When the City of Philadelphia passed an ordinance this week, they became the largest city in the US to create a municipal land bank. They certainly wont be the last. As new techniques are sought to tackle the nationwide problems of unused, foreclosed and abandoned property, chances are a municipal land bank is headed to a commercial real estate market near you.
Created under Pennsylvania’s Land Bank Act of 2012, the Philadelphia Land Bank takes on the problem of portfolios of tax-delinquent property using an updated, streamlined approach as compared to decades past. Before the law, such properties in Philadelphia were administered by multiple governmental departments with differing constituencies and purposes. Selling a foreclosed property has its significant challenges even without city involvement — as many agents who dial the phone into bank REO departments can attest. Add multiple bureaucratic layers of city government into the process, and you’ve perfected a recipe for inertia with a side of gridlock.
With 40,000 vacant parcels of land in Philadelphia, a quarter of which are owned by the city, the effort to reduce that number needs to cut through the red tape, and the land bank certainly appears to fit the bill. The problem for the city is twofold: reduce the number of vacant parcels held, while, ironically, increasing the same number. The first requirement of any two-way street is that it be wide enough, and the legislation has laid the groundwork for heavy traffic.
Doing Both Sales And Acquisitions
The city needs not only to reduce the time to market for foreclosed and abandoned properties it already owns; it also needs to speed up its own acquisitions process for tax-delinquent properties that need to go to market but can’t. You can’t have tax delinquency without tax delinquents, and these parties tend not to make the most conscientious property owners. Consolidating management of these properties presents at long last a single point of negotiation for private market actors to engage; the process of returning these plots to private ownership can only get faster.
According to JD Supra, the land bank created by the City Council still needs to be incorporated, the city needs to provide it a budget, appoint a board of directors, and assign it the vacant land. When that happens…
[...] the city anticipates that developers and other prospective purchasers will have a much easier time navigating the administrative process and acquiring city-owned property. Further, because the land bank will be able to acquire tax-delinquent property more easily, purchasers may have the opportunity to acquire larger blocks of land all at once without having to track down private owners or purchase at tax sales.
As for other benefits, the city also anticipates an increase in its tax revenue as formerly vacant land is developed, and city residents can look forward to enhanced safety as formerly vacant properties are developed.
Not Just The 2008 Crisis
The longer-term decline in industrialization seen by many areas, added to the wave of foreclosures from the 2008 recession amounts to a tenacious problem in both property markets and civics. New ideas to cut these properties loose from government and send them back into private hands are welcome ideas.
(Photo credit: Flodigrip’s world)
Citing 33 stores as “underperforming”, retailer JCPenney announced the closure of nearly three dozen stores and the elimination of 2,000 jobs late on Wednesday. The wave of closures hits 21 states with Wisconsin the hardest hit, and is intended to produce $65 million in savings for the beleaguered retailer.
“As we continue to progress toward long-term profitable growth, it is necessary to reexamine the financial performance of our store portfolio and adjust our national footprint accordingly,” said Myron E. (Mike) Ullman, III, chief executive officer of JCPenney. ”While it’s always difficult to make a business decision that impacts our valued customers and associates, this important step addresses a strategic priority to improve the profitability of our stores and position JCPenney for future success.”
The full list of closures is below.
