2020 | Page 3 of 16 | FIP Commercial

Nov 10 No Comments

Construction Progresses On Miami’s Deepest, Most Expensive Underground Parking Garage

Author: Admin

The three-level subterranean basement will become the deepest, most expensive underground parking garage ever built in Miami. The vertical construction of the 47-story luxury tower is slated for 2021, to be completed in 2023.

Construction is progressing on what will become Miami’s deepest, most expensive underground parking garage. Reaching nearly 50 feet and three stories below sea level, the 100,000-square-foot, 236-car garage for Miami’s Una Residences condominium will cost the developers $25 million to build. The first-of-its-kind subterranean parking garage, set on the edge of the Biscayne Bay waterfront, will become a key element of the 47-story luxury residential tower upon its completion in 2023.

Developers OKO Group, the luxury development group helmed by real estate mogul Vladislav Doronin, and Cain International have enlisted world-renowned architects Adrian Smith + Gordon Gill (AS+GG) to design Una Residences. The 579-foot-tall tower was envisioned to embody the spirit of the city and the aesthetics of the Brickell neighborhood’s urban, waterfront environment.

OKO Group is an international real-estate development firm established by Chairman and CEO Vladislav Doronin.

OKO Group’s current U.S. portfolio of prime properties and development projects include two luxury residential developments in Miami; Missoni Baia in East Edgewater and Una Residences on the Brickell Waterfront; and in New York City at the crossroads of 5th Avenue and 57th Street, the Crown Building which will soon become Aman New York.

Hiding Underground

This open waterfront concept could only be realized by ‘hiding’ the parking garage underground – a challenging and costly approach that contrasts sharply with typical condominium developments in South Florida, which tend to feature a pool deck situated high atop several levels of parking. To create the underground structure, the development, design, and building teams worked closely together to determine the best method for subterranean construction in such close proximity to the bay.

“OKO Group has extensive experience with subterranean construction, with our firm’s Capital City mixed-use development in Moscow encompassing a six-level garage for over 2,000 vehicles built 72 feet deep underground adjacent to the Moscow River,” said Ahmet Oktay Cini, Chief Operating Officer of OKO Group. “When conceptualizing the design for Una Residences in Miami, we envisioned a similar urban-style, efficient tower that would maximize as much space as possible for the use of residents and showcase the site’s waterfront views. The result was a modern condo tower without a parking podium, meaning more square footage for luxury amenities and residences.”

In order to build a garage that doesn’t flood, the building’s general contractor, a joint venture between Civic Construction and Ant Yapi U.S., along with specialty subcontractor Keller International, set out to create a massive watertight concrete box deep underground. Using highly advanced technology and equipment, the complicated undertaking requires workers to drill 800 holes 50 feet deep into the ground and fill them with concrete and water. The interlocking pillars create a cement block that is hollowed out to build the garage.

Project Estimates

130-150 workers will be employed daily
50,520 cubic yards of concrete will be placed
8,960 tons of rebar will be used
1,693 tons of structural steel

Following the building’s groundbreaking earlier this year, the construction team embarked on the deep-soil-mixing construction process to create a giant waterproof ‘bathtub’ that protects the building’s concrete mat above the tub from the groundwater and forms the base of the garage. Engineers are now using a state-of-the-art, 10-foot high-torque drill to create the bathtub by digging into the site’s crushed limestone, while simultaneously injecting cement slurry into the ground and blending it with the limestone rock and sand. This process changes the composition of the soil, creating a support system for the bathtub’s walls and floor while ultimately reducing waterflow and permeability to allow for excavation of the site.

Once the soil mixing process and tub is complete in early 2021, the construction team will begin drilling piles 135 feet deep into the ground to support the tower, and to hold down the floor of the tub during construction. The loose-mix soil inside of the tub will then be mass excavated – a three-month-long process – to reveal the new, waterproof underground form. Once the site is excavated, the building’s steel mat foundation will then be constructed followed by a massive concrete foundation pour. Once the three levels of vertical columns are completed in the underground basement, ground-level vertical construction will then commence, estimated to take place in late 2021. From there, the tower’s rise will move at a fairly quick pace, accelerating approximately one level a week through top off of the 47th floor in late 2022.

The Bottom Line

“A below-ground garage of this caliber costs triple the amount of a typical parking garage. This kind of major investment in underground construction has never been seen before in Miami,” said William Real, President of Civic Construction Company. “The developers of Una Residences are sparing no expense when it comes to top-notch construction quality and efficient design, which will ultimately deliver a superior product for residents.”

