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The Bisnow Weekender: Return To The Land Of OZ

National
National
June 27, 2024 Mark F. Bonner, Editor-in-Chief

Thanks for reading the Bisnow Weekender, my personally curated roundup of the most impactful news, notable quotes, binge-worthy show recommendations and other colorful highlights from the Bisnow world of commercial real estate and beyond. 

When was the last time you heard anything about opportunity zones?

Sure, the max perks of the program are behind us, but there are still a few precious years left to take advantage of tax benefits before they expire in 2026. 

But it appears President Donald Trump’s signature economic initiative — the one that whetted CRE’s appetites in the prepandemic years — is essentially belly-up.

Initially, these zones — all 8,764 of them — attracted billions of dollars by offering tax deferment on capital gains. In 2020, two years into the program, at least $48B had poured into thousands of opportunity zones across America. By 2022, it was just $9.7B. And last year, the dollars really dried up: $3.5B was raised.

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Unsplash/Denise Bossarte

Some of that is due to the tiered nature of the program. Projects launched by Dec. 31, 2021, got an extra 10% step-up in the basis of their investment. Launching developments after that cutoff simply wasn’t quite as appealing.

“The fundamental marketing pitch around the [OZ funds] was, why would you pay the tax to the government now if you can invest in a fund and pay tax in six years?” Riaz Taplin, founder of California-based OZ fund Riaz Capital, told the Financial Times last month. “That big marketing line is no longer relevant.”  

But it’s more than that. Increased costs and higher interest rates sank their teeth into OZs. Nowadays, many opportunity zone funds are struggling and facing a massive decrease in new investments. 

Many current OZ projects are underwater as developers lured by tax breaks rushed to complete projects that today don’t look financially sound. 

U.S. lawmakers are mulling a proposal to extend the program by two years, but the uncertainty surrounding its approval, especially ahead of the U.S. presidential election, is causing many to adopt a wait-and-see approach. 

Despite those sentiments, some OZ funds still see a path forward — especially with the sustained affordable housing demand.

Robert Silverman, managing partner at LJJ Fund, a New York-based opportunity fund, told the FT that despite high interest rates, “they are still attractive enough to attract investment.”

He might be right. I’ve seen two new OZ deals announcements just this week.

— Mark F. Bonner, Bisnow Editor-in-Chief

 

Voices From The CRE Battlefield: Crazy Charts Edition

 

The Best Of Bisnow News: June 24-28

SPECIAL REPORT: The Average Appraiser Is Aging Out Of The Workforce. A Crippling Labor Shortage Looms — South Florida Reporter Matt Wasielewski, New York Reporter Sasha Jones and Chicago Reporter Ryan Wangman

The certification process for appraisers requires an apprenticeship program, thousands of hours of on-the-job training and online or in-person courses. It can be a daunting series of hurdles that is only exacerbated by a reluctance across the industry to take on new trainees.

The dynamic has created a demographic crisis across the industry.  

Appraisers are too old, too few and too insular. The median appraiser is 60 years old, and 80% are over 50, according to the National Association of Realtors. But the ranks of the next generation of appraisers are thin, held back by a convoluted certification system and an industry culture that shuns newcomers. 

"Unless things change and we create ways and incentives to trigger a higher rate of entry into the profession, then it's over,” Miller Samuel CEO Jonathan Miller said. “That's coming within the next decade.”

RELATED: Commercial Property Appraisers Are Growing In Influence As Market Morphs

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Members-Only Club Sues Michael Shvo For Fraud, Seeking $600M In Damages — New York Reporter Sasha Jones and Deputy Managing Editor Ethan Rothstein

In a lawsuit filed Wednesday in New York State Supreme Court, the owners of Core Club claim developer [Michael] Shvo deceived them with "tales of grand expansion" when they agreed to partner with him at 711 Fifth Ave., the Transamerica Pyramid in San Francisco and an expansion to Milan, Italy.

Instead, they allege he has made a string of "broken promises," failed to deliver on promised developments, performed substandard construction and maneuvered to improperly seize a 50% stake in their business.

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RealPage To Lay Off 4% Of Its Workforce As It Fends Off Price-Fixing Allegations — Chicago Reporter Ryan Wangman

The cuts come as the company fends off a massive class-action lawsuit, though a spokesperson attributed the cuts to its plan to boost growth. The company said it employed more than 6,500 people in the United States, the United Kingdom, India, Spain and elsewhere, meaning the layoffs impact at least 260 employees.

"RealPage is hyper focused on innovation and accelerating its business growth in 2024 and beyond, and as a result has made the decision to eliminate a small number of roles within the company," Jennifer Bowcock, senior vice president of communications and creative at RealPage, told Bisnow in an emailed statement.

"We didn’t make these decisions lightly, and we are committed to supporting our employees during this transition inside and outside of RealPage.”

