More from beyond the Hudson
Since there appears to be minimal OZ activity in NYC, it might be a good time to check once again1 on what is happening out there beyond the Hudson.
Traditional Real Estate Projects
Of course, garden-variety (or OZ-variety) multifamily and mixed-use projects are popping up all over the country. Some more interesting projects in or close to traditional real estate development include:
- • A nine-story retail showroom in the Miami Design District, an area that has already attracted many luxury retailers.
- • An industrial project in the Phoenix area (spearheaded by a NYC-based investment firm).
- • A proposed eight-story biomed office-lab building to meet the burgeoning demand for lab space from the flourishing life science industries in Philadelphia.
- • Hotbed Entertainment Group launches Omni Impact Opportunity Fund to develop Hotbed Music Hall businesses in OZs, the first of them to be located in New Orleans, each of which will include a restaurant, bar, and music venue.
Stadium projects are appearing. The Miami Beckham [that’s David] United Group has purchased a site in the Overtown OZ area from Miami-Dade County that could end up as a major league soccer stadium. If the owner of the soccer franchise also owned the stadium and qualified for OZ benefits, both could be very valuable and sold free of taxes after ten years. Brewing in Raleigh, N.C. is a potential huge project (cost of $1.9 billion) involving a 20,000-seat soccer stadium, office space, multiple hotels, residential units, restaurants, and other retail space.
In Atlanta, they are undertaking special initiatives to deal with the difficult issue of gentrification. The Atlanta Land Trust buys land and retains ownership to ensure that the homes remain affordable. The Westside Future Fund has developed an Anti-Displacement Tax Fund that will pay residents’ property tax increases to assist residents to avoid displacement.
Startups and other operating businesses seem to be having trouble gaining traction in OZs despite some of the more favorable clarifications announced in the second round of regulations. Some signs of distant life include things like:
- • U.S. Dept of Commerce, Economic Development Administration provides $3 million grant to Rapid City, S.D. to support the development of a new incubator facility to promote the formation of sustainable manufacturing and technology-based businesses.
- • Another such grant to Ludlow, Mass. for infrastructure improvements to help support the growth of manufacturing in an OZ, which the town hopes will create 950 new jobs.
- • Yet another such grant to Kearney, N.J. to support development of a business center consisting of five buildings, two million total s/f, to include manufacturing, office, and entrepreneurial space.
- • Relocation of the headquarters of Aperiomics Inc, a Northern Virginia biotech, to an OZ.
- • In Houston, Germany-based manufacturer MAN Energy Solutions opens its North American headquarters in the OZ-located Uplands, a 400-acre business park development.
- • A possible brewery, or a brewery complex involving multiple breweries, in a 130-year-old former dairy operation in Denver.
- • A vertical farm in Texas projected to produce two tons of produce per day, create at least 75 new jobs, and reach 17 million customers. The LGS (Locally Grown Salads) OZ Fund launched to operate vertical farms in the Greater Baltimore area.
- • Vivakor, Inc. has commenced manufacturing Remediation Processing Centers (remediation of oil sands and extraction of bituminous materials) in a Salt Lake City OZ, “Creating enormous potential tax savings for its investors.”
“Creative” Office Projects
In the same vein, various “creative office” projects are appearing, trying to attract start-ups and other operating businesses into OZs. One is planned for Chapel Hill, directly across the street from the University of North Carolina, where the previously-named Bank of America Plaza is slated to be repurposed into an entrepreneurial hub for businesses seeking OZ benefits for their investors. In Austin, Texas developers plan the city’s first ground-up OZ office development seeking to attract tenants interested in taking advantage of the OZ program. Hunt Investment Management is developing the Charleston (S.C.) Tech Center project, a 92,000 s/f office building scheduled for completion in late 2020.
Fireworks and Flying Fish
Of course, we shouldn’t overlook the announcement from a fireworks company that plans to build new headquarters and relocate to an OZ in Grandview, Mo., a suburb of Kansas City. And how about an Asian carp fish processing plant in Illinois? Specimens of this invasive species, weighing up to 100 pounds, have become infamous for explosive leaps out of the water, sometime smacking boaters in the face along the Illinois River among other waterways. Why? Apparently there is an exploding market in Maine to use the explosive fish for lobster bait. When given lemons, make lobster bait.
Finally, despite warnings from the very top, i.e. treasury secretary Steven Mnuchin, that they should stay far away from the land of OZ, marijuana entrepreneurs are not necessarily backing off. Certain marijuana real estate developers in California, among other places, are encouraging potential tenants in cannabis business park developments to challenge the federal government on marijuana eligibility for OZ benefits since marijuana is not specifically included in the list of “sin businesses” incorporated (by reference to another statute) into the OZ legislation. If the marijuana entrepreneurs should prevail, that could make things very interesting if New York adopts sweeping marijuana legalization as it seems likely to do in the near future.
1 See previous article, “Down in the Boondocks,” published February 5, 2019.
Dan Flanigan is managing partner of the New York office of POLSINELLI.
Flanigan and POLSINELLI have provided the above material for informational purposes only. The material provided is general and not intended to be legal advice. Nothing in the material should be relied upon or used without consulting a lawyer to consider your specific circumstances, possible changes to applicable laws, rules and regulations and other legal issues. Receipt of this material does not establish an attorney-client relationship.