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At recently reported by Bloomberg, Macy’s is planning to build a skyscraper on top of its famous Herald Square location in order to unlock the real estate investment potential inherent in its prime location. The plans currently call for a 1.2 million square foot tower. The plan also calls for the tower to be occupied by tenants other than Macy’s giving it a great opportunity to grow a cash flow positive asset, in addition to its recent success in growing its digital presence.
Another company looking to unlock the power of real estate development is Life Time. The fitness and now co-working company just announced plans to build several high-end multifamily properties in conjunction with its fitness and co-working spaces. The new concept called Life Time Living, which will be health-focused luxury residential residences.
BisNow reports on this new offering, Life Time Launches High-End Apartment Concept.
Combined with Life Time Fitness and Life Time Work, these projects will now be Life Time Villages…Residents who join these communities will obtain direct access to high-end fitness facilities and coworking space.
Every apartment will offer a Life Time Athletic Resort & Spa and a LifeCafe. Renters will have access to a variety of one- and two-bedroom apartments.
“Living an active, healthy and happy lifestyle is dependent upon many factors. Among them is the critical element of where we choose to live,” Life Time founder, Chairman and CEO Bahram Akradi said in a press statement. “By integrating where we live, work and play in these Life Time Village developments, we’re creating far more time efficiency for members in their day-to-day lives while also having a positive impact on our planet. The design truly is a natural extension of our mission to inspire people to live completely healthy, happy lives.”
For both Macy’s and Life Time, real estate development allows each company to unlock stored value. With the creation of Opportunity Zones, it will be interesting to see what other companies follow suit and begin to utilize real estate development as a means to unlocking more shareholder value.
Savvy real estate developers and investors will find value in helping corporations unlock the hidden value in their real estate holdings.
Real estate investors in the Philadelphia Metro area have numerous excellent opportunities for investment. For those with a long-term outlook, it is important to look at a number of variables, one being what’s the long-term outlook for growth.
One area which is currently seeing tremendous growth and could potentially see even more growth is Montgomery County. Right now areas like Conshohocken and King of Prussia are seeing strong growth in industrial and commercial and residential real estate projects and from a look at projects in the planning phase, even more, growth can be expected.
Currently, more growth is expected even along Lancaster Avenue in Ardmore. Piazza Management recently unveiled plans for a new mixed-use development on Lancaster Ave. Katie Park for Philly.com wrote a recent article, Ardmore is getting ready for its transformation — a downtown, which highlighted this potential development.
If approved, the complex would replace the Acura and Volkswagen dealerships on Lancaster Avenue with a six-story, mixed-use complex that would have 257 apartments, 122,990 square feet of commercial space, and 840 parking spots.
Located on a highly visible and traversed section of Ardmore’s commercial district, the development could be a linchpin of the town’s vision of an attractive, walkable downtown that abuts residential neighborhoods.
This new development could bring major changes to downtown Ardmore and trickle out up and down Lancaster Ave and the surrounding neighborhoods. Meanwhile, Conshohocken is seeing tremendous growth in office space and mixed-use developments. One major project that has been announced is SORA West.
A massive new mixed-use development featuring office space for a major company, a hotel, and dining options has broken ground in Conshohocken.
Officials are calling SORA West “vibrant public plaza,” which, when complete, will include a 200-foot tower, 165-room hotel with a rooftop restaurant and lounge, a 1,500 space parking garage, and more.
Amerisourcebergen, a pharmaceutical distributor and one of the wealthiest companies in the world, will relocate its global headquarters to the 11-story, 429,000 square foot office tower.
This new development and the relocation of Amerisourcebergen from Chesterbrook (Chester County) to Conshohocken (Montgomery County) will likely spur additional growth in Conshohocken and throughout Montgomery County.
Fortunately, for investors in Conshohocken and Montgomery County, this is not the only new office development planned. More Than The Curve reported, that Seven Tower Bridge, a previously bankrupt development, is now going forward with another building 250,000 square feet of office space on the Conshohocken riverfront.
Within the article they mention the potential tenant being Hamilton Lane who would be making a move within Montgomery County from Bala Cynwyd to Conshohocken.