Slated for completion in 2023, Una Residences will be comprised of 135 spacious condominiums spanning 47 floors. Residences range from two-to-five bedrooms, measuring between 1,100 to 4,786 square feet in size, with two ultra-exclusive penthouses available. The tower’s secluded waterfront location, situated in the South Brickell area at 175 SE 25th Road, is only moments away from downtown Miami’s metropolitan city life. Residences are priced from $2 million to $7.4 million, with penthouses up to $21.6 million.

Source: FCP

Nov 07 No Comments

$58M Affordable Housing Development For Seniors Underway In Trendy Allapattah

Author: Admin

Categories: Allapattah,Commercial News,Development,Multifamily

Seniors seeking affordable housing near art, barbecue and the Health District can soon look to Miami’s up-and-coming Allapattah neighborhood.

The Downtown Miami-based Interurban, a branch of Integra Investments, and the Sunrise-headquarterd property management company Elderly Housing Development & Operations Corporation, or EHDOC, are developing Mosaico, an affordable housing community for seniors.

The 13-story, 290,000-square-foot building will have 271 units, 92 studios and 179 one-bedroom, one-bath units. Amenities include a gym, computer lab, library, laundry room, and rooftop garden.

Mosaico will sit on 1.2 acres at 1396 NW 36th St., two blocks from the Allapattah Metrorail Station north of the University of Miami School of Medicine, Jackson Health and Bascom Palmer Eye Institute — and a short walk to the Rubell Museum, the soon-to-open Superblue art space and Hometown Barbecue in the emerging Allapattah neighborhood. Construction began in September and is expected for completion by late 2021.

“Miami is one of the most significantly rent-burdened markets in the country,” said Jake Morrow, head of Integra Investments’ Interurban. “The pandemic has exacerbated the dire need for affordable housing, especially for the area’s elderly population whose income far too often consists of only Social Security income.

“To serve the community’s needs, Interurban is committed to providing high-quality housing at affordable rents,” he said. “The pandemic has heightened the need for affordable housing. I think that we can see upward pressure on market rents due to an influx of residents from northern cities.”

EHDOC did not immediately respond.

The firms are using low income housing taxing credits syndicated by Boston Capital and tax-exempt bond construction financing from the Housing Financing Authority of Miami-Dade County, which are underwritten and administered by R4 Capital, for the $58 million project.

Interurban and EHDOC hired the architect firm C.C. Hodgson Architectural Group to design the project.

The firms expect to rent the 450-square-foot studios to single seniors and 580-square-foot one-bedroom units to couples. All units are reserved for households with average incomes at or below 60% of the area median income, which is $59,100. In other words, prospective residents cannot earn more than $38,400 per year to qualify.

Residents would spend 30% of their income on rent and would need a Section 8 voucher, administered by the U.S. Department of Housing and Urban Development.

Seniors interested in living in Mosaico must first register on the Miami-Dade Public Housing and Community Development general waiting list at miamidade.gov for affordable housing in Miami.

Integra, founded in 2009, launched Interurban in 2017. In recent years it has focused on mixed-use, market-rate projects; Mosaico and Las Brisas Trace, in Brownsville, near Liberty City, are its first affordable housing developments.

EHDOC operates 55 senior living communities nationwide, including in Florida, Illinois, California, and Ohio.

Mosaico and Las Brisas are among the growing affordable options for local seniors, often strapped by the region’s notoriously high housing costs. Earlier this year, Related Urban announced Lincoln Gardens, a Brownsville project due to open in 2022; and expansion of affordable project Brisas del Este, also in Allapattah at NW 18th Avenue and NW 29th Street, due for completion in 2022. Earlier this year, Pinnacle Housing Group opened Caribbean Village in Richmond Heights in southern Dade and Carrfour Supportive Housing opened a complex for LGBQT seniors in Wilton Manors.

Source: Miami Herald

Nov 06 No Comments

Developer Proposes Five Apartment Buildings Near Aventura

Author: Admin

Categories: Aventura,Commercial News,Development,Multifamily

A developer has proposed five apartment buildings in the Ojus neighborhood just west of Aventura.

The West Aventura Lofts would combine for 172 units. The project is led by Samir Dichy of Casa USA Brokers and all five buildings were designed in a similar style by Gustavo Spokolny of GS Architecture.

All five sites are located just west of the new Brightline passenger rail station under construction in Aventura, and east of the Sheck Hillel Community School. When completed, the Brightline station will connect Aventura to downtown Miami, Fort Lauderdale, Boca Raton, West Palm Beach and eventually Orlando.

Source: SFBJ

Nov 04 No Comments

Medical Offices Remain Attractive Amid Pandemic

Author: Admin

Categories: Commercial News,Healthcare,Offices,Trends

The coronavirus pandemic has been a boon for industrial real estate as increased online shopping drives up demand for logistics space, but the medical office sector has also fared well in 2020, and experts expect continued strength in that area during and after the pandemic.

