The first phase grand opening of Aggie Square is slated for May 2. A development by Wexford Science + Technology in partnership with The University of California, Davis and the city of Sacramento, Aggie Square is a mixed-use development on the UC Davis Health Campus in Sacramento. The first phase will consist of approximately 808,000 square feet of Class A life sciences research labs, technology and office space, plus housing and retail space

“Once the entire Aggie Square project is up and running, it will support 3,200 jobs annually and about $500 million in annual regional economic impact in the Sacramento region,” said UC Davis Chancellor Gary S. May, citing analyses from Economic and Planning Systems Inc.

Wexford hired a Cushman & Wakefield leasing team including local office/technology brokers Ron Thomas, Bruce Hohenhaus, and Kris Kalmbach together with Marc Pope and Brett Ward of the firm’s National Life Sciences Practice Group in Northern and Southern California.

GA Group and A&G Real Estate Partners plan to auction 790 retail store leases and five distribution centers in conjunction with the wind-down of fabric and crafts retailer Joann Inc. following its January filing for Chapter 11 bankruptcy. The bid deadline is April 16 and the auction is expected to occur in New York on April 22.

The available leases cover a range of property types across 49 states, including freestanding stores, power centers, strip malls and urban retail corridors, ranging from 7,500 to 52,000 square feet. No fee-owned properties are available in the auction.

“This diverse portfolio offers strong real estate fundamentals, prime high-traffic locations, and turnkey spaces ready for immediate occupancy,” said Michael Jerbich of GA Group. “This auction offers business owners and investors a prime opportunity to expand their footprint and strengthen their local presence.”

GA Group was recognized in February as the successful bidder to serve as exclusive agent to monetize substantially all Joann’s assets.

GBT Realty Corporation and Robinson Properties are teaming up on a new retail and multifamily development in Mount Juliet, Tenn., approximately 20 miles east of Nashville. Construction of the retail space is expected to begin this month and be completed in October 2025. A timeline and details of the residential development, to be developed by Robinson Properties, will be announced later.

Everett Downs is situated on a 10.9-acre site at the corner of Division St. and Mt. Juliet Rd. near I-40. The retail component, helmed by GBT Realty, will comprise a 41,255-square-foot neighborhood center. It features a 23,256-square-foot Sprouts Farmers Market, 18,000 square feet of small shop space and two out parcels. An additional 10,200 square feet and one out parcel remain available for restaurants, fitness services and soft goods retailers. This shopping center marks the 12th Sprouts-anchored property developed by GBT. 

California-based Orton Development is considering converting the nearly century-old Joseph Vance Building, an art deco property in downtown Seattle.

Location at the corner of Third Avenue and Union Street downtown, the project would turn unused Seattle offices into housing, reported the Seattle Times. City and state officials have recently passed legislation to encourage and support developers to undertake these types of conversion projects, offering tax breaks and regulatory relief.

Potential plans are still being finalized, but the Vance building project includes the initial vision to create 155 residential units and 10,000 square feet of retail space in the 14-story building. The 1929 Vance building offers potential as a conversion, given the property’s shape and layout.

Another one of Seattle’s well-known office buildings, Smith Tower, was recently sold to Seattle-based GT Capital which acquired the 110-year-old, 42-story building and Butler Garage in Pioneer Square.

Photo credit: Kidder Mathews

A one-time Greensboro car dealership may be converted into a mixed-use project that could include office, multifamily and restaurant space.

GCMC Properties is working with Trask Land Co. Inc. of Wilmington on the former Gate City Motors site.

Triad Business Journal reports that GCMC purchased the 3.5-acre site at the end of 2019 for $2.7 million. Demolition of the former car dealership commenced in January 2020. The site had been vacant since 2011. 

Trask Land Company says it performs all types of development—commercial, industrial, retail/mixed-use and multi-family—that includes creating and implementing projects from the rezoning stage to both commercial and residential infrastructure and commercial build-to-suit.

Trask projects include a Scotts Hill 55+ apartment community, a Wilmington shopping center and a corporate headquarters for a fintech company.

The first Midwest location of Andretti Indoor Karting & Games could break ground within the next few months.

Schaumberg officials anticipate a summer groundbreaking for the 89,300-square-foot entertainment venue, according to the Daily Herald. It will feature a multilevel indoor electric go-kart track as well as a restaurant, bowling alley, laser tag room, ride simulator room and a variety of games.

The Andretti Indoor Karting location will be built in conjunction with a six-level public parking deck that would anchor the first phase of an entertainment district around the Schaumburg Convention Center and Renaissance Hotel.

A 7,800-square-foot mezzanine area on the second floor is planned to include private rooms for parties and events. The first phase of the entertainment district on the west side of the Renaissance Hotel includes designated space for two future restaurants north of Andretti Karting.