 

More Big News From The Week … 

— After A Decade Of Dominance, Sovereign Wealth Funds Are Forced To Evolve

— The $2T Wall Of Maturities Is Being Climbed Behind Closed Doors

— CMBS Bondholders Left In The Dark As Valuations Tumble

— Apple Halts Work On $1B Campus, Following Other Tech Titans

— 8% Of U.S. Office Buildings Are Taking Basically All The Tenant Activity

— The Agency's Mauricio Umansky Talks Office Turmoil, Challenging The NAR And The Reality TV Spotlight

My Slightly On/Off-Topic Media Diet

From Polling Places To Commercial Spaces: Does Real Estate Prefer Trump Or Biden? (RCLCO): “More than half of respondents (55%) predict that Trump will win the upcoming U.S. presidential election, compared with 43% who predict Biden and 2% third party. … Of those who predict Trump will win, 65% believe this will have a positive impact on the real estate industry.”

Fearing Losses, Banks Are Quietly Dumping Real Estate Loans (NYT): “‘What I have been seeing is the cockroaches are starting to come out,’ said [Michael Hamilton, one of the heads of the real estate practice at O’Melveny & Myers]. ‘The general public does not have a sense of the severity of the problem.’”

How Will Your City Feel In The Future? (The Pudding): “In 2070, Los Angeles’s temperature will increase 3 degrees celsius. The city moves from a Temperate to Arid classification and its climate will resemble how New Delhi feels today. In the near future, people might be bragging about their luxurious beach side resort in Copenhagen. Moscow will be a lonely place in 2070, as the only remaining of our cities to exist in the Cold classification."

It Has Never Been Harder, Or More Essential, To Have A Work Best Friend (WSJ): “Sensing worker bonhomie is good for business, companies are now trying to foster friendships by planning events and creating cozy office lounges. Company karaoke parties may feel forced, but the potential payoff is considerable. When people are close with their co-workers, ‘they can get more done in less time, they’re more likely to share innovative ideas,’ says Jim Harter, Gallup’s chief workplace scientist.” 

CLUE: This Naturalized U.S. Citizen Is Now Honored With A Forever Stamp (U.S. Postal Service): “This stamp commemorates Alex Trebek (1940–2020), the longtime host of the television quiz show ‘JEOPARDY!’ who became a respected and beloved presence in millions of homes.”

Bisnow Weekend Interview Preview

Derrick Barker began his real estate career while at Harvard, buying properties in his home city of Atlanta with the hope of providing his community with affordable, quality housing options.

Fast forward 22 years through a stint at Goldman Sachs, and he’s still in the property game but this time as an alternative lender.

He and his wife started their own firm, Nectar, in 2020 to finance midsized projects by companies and in communities that are often overlooked.

He chatted with Bisnow Deputy Newsletter Editor Kayla Carmicheal about his history in the field, how alternative lending has boomed in popularity and how Nectar snags opportunities other lenders pass up.    

Bisnow: Do you make it a point to take a shot on someone that might not get funding elsewhere?

Barker: We are set up as a business to supply capital in places where larger institutions are not focused on. So we’re focused on the small- and medium-sized real estate companies who, you know, they’re too big for friends and family capital. If you have a $75M or $115M portfolio, it’s hard to pass the hat around, but Goldman Sachs isn’t going to give you money. And that’s where most of the people who own Class-C apartments and nationally affordable housing that’s in neighborhoods of color [are] ... those aren’t institutionally backed companies that own their real estate. It’s a lot of these small- and medium-sized real estate companies that might own $100M or $200M in real estate, but they’re really under-capitalized because institutional capital isn’t there, and that’s where we focus our business on.

The Weekend Interview goes live every Friday evening — head to www.bisnow.com over the weekend to check it out!

 

Jobs! Jobs! Jobs!

Here are this week’s top jobs over at Bisnow's careers platform, SelectLeaders. Reach out to SelectLeaders Managing Director Ryan Neale to learn more. You can email him at ryan.neale@bisnow.com. 

Managing Director of Asset Management — Lead HASTA’s asset management portfolio and manage a dynamic team of directors, associates and analysts. 

Senior Vice President of Multifamily Acquisitions — Lead acquisitions of apartment properties, focusing on value-add and opportunistic assets primarily in the Greater Los Angeles and San Francisco Bay areas.

Vice President of Asset Management — Oversee the performance, optimization and strategic direction of a 3,900-unit multifamily portfolio.

Vice President of Finance — Lead the financial management of a $7B loan portfolio in the western United States, UK and Ireland.

Upcoming Bisnow Events And Webinars

Wednesday, July 3 (Digital): Capital Insights: Navigating Real Estate Investments In Uncertain Times in London

Thursday, July 4 (London): UK Construction and Development: Retrofitting For The Future in London

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How did I do? You can send all love letters and dissents directly to me at mark.bonner@bisnow.com.

Contact Mark F. Bonner at mark.bonner@bisnow.com
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