Times Square Will Soon Be Wastin’ Away In Margaritaville

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Times Square is not known for its laid-back vibes, but a new hotel will attempt to inject one of the world’s most touristy spots with a beach bum attitude and some sugary cocktails.

A 234-room, 29-story Margaritaville Resort is planned to open in Times Square, at 560 Seventh Ave., in 2020. Margaritaville Holdings reached a deal to bring the hotel to the property once slated for a Dream Hotel.

The resort, which is expected to cost $300M, will have several Margaritaville-themed bars and restaurants, including a rooftop Landshark Bar & Grill, a pool and ground-floor retail space.

The hotel aims to “bring an authentic ‘no worries’ vibe” with “signature ‘casual-luxe’ design elements,” according to Margaritaville’s announcement.

The property is owned by Sharif El-Gamal’s Soho Properties and will be developed by Soho in partnership with Chip and Andrew Weiss and MHP Real Estate Services.

“We are thrilled to collaborate with one of the world’s most beloved brands and bring New York’s first Margaritaville to Times Square, where it will undoubtedly be a top destination for visitors and NYC residents alike,” El-Gamal said in a statement.

https://bit.ly/2Kga3xk

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With $6T Potential Investment On The Line, Opportunity Zones Taking Shape

Thousands of communities across the U.S. will soon have built-in incentives for investors to put money into their real estate and businesses thanks to the new Opportunity Zone federal program. Where those zones will be is beginning to come into focus.

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Homes in Southeast D.C.’s Barry Farms community, an area the District designated as an Opportunity Zone

The extended deadline for states and territories to nominate census tracts as Opportunity Zones passed Friday, and as jurisdictions release their selections, distinct patterns are beginning to emerge around how states went about choosing zones and what areas were ultimately selected.

How Did We Get Here?

The Opportunity Zones tax incentive was included in the Tax Cuts and Jobs Act President Donald Trump signed into law in December. But the idea stems from a 2015 white paper from the Economic Innovation Group, a D.C.-based think tank that is now working closely with states to help implement the program.

“We were looking for a way to connect private investors with needs in struggling communities across the country,” EIG co-founder and CEO Steve Glickman told Bisnow. “You had a map emerging of two Americas after the recession where you have some communities doing as well as before and a number that never recovered. And the problem was only getting worse.”

The law gives tax benefits to investors that place unrealized capital gains into Opportunity Funds, which then invest in Opportunity Zones, a host of census tracts local governments decide have the most need and can best support the investment. EIG’s analysis shows there are more than $6 trillion in unrealized capital gains in the economy, between individual and corporate investors, that could potentially be deployed into Opportunity Zones. States and territories were given an initial deadline of March 21 to nominate their Opportunity Zones, with the option for a 30-day extension. That 30-day extension deadline was Friday, and Glickman said he believes all 50 states and the District of Columbia have submitted their nominations, even if they have not all been made public.

Trust The Process

With a small window of time and no specific process given for how states should select their Opportunity Zones, local governments undertook a wide range of methods with varying levels of public engagement.

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D.C. Deputy Mayor for Planning and Economic Development

A map showing the census tracts D.C. nominated as Opportunity Zones

Some states such as Colorado, Virginia and Mississippi took the lead early on in engaging the public and having a completely open and democratic process, according to Enterprise Community Partners Impact Investing Director Rachel Reilly, who has been closely following the process.   Other states such as Georgia and Maryland had a closed process, she said, keeping their cards close to the vest and giving the public little information about how they made their selections.

“Some governors saw this as fraught with political risk, and so there was a sentiment around trying to designate some of the tracts and feeling like they’re picking winners and losers,” Reilly said.

A handful of local governments approached the selection with what Reilly calls a hybrid process, making their own initial designations and then taking public input. Washington, D.C., for example, completed its own initial analysis, selecting 18 core tracts that best fit the Opportunity Zone description, then sorted the remaining eligible tracts into three thematic clusters. D.C. then put out a public survey to get a sense of where priorities were, and the majority of the 385 respondents picked the cluster with census tracts east of the Anacostia River, a relatively low-income part of the District. Economic development officials then spoke with local neighborhood leaders and council members, combining all of the public input with their own analysis of important factors before selecting 25 census tracts to designate.