Don’t miss the Lifetime Achievement Award Presentation and Keynote Interview with G. Joseph Cosenza, Vice Chairman of The Inland Real Estate Group, LLC and President of Inland Real Estate Acquisitions, LLC at Connect Midwest: Multifamily, Affordable, Student & Senior Housing Trends on June 4, 2024, at the W-Chicago, City Center Hotel, Chicago, IL. Register Today to network with your peers!

Courtesy of Chicago Neighborhood Initiatives

Pullman Crossings

A deadline is approaching for investors that want to pour capital gains into federal opportunity zones, and a rush could be on.

As of Jan, 1, investments into qualified opportunity zone funds won’t receive the 10% reduction on deferred capital gains taxes that has been part of the program since it was created by the 2017 Tax Cuts and Jobs Act.  

Those who act after Dec. 31 can still secure two other benefits from the program, which, according to its congressional sponsors, was meant to drive investment into neighborhoods historically starved for capital. Future investors can still defer their capital gains tax liability until Dec. 31, 2026, as well as eliminate taxes on any capital gains realized from an opportunity zone investment after 10 years.

Those two benefits are each more valuable to investors than the 10% reduction on deferred capital gains taxes that will sunset in less than four weeks, according to Origin Investments Co-CEO David Scherer. But the loss of that reduction is still causing a new rush of investors seeking to take advantage of opportunity zones.  

“It’s a better idea to do this in December rather than in January because why not get the 10%?” Scherer said.

Origin closed its first qualified opportunity zone fund in July after raising $265M from more than 800 investors, he said. These dollars can flow into most kinds of developments, properties and businesses within the nation’s 8,700 opportunity zones, but Origin concentrates on multifamily developments. Its first fund has about 3,700 units under construction in 11 multifamily properties, with a total value of more than $846M.

The firm launched its second qualified opportunity zone fund in October. It has six multifamily assets in its pipeline, including projects in the Atlanta, Phoenix, Charlotte and Colorado Springs markets.

It is typical that Q4 is the busiest for firms running qualified opportunity zone funds, Scherer said, but based on activity over the past few weeks, this year could be the busiest.

“I can’t give you an exact number, but we’re already seeing it, and we’re pretty confident we’ll have a record December,” he added.

Opportunity zone funds have become more popular with investors. In the first half of 2021, qualified funds raised more than $17.5B, a 15.5% boost over the total reported for all of 2020, according to a study by Novogradac, a public accounting firm.

The program has its critics, who say opportunity zones provide tax breaks for wealthy investors and promote development in areas that aren’t really struggling.

That isn’t true, at least in Illinois, according to Jennifer Bransfield, chief operating officer of Chicago Neighborhood Initiatives, a nonprofit developer that does a lot of work in the Far South Side neighborhood of Pullman. She credits state and city officials for making sure opportunity zones in Illinois covered the neighborhoods, including Pullman, that needed the most help.

“It’s an important tool that helps finance projects that traditional developers will overlook because they don’t pencil out with traditional forms of capital,” she said.

Opportunity zone investors provided all the funding for the $35M, 400K SF industrial building that CNI developed in Pullman Crossings, a 62-acre industrial park. The project was finished two years ago and is now fully occupied by manufacturer SC Johnson.

“Having the OZ financing meant we were able to develop the project very swiftly, just nine months, and deliver 200 new jobs to the neighborhood,” Bransfield said.

As the coronavirus storm clouds began to gather in March, CRG Managing Partner J.J. Smith was hired to help run the firm’s residential sector. In the first few weeks, he concentrated on developing a plan that leaned heavily on urban infill projects in high-density markets, the profitable strategy pursued by so many builders in the last decade. But after watching downtowns turn into ghost towns, Smith decided on another approach.

“I called it the pandemic pivot,” he said.

Dense urban cores now cause unease among many affluent renters, Smith noted, and even if vaccines tamp down the coronavirus pandemic, developers need a new product type that investors find appealing. When he ran the numbers, the answer seemed logical.

Courtesy of CRG

Broadway Chapter at 401 Hemphill St. in Fort Worth

Middle-class and workforce housing fared better during the 2020 downturn, especially in the suburbs, with rents and occupancy staying near pre-pandemic levels, Smith said. CRG, the real estate development arm of Chicago-based Clayco, took that data and in November committed $1B toward the development of Class-B workforce housing across the nation, mostly in first-tier and second-tier suburbs.

“You will still see urban living, of course, but in a more balanced state,” he said. 

The shift could provide a silver lining. Before the pandemic, the apartment industry got a bit too set in its ways, far too reliant on the same luxury-centric formulas, Smith said.

“Nobody had to innovate or think of a way to build a better mousetrap,” he said.

It is time to realize that workforce housing can also be a business that generates solid returns, he added. But it has to be done right, with an eye kept on controlling costs and making careful choices when it comes to location.

Other players in the multifamily market agree.

“I have always been a huge believer in investing in underserved communities, and if it’s done intelligently, you can get better returns,” Turner Impact Capital CEO Bobby Turner said.

His Santa Monica, California-based firm just closed its second workforce housing fund with $350M of committed capital, and it plans to leverage that into $1.25B of investments, acquiring up to 10,000 units in existing communities affordable to the working class.

