Coconut Creek To Decide Whether New Warehouse Complex Can Be Built In South Part Of City

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According to Coconut Creek officials, plans to build a warehouse complex in the city’s south part are in the “best interest of the city.”

City commissioners are expected next week to take the first set of votes on whether to permit developers to build a 385,000-square-foot light industry complex on vacant land on the northwest corner where Atlantic Boulevard and Lyons Road connect.

Those plans have already been approved by two city panels and will now advance to the commission for final decision.

The commission will need to rezone the land and approve the building plans before the 36-acre property — owned by Coolidge Inc. – can be developed into three buildings. The property was approved in 2008 for a 340,000-square-foot Lowes Home Improvement and Kohl’s plaza, but was never constructed.

Some nearby residents have spoken out and sent letters to city officials urging them not to move forward with the building plans out of concern for traffic, noise and other issues. Developers — and some real estate brokers — have said the complex would meet demand for new industrial buildings to support “service-oriented uses and distribution of goods” in Broward County.

The Cocomar Business Logistics Park, as the complex would be called, would be designed for local and national businesses looking for “Class A logistics space,” according to plans.

The project is expected to create more than 3,200 jobs and generate more than $1.3 million in impact fees for Coconut Creek and Broward County, according to plans.

The buildings would range in space from 61,055-square-feet to 167,350-square-feet. The site would include 314 parking spaces, a preserve, and relocation of more than 80 trees and two palms, as well as landscaping buffering with nearby homes, according to plans.

According to city documents, the city finds the complex’s site plans are “in the best interest of the city” and consistent with land regulations.

City commissioners are schedule to vote on the property’s rezoning and site plans on Thursday, July 13, at 7 p.m. at Coconut Creek Government Center, 4800 West Copans Road.

 

Source: TAPintoCoconutCreek

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Industrial Outdoor Storage Rises In Popularity Among Institutional Investors

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Industrial outdoor storage (IOS) is emerging as an increasingly popular property sector among institutional and other types of investors.

Interest in the sector ramped up during the pandemic as space was needed for container storage to relieve backlogged ports. Estimates from the experts WMRE interviewed suggest that the U.S. IOS market, which represents a niche within the larger industrial asset class, ranges somewhere between $130 billion and $200 billion in value.

Zoned for industrial use, IOS sites typically house vehicles, construction equipment, building materials and even shipping containers on an interim basis and range in size from two to 10 acres, often including a small building. The sector has been referred to as a “beautiful ugly duckling” by Green Street’s Vince Tibone since the properties are just lots with storage containers and construction equipment that have delivered “exceptional” returns over the last three years and brought in more institutional investors for funds raising hundreds of millions of dollars to target IOS.

While the sector is not immune to the same forces that are affecting other property types in the current environment, Tibone said he remains bullish on IOS over the next five to 10 years. Investor demand for IOS has been buoyed by strong recent operating results, favorable long-term supply/demand dynamics and a minimal cap-ex burden with an option to use the land for a higher and better use at some future time.

IOS sites located in infill submarkets in particular can deliver risk-adjusted returns “that are superior to those available on most other commercial real estate investments, including traditional industrial,” Tibone said. However, the fragmented, non-institutional ownership structure of the sector today makes it difficult to invest at scale, he noted.

“IOS portfolios do not come on the market often and the best returns are likely available through one-off deals, where there could be operational upside left on the table from the prior owner,” Tibone said. “Those with the patience and wherewithal to aggregate infill IOS sites over time should be rewarded with robust total returns relative to other property types.”

Among investors that are currently raising funds and targeting acquisitions in the IOS marketplace is EverWest Real Estate Investors, a Denver-headquartered real estate investment advisor with $5.2 billion in assets under management, including in the industrial, multifamily, office and retail sectors.

EverWest operates open-end funds and three single–client accounts with industrial strategies focused on IOS. The average size of the deals it has completed ranges between $10 million and $25 million.

So far in 2023, EverWest acquired two IOS sites—39.6 acres south of Atlanta for $12 million and 4.12 acres in Miami for $12.5 million, according to John Maurer, EverWest’s senior managing director and head of portfolio management. In May, the firm also invested in an industrial asset in Carlson, Calif. that includes acreage that can be used for IOS.

Part of the appeal of the sector is that when U.S. industrial inventory tightens and rents rise, IOS sites rise in value as they become reliever locations for a wide range of logistics activity, Maurer noted. In addition, in a market where industrial assets are still often priced at a premium, with cap rates as low as 4.5%, an IOS site adjacent to such a traditional industrial asset will often sell at a cap rate that’s 50 basis points higher. Rental rates in the sector have also been rising by 3.5% to 4.0% a year, according to Maurer.

EverWest’s open-end fund, the Open End Diversified Core Equity Fund in the NFI-ODCE Index, has a target return of 10%. Like Tibone, Maurer noted that the IOS marketplace is less institutionalized than regular industrial and has more fragmented ownership.

“We think because it’s difficult to acquire these sites that are smaller, if you aggregate portfolios in a target market that there’s going to be a cap rate compression,” Maurer said.