“We knew we were on a tight deadline so we wanted to strike the right balance of working quickly to meet the deadline and getting a solid amount of public input to inform the process,” said Sharon Carney, economic strategy director for D.C.’s Office of the Deputy Mayor for Planning and Economic Development.

What Zones Were Selected?

D.C. ended up weighting its nominations heavily toward the lowest-income areas, and it was not alone. Initial analyses have found that states and territories with publicly announced Opportunity Zones largely prioritized the most distressed communities. Courtesy: Enterprise Community Partners Enterprise Community’s analysis of public opportunity zone designations shows states chose communities with lower incomes Enterprise Community Partners analyzed the 4,831 designated tracts that have been publicly announced across 20 states and four territories, and found that they skew toward lower-income census tracts.  The designated Opportunity Zones had a median household income of $34K, compared to $44K for eligible census tracts that were not nominated and $58K for all tracts, Enterprise found. The homeownership rate in nominated areas was 45%, compared to 56% in eligible but not designated areas and 62% in all tracts.  Roughly 73% of the designated Opportunity Zones were in urban or suburban areas, Enterprise found. The designated Opportunity Zone areas included larger African-American and Hispanic populations than the eligible or total tracts, the research showed.  EIG’s analysis also shows the designated tracts are largely in the most distressed communities, which Glickman said proves local governments understand the mission behind the program.

“The intent of this program was to get capital and investment flows to places that were cut off,” said Glickman, a former Obama administration official. “Predominately, we see that happening.”

But states could not just choose the most distressed communities, Reilly said. They had to find a balance between areas with need and areas into which investors would be willing to put money.

“The money that will be made available is market-driven equity capital,” Reilly said. “Private equity is going to demand market-rate returns, so I don’t know what the risk tolerance is going to be.”

With that in mind, she said local governments should designate areas where they are already making investments and have additional programs that can complement the Opportunity Zone incentives, giving investors more confidence in the area. But if their selections swing too far in the direction of areas with an existing foundation of investment, states could risk reducing the impact of the program, some experts argue. Brookings Institution Senior Fellow Adam Looney said in a February report that there is a risk of the Opportunity Zone incentives becoming nothing more than tax breaks for developers already planning investments if states choose areas that are experiencing gentrification. But in Looney’s initial analysis of the publicly announced designations, he has found that states have largely chosen deeply impoverished places rather than up-and-coming neighborhoods, allowing the incentives to help spur growth in places that most need investment.

In the public feedback D.C. received, Carney said some residents saw Opportunity Zone designations as a potential catalyst for displacement. She said D.C. looked closely at commercial investment already in the pipeline for some neighborhoods and tried to be cautious about choosing ares that were already experiencing socio-economic change.

“You don’t want the program to be just a tax break, and you don’t want to incentivize something that would otherwise already happen,” Carney said. “So we tried to think proactively about what areas were exhibiting high need and had adequate investment opportunities and tried to find a balance.”

When Will Communities Feel An Impact?

Now that the Opportunity Zone nomination deadline has passed, the law gives the U.S. Treasury Department 30 days to certify the designated census tracts. Then, the Treasury must lay out the rules for how funds can be set up and deploy capital to Opportunity Zones before the investment can begin.  Once the program is off and running, Glickman said EIG will focus on outreach to investors to educate them about how to best utilize Opportunity Zones. He said the organization is working to form a coalition of interested investors, with nearly 50 already on board. With a $6 trillion pool of money to work from, he said it has the potential to be the largest economic development program in the U.S., if it is done right.

“The program only works if investors are willing to make bets in communities, and it’s going to require a whole new industry and asset class built around it,” Glickman said. “You don’t usually have fund managers doing low-income community investing, so it’s going to be an ongoing process of building capacity with investors over the next couple of years.”

To take advantage of the tax incentive, the law requires reinvestment of capital gains within 180 days of a sale or exchange. The temporary program only applies to gains made before Dec. 31, 2026, and the earlier people invest, the more benefits they can capture, so Reilly expects investors will start setting up funds soon.

“Investors will have to time it well and read the tea leaves if they’re hoping to take advantage immediately,” Reilly said. “You will see some early adopters.”