Smith and CRG decided to focus on regions that enjoy the strongest job and population growth. That means favoring the Sun Belt over gateway cities like Chicago or coastal markets, Smith said. Metros such as Austin, Charlotte, Dallas, Nashville and Phoenix were among the most attractive, although a few high-growth standouts like Minneapolis, Denver and Salt Lake City will also be considered.   

A focus on each area’s respective suburbs was also an easy call. Smith said even in the Chicago region, which has recently experienced little or no population growth, new apartment developments in its affluent western suburbs like Naperville and Wheaton are opening with high levels of occupancy. That greatly increased CRG’s confidence in suburban Atlanta towns such as Alpharetta and Decatur.

“It directly lines up with where the institutional investor community is looking for product,” Smith said.

He anticipates the $1B the company plans to raise will fund about 10 new apartment communities over the next three years. Tax incentives or subsidies won’t be used, and residents will most likely earn between 80% and 120% of the area median income.     

CRG will debut its first project in June, when it opens Broadway Chapter, a five-story multifamily housing complex in Fort Worth, Texas. The 320K SF development isn’t suburban, but it is about 1 mile from downtown in the city’s Medical District, and Smith said the company has already seen great interest from local health care workers who can’t afford top-flight luxury housing.

Such strong demand convinced Smith other markets were aching for developments like Broadway Chapter — ones for renters with solid incomes, such as health care workers, teachers or police officers, but renters who can’t afford all the amenities of Class-A housing.

“It’s right down the middle of the fairway,” he said. “That’s always been a void in the market.”

That doesn’t mean every region is likely to see new workforce housing in the post-COVID-19 era. Developers in small Midwest markets still confront a dilemma. Rents in many of these markets just aren’t high enough to justify new construction of apartments targeted toward those with modest incomes, according to Hannah Ott, executive managing director of Cushman & Wakefield’s Indianapolis office.

“I’ve checked our pipeline in Indianapolis, and it is just about all luxury,” she said.

Courtesy of Turner Impact Capital

Portola Del Sol in Las Vegas

It’s been years since a large number of Class-B units were built in the city, even though the occupancy rate for this asset class is more than 94%, she added.

“I feel certain that if a new Class-B property was built, people would be very excited about it,” Ott said.

Similar conditions prevail in tertiary metros such as Cincinnati and Columbus. But with construction costs going up, bringing about change will be difficult.

“Without some sort of subsidy, it’s just hard to make it work,” Ott said.

Even in its vibrant Sun Belt markets, CRG plans a number of strategies to boost returns as it constructs apartments that charge modest rents, Smith said. Broadway Chapter’s wood-frame construction is just one way to utilize less expensive materials. In the future, builders in the space may also need to adjust unit sizes, perhaps use modular components created off-site, and leave out amenities such as stainless appliances or quartz countertops.

“All of these items are sure to come into play as we attempt to serve the middle-market segment,” Smith said.

Even before the pandemic, workforce housing was a solid performer, with relatively low vacancy rates and above-average rent growth, according to a 2018 CBRE study. Slow wage growth across much of the nation, which locked so many out of more expensive units, was part of the reason. But developers didn’t necessarily see it as an attractive business, and the sector lost about 100,000 units each year, many demolished to make way for high-end properties, CBRE said.

Turner said the industry needs to reverse that trend.

The pandemic is worsening the housing situation in the U.S. for so many, and even before COVID-19, millions of families were severely rent-burdened, paying more than 60% of their income toward housing costs, he added.

“We have so many people living in survival mode, and it’s not sustainable,” Turner said.

His company has been making money in the workforce housing sector for years. Its first affordable multifamily housing fund invested nearly $700M, acquiring 7,840 existing workforce units that housed more than 14,000 residents, Turner said. The second fund has already acquired seven multifamily communities and has an eighth under contract for a total of more than 3,000 units. The company also owns developments in the Atlanta, Austin, Dallas, Houston and Las Vegas metro regions, including Portola Del Sol, a 350-unit workforce housing community in Las Vegas it purchased one year ago.

Although Turner said he believes business can be a force for good, he also said this work isn’t philanthropy. There’s money to be made in preserving workforce housing, even where his company works, primarily in communities heavily populated by immigrants and people of color. But raising rents would defeat the goal of holding down costs for working families.

“The only other option is to reduce expenses, and the biggest expense is turnover,” he said.

Turner keeps apartments filled by also providing free employment assistance, community health facilities, homework help for local children and other services, sometimes through local community groups such as food banks or by building its own facilities.

The average rent throughout the Turner portfolio is $924 per unit, he added. But building managers rarely have to spend time and effort seeking out new renters for vacant units. That leaves enough money on the table to improve the properties without government subsidies and keep investors happy.    

“It’s not rocket science,” he said. “I do think of myself as being in the real estate business, but I also consider myself to be in the service industry. That’s why our tenants become sticky tenants.”