While banks are hesitant to lend on properties in the retail and office sectors, financing remains available for medical office properties, experts say. And investors also continue to eye such properties, thinking that demand for services there will pick up once a vaccine is found and becomes widely available.

Here, Law360 looks at three reasons medical office properties remain attractive amid the pandemic:

Banks Are Still Interested in Lending

In the weeks after the World Health Organization declared COVID-19 a pandemic, lending all but stopped for commercial real estate. While capital is still tough to come by for retail and office assets, lenders are now providing financing for the medical office sector.

“Lenders are willing to lend on medical office,” said George Scopetta, chief investment officer at medical office owner and services provider ShareMD. “If you come to market with retail buildings, the answer is going to be no. A medical office building, especially if it’s a stabilized building, that’s an asset class that [parties] want to be in.”

Danielle Gonzalez, a shareholder at Greenberg Traurig LLP, said she has closed more than $800 million in loans on medical office buildings since the pandemic began, including an $89 million loan in late September from Starwood Mortgage Capital for eight properties owned by ShareMD.

She said medical offices, along with multifamily properties, have fared markedly better than other asset classes amid the pandemic. Federal stimulus assistance this summer helped many tenants at multifamily properties continue to pay their rents.

“I see a wide variety of asset classes. Not just medical office. … We have seen the least impact on medical office buildings and multifamily,” Gonzalez said. “It was a small blip on the radar compared to other sectors.”

Occupancy Has Remained High

Another reason banks have been willing to lend on medical office properties is due to high occupancy levels there, and tenants have remained in those properties for a variety of reasons.

For one, many medical office tenants were unaffected by shutdown orders earlier in the year. David Tabibian, a partner at Jeffer Mangels Butler & Mitchell LLP, said occupancy rates for the sector have hovered around 90% to 92% during the pandemic.

“Rent collections have been very strong — above 90%. That’s exactly what you want as an investor in an unstable market,” Tabibian said. “They are essential services, and tenants are able to still access their space and are still paying their rent. Historically, [medical office properties] have done well in downturns.”

That has meant landlords have had stronger rent rolls to show to lenders, a domino effect that inspires more confidence.

But another reason occupancy has remained high is that leases at such properties tend to be longer, which means fewer leases have come up for renewal during the pandemic than leases in other sectors.

“Landlords want longer lease terms. That’s why you see higher occupancy levels,” Tabibian said. “There are various types of equipment. … It’s more custom, more expensive, and as a result of that, tenants tend to sign longer leases at medical offices.”

More Consumer Demand Is Expected Once a Vaccine Arrives

While the medical office sector has taken a hit during the pandemic when it comes to consumer traffic in and out of facilities, experts expect demand to pick back up once consumers feel safe going in for procedures. That may not be the case for retail and office properties.

“The big distinction is the impact on medical office buildings was very much temporary, whereas the impact that we’re seeing on retail and office is much more permanent in nature,” Gonzalez said. “Once this is over, people are still going to have to go back to their dentist’s office for a root canal or their doctor for a comprehensive medical exam.”

And with real estate investors looking for places to park their capital and shying away from retail and office, medical offices will remain a solid option, experts say.

“Medical office really attracts the long-term, serious investors. There is tons of investment by [real estate investment trusts] and funds and institutional buyers,” Gonzalez said. “These are players that do thorough due diligence and are really looking for strong assets to hold for the long term.”

Expect more investment in the sector in coming months, particularly in the first and second quarters of 2021, said Tabibian, who noted there is lots of cash on the sidelines that could flow into such properties in 2021.

That investor optimism is being fueled by a sense that there will be a rush back to the properties once a vaccine is widely available.

“Telehealth … has its limitations and does not work with every specialty. At some point, doctors need to see their patients and can’t always do that virtually,” Tabibian said. “Many people have not undergone elective procedures during the pandemic. There’s a huge amount of demand for elective procedures … that’s coming as soon as there’s a vaccine.”

Source: Law360

Nov 03 No Comments

Miami’s Biggest Condo Developer Is Focusing On Apartment Rentals Now. Here’s Why

Author: Admin

Categories: Commercial News,Development,Multifamily,Trends

The pivot quietly began five years ago.

Back then, construction cranes dotted the downtown Miami skyline like the towering alien invaders in Steven Spielberg’s “War of the Worlds.” The real estate industry had recovered from the 2009 recession and was bouncing back hard. Thousands of condos — many of them priced way beyond the reach of local residents — were being delivered or built, completing Brickell’s transformation from office district to dense residential neighborhood.

But Steve Patterson, president and CEO of Related Development, the multifamily rental arm of the Related Group, saw a different picture altogether and started buying up land outside of Miami-Dade.