As a result, EverWest aims to aggregate a number of acquisitions from different sellers to build up its IOS holdings. Over the past 12 to 18 months, the firm has invested about $200 million in the IOS sector and it hopes to double that volume in the next 12 to 18 months. EverWest is also planning to launch an enhanced fund with a higher return strategy in the near future that will have a significant IOS component, according to Maurer. The firm is hoping to build off its current investor base of public and private pension plans, foundations and endowments, insurance companies and financial advisors for the fund, Maurer said.

However, Maurer admitted that EverWest’s transaction volume is currently about 15% off what it was a year ago because the increase in interest rates has made the firm more selective in making new purchases.

“There are some compelling opportunities in the marketplace in terms of attractive return potential, given where rates are today versus they were 12 months ago,” Maurer said. “We always want to look at where pricing is going and take advantage of correctly priced opportunities. What we see is sellers ultimately capitulate and need liquidity, so they will sell at market-clearing prices based on our new model for interest rates in the current environment.”

Assuming a leverage level of 40% to 40%, EverWest’s investments can deliver gross returns of 12% to 14% over a seven- to 10-year period, Maurer noted. That would require a barbell approach of doing straight up five-year lease IOS deals, he said. There would also need to be some value-add component for redevelopment in its strategy. About 20% of the IOS marketplace is about adding a warehouse over time, Maurer noted.

Change Is Coming

In the meantime, the number of institutional players involved in the sector is growing. For example, Brooklyn-based Zenith IOS, a builder and owner of outdoor storage properties, has partnered with institutional investors advised by J.P. Morgan Global Alternatives, to buy hundreds of millions of dollars of IOS properties last year. In February, J.P. Morgan and Zenith IOS announced a $700 million joint venture to buy more IOS assets.

Another active participant in the marketplace is Alterra IOS, which is part of Philadelphia-based Alterra Property Group, a real estate investment and development company that, according to reports, made more than $850 million in acquisitions over the past year.

In its most recent announcement, dated June 22nd, the firm expanded its presence in Las Vegas by acquiring a six-acre site for $7 million—its third in the marketplace.

Alterra declined to comment on its current fundraising effort, instead referring to a public filing from the Ventura County Employees’ Retirement Association (VCERA). The filing contained a recommendation to commit $35 million from the pension fund to Alterra’s IOS Venture III fund. Alterra’s goal has been to raise $750 million for the fund targeting IOS properties, according to IPE Real Assets. A previous Alterra fund raised $524 million in 2022, exceeding the firm’s goal of $400 million.

IOS Venture III will target smaller, infill IOS assets operating on triple net leases. Part of the value proposition of these assets, according to VCERA’s filing, is that they are typically owned by single owner-operators and have escaped the attention of most institutional investors. Alterra also plans to leverage its in-house management and leasing expertise to pursue value-add strategies for the assets. The firm estimates that it will generate from 30% to 40% of its total returns through the assets’ current cash flow, creating annual cash flow yields of 6% to 8%.

The fund has an eight-year horizon, with two one-year extension options, and will offer a preferred return to investors of 9%, with a carried interest of 20%. The fund’s net IRR target is between 14% and 16%, with a leverage ratio of 65%.

In addition to VCERA, Alterra’s equity investors include other public pension funds, foundations, endowments, insurance companies and family offices, both domestic and foreign, according to Managing Director Matthew Pfeiffer.

“Investors are finding IOS an attractive proposition right now because, unlike with a number of other real estate assets, supply is structurally muted, with municipalities not being incentivized to add new zoned land for outdoor storage,” Pfeiffer said.

He also mentioned the attraction of low cap-ex.

“Beyond the favorable supply and demand dynamics, IOS also benefits from being a very low capital expenditure business translating into low frictional leasing costs to put new tenants in the space,” Pfeiffer noted. “Lastly, the tenant profile is largely credit and national, under a triple-net lease structure that further entices institutional capital’s interest in the space,”

According to BJ Feller, managing director and senior vice president at Northmarq, cap rates on traditional industrial properties have gotten so aggressive in recent years that institutional capital was looking for opportunities with a similar profile, but more attractive cap rates.

“Once they’ve been able to establish their credibility and track record in the segment, we’ve seen operators have great access to the capital sources who want to play in this asset class,” Feller said.

He added that while equity inflows to the sector have “cooled to a certain degree” on a year-over-year basis, they remain robust relative to other property types.

“Most of the decline has been a reaction to caution that cap rates may be going mildly higher and offer better acquisition opportunities in the months ahead,” Fuller said.

 

Source: Wealth Management

Palm Beach County: Business Basking In The Sunshine

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Many families and business executives relocate to Palm Beach County for a number of reasons.

Low taxes and no personal state income tax, the balmy winter days, and often an escape from the harried lives they led “back North” have lured them South.

What they’ve also found is both a burgeoning and existing business community representing many of the core sectors leading the charge into the new economy. These include information technology and telecommunications; healthcare and health tech; manufacturing, warehousing and logistics; business services; aviation, aerospace and engineering; even equestrian and agribusiness across thousands of open acres to the west.

The growth of financial services, private equity and investment banking has been so concentrated and profound, with names like Citadel, BlackRock and Goldman Sachs coming to town, the Palm Beaches have been coined “Wall Street South.”