While all these developments are great for Montgomery County, it also means there are plenty of opportunities for savvy real estate investors throughout the area.
With Opportunity Zones continuing to be on the minds of real estate investors, one Pennsylvania Opportunity Zone that could be poised for tremendous growth is in Coatesville. The Coatesville Opportunity Zone has several positives outside just the OZ incentives.
Vista.Today has a recent article, Coatesville’s Future Isn’t in Our Rearview Mirror, highlighting the changes happening around Coatesville:
Despite repeated and well-intentioned initiatives over the years, Coatesville was seen by many as distressed and unable to summon the vision or willpower to rise up and revitalize itself on its own.
That all started to change 10 years ago when city leaders, local clergy, county and state politicians, together with civic and business leaders, began imagining what a revitalized Coatesville might look like and began working incrementally toward that vision.
Today, the city’s “Green Tape” policies make it easier than ever to apply for and receive building permits and code changes.
A LERTA program, meant to offer tax abatements to developers who invest in and redevelop difficult or undesirable properties, is in place.
Another excellent benefit for Coatesville is being located in Chester County which is experiencing tremendous growth and is among the most affluent counties in Pennsylvania along with being one of the healthiest counties in the US. Patch.com has an article on it, Chester County Among Nation’s Healthiest Communities: U.S. News.
Chester County is in the top echelon of the nation’s healthiest communities, new rankings say.
Released on Tuesday, the 2019 healthiest communities rankings are a joint collaboration between U.S. News & World Report and the Aetna Foundation. To come up with the finalized list, U.S. News and the Aetna Foundation evaluated nearly 3,000 communities across multiple health-related metrics in 10 categories.
Chester County placed 117th overall, just behind Pennsylvania leader Montgomery County (110th) and ahead of Bucks (174). Those were the only three southeastern Pennsylvania counties to make the list.
NBC 10 Philadelphia highlights another big change coming to Coatesville, SEPTA Set to Resume Regional Rail Service in Coatesville. The return of SEPTA regional rail service could potentially be a bigger boost than the Opportunity Zone designation.
After more than two decades away, Chester County and SEPTA officials announced Thursday that regional rail service is set to return to the city. The move is part of a larger effort to revitalize Coatesville…
The nearest SEPTA train service is the Paoli/Thorndale line, which goes only as far as the Thorndale station, about 3 miles from the current Coatesville Amtrak station.
The new train station would be located at Third Avenue and Fleetwood Street, and service would not begin until the station’s completion. However, though the county commissioners promised $1 million to fund a parking lot for the station, it’s still unclear when the Pennsylvania Department of Transportation will complete its construction.
If you are an investor who is considering buying real estate in or around Opportunity Zones in Pennsylvania, then it definitely could be beneficial to check out what’s happening in Coatesville.
Though not an article about local Philadelphia retail real estate, BisNow London has an article called, If You Don’t Want Your Property To Become Obsolete, Here Are The 10 Things You Need To Know. The article cites a new study from the Urban Land Institute and PwC called Emerging Trends in Real Estate: The Global Outlook for 2019.
The customer used to be the capital markets, but now it is the person using the building.
The acute problem for the real estate industry going forward is how to value older, retail properties that are becoming obsolete in today’s new retail paradigm? The problem retail real estate investors face going forward, is how to begin properly valuing these properties before and after their conversion.
The article from BisNow highlights an interesting part of the retail paradigm where a number of retail real estate investors, may be trapped by their current leases and see the value in current leases and not find value in reinvesting money back into the property. This seemingly narrow-minded outlook could be the best option for many.
If you are a leveraged investor, you might know that the equity value of the scheme that you own is zero,” one investor said in the report. “With that in mind, the only value the property has for you comes from the leases that are currently in place.
So why would you invest money in the property or do anything that reduces the income from those leases?” On top of this, it will take some time before those willing to step in and undertake the process of repositioning retail get the chance, the report said.
Going forward retail property owners will need to elicit better feedback from those using their buildings. As the study points out the future of retail is going to be driven by the end users experience.
It is no longer okay to just give people a box and then not speak to them for the next 10 years. People want you to design, develop and manage the space for them. They want you to provide amenities, experience and help to create a community.