“I was hired by Jorge Pérez [chairman and CEO of the Related Group] right at the trough of the recession to reactivate the company’s market-rate rental division,” he said. “We like to put the pedal to the metal during a downturn, because costs are lower and the quality of our product is better. There is some softness in the condo market now, and we feel it’s the perfect time right now.”

The Related Group is best-known for its luxury and market-rate condo towers, with an estimated 80,000 condos built, the bulk of them in Miami-Dade. But with a glut of unsold condos dragging down that market, the company is shifting gears and invested $2.3 billion for a wave of apartment rental buildings — both affordable and market-rate — in Miami-Dade and cities such as Tampa, Orlando, and Fort Myers.

This year alone, the company has delivered 3,053 market-rate and 719 affordable/mixed-income rentals in Lantana, Palm Beach and Orlando, including another 204 units in the ongoing $300 million Liberty Square renovation project, which unveiled the completion of its second phase on Friday. Phase I, which opened in July 2019, brought another 204 affordable and workforce units online.

In the pipeline are another 6,772 market rate units in cities including Fort Lauderdale, Phoenix, Atlanta and Jacksonville, all due to break ground between now and the summer of 2021. Another 3,576 affordable and workforce units in mixed-income developments built with the support of local government and federal subsidies are under construction, most of them in Miami-Dade. They include the 120-unit Brisas del Este in Allapattah and the 150-unit Gallery at River Parc in Little Havana.

Related still has more than 1,500 condos under construction or in development in cities such as Fort Lauderdale, Tampa, Sanibel and Jacksonville, but none in Miami-Dade

According to Patterson, all major banks are continuing to provide real estate funding, including Related’s projects. But lenders are being more conservative than in years past, and backing for condominiums is much tougher to secure than that for apartments — another motivator for the company’s pivot to rentals.

Because of the glut of apartment rentals built over the last couple of years in the downtown urban core — nearly 6,000 units since 2014, according to the Downtown Development Authority — Related is steering clear of that area except for one project: The first of three planned towers at 444 Brickell, a four-acre site the company bought in 2013 for $104 million, will be a 40-45 story tower with 500 apartment rentals. Groundbreaking is scheduled for first quarter of 2021 and will take 30 months to complete. In total, the company has 1,500 condo units in the pipeline in Florida, Brazil and Cancun, Mexico.

A NATIONAL TREND

Related’s switch to apartment rentals is a continuation of a national trend that’s been happening for the last few years.

“The biggest driver of apartment construction is the home ownership rate,” said Gerard Yetming, executive managing director of the Urban Core Division of Colliers International. “Home ownership peaked in 2005 at 69% and it’s been trending down every year. So it makes sense there would be a growing demand for rentals and that Related is pushing into that area. The question is will it be a long-term trend. What you’re seeing right now is really just a result of big economic trends that are cyclical.”

Over the last 20 years, home ownership in the U.S. peaked in 2005 at 69%, according to Statistica, and hit a low of 62% in 2015. The percentage inched back up to 65% in 2019. But the U.S. population also grew during that time, from 296 million people to 328 million in 2019.

“The government created the notion that owning a home was the American dream,” Patterson said. “It proved to be beneficial to most people who bought homes until we saw the spike in prices in the last cycle. A lot of millennials saw their parents lose a lot of money.”

The housing bubble burst in 2008, when the bottom fell out of the real estate market, resulting in 2.3 million foreclosures and a loss of $2 trillion in home values in that year alone.

“Timing is everything,” he said. “If you don’t have the flexibility to buy and sell a home at the right time, you are not necessarily going to make a profit. People no longer see home ownership as the only way to creating true wealth.”

Home prices have also risen so much — the median sales price of homes in Miami-Dade is at an all-time record high of $425,000 — that many would-be buyers are shut out. Condo median sales prices are at a more attainable $275,000, but a lot of that inventory is older. The median household income in Miami-Dade, meanwhile, remains at a stagnant $52,205.

According to the National Multifamily Housing Council, a Washington, D.C.-based advocacy group, the number of new completed apartments around the U.S. in 2019 hit 474,446 — the highest since 1989. In Florida alone, 51,339 new apartments were built in 2019 — second only to Texas, with 76,440 — at a total value of nearly $7 million.

“Apartments are the right avenue for [Related] right now, because who knows what’s going to happen with the condo market,” said Rick Jones, president of the Georgia-based Caliber Living, which specializes in property management of rental properties.

“During the last downturn, condos got hit really hard and people were surprised how quickly they were able to rebound,” Jones said. “But right now, due to COVID and the economy, we’re on the edge of this cliff looking down, and doing multifamily [rentals] is a safer bet if you’re going to be in the real estate game.”

