Tag Archive for: land demand

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South Florida Churches Find A Higher Calling As Property Values Ascend

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Church property in South Florida often attracts developers who want to build something new on sacred ground, due to strong demand for precious land in the coastal corridor from Miami to West Palm Beach.

Nevertheless, church sales and redevelopments are rare in the tri-county area due to land-use and rezoning issues as well as resistance from church members and leaders. But that might be changing. Ascending property values in South Florida and the lingering impact of the COVID-19 pandemic may lead more church owners to put “For Sale” signs on their real estate.

Brokers try to nudge churches onto the market by “cold calling and saying: ‘Hey, do you know your property is worth $50 million today?’ ” said attorney Luis Flores, Miami-based partner of law firm Saul Ewing. “I think a lot of church leaders are going to dip a toe in the water and find out: What is the value of my property? Is it the value that’s advertised when people knock on my door?”

One of the latest listings is a 67-year-old church at 6501 North Avenue in Miami, an 18,800-square-foot brick building with a $4.9 million asking price – or $261 per square foot.

“We have multiple offers on it,” broker Matt Messier said in early March. “South Florida is extremely active.”

Messier is a principal of the brokerage with the listing, Foundry Commercial, an Orlando-based national specialist in sales of churches, schools, camps and other properties owned by religious denominations. He said Foundry brokers about 100 church sales a year nationwide.

“Lately, because the market’s so hot, a lot of churches are sitting on some really good real estate,” Messier said, “So you’re seeing churches being bought to be converted to another use. You’re seeing a lot more of that.”

One of South Florida’s biggest pending sales of a church property would lead to construction of a high-rise condominium in the bayfront backyard of First Miami Presbyterian Church, at 609 Brickell Avenue in Miami. Key International and 13th Floor Investments have offered $240 million for the church’s land on Biscayne Bay for a condo tower project that would preserve the 65-year-old church building that faces Brickell Avenue.

Attorney Cary Tolley, a member of the church, filed a complaint with the Presbyterian authorities to stop the sale of the church property. But the Kentucky-based Presbyterian Office of General Assembly rejected his complaint last September.

“If they build a high-rise condo on the property, that will be the end of it,” Tolley said. “The church will close, and the condo will be all that’s left.”

COVID-19 closed First Miami Presbyterian Church for about two years, reducing Sunday worship to an online-only experience. Tolley said the pandemic cut opposition to a sale of the church’s bayfront property, which had support from the church’s pastor, the Rev. Chris Benek, and by his supervisors at the Presbytery of Tropical Florida in Fort Lauderdale. Neither Benek nor officials at the regional presbytery responded to requests for comment.

“There’s no question that the pandemic played into their hands,” Tolley said. “Benek just wanted to sell the real estate. He’s not a big believer in the importance of in-person worship. He’s one of these guys who believes you can have worship online and have everything done over the internet.”

The pandemic had a simple effect at The Center for Spiritual Living, an aging church in Boca Raton that found a buyer after the pandemic killed cash flow from organizations that rented meeting space at the church.

“When COVID came and all the renters disbanded because no one was meeting anymore, it was a challenge for us because we still had the same expenses,” said the Rev. Jill Guerra, whose mother, Barbara Lunde, is also a minister and controls the company that owns the 3.7-acre church property just south of Palmetto Park Road on Southwest 12th Avenue. “We just realized it was too big of a property for us to maintain.”

In the fall of 2020, Boca Raton-based developer Jay Welchel approached the mother-daughter ministerial team and negotiated a contract to buy the Center for Spiritual Living, then got their consent to extend the closing date of the sale as social distancing and other COVID-era protocols persisted.

“The $4.2 million sale was scheduled to close March 28,” Welchel said in a March 7 interview.

Welchel plans to develop a 128-bed assisted living facility for the elderly on the church site. But he is locked in a court battle with the city government that stems from city staff’s insistence that Welchel’s planned development would require a land-use change for the site.

“If unable to develop an assisted living facility there, I guess my backup would be to put a learning center type of day care at that location,” Welchel said.

“Church sales are different from other real estate deals because the seller often wants to stay on the property,” said attorney Flores. “The uniqueness of church sales is, the church usually wants to stay on the property somehow. It’s not like the typical sale. Those opportunities require the developer to rebuild the church, renovate the church or build around the church, and most developers are savvy enough to do that.”