What each finds is a pro-business, relocation-friendly infrastructure keen to launch, lure or retain new businesses. That’s atop the county’s enduring allure as a vacationer’s and business traveler’s destination. Travel and tourism in 2022 welcomed a record 9.1 million visitors with a total estimated economic impact of $9.7 billion.

It all continues to grow, adding to a county with over 1.5 million residents. Some 70% of business recruitment projects handled by the Business Development Board of Palm Beach County are from out of state, atop the 460 corporate headquarters already here. Topping the list: Carrier, TBC Corp., Office Depot, SBA Communications and ADT.

“We’re officially ‘Wall Street South,’ with many financial firms relocating from New York to the Countycounty, and we only see that trend accelerating as new Class A office buildings open within the next few years,” said BDB President and CEO Kelly Smallridge, whose organization in the last fiscal year landed 33 corporate relocations and expansions, secured some 2,500 jobs, and drove $362.5 million in capital investment. In fact, over half of those deals were from out of state. “With an A-rated public school district, 115 private and faith-based schools and world-class higher-ed, executives are learning Palm Beach County has the best opportunities for business and family.”

Today, the county is part of a tricounty region of over 6 million that’s the largest economic engine in a state that is the nation’s fourth largest, with $1.4 trillion in gross state product in 2022 and would be the 16th-largest economy if it were a sovereign nation, notes the International Monetary Fund.

Think of the county as a collection of 39 interconnected municipalities each adding to the greater whole. Eastside destinations, such as Boca Raton, Lake Worth and Delray Beach, bring culture, dining and entertainment that attracts visitors from across the region and world. To the west, Wellington is the global epicenter of winter equestrian sports.

The names of those calling the county home have changed its very reputation. Once known only as a vibrant vacation destination, today it’s a hub of business and industry. Ken Griffin’s Citadel and other investment and private equity firms are only the most recent arrivals to “Wall Street South,” the banking, financial services and insurance (BFSI) sector centered in West Palm Beach.

As a medical device manufacturing hub, Johnson & Johnson subsidiary DePuy Synthes, Precision Esthetics, SurGenTec and Boca Raton’s own Modernizing Medicine are among the hundreds here that make life sciences among the county’s hottest sectors.

The county’s diversity makes it a prime market for health care providers. Regional names, such as Cleveland Clinic Florida, Nicklaus Children’s Health System and Baptist Health each have made inroads in the county. Baptist, for example, acquired several hospitals – —Boca Raton Regional Hospital and two Bethesda hospitals in Boynton Beach – — and continues to add new services. These include institutes for cancer, vascular care, women’s health, neuroscience and orthopedics. In all, the county has 23 hospitals, from county-run facilities and leading national health care providers.

The county is a hotbed for higher education. Beyond the UF / Scripps deal, Palm Beach State College recently announced TGL, a new tech-infused virtual golf program and prime-time league co-founded by Tiger Woods and Rory McIlroy, that will attract world-class golfers from around the world on its Palm Beach Gardens campus.

Palm Beach Atlantic University, which recently received Association to Advance Collegiate Schools of Business accreditation, unveiled a new state-of-the-art, six-story business complex planned for downtown West Palm Beach.

Florida Atlantic University (FAU), a top public university as ranked by U.S. News & World Report, is a significant contributor to the region’s economic growth and development. It awards more than 8,000 degrees annually, making it first in the nation for degree completion, as noted by the Association of Public & Land-grant Universities, and top 20 and top 40, respectively, for graduating African American students and Hispanic students with bachelor’s degrees.

FAU’s undergraduate entrepreneurship program is ranked 27th and the graduate program is ranked 42nd in the nation by The Princeton Review. FAU has received the Carnegie Community Engagement Classification, an elective designation that indicates institutional commitment to community engagement.

Another literally high-profile ranking: the school’s men’s basketball team last season had the best season in program history. It notched a school-record 35 wins, the nation’s best record (35-4), a perfect 17-0 record at home and a spot in the NCAA Tournament’s Final Four.

FAU’s various colleges – — of business, engineering, technology, life science and others – provide next-generation talent for the region’s growing workforce needs, often alongside career training organization, CareerSource Palm Beach County. As the region expands, employers are turning to such providers to prepare skilled workers.

Suffolk Construction, for example, partners with universities to build its pipeline, said Chris Kennedy, VP of preconstruction with the firm, whose list of work in the county includes The Bristol, Plumosa School of the Arts Expansion, The Strand, One City Plaza, and ongoing projects such as Palm Beach International Airport Concourse B Expansion, Royal Palm Residences in Boca Raton and the Ritz-Carlton Residences Palm Beach Gardens.

Among the talent it seeks are those skilled in construction management services, including such lines as its real estate capital investment, design, self-perform construction services, technology start-up investment and innovation research/development.

“We are seeing more seasoned construction professionals start to retire, so the need for younger talent is even more dire,” added Jay Fayette, Florida East Coast president for Suffolk.