- AL: Selma Mall, Selma
- CA: Arrow Plaza, Rancho Cucamonga
- CO: Chapel Hills Mall, Colorado Springs
- CT: Merriden Square, Merriden
- FL: Lake Square Mall, Leesville
- FL: Gulf View Square, Port Ritchey
- IA: Muscatine Mall, Muscatine
- IL: Stratford Square Mall, Bloomingdale
- IL: Hickory Point Mall, Forsyth
- IN: Five Points Mall, Marion
- IN: Marketplace Shopping Center, Warsaw
- MD: The Center At Salisbury, Salisbury
- MI: Westwood Plaza, Marquette
- MN: Northland Mall, Worthington
- MS: Singing River Mall, Gautier
- MS: Natchez Mall, Natchez
- MT: Butte Plaza Shopping Center, Butte
- MT: Cut Bank
- NC: Vernon Park Mall, Kinston
- NJ: Burlington Center, Burlington
- NJ: Phillipsburg Mall, Phillipsburg
- OH: Wayne Town Plaza, Wooster
- PA: Exton Square Mall, Exton
- PA: Laurel Mall, Hazleton
- PA: Washington Mall, Washington
- TN: Northgate Mall, Chattanooga
- VA: Bristol Mall, Bristol
- VA: Military Circle Mall, Norfolk
- WI: Forest Mall, Fon du Lac
- WI: Janesville Mall, Janesville
- WI: Lincoln Plaza Center, Rhinelander
- WI: Cedar Mall, Rice Lake
- WI: Wausau Mall, Wausau
The ambitious renovation project for Miami’s convention center has come up against significant obstacles: second thoughts, an election and a lawsuit.
The development plan, selected after a worldwide competition, came from South Beach ACE, a team headed by uber-developer Dan Tishman in a partnership with architect Rem Kooolhas. The $1.2 billion plan (see video below) involves a pretty thrilling reworking of the current truck-depot ho-hummery that characterizes the convention center today. Of particular interest is the inclusion of a 800-room hotel on top of the convention center structure, a sweeping, deco-inspired edifice that Tishman’s team claims is essential to the success of the project:
Reconsidering The Hotel And Public Land For Retail
Following the November election of Miami mayor Philip Levine, it was the hotel and retail aspects of the project that came under added scrutiny. In a memo from Levine’s office, the mayor called upon the City Commission to scrap the plan and current negotiations with South Beach ACE, and start a new bid process for a much smaller renovation plan that excludes a hotel and only uses the cash Miami has on hand.
Included in the winning plan was 90,000 square feet of retail on public land under a 99-year lease currently under negotiation with the developer. As Christina Viega reports in the Miami Herald, that requirement is likely on its way out:
The size, scale and price of the Beach’s proposed convention center renovation was a hotly contested campaign issue during the city’s November elections. A new slate of candidates — one that supported a smaller and cheaper renovation plan — was swept into office.
At the same time, Commissioner Jonah Wolfson won a legal battle he waged to make a convention center project more difficult to pass in a required voter referendum.
The original plan, as proposed by the city, called for Miami Beach to lease out public land to a private developer as a way to help pay for the project. On the land, the private developer would build a hotel, shops and restaurants.
When the city picked ACE for the project, the city’s rules called for a voter referendum to approve the lease of city land to any private entity. Only a simple majority was required for the lease agreements to pass.
But Wolfson launched a petition campaign, financed largely by the Fontainebleau hotel in Miami Beach, to change the city’s rules regarding a referendum. He won, and now at least 60 percent of voters would have to approve the lease of any convention center land. Wolfson also took his own city to court to remove a ballot question approving the current plan from the November ballot. His lawyer argued successfully that voters didn’t have enough information to vote on the issue.
Under Levine’s proposal, however, it’s likely that no referendum would be needed. That’s because Levine proposes to nix a convention center hotel and “any requirement for retail or other private commercial uses.”
The Politics Of Competition?
While a complete picture of the conflict over the plan is far from clear, the business interest of the Fontainebleau hotel in the proposed creation of 800 new rooms “down the street” so to speak is impossible to overlook. Any claims of pure democracy in the rewriting of the referendum rules should probably be taken with a grain of salt (and a delicious Cuban medianoche sandwich).
Parties interested in the outcome of the new struggle over the project should keep an eye on the City of Miami City Commission meetings page, along with agendas and streaming video.