For example, a church group in Pembroke Pines plans to share its 5-acre property on busy Pines Boulevard with a Wawa gas station and convenience store. The Wawa would replace the existing Trinity Lutheran Church building and its parking lot at 7150 Pines Boulevard. The church, which has operated in its current location since the mid-1960s, will move to a new building to be constructed on the south side of its property, behind the Wawa site, which is vacant. The local city commission voted last year to rezone the site of the planned Wawa and to change its land-use designation.

“A lot of the church groups we work with have a large property – too large for their use. A lot of groups are just trying to right-size their property,” Messier said. “Churches are, other than the federal government, the largest property owners in the country.”

Buying a church isn’t easy, though, even if the bid is rich.

“They are way more complicated than buying a piece of dirt,” said Ryan Shear, managing partner of Property Markets Group (PMG). “Churches are nonprofit, and we’re for-profit, so there’s a lot of education and getting-to-know-you.”

In partnership with Greybook, PMG has built Elser Hotel & Residences, a 49-story, 646-unit condo hotel in Downtown Miami where the First United Methodist Church of Miami occupies most of the first 10 floors.

“The developers have sold more than 50 percent of the building since unit sales began in June 2022,” Shear said in a March 8 interview.

PMG paid $55 million for the 1.1-acre development site at 400 Biscayne Boulevard after responding to a request for proposals from the leadership of First United Methodist to rebuild the church’s previous home, a dilapidated old structure that occupied the site.

Developer Jeff Burns made a bid to redevelop a Lutheran church in Fort Lauderdale that went awry after the church’s out-of-town hierarchy objected, even though he had negotiated a deal with the local leaders of the church to buy the property.

“We had a signed contract. And these guys [the church’s higher-ups] came in and hired an attorney to basically come up with a reason why they didn’t have to move forward with the contract,” Burns said. He decided against going to court to enforce the contract. “It meant suing the church,” he said. “But we’re a community developer, so we decided to move on.”

After that fiasco, Burns stumbled across a nearby church in Fort Lauderdale. He liked the address so much that, after redeveloping it, he moved his business there. He was looking at property across the street when he happened to notice the Gospel Arena of Faith on Northwest Third Avenue, a few blocks north of Downtown Fort Lauderdale and just west of the Flagler Village area. Burns walked into the church, met its owner, the Rev. T.G. Thompson, and asked him if he wanted to sell the church.

“It took a long courtship, if you will, for him to be comfortable and trusting of us,” said Burns, CEO of Fort Lauderdale-based Affiliated Development. “We met him on numerous occasions prior to even submitting an offer.”

Thompson died Nov. 24, 2022, after the sale was completed.

Affiliated Development ultimately paid $2.1 million for the 1.1-acre Gospel Arena of Faith property at 613 Northwest Third Avenue, where the company developed Six13, an apartment building with ground-floor commercial space, which is partially occupied by Affiliated. All 142 apartments at Six13 are so-called workforce housing units, available only to people who earn 80 percent to 140 percent of area median income.

Church redevelopment in South Florida probably will persist, because so many houses of worship occupy coveted locations.

“They have fantastic land,” Burns said. “And a lot of churches have property in areas that are prime for redevelopment. Money isn’t the only consideration because church redevelopments are unlikely to succeed if church sellers don’t like the plan. They would much rather try to figure out a deal with somebody who’s going to do something good on their properties and solve a social need, versus somebody who’s just looking for a profit.”

 

Source: Commercial Observer

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Florida Land Sales Show No Sign Of Cooling Down

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Over the last few years, Florida has benefitted from tremendous in-migration, which equates to approximately 1,000 people per day moving to the state.

The trend includes not only the movement of individuals, but also employers, capital sources and developers who are expanding into the Florida market. For the first time in 65 years, Florida leads the nation in population growth.

This recent growth has been a catalyst for development, particularly in South Florida, Orlando and Tampa, which are some of the most active development markets in the U.S. In the last few years, development was primarily limited to residential and industrial, but there is renewed interest in office, hotel and retail projects. New residential developments extend beyond traditional multi-housing to build-for-rent communities, senior housing, student housing, affordable housing and manufactured housing.

As a result of the robust development pipeline, developable land is in high demand and selling at record prices. JLL’s Capital Markets team has sold more than $6 billion in land sites over the past 25 years in South Florida, $1.6 billion of which was sold in the last three years alone, demonstrating the sharp uptick in demand. In addition, compared to the broader U.S. market, South Florida / Miami land sales totaled $3.2 billion in 2022, up 49% year-over-year, while the U.S. land sale volume equaled $28 billion, down 10% year-over-year.

Some of the record setting JLL sales include the $363 million sale of 1201 Brickell Bay Dr., which is slated for Citadel’s new headquarters and 700 North Miami Avenue, a 4.7-acre site that sold for $94 million.

