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

 

 

Looking to invest in Qualified Opportunity Zones? These resources may help

As investors across the nation seek to deploy billions of dollars in capital gains into Qualified Opportunity Zones, they are actively seeking guidance about the program and on the hunt for resources to help identify neighborhoods, assets and available land within opportunity zones most ripe for investment. 

The program, created through the passing of the Tax Cuts and Jobs Act last year, aims to incentivize private investment in underserved and otherwise blighted communities across the U.S. in exchange for a hefty tax break.

More than 8,700 census tracts have been classified as opportunity zones and numerous opportunity zones funds have already launched to take advantage of the program — with an estimated $6 trillion in unrealized capital gains eligible to be deployed into opportunity zones, according to a study conducted by Real Capital Analytics.

In response to high demand from firms and high net worth individuals interested in the opportunity zones program, a number of tools have come to market to help potential investors understand how the program works, identify neighborhoods that qualify for it and locate assets within the designated areas in need of investment.

“Opportunity zones have brought national attention to areas of the country that have been too often looked over for investment. Unlike traditional community development institutions, knowledge and understanding about these communities is quite limited,” Smart Growth Americas Vice President of Land Use and Development Christopher Coes told Bisnow. Coes is also director of national real estate developer and investor network LOCUS.

“The structure of the opportunity zones tax incentive places the onus on the investor to identify and conduct due diligence … which requires an understanding of not only the project but also the place. Because of this demand, we’re seeing a lot of tools [come to market] to help assist investors and policymakers.”

Read more on Bisnow

 

 

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

 

 

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

 

 

Report: U.S. Commercial Real Estate Pricing Growth Cools in Late 2018

Growth in U.S. commercial property prices decelerated in October to the slowest annual pace in 2018 so far, according to a new report by Real Capital Analytics.

The company’s U.S. National All-Property Index was up 6.4% from a year ago. The pace of annual price growth has been gradually slowing since a 2018 high of 8.4% in February, but in fact, price growth as measured by annual gains has been slowing down for about three years, RCA reports.

Year-over-year gains in 2014 and early 2015 were well over 10% each month for all assets, which represented a strong comeback from the recession, when property prices during much of 2009 contracted by over 20% compared with a year earlier. Since mid-2015, annual gains have slowed considerably.

According to the report, easing growth in major U.S. metros placed the largest drag on national prices, presumably as investors perceive that prices in some major markets have bubble-like aspects. For the purpose of the report, major metros include Boston, Chicago, Los Angeles, New York, San Francisco and Washington, D.C.

Prices in U.S. major metros were growing an average 8.8% year over year at the beginning of 2018, but as of October, that growth was down to 3.1%.

Growth in the non-major metros has also slowed since a high in the summer, though the change is more modest than in the major metros, RCA reports. Prices rose 7.8% year over year in non-major metros in October, down from 8.4% in May.

Apartments are still leading the way in price growth, up 9.6% year over year, but even that property type has seen a slowdown. In April, the annual gain for apartments was 12.4%.

 

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US homebuilding rose in October on a rebound in multifamily housing projects

U.S. homebuilding rose in October amid a rebound in multifamily housing projects, but construction of single-family homes fell for a second straight month, suggesting the housing market remained mired in weakness as mortgage rates march higher.

Other details of the report published by the Commerce Department on Tuesday were also soft. Building permits declined last month and homebuilding completions were the fewest in a year. Housing starts increased 1.5 percent to a seasonally adjusted annual rate of 1.228 million units last month.

Data for September was revised to show starts dropping to a rate of 1.210 million units instead of the previously reported pace of 1.201 million units.

Building permits slipped 0.6 percent to a rate of 1.263 million units in October. Economists polled by Reuters had forecast housing starts rising to a pace of 1.225 million units last month.

The housing market is being hobbled by rising borrowing costs as well as land and labor shortages, which have led to tight inventories and higher house prices. This is making home buying unaffordable for many workers as wage growth has lagged.

The 30-year fixed mortgage rate is hovering at a seven-year high of 4.94 percent, according to data from mortgage finance agency Freddie Mac. Wages rose 3.1 percent in October from a year ago, trailing house price inflation of about 5.5 percent.

Residential investment contracted in the first nine months of the year and housing is likely to remain a drag on economic growth in the fourth quarter. Economists expect housing activity to remain weak through the first half of 2019.

U.S. financial markets were little moved by Tuesday’s housing starts data.

Single-family homebuilding stalls

Single-family homebuilding, which accounts for the largest share of the housing market, dropped 1.8 percent to a rate of 865,000 units in October after declining in September.

Single-family homebuilding has lost momentum since hitting a pace of 948,000 units last November, which was the strongest in more than 10 years.

A survey on Monday showed confidence among single-family homebuilders dropped to a more than two-year low in November, with builders reporting that “customers are taking a pause due to concerns over rising interest rates and home prices.”

Single-family starts in the South, which accounts for the bulk of homebuilding, fell 4.0 percent last month. Single-family homebuilding jumped 14.8 percent in the Northeast and fell 2.0 percent in the West. Groundbreaking activity on single-family homes dropped 1.6 percent in the Midwest.

Permits to build single-family homes fell 0.6 percent in October to a pace of 849,000 units. These permits remain below the level of single-family starts, suggesting limited scope for a strong pickup in homebuilding.

Starts for the volatile multifamily housing segment surged 10.3 percent to a rate of 363,000 units in October. Permits for the construction of multifamily homes fell 0.5 percent to a pace of 414,000 units.

 

Read more on CNBC

 

 

There’s a new plan to stop Millennium Tower sinking — and settle lawsuits

All sides in the Millennium Tower debacle appear to be nearing an agreement on a $100 million-plus fix to stop the 58-story high-rise from sinking further — but at least part of the building’s tilt will probably remain.

“We’re very encouraged by the recent progress that has been made,” said P.J. Johnston, spokesman for Millennium Partners, the luxury condominium’s developer. “We look forward to working with the homeowners and the city to get this all completed as soon as possible.”

Doug Elmets, spokesman for the homeowners association, cautioned that nothing has been submitted to the city yet for review, but that residents are “encouraged by the ongoing progress.”

The latest plan calls for drilling piles into bedrock from the sidewalk on the building’s southwest corner. The proposal would be less extensive and intrusive than the plan floated in April, which called for drilling as many as 300 micro-piles to bedrock through the building’s concrete foundation.

The idea was to stabilize one side of the 58-story structure, then let the other side continue to sink until the building straightened itself. That plan, however, probably would have cost upward of $350 million — as much as it cost to build the tower in the first place.

The new plan by Ronald Hamburger, the structural engineer for the developer, is expected to be considerably less expensive and faster, and without as significant a disruption to the residents.

“Hopefully, it will take out some of the tilt and stop the building from moving entirely,” said one source familiar with the plan, but who wasn’t authorized to speak for the record.

The tower has sunk 18 inches and tilted 14 inches to the west since it opened in April 2009.

The building sits on a 10-foot-thick mat foundation, held in place by 950 reinforced concrete piles sunk 60 to 90 feet deep into clay and mud. They do not, however, reach bedrock.

The repair job is expected to take several months to complete. The timeline for getting started, however, will probably hinge on how fast the parties can get approval of an environmental impact report and the necessary building permits.

Read more on The San Francisco Chronicle

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