Not provided as an endorsement - more like an interesting take on how to organize the work commercial real estate agents do – but I found this clip well put together in its linking of listings, prospecting, targets and goals, territory definition, competition and all the rest. I’m also a fan of the mind-map presentation style, where concepts are linked visually in both big-picture and smaller-picture format. Yes, Mr. Highman appears to be Australian, but most of what’s covered is universal to commercial real estate, with a little translation. (When you hear “solicitor” you should think “lawyer”, for example. “Franchise group” might be something closer to a REIT in the US.)
- A Murky Real-Estate Market Comes into Focus, WSJ, Dec. 17, 2013 – Wherein FINRA proposes new reporting rules for “untraded” REITs.
- Chinese buyers develop a taste for US commercial property, Reuters, Dec. 20, 2013 – 2013 saw an over six-fold increase in Chinese investment in US commercial property.
- An Industry Revived: Commercial Real Estate in Nevada, Nevada Business, Jan 2, 2014 – Unfinished resorts getting second lives as the Sagebrush State stages a commercial real estate recovery
- Top 10 Commercial Real Estate Moments of 2013, NREI, Dec. 31, 2013 Hilton’s IPO, UBS snags Water Tower in Chicago and Pershing Square Capital pinched by JCPenney.
- Denver Real Estate Booms as Slopes Beat NYC Bustle, Investors Business Daily, Jan. 1, 2014 – Downtown Devnver’s mile-high renaissance given the spotlight
- Silicon Valley’s Biggest Commercial Real Estate Stories of 2013, Silicon Valley Business Journal, Dec. 25, 2013 – $1,000 a square foot in the tech center is the new normal
- Brooklyn: the place to be, if you can find the space, Crains New York, Jan. 5, 2014 – The borough is nearing full and eyes are leading to East New York and Brownsville
- Forget houses, shrewd investors are turning to warehouses, Sydney Morning Herald, Jan. 2, 2014 – Down under, the industrial sector’s getting a new look from idle capital.
- Cassidy Turley: Cincinnati’s industrial market keeps booming, REJournals, Jan. 3, 2014 – Vacancy rates on the plunge in Cincinnati industrial, at least some of which is not attributable to demand for five-way chili.
- Retail seen as bright spot for 2014 commercial real estate, St. Louis Business Journal, Dec. 24, 2013 – The shopping centers of St. Louis are ringing up the numbers and absorption is looking fine.
- Four Forces that will Propel Retail Investment Sales in 2014, NREI, Jan. 3, 2014 One out of five investment dollars in 2013 are retail investments, say NREI.
- City’s retail rents expected to remain in stratosphere, Crains New York, Jan. 3, 2014 – News flash: Manhattan retail rents are a bit on the pricey side!
- Farms aren’t going away, but a lot of little ones are, The Texas Tribune, Jan. 3, 2014 – Ag dirt prices shooting through the clouds are sending small farmers off the land.
- Mesa land sale will generate $135M for city economic projects, Phoenix Business Journal, Dec. 31, 2013 – The Chicago Cubs spring training stadium in Mesa, AZ needs to be paid off. Of course, the team owners aren’t the ones doing the paying, the city of Mesa is.
As mentioned in these pages last year, recent SEC deregulation has cleared the way for commercial real estate investments to seek capital from individual investors with fewer requirements than before. Add the internet to this new playing field and you get crowdsourcing of real estate investment: where property-based offers are thrown open to anybody with a web browser (and sufficient capital).
Among the early wave of startup companies in the crowdsourced real estate investment business is Realty Mogul. If this startup is any indication, it appears the new crowdfunding sector is getting off the ground: the company has announced $10 million in property acquisitions totaling 27 properties.
The properties include multifamily, retail centers and storage facilities. As reported by Globe St.’s Kelsi Maree Borland, one thing that characterizes each of the portfolio’s properties is cash flow:
“Our early success confirms that people are frustrated with the low returns offered by banks and are looking for alternative ways to invest,” says Realty Mogul co-founder and CEO Jilliene Helman. The company has invested inmultifamily properties, retail centers and storage facilities with cash flow, offering investors a quick return on their investment.