To the west, the aviation, aerospace and engineering sector is home to over 1,600 companies, led by Pratt & Whitney, Lockheed Martin, Sikorsky, Aerojet Rocketdyne and Northrop Grumman. Interspersed where large-parcel land permits, is the burgeoning distribution and logistics sector for companies seeking proximity to a metro area of over six million stretching from the Palm Beaches through greater Fort Lauderdale to Miami-Dade County. Players epitomize household names, including Amazon, Aldi, FedEx, Tropical Shipping, Walgreens, Woodfield Distribution and Cheney Brothers.

Connections make the county and region desirable to logistics firms, as well as those millions of leisure and business travelers and local commuters. The downtown West Palm Beach and new Boca Raton stations for regional rail provider Brightline simplify travel between the three counties – — and soon, Orlando.

For longer travel, Palm Beach International Airport is part of a three- airport offering (along with Fort Lauderdale-Hollywood International Airport and Miami International Airport) offering thousands of flights throughout the region, nation, hemisphere and world.

With growth among its residents, businesses and trade, a high quality of life and that escape from harried lives back north make the county a thriving business and lifestyle destination.

 

Source: SFBJ

How The Ag Reserve Is Changing: Palm Beach County OKs Warehouses On Nursery Land West Of Delray Beach

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Joe Mulvehill and his siblings have been working to get their 40-acre wholesale plant nursery west of Delray Beach rezoned for about a decade so it could be sold to a commercial developer.

Now that dream is on its way to fruition.

The Palm Beach County Commission has proposed warehouse development at the site at the northeast corner of State Road 7 and Happy Hollow Road in the county’s Agricultural Reserve. BBX Logistics Properties, based in Fort Lauderdale, plans to build three warehouse buildings and offices totaling 672,533 square feet and 687 parking spaces.

“The entrance and exit to the project known as State Road 7 Business Plaza will be on S.R. 7, instead of Happy Hollow, where the nursery entrance is now,” said Mark Levy, BBX president. “The property was put under contract in August 2021 and the company will close on it after site plan approval. Obtaining final approvals to build is expected to take several months.”

Construction will likely begin in the first quarter of 2024 with a total project cost of more than $100 million, Levy said. The average tenant, such as plumbers, electricians, companies which supply hospitals and schools and others, will rent from 25,000 to 60,000 square feet. Offices will be in the front, with storage areas in the rear.

Nursery Operation In Southern Palm Beach County Dates To 1980s

Mulvehill, 60, owns the property with his siblings Diane, Suzanne and James. He began working for his nurseryman father, the late Joe Mulvehill Sr., at age 17 when he was still a student at Coral Springs High School in Broward County.

The 40-acres of the Mulvehill Nursery (Photo Credit: Andres Leiva, Palm Beach Post)

Mulvehill, who is the nursery operations’ sole owner, has been in business for 42 years and has run the nursery from the current location since 1995. He said he was grateful the county commission understood that the nursery was “left out of the Ag Reserve Master Plan. We are one of the few remaining property owners who bought our property before the Ag Reserve land use restrictions went into effect in the late 1990s.”

“That heavily restricted our property rights. We have worked with the prior commissions for nearly a decade bringing this issue to their attention and finding equitable solutions,” Mulvehill said.

Mulvehill and other small landowners in the 22,000-acre Agricultural Reserve west of Boynton Beach, Delray Beach and Boca Raton, have said for years that the county’s development rules for the area have depressed the value of their land by limiting what a potential purchaser could do with it. The Ag Reserve was formally created in 1980.

Despite hurricane damage and losses, insects, diseases, labor shortages and other issues Mulvehill has faced over the years, he wants to stay in the business. He ships foliage and interior plants throughout the continental U.S. and Canada and sells locally to landscapers.

“My father started with a 5-acre nursery in 1976 and expanded it to 20 acres when I started working there during high school. This parcel was sold to develop what is now called Four Seasons, a residential community off Atlantic Avenue and S.R. 7. In fact, you will see Mulvehill Road off of Atlantic Avenue that still shows up on Google Maps. That was the original road to our first nursery,” Mulvehill said.

Mulvehill said this year has been especially difficult as he lost all his entire crop of mandevillas, a flowering vine, to a pest called pepper thrips.

He said he will continue to operate Mulvehill’s Nursery on 15 acres off Smith Sundy Road, an arrangement that “will be less stressful and give me more time to enjoy life,” Mulvehill said.

Some Concerns Warehouses Won’t Fit With Agricultural Area

At the May 25 hearing before the county commission, nearby residents who support the project and those who oppose it spoke and submitted comment cards. Those opposed expressed concerns about noise, lights and increased traffic that could impact residential developments and horse farms.

The commission took two votes, the first was a 6-1 approval, changing the property’s future land use designation from Agricultural Reserve to Commerce with an underlying Agricultural Reserve.

Vice Mayor Maria Sachs opposed the land use change, as did the county’s staff, which said it will be an isolated industrial use inconsistent with the other development along that portion of S.R. 7.

Sachs said she wants to work with the legacy farmers to find ways for them to get out of the business, and for the highest and best use of their land. However, she said Clint Moore Road and Congress Avenue, about 12 miles to the southeast in Boca Raton, is a more appropriate location for warehouses.

Sachs also said that the Florida Department of Transportation said that the project may generate more traffic than allowed under the Commerce designation.

Next, the commission voted 7-0 to rezone the property from the Agricultural Reserve Zoning District to the Multiple Use Planned Development Zoning District.