Glickman also expects to see some early movers, and he believes more risk-averse investors will jump into the program over time as it becomes better understood. Carney expects funds to begin forming in early 2019, with investments being made as the year progresses.

“I think there will be some short-term activity piping up in 2019, and that’s probably where we have an opportunity to shape a lot of it in partnership with the investment community and residents,” Carney said. “Over time it will hopefully accrue to a broader set of stakeholders.”

https://bit.ly/2FhuSEM

NewYork-Presbyterian Opens 740,000 SF Ambulatory Care Center

NewYork Presbyterian ambulatory care center

The NewYork-Presbyterian David H. Koch Center will open on April 30. The approximately 740,000 square-foot facility, located at the NewYork-Presbyterian/Weill Cornell Medical Center campus on 68th Street and York Avenue will house a wide range of ambulatory care services. This will include outpatient surgery, interventional radiology, diagnostic imaging infusion services, and a health and wellbeing program that will open in June. NewYork-Presbyterian trustee David H. Koch donated $100 million to create the center.

“Understanding the increasing shift from inpatient to outpatient care, the center was designed to deliver the most advanced clinical care to patients in a setting where both the patient and family will feel respected and supported with the utmost compassion,” says Koch.

Dr. Steven J. Corwin, president and CEO of NewYork-Presbyterian, says the building’s design and operation focus on the patient. This includes efficient, easy check-ins, light-filled treatment areas and real-time status updates. “This is truly an environment that was designed for healing, and we believe it represents the future of ambulatory care,” says Corwin.

The center characterizes itself as a one-stop alternative for individualized, coordinated care from diagnosis through treatment. Multidisciplinary teams of physicians from Weill Cornell Medicine under one roof will be able to provide overall patient care. This could include, for example, treating digestive diseases, cancer or other conditions, outpatient surgery, interventional radiology or diagnostic imaging, according to the center.

The building incorporates smart technology and smart spaces. Patients can complete paperwork remotely and securely before their visits, using mobile phones or computers. Upon arrival, they will receive personalized “smartbands” that provide access to the building and information about their visits and directions to their rooms, using a NewYork-Presbyterian app. The app will also provide access to discharge instructions, test results and video follow-up appointments with physicians.

An angiography suite will combine key imaging technologies used for minimally invasive procedures, including MRI/PET, fluoroscopy, ultrasound, and rotational CT. This will enable clinicians to diagnose, plan, and precisely guide procedures and verify their completeness. The center will also have three linear accelerators, including an MRI-guided linear accelerator for precision radiation treatment of tumors.

The facility will offer 12 operating suites, six radiology procedure rooms, and 11 endoscopic procedure rooms, including an operating room dedicated to breast surgery with mammography and ultrasound equipment.

Decentralized clinical care with stations directly outside private patient rooms have been designed to provide patients easier access to their medical teams. Unlike many institutions, there are no basement treatment areas. The center will be part of the Weill Cornell Medicine’s academic medical center. The intention is for patients to benefit from the school’s biomedical research with treatments and therapies.

In 2020, the top five-and-a-half floors will house the NewYork-Presbyterian Alexandra Cohen Hospital for Women and Newborns. The 220,000 square-foot maternity hospital within the hospital will offer rooms for neonatal intensive care, labor and delivery, and cesarean sections. It will have operating suites, maternal assessment and treatment rooms, and ultrasound rooms. MRI capabilities and an operating room in its neonatal intensive care unit will also be in the facility.

The center has a green roof, and a blue roof that can detain up to six inches of storm water. It incorporates triple-panel insulated glazing with a slated wood screen. This reduces solar glare, building heat and the need for shades.

The structure was constructed for resiliency in extreme weather events or disruption to city power. Heating equipment, air handling units, emergency generators and other key operational equipment are located on higher floors above potential flood levels.

HOK, Ballinger, and Pei Cobb Freed & Partners, were the building architects. Peter J. Romano and Company is the project manager, and Turner Construction is the construction manager.

https://bit.ly/2qW4A6M

NYC Housing Authority emergency may cost city hundreds of millions

Earlier this month, Governor Andrew Cuomo officially declared a state of emergency on the New York City Housing Authority, calling for the appointment of an independent monitor who will oversee expedited repairs at public housing facilities. While many local officials applauded Cuomo’s decision, even joining him on stage for the signing of the executive order, many did not realize the potential financial burden it may place on the city’s budget, reports the New York Times.

