TOOLS & INCENTIVES TO REACTIVATE THE REAL ESTATE INDUSTRY IN TODAY’S ENVIRONMENT URBAN LAND INSTITUTE/ NEW ORLEANS BUSINESS ALLIANCE PRESENTATION MAY 28, 2020
FAEGRE DRINKER IS A LEADER IN THE OZ MARKETPLACE I N F L U ENCI NG P U B L I C E X E C U T I NG O Z R E L AT E D T H O U GHT O N O Z T R A N S A CTI ONS Acknowledged Thought Provider of Educational OZ Fund Formation Leaders Resources •Participants in OZ Conferences •OZ Introduction Webinar •Published Articles on •Social Equity & Gentrification Opportunity Zones OZ Webinar •A to OZ Primer Wealth Management (Family Office Investment) Corporate HQ & Corporate Investments Municipal Advisory & Strategy
COVID-19 MARKET TRENDS AND REAL ESTATE
MUNICIPAL & FEDERAL STAGES OF PANDEMIC RESPONSE Health Crisis Response We Are •Lockdown, Investments halted Here Employment Triage •Federal response to encourage retention, local response Local Stimulus Plan •Municipalities still in denial but beginning to plan, Federal government yet to fully respond Recovery Plans •Federal government & municipalities make strategic investment to spur growth Municipal Impact Realized •Local municipalities begin/continue to restructure, make service cuts, raise taxes in response to full economic impact
PREPARING FOR THE “NEW NORMAL” IN REAL ESTATE Public Money will Globalization in Travel Patterns The New Normal of Lead Private Real Retreat Shifting Personal Interaction Estate Investment • Across the global, • As happened after • Hospitality in • The level of there are national 9/11, a large particular but every uncertainty in the efforts to reshape percentage of category from retail market will shift the the trends of leisure travel will be to class A offices drivers in the real globalization domestic versus and industrial estate market international locations will need • The • Federal and state benefiting domestic to rethink and interconnectedness investment in real tourism recreate personal of the world will not estate and interactions with an be eradicated but • Business travel is infrastructure eye towards: there will be likely to retrench projects will serve substantial shifts in with locations with • Food and worker as both a market investment and acyclical demand safety signal and a risk production patters from military bases, mitigation tool to • Customer and hospitals and encourage private client safety universities real estate • Crowd outperforming investment by asset management & class and Safety geographic location • The expectations and safety of personal interactions
REAL ESTATE RETREATS TO SUBSIDIZED INVESTMENTS Class C Residential Class A • Mixed Use, Market Rate Apartments & • Workforce & Mixed Residential Income Housing T ownhomes • Mobile Home Parks Hospitality • New Construction of Hospitality Full Service, Boutique • Busted Construction, Selective Asset Assets and Select Hotels Acquisition Other Investments • Limited Investments in Other QOZ Business • Combined QOZ Business and Real Estate Invests Investments • Increased in Public Supported Infrastructure
THE DECISION POINTS AND CAPITAL NEEDS OF BUSINESSES • Timeframe: • Timeframe: • Timeframe: 30-45 Days 30-120 Late Can I Can I Days summer • How to Do I Close Make it Restart 2020 manage • How to pay Now? Thru My pre- bills/staff • How do I Crisis? Business? COVID-19 during grow post- liabilities shutdown COVID-19 • $25K SBA Express Loan • Paycheck Protection • Investments to Plan (PPP)- requires accommodate higher • $10K Economic Injury bank support safety standards, Disaster Loans (EIDL) marketing and new Advance • Economic Injury Disaster inventory Loans (EIDL) – requires • Any local grants bank support • SBA 7a Loans Need cash to Working Capital Need for manage to Emerge from immediate cash shutdown costs Shutdown
SOURCES OF PUBLIC FUNDING THE CARES ACTS AND LOCAL FUNDS Housing & Urban Development The public funding will drive • CDBG a substantial amount of real • Home Funds estate investment as we • 504 Loans • Housing Vouchers reemerge into this post Small Business Administration COVID-19 world. • Paycheck Protection Plan (PPP)- requires bank support Public private partnerships • Economic Injury Disaster Loans (EIDL) – requires bank support will become even more • SBA 7a Loans important. EDA • Construction Grants Much of the Federal public • Revolving Loan Fund • Capacity Building Grants funding will be driven • Planning Grants geographically by Local Municipal Funds Recovery Funds opportunity zones. • Recovery Funds (Grant, Debt & Equity) • Asset Recycling