THE COVID FACTOR

The pandemic has also been a driver in the apartment arena. Although many renters have stayed put in their current homes, many are struggling to pay their rent due to unemployment and business closures. The flood of out-of-towners fleeing dense cities such as New York also has been renting apartments, either as a temporary relocation or a way to try out Miami living before moving here. Some brokers report a growth of 25% in out-of-towners looking to rent.

“One of the things that’s happening in this marketplace is that while people are more reluctant to purchase a condo in a high-rise, they don’t seem to be that afraid of renting in a high-rise,” said Bruce M. Goldstein, founder and CEO of the Fort Lauderdale-based BMGA real estate development and brokerage firm. “Maybe it’s less of a commitment. But rental projects around the country are very buoyant. While the focus for most developers is new condos, most of them that I know are talking about how many unsold units they have. When I ask them what are you doing now, the answer, without exception, is multifamily.”

Richard Swerdlow, founder of the online brokerage condo.com, said he has seen a 15% increase on rental inquiries instead of sale inquiries.

“It’s a cyclical shift,” he said. “Once you have so much condo inventory available, the dollars start to shift to products where there’s higher velocity.”

AFFORDABLE HOUSING

Affordable and workforce housing form a big chunk in Related’s new focus on rentals, even though many developers shy away from that arena because of the complexities of land rights, financing, tax credits and government approvals. Experienced as it is, even Related has come under scrutiny. In 2017, the firm was the subject of a federal investigation as part of a broad effort by the U.S. Attorney’s Office to probe fraud and abuse in projects subsidized by city money. But the investigation, which focused on an affordable housing building for seniors in Shenandoah, revealed no wrongdoing.

Albert Milo, president of Related Urban Development Group, the company’s affordable housing arm, says the firm’s long experience in the field gives them an advantage over other developers. (Jorge Pérez, who founded the company in 1979, began by focusing on building and operating low-income housing.)

“Because of our financial strength, we have access to all of the national lenders and all of the different programs and equity providers,” Milo said. “We were the first developer to use tax credits through an Opportunity Zone and mix that with institutional debt. A lot of people just follow the path of status quo. We approach things a little different. You have to be able to use that financial creativity to get these deals.”

But just because Related is focusing primarily on apartments now doesn’t mean the core of the company is changing.

“It’s important to emphasize that Related is made up of four divisions [condos, affordable housing, market-rate rentals and international],” said Jon Paul Pérez, who succeeded his father Jorge as president of the Related Group on Oct. 21.

“At any one time, depending on the market, one division may be more robust than the other. Five years ago, the condo division was more active because everyone was buying condos. We are a very well-diversified company so when one product type is not having the best market, the other one picks up the slack. We’ve diversified.”

Source: Miami Herald

Oct 28 No Comments

DoorDash Launches Program To Revive Closed Restaurants Using Ghost Kitchens

Author: Admin

Categories: Commercial News,Retail,Trends

Since the pandemic hit, hundreds of restaurants across the U.S. like Krazy Hog Barbecue in Chicago have remained temporarily closed as they figure out the right time to reboot their businesses.

Some won’t ever come back.

Today, DoorDash launched a plan to give these brands a fighting chance by matching them with ghost kitchen facilities through a new program called Reopen for Delivery.

Krazy Hog, a full service restaurant that has been temporarily closed since the onset of the pandemic, will be the first brand to take advantage of the program.

“We couldn’t plan for the pandemic,” Krazy Hog owner Dana Cooksey said in a statement. “The first thing I thought of when I heard the executive order in March was, ‘Who is going to feed our customers? There was a massive fear factor – the future was uncertain and overnight our business came to a halt.”

Krazy Hog plans to reopen a new brick and mortar restaurant soon in Chicago. In the meantime, the barbecue concept has hooked up with DoorDash to reboot the business through a delivery only model.

Krazy Hog will be preparing its menu, known for its pork rib tips, in virtual kitchen facility Á La Couch. The company provides restaurants with kitchen spaces designed for off-premise orders. The ghost kitchen operator, located in the Lincoln Park area of Chicago, also licenses brands.

“Our fully staffed kitchens handle cooking, delivery, and fulfillment on behalf of restaurant partners so they can focus on what they do best,” the company states on its website.

Restaurant brands listed on the company’s site include Wow Bao, Tender Canteen, Mac’d, Momo Noodle, The Bombay Frankie Company and SINI.

Victor Cooksey said DoorDash has stepped in to help his restaurant build an off premise operation until he and his wife can ultimately reopen their new restaurant.

DoorDash, which operates a ghost kitchen facility in Northern California, plans to use this model to revive other closed restaurants. The company, however, has not named any other restaurant partnerships.