“We’ve really seen an uptick in non-traditional real estate owners monetizing their land holdings as well – groups such as schools, religious institutions and non-profits,” said Maurice Habif, Managing Director, JLL Capital Markets. “They see the record setting prices others are getting for their properties and realize they can fund more of their goals and missions by monetizing their land holdings. It’s been really fulfilling working on behalf of the non-profit organizations, and we look forward to seeing this trend continue in the near term. Land is only becoming more and more coveted throughout Florida and that demand should continue for the foreseeable future.”

“Florida really is experiencing phenomenal growth on all fronts,” added Simon Banke, Senior Director, JLL Capital Markets. “With more than 1,000 new residents moving to Florida every day, the state currently leads the country in population growth. Now, for the first time in forty years, Florida boasts more jobs than New York. Investors are acutely aware of these trends and hyper focused on investing in our market. In addition to a wealth of developers and capital providers that are already active in the state, we are speaking with new investors that want to be in Florida on a daily basis.”

 

Source: MarketScreener

Why Outdoor Storage Is The Hottest New Play In Commercial Real Estate

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The nine-acre truck depot in Kearny, New Jersey, wouldn’t appear to fit anyone’s definition of prime real estate.

The site is surrounded by a tangle of major highways that are often clogged with traffic, abuts a rail yard packed with clattering freight cars, and is just down the street from one of the most polluted landfills on the northern New Jersey waterfront.

To Andy Smith, a managing director at Brookfield Asset Management and the global head of its logistics investments, the parcel, located less than 10 miles outside of New York City, was as attractive as any of the top-tier properties his company owns. This past December, Brookfield paid a little more than $67 million to acquire the site at 1100 Newark Turnpike, which it plans to continue to operate as a terminal for trucks.

“I’m not sure if someone driving down the highway would look out and think, ‘Hey, that’s an immaculate truck terminal,'” Smith conceded. “But as crazy as it sounds, it’s fantastic real estate.”

Brookfield’s portfolio is still headlined by blue-chip real-estate assets such as the Manhattan West mixed-use complex in New York City, where major office tenants, like the law firm Skadden Arps, base their operations, and Canary Wharf, a similarly large-scale London property with a mix of office, retail, and residential space. But the development and investment firm, whose global real-estate portfolio includes $260 billion of property, has also amassed about $500 million — and counting — of industrial land sites across the country since 2018.

Brookfield is one of several big-name investors that are paying increasing attention to lowly industrial land. Recent buyers include the financial firm J.P. Morgan Asset Management, the private-equity players Fortress and Cerberus, and real-estate-focused investment giants, including Brookfield and the San Francisco-based firm Stockbridge.

Industrial land is used for a range of purposes, such as parking trucks and buses, storage for bulky equipment like cranes, cherry pickers, and bulldozers, and a place to stage heavy goods that can weather exposure to the elements including gravel, lumber, or shipping containers. The interest in industrial land reflects the growing recognition that these sites are as essential as they are ordinary, providing key infrastructure for the delivery of goods and services to large swaths of America.

Such land has been around for as long as the country has had heavy industry. What’s new is the rush of major investors who see a lucrative opportunity to corporatize a niche of the real-estate market that is still overwhelmingly owned by an array of small businesses and individuals. The segment has even been rechristened with a more sophisticated-sounding moniker: industrial outdoor storage, or IOS.

Investors estimate there’s at least $200 billion of industrial-outdoor-storage land across the country, a sizable enough market for years of investment to come. IOS sites have caught on as an unlikely institutional-caliber asset as other more established areas of the real-estate-investment market, like office buildings and retail space, have been upended by the growing popularity of working from home and online shopping.

There’s A Shrinking Supply Of Industrial Land  

Another factor that has helped ignite interest in this unheralded corner of the industrial market is the fact that outdoor-storage sites are a disappearing commodity, driving up rents and their value.

That’s especially true in northern New Jersey (just outside New York City), Los Angeles, the San Francisco Bay Area, Seattle, and other major cities across the country, where land is scarce, populations are large, and transportation infrastructure like highways, cargo ports, rail links, and airports abound. In these places, industrial areas have been whittled down for decades by demand to convert those districts to other uses, such as residential and commercial space.

More recently, a boom of warehouse construction has cut into the already-shrinking pool of outdoor-storage land. A record 446 million square feet of warehouse space was finished last year across the country, according to CBRE. The huge volume of new warehouse development has not only thinned the number of remaining outdoor-storage sites, but also created additional demand for it.