PROJECTED OZ MARKET INVESTMENT PROFILE Early Stage OZ Investments – Investment Ready Projects (2018-2020) Capture 7 year tax reduction benefit Swap one form of capital for OZ Projects likely to be located in before Jan 2020 investment money “gentrified” areas Intermediate Stage 2 OZ Investments – Concept Ready Projects (2020-2022) Capture 5 year tax Investment will likely follow Municipalities will drive Likely to include clean reduction benefit before Jan demonstrated public location and sharing of energy, agricultural and 2023 investment social benefit infrastructure projects Late Stage OZ Investments – Combined Operating & Real Estate Projects (2021-2026) Capture 10 year tax free appreciation Investment will likely follow May be one of projects or part of large benefit demonstrated public investment concepts with multiple investments 5/26 /202 9 0
STRATEGY RECOMMENDATION: PATH TO OZ ATTRACTION Municipal & University Prioritization Existing or Potential Single & Multi Project Identification Pre-Development Needs and Fund Sourcing Public Investment Site Aggregation & Planning Zoning & Permitting Infrastructure Direct Co-Investment Private Follow-on Investment Catalyst Projects Anchor Projects Fill Projects •Initiate multi project sites •Establishes cashflow •Develop organically from catalyst and/or anchor projects and/or master plan •Can sometimes be public infrastructure •Attracts related industries and businesses
OZ INVESTOR INTEREST & COMPETITIVE ADVANTAGE Sustainable Competitive Pre-Development – Pre-Development Advantage Jump Starting Activity Funding Sources OZ Venture Medical OZ VC Capital Hospitals Professionals Backed Partnership Recruitment Companies Ease of Transportation State and Retail & Access, High upgrades to Federal Entertainment Traffic facilitate more funding Location traffic support Commercial Proximity to State, Federal Housing &Tech Desirable & Private Density Workforce Funding Companies Significant & State, Federal Residential Transportation attractive & Private Housing public upgrades Funding amenities
EXAMPLE PROJECTS
THE LARGEST OPPORTUNITY ZONE PROJECT IN THE US… The Tampa Innovation District is arguably the largest opportunity zone project in the United States by area and diversity of OZ projects. The effort underway in Tampa to revive a struggling mall and to redevelop the surrounding neighborhood area without displacement of people and businesses represents both the promise and spirit of the opportunity zones legislation.” The District is: 19 sq. mile redevelopment area 100 acre mall with multi-billion dollar investment Largest medical district in Florida 2nd largest VA Hospital in US 44,000 Students at University of South Florida 4 million annual visitors to Busch Gardens
OVERCOMING GATING ISSUES TO ACHIEVE EQUITABLE GROWTH Achieving population growth and enhanced tax revenue without displacement cannot be Large Scale Gating Issues achieved without a substantial investment in storm water and waste water infrastructure that • Transportation will allows for the population density that can, in • Infrastructure – Waste & Storm Water turn, fund the enhancements. • Infrastructure Improvements New Housing Site Specific Gating Issues • Site Control • Land-Use • Zoning • Pre-Development Activities Funder/ Operator Gating Issues Infrastructure Population Improvements Density • Developer Identification • Business/ Entrepreneur Identification • Incentives 14
OZ MIXED USE RESIDENTIAL INVESTMENT LAKE FOREST BLVD NEW ORLEANS Attractions & Assets • Lake Forest Blvd • Plaza Site • NOE Hospital • Joe Brown • Audubon • Franklin Ave Household of Faith • Lake Forest Academy Recent Projects • Public Investment • Site at Mayor • Private Investment • Bullard Strip Mall Improv. • South Central Bell Site • Toys R Us Site 15
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