The web-based platform simplifies the investment process. Participants can do everything through the website from browsing opportunities to viewing transaction details and signing legal documents. “We’ve made it easy to participate in real estate investing via the Internet by creating a fantastic user experience,” says Helman. “Crowdfunding is going to revolutionize capital formation in real estate. It is here to stay.”
These thoughts are echoed by the SEC who unanimously voted in October to approve Title III crowdfunding proposed rules that allow businesses or investor groups to participate in securities-based crowdfunding. That means that unaccredited investors could make private investments, something that has been banned for 80 years.
Potential commercial real estate applications for low-flying aerial vehicles abound: these include mapping, surveying, traffic measurements (vehicle and foot), hyperlocal weather reporting, parking availability reporting and competitive research and analysis, just to name a few. There isn’t a sector in commercial real estate that couldn’t use an eye in the sky at one point or another.
The plummeting price of the drones themselves (note: link is to a hobby device only) plus the steady onset of hardware and software solutions for collection of visuals and presentation of data from those visuals are together creating a new set of tools that were previously available only to governments and militaries.
Drones are a little bit like the internet in that way.
None of which means anybody should run out and buy a drone or a drone fleet tomorrow: there’s the little matter of airspace management to consider. And for that, we have the Federal Aviation Administration, whose work in the area is going to set the tone of the impending era of commercial, private drone traffic.
The good news for drone enthusiasts is the FAA is well underway in researching the issue. The Baltimore Sun reports that the FAA has selected test sites in six states for the purposes of researching the widespread introduction of private (and law enforcement) drone technology into US airspace:
Drones, best known for their use in war, are expected to transform American life in the coming decades. The FAA has issued more than 1,400 permits for unmanned aircraft since 2007, mainly to police departments and civilian federal agencies; the agency estimates that the number of small commercial drones will grow to 7,500 within five years.
Research conducted at the six test sites will help the agency develop regulations to allow unmanned aircraft to fly safely among manned jets, airplanes and helicopters.
Other countries already are using drones to dust crops and monitor oil spills. Florida is testing a system that can spot mosquito larvae in difficult-to-reach mangrove trees. Amazon CEO Jeff Bezos has described plans to use unmanned aircraft to deliver orders — just as the U.S. military has shipped cargo to troops in Afghanistan.
News organizations have spoken of using drones to produce footage of natural disasters, police chases and crime scenes. Real estate agents want them to take aerial photographs of properties.
Maryland already has established itself as a center of the growing industry. The state is home to several manufacturers. The University of Maryland, working closely with the Navy and NASA, is developing vehicles. And the military has long tested drones at Pax River.
The Association for Unmanned Vehicle Systems International, the main industry group, estimated this year that drones would add 2,500 jobs and $2 billion to the Maryland economy by 2025 — part of an $82 billion impact nationwide.
The new international digital currency Bitcoin has found itself in the news quite a bit over the past couple of years. The novelty of Bitcoin’s story is attractive — a currency not beholden to any central bank nor any state is something that causes imaginations to run, and makes us review the relationships between the deals we make and the stuff we use to transfer value in those deals. Dollars are, after all, only one (supremely popular) means of facilitating payment.
Beyond that rich area for thought lies the fact that Bitcoin’s value in dollars has, in the long term, climbed sharply. Some see a speculative bubble destined to messily pop, some see the early days of a permanent and true digital currency. Many lie somewhere in the middle while a whole lot of folks are left wondering what the heck Bitcoin is.
What is Bitcoin?
I don’t want to make anyone’s eyes glaze over, but the fact is, explaining Bitcoin properly requires a lot of computer-nerd vocabulary and experience. As readers of The Source already know, I have a some depth in technology topics. The question is: can I explain Bitcoin without drowning anybody in jargon? Let’s try:
The simplest and most useful way to put it is like this: Bitcoin is a “secure” way to carry value on your computer or pad or phone. You convert dollars to Bitcoins (BTC) using an Bitcoin exchange and you carry around and spend Bitcoins in the same way you carry around files on your computer or send messages such as e-mail or text.