“Many warehouses just weren’t designed for the parking, storage, and staging requirements that come from the enormous throughput of goods traveling in these spaces today and the speed at which they’re moving,” said Matthew Pfeiffer, a managing partner at Alterra Property Group, which invests in IOS sites. “That has created increased demand for outdoor-storage needs that benefits us.”

Pfeiffer, for instance, said that Alterra, which was founded in 2017 in Philadelphia, is in the process of negotiating a lease for an 11-acre site in South Florida next to a new warehouse that was recently leased by a large shipping and logistics company. The shipping and logistics company, he said, realized its warehouse operations will require additional parking capacity on Alterra’s site. Pfeiffer said he couldn’t yet disclose the details of that transaction, including the location of the parcel or the identity of the players involved, because the deal is ongoing.

Investment In Industrial Is Just Taking Off 

Buyers of these parcels see a supply-and-demand imbalance that is likely to persist and generate profits for years to come.

“There’s only so much land that’s zoned for industrial uses,” said Dan Haroun, who cofounded the Manhattan-based IOS investment firm Catalyst Investment Partners in 2021. “And these municipalities aren’t going to create more of it.”

Outdoor-storage sites are different from many other real-estate assets in that they need little in the way of capital upgrades and maintenance to prevent them from becoming obsolete. Industrial land also generally has lower operating costs and taxes compared to other real estate.

Haroun said tenants pay a wide range of rents that often depend on the specific attributes and location of a site. IOS space can cost just a few thousand dollars per acre per month in smaller markets, he said, up to $60,000-$70,000 for well located sites in large, space constrained urban areas.

IOS sites are not always completely vacant, but are generally defined as having 30% or less of their land area covered by a building or structure. Brookfield’s Kearny truck terminal, for instance, has abundant parking, but also a long, narrow building that allows goods to be unloaded and transferred between truck trailers.

It’s Hard To Find Big Enough Portfolios Of Industrial Land 

There are challenges, too, in breaking into the business of owning industrial land.

Unlike Brookfield’s transaction, most IOS sites are under $10 million, investors said, making it work-intensive to amass portfolios of the dollar scale substantial enough to attract institutional capital.

Fortress has compensated for that by acquiring properties at a rapid rate, purchasing 80 properties in the past 18 months, “one of the fastest acquisition pipelines in the IOS market,” said Greg Pearson, a managing director at the firm who helps manage its IOS acquisitions. The investment firm has bought roughly $1 billion of outdoor-storage sites over the past two years in Los Angeles, the San Francisco Bay Area, and Seattle. Pearson said he expects the firm to “remain active,” buying up more IOS land in the coming year.

Others have found ways to buy at scale. Alterra, for instance, closed on an $86 million purchase of 14 outdoor-storage sites in December that were sold by the trucking company Heniff, which plans to continue to lease and occupy the properties. But Alterra has also built up its capacity to handle a larger volume of smaller IOS deals. The 75-person firm now has a 20-person investment team dedicated to IOS alone. It raised a $500 million fund for IOS investment in 2021 and is in the process of launching a follow-up vehicle that will be larger in size.

Catalyst, with a 10-person team, raised a $55 million fund in 2021 and is now raising a second fund that will be about $130 million, Haroun said. While the first fund was made up of mainly high-net-worth investors, the second will have larger-sized contributors, such as “pension funds and endowments,” Haroun said, a sign of the growing eagerness among institutional investors to partner with specialists who focus on IOS and can manage the transactional volume.

Zenith IOS, another outdoor-storage-investment firm that’s based in Brooklyn, struck a $550 million joint-venture deal with J.P. Morgan Asset Management in 2021 and is in the process of deploying that capital. So far it’s spent about $350 million of that and this year plans to use the remaining $200 million. Combined with financing, it expects to purchase roughly $600 million worth of IOS deals this year, Benjamin Atkins, the firm’s CEO and cofounder, said.

Atkins said he has been impressed by the robustness of the IOS market, even with fears about the broader economy. Zenith is currently in negotiations, for instance, to lease 8280 NW 80th Street, a three-acre site it purchased last summer in Miami for $9.1 million, to a logistics company that would use it for storage and vehicle parking.

“We’ve been looking for signs of weakness as other areas of commercial real estate slow down, but in IOS we’re not seeing it,” Atkins told Insider.

Zenith has such an appetite to expand its industrial-outdoor-storage portfolio that Atkins used Prologis, one of the world’s largest owners of warehouse space, as a benchmark for his ambitions.

“We want to be the Prologis of dirt,” Atkins said.

 

Source: Business Insider