Commissioner Marci Woodward said she met with neighbors in the immediate area of quiet roads next to a canal and said they are happy with the entrance being moved to S.R. 7 because there will be less traffic on Happy Hollow and Smith Sundy.

Joseph Starkey owns a 60-acre horse boarding farm, Irish Acres of Florida, near Lyons Road and Atlantic Avenue, also in the Ag Reserve west of Delray Beach. He said that the warehouses do not belong in the Ag Reserve.

“I believe in landowner’s rights and in developer’s rights. I truly believe in the rights of the existing land owners. They are in the Ag Reserve for protection,” Starkey said.

Mike Atchison, owner of Atchison Exotics at 9625 Happy Hollow Road, and president-elect of the Palm Beach County chapter of the Florida Nursery, Growers and Landscape Association, said he supports the rights of the Mulvehills and other farmers to have their property rezoned and to sell their property.

“The industry is tough between bugs, labor and government overreach. I am here before you to express support for the code change. The Mulvehills’ property is not designated as a preserve or a reserve,” Atchison said.

Suzanne Mulvehill, Joe Mulvehill’s sister and a former Lake Worth Beach city commissioner, also spoke before the commission.

“We are the legacy farmers. We have been here before every GL Homes development. We have been here before Lyons Road went through. We were here before the county bought the 1,000-acre dairy at the end of Smith Sundy Road. We were here before the Ag Reserve rules were put into place,” Suzanne Mulvehill said. “We been coming here for 10 years, you have heard farmers get up and share about being here since the 1970s. Our rights were restricted when those rules went into place.”

Commissioner Mack Bernard noted that the Mulvehills had worked with the county on the site’s future for several years.

“Joe and Suzanne, I have been here for 7 years, and you have been coming here in front of us for 10 years,” said Bernard. “I said we would try to be fair to you if you came with the right project. I believe this is a good project for Palm Beach County.”

Entrance To Warehouse Complex Will Be Off State Road 7

The approval includes a requirement for an 8.9-acre preserve and a 4.26-acre water management tract with a 2.86-acre wetland designed to provide enhanced environmental features.

BBX’s Levy said the extraordinary population growth in southwestern Palm Beach County proves the need for more warehouses, and right now no space is available. He said the Mulvehill location is ideal because it is on the U.S. 441-S.R. 7 corridor and close to Florida’s Turnpike. Some companies could not find space in Palm Beach County, and had to locate as far away as Miami and Orlando.

The loading docks will be in the project’s interior, with the buildings serving as a noise buffer, and Levy said he expects most of the trucks coming in will be vans and box trucks, not semi-trucks.

Levy said that he will reach out to homeowners in the nearby Four Seasons residential development after a homeowner stated at the meeting that the group had not heard from the developer. The buildings might be built in phases, and once they are occupied, Levy estimates that 250 to 300 people will be working there.

“So many companies have expressed interest. We can’t build this fast enough,” Levy said. “It will be such a great thing for the community. We worked so hard to integrate it into the community. We feel really good that we did this the right way.”

 

Source: Palm Beach Post

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Broward County Suburb To Consider Millions In Incentives Toward Hotel Demolition, Redevelopment

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The city of Plantation could award incentives to a developer to demolish a hotel and replace it with a mixed-use project.

The board of the city’s Community Redevelopment Agency (CRA) will consider the $2.235 million forgivable loan for Wells Real Estate Investment on June 7. The West Palm Beach-based developer would utilize the funds to purchase and demolish the Plantation Inn at 375 N. State Road 7.

According to the application, Wells Real Estate Investment has the 75-room hotel under contract from Plantation-based Plantation Hospitality Group for $12.2 million. It was built on the 31,744-square-foot site in 1970.

According to the city staff report, the site of the Plantation Inn hosted 32 arrests and 121 incident reports to police so far this year – far more than any other hotel in the city.

The proposed loan agreement states that the $2.235 million loan would be forgiven in full, without interest, after the developer purchases the property and completes demolition of the hotel.

The Plantation Inn site would be combined with two neighboring parcels Wells Real Estate Investment already owns to create a mixed-use project. It owns the 31,935-square-foot medical office building at 4100 S. Hospital Drive and the 5,102-square-foot office building at 4050 N.W. Third Court.

According to the application, the $70 million project would consist of 118 residential units inclusive of 15% workforce housing, 36,000 square feet of medical office space, a 124-room Marriott-branded hotel and 350 covered parking spaces.

Janalie Bingham Joseph at Wells Real Estate Investment couldn’t be reached for comment.

The city also has interest in redeveloping the property because it wants to spur more economic activity next to the former Plantation General Hospital, which HCA Healthcare (NYSE: HCA) closed and relocated to Davie. HCA still operates an emergency room in the former hospital building, but it doesn’t use most of the campus. According to the city staff report, HCA is considering plans to build a new free-standing emergency department facility of about 11,000 square feet closer to State Road 7.

 

Source: SFBJ

CP Group Planning Mixed-Use Project At Boca Raton Innovation Campus

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The owners of the Boca Raton Innovation Campus, the largest office complex in South Florida, are working on plans for a mixed-use project, but the goal is to enhance the office space, not replace it.