That’s it, for now anyway. The hows, wheres and whens are all nerd stuff and I’ll be glad to answer any questions in comments. But for now: Bitcoins are magic pieces of digital information that carry value measured in dollars. Or Euros. Or Yen, etc.
“Secure” Doesn’t Mean “Stable”
While Bitcoin is by design secure, meaning the amount of BTC you have and spend is protected against a wide variety of theft, (theft from your machine, theft in transit, theft during transaction) Bitcoin is not by any means stable. By that, I mean the predictability of the dollar value of BTC is a very different beast than the dollar value of, say, the Euro or the Yen, just to take a couple of examples.
The rate at which dollars are traded for BTC is determined by markets, the oldest and most famous of which is based in Japan, called Mt. Gox.
A quick look at the charts of trading in BTC will show what I mean by avoiding calling BTC “stable”. Unlike traditional currency markets, BTC can see radical loss in value in just one trading day. These crashes are eye-popping, the latest having lost nearly 50% of the “currency”‘s value.
The most recent crash was spurred by an announcement that the biggest Bitcoin startup in China, called BTC China, would no longer accept deposits in Chinese currency (the yuan).
In other words, Bitcoin is money that could be worth half what it was yesterday around the world if one country decides to enforce capital controls.
Property Transactions Using Bitcoin: Seller And Buyer Beware
From where I”m sitting, using a crash-prone currency to conduct real estate business seems to be risky, risky stuff. Yet, all that observation does is prove that my appetite for risk is always going to be less than somebody else’s.
Today, that somebody else is a home seller in Southampton, NY who says he will accept the $799,000 sale price in Bitcoin
Cash-strapped buyers eyeing a particular four-bedroom home in Southampton need not fear: the seller will also accept Bitcoin for the $799,000 asking price.
That may be a tricky price to nail down however, as the digital currency’s value has been all over the place in the past 12 months. Philipp Preuss, who is selling the home, told the Wall Street Journal that with this transaction, the Bitcoin price will be determined by the average exchange rate on the day the sale closes.
He would also accept a combination of Bitcoin and cash, he told the Journal.
“There might be international buyers, or a younger computer whiz who came into a little bit of coin overnight,” Preuss told the Journal. By opening up the sale to accept the digital currency, he said he is “expanding my buyer base.”
Preuss said he had to give his broker, Amadeus Ehrhardt of Brown Harris Stevens, a crash course in the currency.
“Aside from what I hear on the news about it here and there, I didn’t know much about Bitcoin,” Ehrhardt told the Journal. “But people are always interested to see what’s new and people like options.”
Prime Time: Not Yet
Obviously it’s early in the history of Bitcoin and in digital currencies more generally. But I feel safe saying that the financialization and stability requirements of commercial real estate transactions — transactions that rope together so many skill sets and variables as it is — mean this industry isn’t likely to embrace Bitcoin with the same enthusiasm that other business sectors might. A currency that sheds half its value overnight just doesn’t make the grade.
- Here’s why now is a good time to enter commercial real estate, (CNBC MoneyControl.com, Dec. 11, 2013). First of all, who knew they had CNBC in India? Not me. It forces the question: does Indian TV also have Jim Cramer and his big red button that makes silly noises? Until we find out, a bit of international commercial property markets news is always welcome.
- CIT Survey Finds Middle Market Commercial Real Estate Executives Cautiously Optimistic but Feeling the Strain of Taxes and Regulation, (Forbes, Dec. 12, 2013) Wherein a CIT survey finds middle-market CRE execs, while bullish, are still annoyed with taxes and regulation. One presumes the taxes and regulation they are annoyed with do not include the taxes that pay for the infrastructure that lends their property much of its locational value nor the regulation that enforces private property ownership.