Krazy Hog owners Dana and Victor Cooksey are featured in “Southside Magnolia,” a documentary by Rodney Lucas that chronicles how COVID-19 pandemic has impacted the two Black entrepreneurs in Chicago.

“The South Side is the heart of resilience, and we see that through the Cookseys’ story. They’ve never accepted their fate as being closed and fought to reopen,” Rodney Lucas said in a statement. “They have an entrepreneurial spirit that runs generations deep and an unwavering faith. COVID wasn’t going to stop them.”

Source: NREI

Oct 28 No Comments

Growing Number Of Landlords Are Offering Restaurants Percentage-Only Rent

Author: Admin

Categories: Commercial News,Retail,Shopping Centers,Trends

A recent survey by the NYC Hospitality Alliance helps illustrate the dire straits of America’s restaurants.

The survey found that 87 percent of New York City’s restaurants, bars and nightlife venues couldn’t pay their full rent in August. The culprit, of course, is pandemic restrictions imposed on these businesses.

Further complicating the situation, 60 percent of the businesses surveyed said their landlords hadn’t waived any of their rent in response to the coronavirus pandemic. But in New York City and across the country, a number of landlords are offering concessions for restaurants and other hospitality businesses in the form of percentage-only rent.

Some restaurant landlords are temporarily switching from fixed-rate rents to rents based only on a share of the tenant’s gross sales or revenue, in an effort to help these businesses survive, says Ken Lamy, founder, president and CEO of The Lamy Group, a Mandeville, La.-based financial management consulting firm. Landlords are then leaving the door open to revisiting the rent structure at a later date, perhaps 12 to 18 months down the road, he notes.

“Rent is a function of revenue, and with restaurant revenue getting decimated in certain types of trade areas, one way to protect the financial stability of a restaurant—and provide a cushion before we recover from COVID-19—is to structure a percentage-only rent deal and fix the restaurant’s rental expense with an acceptable percentage of gross sales,” says Jason Kastner, managing director of the national advisory group at Washington, D.C.-based Dochter & Alexander Retail Advisors, which represents restaurant and retail tenants.

Percentage-only rents are especially helpful in an industry with notoriously thin profit margins of around 3 percent to 6 percent and, now, with slumping sales. In September, sales at U.S. eating and drinking establishments totaled $55.6 billion, compared with the pre-pandemic tally of $65.4 billion in February, according to the National Restaurant Association, an industry trade group.

The percentage applied to a restaurant’s rent in a pandemic-era agreement typically ranges from 5 percent to 15 percent, according to Lamy. The figure sometimes includes common-area expenses like property taxes and insurance, but sometimes excludes them, he says. In some cases, the percentage-only rents come on the heels of rent deferrals that went into effect earlier in the pandemic.

Not every restaurant can take advantage of percentage-only rent, though. For instance, some landlords are limiting percentage-only deals to tenants that operate multiple restaurants rather than just a single “mom- and-pop” location.

At the other end of the spectrum, some landlords are being quite generous. For instance, San Francisco-based Presidio Bay Ventures, a commercial real estate investor and developer, has let Merkado, a Mexican restaurant and open-air market in San Francisco’s SOMA neighborhood, operate rent-free since March.

A prime example of the percentage-only approach to rent is New York City’s Grand Central Terminal. The Metropolitan Transportation Authority, which operates the terminals, has proposed percentage-only rents for restaurants at the famed train station that are run by small businesses. The percentage, to be based on gross revenue, hasn’t been revealed. The rents would likely return to fixed rates once business reaches pre-pandemic levels.

Without percentage-only rents in place for some restaurants, vacancy rates would climb even higher, according to Lamy. (In the second quarter, the average vacancy rate in the retail sector, which includes restaurants, jumped to 20 percent, according to Statista.)

“A store that’s empty is not a good situation anytime. It’s even more damaging to the landlord today,” Lamy says. “So, is it better to have some dollars flowing with a store that’s open? Or would you rather have an empty store because you think you can re-lease it at a better rent? But when is that going to happen?”

Some restaurant landlords might even benefit from percentage-only rent if a tenant’s sales numbers happen to rise above the average, says Allan Perales, chief operating officer of Chicago-based Gold Street Partners, which represents commercial real estate landlords and tenants. Still, the most important consideration for a landlord agreeing to percentage-only rent is to simply keep a restaurant space occupied, Perales says.

The National Restaurant Association reports that in the first six months after pandemic shutdowns took effect, nearly 100,000 restaurants closed either permanently or for a long-term period. Thousands more could be on the chopping block.

For the percentage-only rent structure to work from the landlord’s perspective, a restaurant must supply up-to-date sales and revenue data, according to Lamy. This puts landlords in a “trust but verify” position, he says.