In our opinion experiential retail is going to play a big part in redeveloping older retail properties. The drive towards increased understanding of one’s tenant is only going to grow. The adoption of digital tenant engagement apps by the major REIT’s is an early first-sign in the drive towards increased tenant engagement.
It’s clear that to avoid obsolescence and remain relevant in the modern world, real estate will need to provide that amenity and experience that the ultimate end users require – be they office workers, shoppers or residents.
Technology will be key in measuring feedback from people – both in terms of what they say they like about a building as well as how they actually use it in practice – and in creating a clearer link between new uses and value.
Owners will need to forge closer ties with occupiers, to collaborate and analyse what’s working for the people using buildings, day in and day out. The owners who can assess how people want to feel about a building and fulfil that intangible demand will be the most likely to avoid their assets becoming obsolete.
If you are a real estate investor that is considering the opportunities offered by retail and older mall redevelopment than it is going to be important to continually focus on how you can drive value to your visitors. Adopting innovative mall marketing strategies is one step towards going forward.
A very interesting study on where prosperity can be found across the US came out from The Hamilton Project in a blog post, An Interactive Exploration of the Geography of Prosperity. The study highlights what it calls the Vitality Index.
For real estate investors, there definitely seems to be some potential insights for which areas could be the best places to find future real estate investment opportunities.
Pennsylvania real estate investors especially those looking in the 5-county area of Southeastern PA around Philadelphia will find the 3 of the highest-rated counties according to the research, Chester County came in first, followed by Montgomery County, then Bucks County with Delaware County and Philadelphia further behind.
From the Hamilton Project:
Americans in many ways experience a different economy based on where they live, generating substantial gaps in life outcomes.The typical household income in the wealthiest 20 percent of counties is more than twice that in the poorest 20 percent, and that gap increased substantially from 1980 to 2017.Poverty rates are three times higher in the poorest 20 percent of counties compared to the top counties.Life expectancy is 6 years longer in top performing counties than those at the bottom. To put this gap into context, it has taken about 4 decades for U.S. life expectancy to rise 6 years, so the gap across counties is the equivalent of 4 decades of progress.To present a more complete picture of which places are thriving, The Hamilton Project created the Vitality Index, which measures the economic and social well-being of a place. The index combines the following measures:
- median household income,
- poverty rate,
- unemployment rate,
- prime-age employment-to-population ratio,
- housing vacancy rate, and
- life expectancy.Using a statistical procedure that can isolate the underlying common factor among these variables, we found that having a high median household income, a low poverty rate, and high life expectancy were the most important indicators of a county’s vitality.
With the buzz around investing in Opportunity Zones continuing to get louder and louder, one company is looking at a potentially genius pairing of new technology and using old industrial real estate which is currently available in numerous Philadelphia Opportunity Zones.
This concept has particular intrigue for areas like Philadelphia and Baltimore which has a large stock of older industrial warehouses which don’t meet the needs of many warehouse tenants.
A recent article in BisNow, Can Indoor Farming Fulfill The Dream Of Opportunity Zones?, highlights Tabakman’s efforts and his launching of an Opportunity Zone fund around his concept,
Because each LGS unit only requires a 15K SF pad with 14-foot clearance heights, Tabakman believes it is actually better suited to older warehouses than newer buildings with higher ceilings, saying “all that extra space would be wasted.”
The model is, in a way, ideally suited as an opportunity zone investment. To that end, Tabakman is working to launch a qualified opportunity fund called I95 OZF, focusing on the Northeast corridor, from Richmond, Virginia up to Boston, where space is at a premium and the most dense population in the country has sky-high food needs.
The article goes on to show how Philadelphia could be an ideal location for urban farms and similar concepts.
Those areas also often contain functionally obsolete industrial buildings for which an urban farm could easily meet the significant improvement threshold required under the opportunity zone regulations, according to CBRE Philadelphia Senior Research Analyst Lisa DeNight.
“[Philadelphia] is one of the oldest industrial stocks in the country, so its buildings are definitely on a smaller scale than other industrial hubs, even on the East Coast,” DeNight said. “Baltimore is probably very similar.”