- Commercial Real Estate Recovery to Accelerate in 2014, (WSJ (press release from JLL), Dec. 17, 2013) Jones Lang LaSalle see a rosy 2014 in CRE.
- Modern Makeover for Wrigley Building, Long a Hallmark of Chicago’s Skyline, (NYTimes, Dec. 10, 2013) A $70 million rehab for our pictured property: Chicago’s most famous and graceful monument to chewing gum, and, for decades, losing baseball.
- After leasing miscue, NRC will share White Flint space with FDA, (Washington Post, Dec. 11, 2013). Meanwhile in Washington, DC, the nuclear plant inspectors and the pharmaceutical inspectors find themselves roommates after a botched lease deal.
- Office construction minimal as federal leasing hits brakes, (Gazette (MD), Dec. 13, 2013) Related to the above, the US Government is about to take away much of its gigantic office space demand in Maryland.
- Sumner warehouse owner lands a whopper of a tenant, (Puget Sound Business Journal, Dec. 11, 2013) Related even more to the above two Office sector stories, Uncle Sam reminds everybody in Puget Sound who one huge customer for square footage is: his name is Uncle Sam. Big Government not such a bad idea after all, mumble beneficiaries in the 300K sq. ft. deal.
- Commercial Development Guide 2013: Wine deals fill Solano County industrial vacancy, (North Bay Business Journal, Dec. 16, 2013) Down the west coast, wine bottles drive a 700K sq. ft. space deal.
- Packard-Plant Buyer Predicts Rebirth for Symbol of Detroit Decay, (BloombergBusinessweek, Dec. 17, 2013) From the Irony Department: Decades after the big three automakers sent huge chunks of Detroit’s economy to points south of the US border, a developer from South America ponies up $400K for Motown’s Packard plant. Ouch.
- Retail Space Leads Global Commercial Rent Growth, (WPC, Dec. 12, 2013). A CB Richard Ellis report has its “global retail capital value index” increased eight percent year-over-year.
- How to Negotiate a Lease — A beginners guide for retailers, (Entrepreneur, Dec. 11, 2013) Nothing against Entrepreneur Magazine nor the author of this fine introductory piece on retail lease negotiations, but if you want the full story from 40 years experience in this stuff, I suggest you talk to NAR Signature Speaker extraordinaire Rich Muhlebach.
- Malls of the future: touchscreen store windows made from ‘connected glass’, (CNN, Dec. 11, 2013) Technology has replaced the store display window with smart glass one can swipe to browse the store wares. At press time, no word what happens when kids press their noses to the glass.
- Off-campus housing a boon for Boca firm, (SunSentinel, Dec. 15, 2013)
- The 10 most notable multifamily projects of 2013, (San Francisco Business Times, Dec. 16, 2013)
- In Philly area, a strong 2013 apartment-rental market, (Philly.com, Dec. 15, 2013)
- Four Seasons Chief is Feeling the Squeeze, (WSJ, Dec. 10, 2013). Developer-turned-hotelier feels the heat as his Saudi investors clamor for an IPO.
- Panel: Wynn Resorts suitable to open casino in Massachusetts,(Las Vegas Sun, Dec. 16, 2013). Massachusetts gaming authority gives green light to Wynn to deal the cards in the Bay State.
- Return to Splendor, Honolulu Star-Advertiser, Dec. 15, 2013 Hawaii’s Wailua Island wrestles with the effects of a decades-past hurricane.
- Price of Iowa farmland reaches a record high, (Des Moines Register, Dec. 12, 2013). Hawkeye dirt approaches record price highs.
- Farm land still a good investment, (SaukValley, Dec. 14, 2013) Northern Illinois dirt, not to be outdone by the dirt on the western bank of the Mississippi, also looking excellent as an investment.
- Corn Plummeting Spurs Talk of ‘80s US Farmland Bust: Mortgages, (Bloomberg, Dec. 16, 2013) On the other hand, corn prices seem to have topped off.