“What’s your average sale today? What was it pre-pandemic? Those metrics are critical to understanding what was happening before, what is happening now and what has happened during this time,” he notes.

Kastner believes the percentage-only rent model will remain as a restaurant lifeline for the next year or two before traditional rent structures kick in again. Unfortunately, the percentage-only setup won’t be enough to save some restaurants.

“For already open and operating restaurants, given the enormous impact to sales because of COVID-19, we will continue to see what feels like daily announcements of permanent closures,” he says.

Source: NREI

Oct 27 No Comments

Covid Pummeled Shopping Centers, But Their Parking Lots Are Thriving

Author: Admin

Categories: Commercial News,Retail,Shopping Centers,Trends

While many traditional streams of income for landlords have slowed or dried up due to the pandemic, one has proven to be a surprising earner: parking lots.

Landlords of large parking lots and garages have been renting out those spaces for a variety of activities, including open-air retail, job fairs, polling stations and drive-through COVID-19 testing, the Wall Street Journal reported.

Retailers like Walmart and Target are using their parking lots as makeshift distribution centers, while owners of parking garages are similarly renting out their spaces for storage and distribution to nearby neighborhoods.

Some parking lot owners are turning their spaces over to more creative uses: One at the Rosedale Center in Roseville, Minnesota has been repurposed for a drive-in haunted house. Participants stay in their car and pay $75 to watch a performance from the safety of their vehicles.

The organizer has sold 1,000 tickets so far, and the mall’s landlord hopes that some of those attendees will make their way into the shopping center itself.

That might be a tough sell: A survey this month found only 45 percent of respondents planned to shop in a mall this holiday season. Traffic at the country’s largest malls dropped 51 percent in the first eight months of the year compared to last year.

Source: The Real Deal

Oct 26 No Comments

Co-Sharing Medical Spaces Gain In Popularity During The Pandemic

Author: Admin

Categories: Commercial News,Healthcare,Trends

The co-working concept is evolving, and has now spread to outpatient medical practices, with some companies offering this model for tenants. At least one of them plans to expand nationwide.

MedCoShare, a healthcare shared workspace provider based in Philadelphia, offers a flexible alternative to traditional medical office leasing. The company allows medical practitioners to rent space according to their own schedules based on membership agreements, without requiring long-term lease commitments.

“We see [the pandemic] creating more of a need than what we anticipated from certain parties,” says Anthony Khan, co-founder and chief financial officer at MedCoShare. “Some of the hospitals have been cutting back hours for their physicians and healthcare practitioners, so there are more who are looking for other sources of income and practice outside of the hospital system. So, it’s created more of a demand than what we’ve seen before the pandemic.”

For example, nurse practitioner Marybell Rodriguez, who specializes in medical grade skincare such as Boton, has signed up for space with MedCoShare.

“It provides me security. I have a month-to-month flex pass,” she says. “I don’t have any long-term contracts or leases or anything, and it helps me build my clientele with the comfort of knowing that if the pandemic flares up and I have to shut down, I won’t have to pay for leasing without even generating revenue. So, starting off, just to build my clientele, it works perfectly for me.”

There are only a handful of co-sharing space providers in the healthcare sector, with a concentration in states including New York, Arizona, Maryland and Pennsylvania. But Ronak Vyas, a commercial real estate broker and co-founder of ARA Group LLC, an investment holding company with more than 25 rental units in two states, says the trend should “start opening up in other cities.” Corinna Bowser, MD, owner of Suburban Allergy Consultants who subleases her space through HealCo, a platform similar to Airbnb but for medical space, says the trend is becoming more prominent because it helps medical practitioners cut down on operating costs while building up a steady clientele, which is especially beneficial in today’s pandemic environment.

Office tenants reconsidering their space needs also means more vacant spaces might become available in commercial buildings going forward, according to Vyas. This could open up opportunities to partner with landlords to expand these short-term alternatives to traditional medical office space leasing, he notes.

“With leases you generally have to do personal guarantees and deposits,” says Vyas. “[MedCoShare] don’t do any of that… There’s really no commitment from the practitioner side.”

While medical practitioners are expected to bring their own specialized equipment to the co-sharing spaces, according to Vyas, MedCoShare does provide basic equipment, including AED, BP cuff, scales, spirometer, otoscopes and ophthalmoscopes. The provider currently operates in the Fishtown neighborhood in Philadelphia, with plans to open two more locations next year.

Source: NREI

Oct 21 No Comments

‘There’s A Lot Of Money To Be Made’: IRS Target Foreign Real Estate Investors

Author: Admin

Categories: Commercial News

In the past month, the Internal Revenue Service has announced two new audit campaigns targeting overseas investors who own or hold interests in U.S. property.