For real estate investors up and down the East Coast Opportunity Zones could provide an interesting way to utilize many different real estate developments including urban farms.
The new era of retail real estate means most commercial property owners need to adopt innovative strategies in order to compete in 2019 and ahead. So we asked a local real estate marketing agency for some ideas on how real estate investors looking for a value-add retail investment can succeed in 2019.
Below are a collection of ideas they put together. Some which we think are really innovative real estate marketing strategies. The successful real estate investor could have tremendous success in the new retail economy by adopting this comprehensive strategy.
Perhaps, the best strategy retail property owners can adopt is to become more local. While that may sound strange since commercial properties are often as local as it can get but overall they often are only local by their location.
Becoming more locally focused means retail and mall property owners need to adopt more local marketing strategies.
From older suburban malls to newer town centers, the commercial property owners who focus on most-effectively driving foot traffic and property recognition are going to find themselves the winners of retail in the new e-commerce age.
We see the winners of the new retail paradigm as the property owner who can best become ingrained into the fabric of local life. As a local retail owner or developer, you must constantly be focused on how can I be the best neighbor possible?
The key is to drive people for events and instances outside the normal shopping experience. Start trying to drive more bodies to your property using events and marketing efforts they incorporate social media and if possible driving people to “check-in”.
Joseph Brendel of Clark Hill PLC has an interesting article, which has some excellent news for real estate investors interested in Pennsylvania Opportunity Zones, on jdsupra.com, Pennsylvania DEP Confirms that Qualified Opportunity Zones in Pennsylvania May Also Offer Environmental Incentives for Redevelopment.
Mr. Brendel writes,
While the real estate development community has focused primarily on the tax incentives available for investment in QOZs, there also may be significant opportunities for limiting environmental risks associated with redevelopment of QOZs.
The designated opportunity zones often are located in financially distressed areas that typically have legacy environmental issues from shuttered manufacturing facilities, refineries, etc.
Therefore, investment in those QOZ areas also requires thorough environmental due diligence and addressing site contamination through state voluntary cleanup programs to protect the investors from exposure to potentially significant environmental liabilities.
The above offers some excellent insights into the potential Opportunity Zones offer for those looking to invest in industrial or commercial buildings in Pennsylvania. Mr. Brendel then goes on to show how a favorable decision by the DECP may make Opportunity Zones even more attractive for industrial real estate investors.
The DEP recently confirmed that properties located within these designated QOZs also qualify as “enterprise zones” for purposes of the applicability of the Special Industrial Area approach under Section 305 of Act 2.
Lastly, he finishes with some excellent insights into why industrial investors in Pennsylvania should benefit from investing in Opportunity Zones.
The benefits associated with remediating Special Industrial Area property in Pennsylvania demonstrate that there can be significant advantages beyond the tax incentives available under the Tax Cuts and Jobs Act for redeveloping environmentally-impacted QOZs that were formerly used for industrial purposes.
As readers of the site know, we are big on the potential being offered by Opportunity Zones here in Philadelphia and across Pennsylvania, New Jersey, & Delaware. We’ve also been examining how investors and eventual employees around Amazon’s planned Virginia HQ could potentially benefit from investing in the Opportunity Zone nearby.
This led our team to take a recent trip from Philadelphia to Southern Florida, in particular, Broward County and Ft. Lauderdale to see what’s happening with what might end up being one of the most sought-after areas for Opportunity Zone investing.
Back in November BisNow highlighted the excitement being shown around Ft. Lauderdale Opportunity Zones,
Opportunity zones are a hot real estate topic around the country, and in Fort Lauderdale, especially so. The city is seen as an ideal place for opportunity zone money to land, because it has several neighborhoods that are already on the upswing.
During the event several investors pointed to Flagler Village, the 13th Street/Progresso area and the Sistrunk Corridor as ripe for opportunity fund investment.
In addition to a strong market, the Opportunity Zones in Florida have access to amazing weather which draws visitors and business owners from across the globe.
Due to the strong market fundamentals and ideal climate, we see many International business owners and real estate investors looking to the South Florida Opportunity Zones over the coming year.