Located on 123 acres at 5000 T-Rex Ave., BRIC spans 1.7 million square feet of offices that previously housed IBM.

Boca Raton-based CP Group acquired BRIC in 2018 with several partners, and in 2021 CP Group brought in several new partners. The ownership group also includes Rialto, DRA Advisors and Las Olas Capital Advisors.

Angelo Bianco, managing partner of CP Group, said he has a pending application with Boca Raton to rezone the property to allow a mixed-use development to rise in the parking lots surrounding the offices. Plans call for 1,250 residential units, 125,000 square feet of retail, restaurants, grocery and entertainment, a 150- to 175-room hotel, and several parking garages. That would include a 4,000-seat performing arts center.

 

Source: SFBJ

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Prologis Anticipates Industrial Rents Will Increase 10% This Year

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The industrial sector experienced a moment of worry several weeks ago amid the mounting economic and financial sector turmoil. That moment appears to have passed, based on Prologis’ Industrial Business Indicator, which moved back into expansionary territory in April with a score of 56.2, after falling to its lowest level in 30 months for March.

Prologis, too, apparently is feeling sanguine about the sector, tweaking its forecast to a 10% increase in rents for the year, given that there has been 275 million square feet of net absorption and deliveries of 445 million square feet to date.

Prologis’ research also reported that the utilization rate stabilized in the 85% to 86% range, which is considered good for logistics users. The rate averaged 85.6% in the first quarter of this year and was close but a slightly lower 84.9% for April, which translates to an absence of shadow space.

It also found that the true months of supply (TMS) number—the time it would take to absorb available supply at the current demand run rate–increased to 30 months, up five months from the fourth quarter. The markets and submarkets with the biggest construction pipelines should have the largest TMS increases and lead to variations in availability, as well as rent growth, depending on locations.

“Macroeconomic crosscurrents may lead to some delayed decision-making, which could push demand from 2023 into 2024,” Prologis concluded. “The U.S. vacancy rate should drift up to the low-/mid-4% range by year-end, well below the historic average.”

If supply drops off sharply in 2024, it may raise the potential for demand to outpace supply and pull the vacancy rate down to the mid-3% range by year-end 2024. Also affecting the longer-term prospects next year is a 40% drop in construction starts due to increased costs and a lack of financing. Prologis suggests customers may face a narrow window to act as projects get done this year but decrease next year, particularly in highly desired locations.

Some markets are also expected to experience more interim vacancies due to an abundance of speculative space under construction. Such possibilities include Dallas, Phoenix, Savannah and Austin. Beside such markets, vacancy rates may remain below 2019 levels, in part due to the existence of few unleased buildings available.

 

Source:  GlobeSt.

IOS Developments Drive Forward Despite Entitlement, Zoning Challenges

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With the trifecta of idling engines, diesel exhaust and the constant presence of 18-wheelers, industrial outdoor storage operators fight an uphill battle getting their projects approved by municipalities.

But rising demand — and the rising prices that come with it — has motivated developers to find ways forward despite community backlash.

Entitlement challenges, zoning difficulties and pushback from NIMBY-esque neighbors slow the production of IOS properties, causing developers to create strategies targeted at avoiding these pitfalls to get their deals done and meet a ballooning market need.

“The lack of available supply for truck terminals has historically been driven by local zoning ordinances,” said Cresa broker Eric Rose, who is based in Omaha, Nebraska. “Most communities aren’t friendly and won’t really add any more of these locations unless it’s via a case-by-case, special-use approval process, which is time-consuming and costly.”

As the continued growth of e-commerce and a renewed domestic manufacturing sector add pressure to expand trucking to handle increased logistics demand, some developers are striking out and figuring out how to add new capacity. With IOS vacancy rates slipping to 3% in 2022, according to Marcus & Millichap research, the need is clear. And with the high rents and sales prices being fetched by existing IOS properties, ground-up development can offer a significant payday, especially from interested institutional investors or truck carriers.

Earlier this month, Industrial Outdoor Ventures announced plans to turn the Twin Lakes Travel Park in Davie, Florida, 24 miles north of Miami, into a 38-acre industrial service facility. Situated south of Interstate 595, between State Road 7 and Florida’s Turnpike, the ground-up development will include two buildings totaling 227K SF and outdoor storage yards that can hold 280 truck trailers.

“This is another great opportunity for IOV to meet market demand by developing the type of modern facilities that today’s end users require and in a location that has a scarcity of land available for this type of asset,” Industrial Outdoor Ventures Senior Vice President of Development and Acquisitions Eric Johnson said in a statement.

Turnbridge Equities also just picked up a 3.6-acre site in Rancho Dominguez, California, near Los Angeles, in a $25.5M buy.

“The deal, another 2.49-acre pickup in the South Bay, aligns perfectly with our strategic vision of expanding our Industrial Outdoor Storage strategy in port-adjacent, infill and high barrier-to-entry markets,” a Turnbridge executive said in a statement.

In nearby Perris, California, Alterra IOS spent $8.5M on a 7-acre towing yard in early May, with plans to renovate it and reintroduce it as an IOS property with easy access to the busy Inland Empire.