One of the clauses within the order states that by declaring health and safety issues in public housing properties a public nuisance, the city will be required to pay for whatever repairs the independent monitor determines are necessary under state public health law. This given the current state of NYCHA buildings, this could easily add up to hundreds of millions of dollars.

Prior to the executive order, the city was not obligated to fund NYCHA, given that the agency is a state-charted entity that is not funded by the city’s budget. However, the Times notes that the city has voluntarily infused cash into NYCHA over the years in efforts of trying to offset the authority’s increasing deficit. According to city officials, the city has invested $3.7 billion into NYCHA since Mayor Bill de Blasio took office in 2014.

City Council speaker Corey Johnson and public advocate Letitia James have both admitted to not being aware of the full stipulations of the executive order beforehand, despite supporting it.

NYCHA currently has more than $17 billion in unmet capital needs, and it is estimated that public housing properties need about $25 billion worth of repairs. Once an independent monitor is appointed and draws up an emergency plan, the total cost of repair will become clearer.

Two weeks ago, Shola Olatoye, the embattled head of the NYCHA, announced that she has resigned from her position, and will vacate her post at the end of April. Olatoye’s resignation came amid increased scrutiny of the agency due to its handling of several scandals, including heat outages in many of NYCHA’s buildings this winter, and failure to comply with lead paint inspections.

https://bit.ly/2Hr61UY

Home buyers dilemma

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If you do not already own a home it’s getting harder and harder to buy one. Meanwhile, rent outstrips wage growth.

I got the idea for the above graph from a similar idea by Sven Henrich.

Sven Henrich

@NorthmanTrader

CPI: rent of primary residence pic.twitter.com/lnpkeAMexa

Sven Henrich

@NorthmanTrader

YOY wage growth versus CPI rent of primary residence pic.twitter.com/mon5dilyl3

View image on Twitter

In my chart, I indexed all the values to 1982.

Key Ideas

  • Those who seek to buy their first home will have a very difficult time finding one that is affordable.
  • There was a small window of buying opportunity from 2009 to 2011 but that window has since been closed.
  • Making matters worse, rent prices accelerated in 2011 and far outstrip wage growth.

Median vs Average Wages

It’s important to note that hourly wages are averages. The median wage earner is even worse off.

​The latest median wage data is from May of 2016. It shows real median wages decline in seven out of the last 11 years.

Toys R Us’ Canadian Stores Have A $300M Bidder

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Toys R Us may survive in Canada, thanks to the latest twist in its bankruptcy saga.

Publicly traded Canadian investor Fairfax Financial Holdings has submitted a $300M bid to buy all of the retailer’s stores in the country out of bankruptcy, the Wall Street Journal reports.

Toys R Us has reportedly requested to name Fairfax as the lead bidder, which would set the auction’s floor at $300M. The bankruptcy auction for the Canadian stores is to be held in New York on April 23, where a higher bidder could theoretically emerge.

Liquidation now seems to be assured for Toys R Us’ 735 U.S. stores after the retailer and its lawyers rejected an $890M bid from MGA Entertainment CEO Issac Larian for all of its locations in the U.S. and Canada. The bid valued the Canadian stores at $215M, and was shot down for being below market value.

With Toys R Us, Bon-Ton and other retailers going belly-up in the U.S., an estimated 9,000 retail locations are expected to close by the end of the year, according to a Cushman & Wakefield report. That number would exceed the 8,500 closures in 2017, which was already greater than the number of stores closed during the Great Recession.

Toys R Us and Bon-Ton are among the retailers that had sizable presences in secondary, tertiary and rural markets, as well as in Class-B or lower shopping centers. Such areas and properties will continue to see the most losses from the changing retail landscape, while better-positioned centers benefit from big-box vacancies by installing experiential retailers or splitting the footprint into multiple stores that pay higher rents per square foot.

Though the wave of store closures is likely to continue, and likely accelerate in rural areas according to Cushman & Wakefield, consumer spending overall has been incredibly strong in the past few quarters, increasing the gap between the haves and the have-nots of retail.

https://bit.ly/2qXqPIu