Often we’ll talk to real estate investors and developers and they are often wondering why we see such great potential for non-traditional real estate investors to see value in Opportunity Zones. Perhaps the biggest reason is due to the current structure of the plan. InvestmentNews.com has a similar look at why it could be beneficial to other investors and particularly business owners, Opportunity-zone investments — are they right for your clients?.
While a 1031 exchange only permits tax deferral on the sale of investment real estate, opportunity-zone benefits apply to the sale of a range of assets, including real estate, a business or highly appreciated stock, and thus are potentially beneficial to a wider range of investors.
Opportunity zone real estate developments may offer a higher internal rate of return than investments in existing stabilized assets, but the nature of a development project means that investors aren’t going to receive any cash flow for the first few years of the investment.
They then continue to show how the longer reinvestment time may end up giving investors and business owners who own real estate more flexibility over the 1031 exchange.
Additionally, because opportunity zones allow 180 days to reinvest, compared to just 45 days in a 1031 exchange, they can be a great option for investors who missed the chance for a 1031 exchange.
The Ft. Lauderdale Opportunity Zones could become an even bigger play, depending on the 50% ruling, for businesses who cater to the affluent and ultra-high net worth as many look to escape the colder climates during the winter months.
One question investors and business owners still have around Opportunity Zones, is the 50% Rule.
Joshua Pollard, @JPollardinsight – Founder of Omicelo – A Mission-Driven Real Estate Investing Firm, provides a great explanation on the rule and what came out of the recent IRS hearing on Opportunity Zones in his article, 3 Big Takeaways From The Standing-Room-Only Hearing On Opportunity Zones,
The 50% test for investing in a business has emerged as, arguably, the most important factor in the legislation right now.
Why? If the IRS determines that 50% of the sales or gross income of a business that is taking on capital gains must be derived from within the Opportunity Zone in which it is located in order to qualify for an Opportunity Fund, that severely limits which and how many projects make for good investments.
Imagine a T-shirt design and printing company that operates in the rustbelt town of Braddock, Pennsylvania, known as the birthplace of Andrew Carnegie’s first steel plant.
Today, most of Braddock is designated as a Qualified Opportunity Zone. In order for the T-shirt business to meet the 50% test standard that would designate it as a Qualified Opportunity Zone Business, half of its T-shirt sales would have to come from inside Braddock.
Never mind the significant retail sales the T-shirt designer conducts online with buyers across state lines.
The 50% test plainly hamstrings businesses residing within OZ’s which seek qualification as OZ Businesses. Confining them to deriving 50% of sales from within the boundaries of their OZ creates little incentive for investors to want to put capital into them.
For those extremely interested in learning more about Opportunity Zones in Ft. Lauderdale, Bichanan Ingersoll & Rooney put together a panel to discuss investing in Ft. Lauderdale Opportunity Zones. (View Video)
The Hollywood Florida Economic Development website has excellent maps showing the Opportunity Zones available there.
For many residential real estate investors, a change in public transportation can have a major impact on an area. One has to look no further than the impact, the PATCO high-speed line has had on a number of South Jersey towns since it’s opening in 1969.
Recently, we’ve heard a number of investors who are interested in the impact the proposed extension of the Norristown high-speed line into King of Prussia could potentially have.
Investors in the Montgomery County and Chester County areas could also see a potential impact of mass transit on real estate in the form of a new train station being added to East Whiteland Township.
Next Wednesday from, February 27, 2019, from 6:00 PM to 7:00 PM, a Public Open House is being held by the East Whiteland Planning Commission at the East Whiteland Township Municipal Building.
The Delaware Valley Regional Planning Commission (DVRPC), in partnership with SEPTA, Chester County, and other partners, is developing the East Whiteland Train Station Feasibility Study. This study will evaluate potential sites for a new SEPTA Regional Rail station in East Whiteland Township, as a followup to the Route 30 Corridor Master Plan and previous planning efforts. Learn more and share your input! Stop by the Open House between 6:00 PM and 7:00 PM and stay for a brief presentation at the beginning of East Whiteland Township’s Planning Commission meeting at 7:00 PM.
Interested investors should keep an eye out on what comes out of the Public Open House, and going forward as it could make for some potential excellent real estate investment opportunities.