Chicago-based Dayton Street Partners has been busy with redevelopments and plans to create new trucking facilities, one of just a handful of ground-up IOS developments taking place. The firm just finished a 95-acre terminal with 500K SF of industrial space at 5800 Mesa Road in Houston, which is being leased to the carrier Maersk.

The firm also has a 47-acre, 1,000-trailer terminal set to open in Baytown, Texas, near Houston and less than 20 miles from two Gulf ports, set to open in June. The terminal includes a 24-foot-tall, 1,382-foot-long building meant for unloading and reloading truck cargo. In addition, Dayton Street acquired two truck maintenance facilities in Atlanta with plans to renovate and reopen.

“The difficulties of finding appropriate space and building new facilities — often renovating existing industrial or vehicle-focused real estate, such as mobile home parks or underutilized warehouse sites with vacant buildings and minimal need for rehabilitation — means it often isn’t worth it to seek out real estate on the fringes of a market,” Dayton Street principal Howard Wedren said. “Financing has been rocky lately so it is difficult to get access to capital compared to those with longstanding client relationships.”

It is key to find locations near big travel hubs and ports, spots already in high demand for industrial developers seeking storage space.

“We don’t go to the outskirts,” Wedren said. “We’re very much into the high-barrier-to-entry sites. That’s our model, and we don’t deviate.”

High barriers are common for IOS projects. In Long Beach, California, the firm Cargomatic received city council approval for an IOS storage site last month near the busy Pacific port, just overcoming significant backlash by business groups and local leaders concerned about additional pollution from heavy trucks.

“There are no guarantees at the end of the day,” Cresa’s Rose said. “So do you go through a multiyear development process, not 100% certain that you’re going to get those rezoning and entitlements you need? Or do you just bite the bullet and buy the existing facility, and you can activate your service immediately upon opening the facility?”

In the case of Industrial Outdoor Ventures’ project in Davie, Director of Construction and Properties Rob Chase said the firm had good relationships with local leaders. It helped that the older travel park was showing signs of age and wear, and many in town were happy to replace the site with something newer.

Even with the support, it is a long process. Properly and fairly relocating existing residents is time-consuming, and even with the relatively simple construction requirements of these kinds of projects, it will still take 14 months of site work and construction once the site is cleared.

On the flip side, an empty site in Jurupa Valley, California, near the Inland Empire, that Industrial Outdoor Ventures acquired on the precipice of gaining approvals for construction in a portfolio purchase, now has to restart the entitlement process.

Chase said he sees the value of existing and new IOS facilities continuing to rise, spurring more developers to attempt more conversions, but he acknowledged that the process is often difficult.

“Having the right zoning is absolutely critical,” Chase said. “An entitlement process I describe as being long and drawn out is nothing in comparison to trying to change the zoning. That’s even more of a hill to climb. You could easily flip these properties, but pushing, sticking with it through to the finish line, is worth it.”

 

Source: Bisnow

Bed Bath & Beyond’s Spillover Effects On Industrial

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Bed Bath & Beyond’s recent bankruptcy filing is not expected to impact retail landlords very much, as many have lined up tenants long before Bed Bath & Beyond actually filed its paperwork.

But it will have ripple effects elsewhere, including in some industrial markets, according to CoStar Group’s May 2023 real estate report.

Bed Bath & Beyond leased 6.1 million square feet of distribution centers throughout the country, most of which in large, modern centers built after 2005. About half already are marketed for lease on CoStar.

CoStar believes that some of those distribution locations will fare better than others and attract new tenants. The reason is that there are only three other existing or under construction distribution centers with space measuring 500,000 square feet or greater, also built after 2000 and within a one-hour drive of Bed Bath & Beyond’s largest Las Vegas distribution center. In contrast, its center within the Dallas-Fort Worth metro market has almost 50 such available distribution spaces within a one-hour drive.

At the same time, several other big chains such as T.J. Maxx, HomeGoods and Ross Stores have grabbed up some of Bed Bath & Beyond’s stores, which could necessitate their demand for more distribution centers down the road.

Meanwhile, while Bed Bath & Beyond’s store closures won’t have that much of an impact on landlords, that is not to say that retail itself hasn’t experienced some setbacks in the first quarter, according to CoStar.

In the first quarter, leasing volume for the retail sector slowed by 2% when comparing quarters and 26% in comparing year to year activity, due to the uncertain economy and absence of available spaces. Altogether, retail tenants occupied 13.2 million square feet on a net basis, which accounted for move outs. This represented the slowest level since 2020 but the ninth consecutive quarters of net demand growth.

Retail property sales also fell—by 40% quarter to quarter and almost 50% year over year due to higher interest rates affecting deal flow adversely. Falling prices have not declined enough to encourage investors to step in.

 

Source: GlobeSt.

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Live Local Act To Create Massive Development Opportunities In Florida, Law Firm Says

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The Live Local Act will significantly change how real estate is developed in Florida, Miami land use attorneys said at a recent webinar.

Held May 4, the webinar was hosted by Bilzin Sumberg partners Anthony De Yurre, Sara Barli Herald, and Carter McDowell. During the hour-long event, the attorneys urged developers to gather with their teams, consult with municipal planning staff, and take another look at their planned projects.

