has also ignited fears that new development will push out existing residents — or drastically change the landscape. And many opponents bristle at the idea of Sacramento interfering with local governments’ ability to shape their own neighborhoods.

“The issue seems to be that Scott Wiener and his bills are so often looking to undermine local control,” said Susan Kirsch, founder of Livable California, a San Francisco organization that advocates for local urban planning and moderate growth. It opposed SB827.

Political leaders in San Francisco and Berkeley fumed at the building heights in SB827, saying it would allow luxury high-rises to sprout up, unchecked, in quaint residential neighborhoods. San Francisco’s Board of Supervisors passed a resolution against the bill after an emotional hearing in which residents compared it to a “hydrogen bomb” and an “undemocratic power grab.” Some detractors worried that their neighborhoods would be remade to look like Manhattan or Miami Beach.

To other critics, the original bill felt like an unfinished draft. It didn’t do enough to protect tenants from displacement or require affordable housing.

“It felt like it was a big proposal, it was a bold proposal, and there were a lot of details that had not been sufficiently worked out,” said Anya Lawler, a policy advocate for the Western Center on Law and Poverty. The center opposed SB827 but has not taken a position on the new bill.

Yet in the last few months, the tenor of the debate has changed. London Breed was elected mayor of San Francisco on an ardent pro-housing platform — she’s among the politicians tentatively supporting Wiener’s revised legislation. In September, the Legislature passed a law empowering BART to fill station parking lots with homes. And Wiener is seeking an ally in Gov.-elect Gavin Newsom, who emphasized the link between housing and transportation in a post-election speech.

 

 

Read more on SFGate

 

 

 

As housing pressures increase in the Bay Area, multifamily developers focus on Contra Costa County

With several multifamily developments rising up around the Bay Area, many developers have started to turn their attention to Contra Costa County.

With rents and housing prices rising around the Bay Area, parts of Contra Costa are becoming more affordable comparatively and ideal places for millennials and other generations to raise families.

Developers are hoping to capture this shifting demographic as demand for housing shifts to the outer areas of the Bay Area. Walnut Creek and Concord have specifically benefited lately from new investment.

“We always wanted to be in Walnut Creek,” Bay Rock Multifamily CEO Stuart Gruendl said during Bisnow’s Future of Contra Costa County event in early November. “The government here in Walnut Creek is somewhat pro-development.”

The city has two active specific plans, and Bay Rock is a stakeholder in the North Downtown Specific Plan. The developer owns a large parcel and has plans to build 52 units, Gruendl said.

Unlike other Bay Area markets, there aren’t thousands of units teed up in Walnut Creek, Gruendl said. The costs are rising in the Tri-Valley and are becoming cost-prohibitive. A no-growth movement is growing in Pleasanton so there will be a natural cap on growth in that area, which bodes well for Walnut Creek, he said.

Bay Rock is focusing on projects in Walnut Creek, Berkeley and Oakland. “We find tremendous value in this market,” The Address Co. CEO and founding partner Eric Chevalier said. “There’s an affordability factor as well. People are getting priced out of the South Bay and the market. … They are migrating in this direction.”

The Address Co. builds both for-sale and rental properties. The company is working on a multifamily project called Riviera in Walnut Creek and has three other projects in the city. It also is working on entitling a project in Richmond, a city which the company is bullish on, Chevalier said.

 

Read more on Bisnow Oakland

 

 

Google is gearing up to buy prime San Jose land for a new tech campus. What now?

As the city of San Jose gets ready to release long-anticipated documents related to the sale of 20 acres of land near downtown, the question on the minds of both boosters of the Google expansion and skeptics is “what now?”

The city of San Jose is on the verge of releasing details of a controversial 17-month negotiation to sell 20 acres of publicly owned land to tech giant Google for a massive new campus near downtown.

Those details, set to be released Friday, are a key milestone, but only the first step of making the Bay Area’s largest city one of the next expansion points for Alphabete Inc.-owned Google, a plan that has been met by community members with both excitement, deep disdain, and as of this week, a lawsuit over transparency.

Now, as the release date of the long-anticipated land sale documents near, the question on the minds of both boosters of the Google expansion and skeptics is “what now?”

First, the end goal: Google has said it wants to build a mixed-use campus that could span as large as 8 million square feet and would include housing, retail, and office space next to transit. Somewhere between 15,000 and 20,000 workers could show up each day at the campus if built out fully.

 

 

Read more on Silicon Valley Business Journal

 

 

 

New SF hotels, WeWork-backed waterfront school among ideas for historic piers

Developer Simon Snellgrove has an idea: A new 65-room boutique hotel just south of the Ferry Building.

The problem: Hotels are illegal on Port of San Francisco land unless voters authorize them.

Snellgrove’s concept is one of 52 responses received by the port to revitalize 13 historic waterfront piers that dot the city’s scenic Embarcadero.

For the past three years, the port has sought public uses to bring new life for the piers, some of which were built over a century ago. The projects have big financial hurdles, requiring millions of dollars in renovations to withstand future earthquakes and sea level rise. But previous projects like the renovated Ferry Building and AT&T Park are a testament to the public’s love — and the lucrative business — of waterfront development.

The port received a diverse mix of ideas, including basketball and tennis courts, art galleries, an Italian Innovation Hub, and an International House of Prayer of Children. Boston Properties, the city’s biggest office owner and majority owner of Salesforce Tower, said it was open to operating nonprofit, maker and research space.

 

 

Read more on SFGate

 

 

 

 

How the stock market’s wild ride could affect CRE investment

Stock market volatility may spur investors to allocate more funds to direct ownership of real estate.

The stock market’s recent rollercoaster, with October’s sharp correction followed by a post-midterm election surge, can put the investment community on edge, including commercial real estate investors.

“People who invest in real estate don’t invest in a vacuum,” says Mark Dotzour, a real estate economist who spent 18 years as chief economist of the Real Estate Center at Texas A&M University before opening a private consultancy three years ago.

It’s impossible to completely separate one’s emotional reactions from financial behavior, says Mike Ervolini, CEO of Cabot Investment Technology, which sells behavioral finance software to professional equity fund managers. Ervolini previously served as a portfolio manager and CIO with AEW Capital Management.

Real estate investors pay close attention to what’s happening in the stock and bond markets and while they may be able to overlook recent volatility, they’ll need to keep an eye on longer-term trends to determine if commercial real estate investment is still the best bet for their financial portfolios, according to Dotzour. For now, it seems the answer is yes.

 

 

Read more on National Real Estate Investor