The campaigns focus on foreign investors selling their interests in U.S. real estate and those who receive rental income from their American properties.

The IRS generally expects to collect 15 percent of the amount a foreign seller realizes off a transaction, though exceptions can be made if the property is sold at a loss or the price is under $300,000, among other factors. The taxes the IRS collects from foreign investors earning rental income ranges depending on how the property is owned, but can go up to 30 percent annually.

Audit campaigns began in 2017 as a way for the IRS to target issues it determines to be at a high-risk of noncompliance. The campaign issues also represent areas where the federal agency believes it has a good chance of recovering unpaid taxes.

When the IRS debuted the strategy, it announced 13 campaigns, a number that has since ballooned to nearly 60. Though the number and focus of the audit campaigns fluctuate over time, tax professionals take heed because once a target is announced, businesses and clients operating within that area have a higher likelihood of having the IRS dig through their returns.

The IRS declined to comment on the new campaigns or its expectations for funds recovered from foreign investors.

William Kambas, a tax partner at Withers, said the agency’s new property investor-focused campaigns are a factor of the pandemic.

“The restraints and constraints on the government now financially has put a new focus on collecting whatever is due,” Kambas said. “Now is the time that the IRS has decided to pursue more rigorous audits.”

The IRS’ aggressive strategy will likely hit the mid-market institutional, private equity investors the hardest, said Kenneth Dettman, a managing director at tax firm Alvarez & Marsal.

Another group that may particularly feel the crunch is foreign investors who own second homes in markets where property values have soared during the pandemic, such as South Florida.

In recent months, Dettman said he’s seen an influx of overseas clients looking to sell their U.S. homes in such markets — and many aren’t aware the IRS levies a tax on the sale, which is indicative of a larger problem.

“From the perspective of foreign persons investing in the U.S., there is a general sentiment that they’re foreign and they’re not subject to the U.S. tax net,” he said. “Their fear of enforcement activity is not very high and therefore they’re very quick to turn a blind eye to it.”

He said the new audit campaigns will likely work hand-in-hand with the IRS investigating the history of a property being sold by a foreign investor to ascertain whether they collected rent.

Most overseas landlords and their stateside tenants deal in all-cash transactions without any rental platform as a middleman, Dettman said, so the IRS has no visibility into the rental income generated off a foreign-owned U.S. property unless it undertakes a major audit.

Vasiliki Yiannoulis-Riva, a real estate partner at Withers, agreed. “There’s a lot of money to be made,” she said. “They’re not actually collecting what they could be collecting.”

According to CBRE, investment in U.S. commercial real estate accounted for nearly half of the global volume in 2019, despite more than half of foreign investors pulling back on pouring money into the U.S.

Not everyone’s concerned, however. Michael Kosnitzky, a partner and co-leader of Pillsbury Winthrop Shaw Pittman’s private wealth group, said the IRS campaigns confounded him.

“I’m just surprised that there’s such a gross lack of compliance,” he said. Kosnitzky’s clientele includes institutional investors and ultra-wealthy individuals, who he said come with a phalanx of lawyers and accountants hired to ensure compliance.

There are also doubts about the agency’s ability to execute. In recent years, the number of audits conducted by the agency have fallen. Of the audits that were conducted by the large business division, only about half closed without the agency collecting any additional revenue, according to a report released earlier this year.

If the IRS can follow through, however, Dettman believes the audits have the potential to change attitudes among mid-level property investors.

“The results of bad audits find their way into social circles in clusters in foreign countries,” he said. “[If there are] audits that come out with very harsh results, I do think it could instill a bit more fear.”

Source: The Real Deal

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‘There’s A Lot Of Money To Be Made’: IRS Target Foreign Real Estate Investors

“The restraints and constraints on the government now financially has put a new focus on collecting whatever is due,” Kambas said. “Now is the time that the IRS has decided to pursue more rigorous audits.”

“From the perspective of foreign persons investing in the U.S., there is a general sentiment that they’re foreign and they’re not subject to the U.S. tax net,” he said. “Their fear of enforcement activity is not very high and therefore they’re very quick to turn a blind eye to it.”

Vasiliki Yiannoulis-Riva, a real estate partner at Withers, agreed. “There’s a lot of money to be made,” she said. “They’re not actually collecting what they could be collecting.”

“I’m just surprised that there’s such a gross lack of compliance,” he said. Kosnitzky’s clientele includes institutional investors and ultra-wealthy individuals, who he said come with a phalanx of lawyers and accountants hired to ensure compliance.

“The results of bad audits find their way into social circles in clusters in foreign countries,” he said. “[If there are] audits that come out with very harsh results, I do think it could instill a bit more fear.”

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