“This opens up a whole area of potential development that was not there before,” said Herald, who specializes in affordable housing and tax credits. “There are a lot of changes. This is probably the most significant land use change in decades.”

De Yurre, who specializes in zoning and complex land use, added “This is the Magna Carta.”

Also known as Senate Bill 102, the legislation was signed into law in late March, effective July 1. Among other things, the bill grants developers the ability to build the maximum amount of units a local jurisdiction allows – and at the maximum allowed height within a mile of a project’s site – on almost any property zoned commercial, industrial, or mixed-use. And that developer can obtain those rights without a public hearing.

The catch is that 40% of those units must be reserved for households earning up to 120% of a county’s area medium income (AMI) for the next 30 years. (A developer can seek the same rights with just 10% of the units reserved for affordable housing, but that will require approval from the jurisdiction’s elected body.)

In addition, SB 102 does not destroy other zoning rights reserved by states such as setbacks and parking requirements. However, the law states that cities and counties must consider reducing parking requirements for affordable projects built within a half-mile of a transit stop.

Besides zoning variances, the code grants developers property tax breaks if they constructed or substantially rehabbed a building in the past five years in which at least 71 units are affordable housing. If those units are reserved for people who earn between 80% to 120% AMI, the landowner is entitled to a tax reduction of 75% for those apartments. If the units are for households earning below 80%, a landlord can secure a 100% reduction on a property tax bill. The catch is rents must conform to HUD rent income restrictions or 90% of an area’s market rate, which ever is less, for the next three years.

 

Source: SFBJ

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Four Things You Might Be Underestimating About Industrial Real Estate

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As with so many areas of real estate, there was an operational and profit high during the last few years that was like an industry getting drunk and then waking up with a headache.

Looking back can create regret, but here are some things that MSCI in its Q1 2023 U.S. Industrial Capital Trends Report suggests are easy to underestimate.

1. Immediate Comparisons Are Unrealistic

Would you compare a little kid running around with a blanket tied around the shoulders like a cape to an actual superhero? Of course not. Nor would you reasonably undergo a once-in-a-blue-moon experience and then expect that should become an everyday event. That is the difficulty in looking at typical year-over-year business comparisons in industrial.

“Industrial deal volume hit a record high of $40.6b for any first quarter in 2022,” MSCI wrote. “The next-highest first quarter period was in 2020 when $34.4b traded. Any comparisons of the current quarter to these record high points for the market are going to look harsh. In truth, the market simply slipped back closer to a normal level at the start of 2023.”

According to MSCI’s analysis, average first quarter deal volume from 2005 to 2019 is $11.2 billion. This year’s Q1 transaction volume fits in with the past.

2. The Industry Was Already Gearing Up For Higher Rates

“It can be difficult to think in terms of anything aside from Covid given the collective trauma experienced, but back in the fall of 2019, investors began to adapt to a rising rate environment,” the analysis said, remembering that concerns about rates existed before the pandemic.

CRE professionals attending industry conferences at the time were concerned about the Federal Reserve tightening its balance sheet. But it had been more than a decade since the Global Financial Crisis. Realistically, how long would the Fed put off cleaning its inflated balance sheet?

“Investors wanted to focus more on asset types that had low capex relative to the NOI for a rising interest rate environment, and the industrial sector matched this need.”

3. Investors Were Under-Allocated

The MSCI report suggests that investors hadn’t allocated enough of their capital to the industrial sector. This was true for multifamily, as they reported in a separate publication.

“It is not yet clear that investors have the allocations that they desire as there are many moving parts in place. But with the RCA CPPI for industrial slowing to only a 3.3% gain from a year earlier and volume back to average levels, one might make that case.”

4. Cap Rates Are Up, But Not That Much

One of the stories floating around is the return of cap rates. They are up some, but that’s in comparison to the depths they visited in 2022. Cap rates are nowhere nearly as high as pre-pandemic levels.

“The RCA Hedonic Series cap rate reached5.5% in Q1 2023, up from a low of 5.2% seen in Q1 2022 before interest rates surged. Cap rates have increased only 30 bps in a time when the 10yr UST has increased 170 bps.”

 

Source: GlobeSt

Former PGA Station Office Campus Could Be Redeveloped

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Developer Daniel Catalfumo wants to demolish two office buildings at the PGA Station business park in Palm Beach Gardens in order to build more apartments.

This would be the second phase of the apartment development at PGA Station. Greenwich, Connecticut-based Richman Group of Cos. broke ground on 396 apartments there in 2022 after buying land from Catalfumo.

PGA Building 9 & 10 LLC, managed by Catalfumo, recently filed plans with the city to amend the development plan for the 37.6-acre business park at 11025 RCA Center Drive. It would remove a 48,000-square-foot office and a 9,000-square-foot office, replacing them with 620 apartments in two buildings plus two parking garages with a combined 975 spaces. The developer would make 10% of those units workforce housing.

Each of the two apartment buildings would be 13 stories tall, one with 328 units and the other with 301 units. Each building would have a rooftop pool deck, a fitness room, a game room, a club room and coworking space. One building would have a half basketball court and the other would have two pickleball courts.

 

Source: SFBJ