Pittsburgh September 2021 – Key Take-Aways
- Josh Lavrinc, CEO of Callay Capital LLC, gave a presentation on commercial real estate fund management and development finance consulting services provided by his two companies, Callay Capital and Grow Community Development Capital.
- Callay acts as fund manager for regional initiatives and adviser to funds, identifying, negotiating, closing, and servicing investments. Grow Community Development is for more complicated, niche financings such as tax-increment financing, federal and state historic rehabilitation or new markets funding.
- The entire city of Pittsburgh qualifies for PA Enterprise Zone tax credits, which can be up to $500,000 for eligible costs of up to $2 million.
- Callay manages the Power of 32 site fund, the Strategic Investment Fund, and ERECT Funds
- Power of 32 raised almost $50 million for a 32-county region in 2014 to create pad-ready sites to invite companies to locate here, with a goal of increasing employment. Industrial and commercial facilities typically look for 20- to 100-acre sites, or even just 5 acres in urban areas.
- The fund cannot finance vertical improvements; it does dirt, sewerage, roadways and other infrastructure needed to have pad-ready sites to attract new employers. It is interest-only for the entirety of the loan; maturity is typically 5 years from raw land to developed/leased or sold land for a user. No payback until it’s leased or sold.
- The Strategic Investment Fund was formed in 1994 by civic leaders such as US Steel and Alcoa and charitable institutions such as Heinz Foundation. It started with Allegheny Conference on Community Development membership and was managed for 15+ years by Bill Clarkson until he retired and then Callay was tapped to take over.
- Strategic Investment has done 63 projects, with a total of $165 million invested and around $1 billion total in project development.
- Typically, this is construction lending, lasting 5 years. It fills a gap —” But for this money, the project wouldn’t move forward” — and is a little more patient than other institutional capital that may be involved.
- Although the mission behind the money is to spur economic development, the board wanted to put “strategic” back into the mission and be more purposeful, so it’s now looking at low-income communities.
- There’s around $50 million and many projects right now in Pittsburgh and Allegheny County are affordable housing. Opportunity Zones are a good place to dovetail this money, and neighborhoods where other groups are actively supporting development, such as the Urban Renewal Authority.
- Desmone does 4 to 6 low-income housing projects each year and knows the level of competition for those dollars has increased tenfold over the past 4 or 5 years. An additional mechanism is needed to make them go forward, even though most are good projects. It’s just tough to win the competition for money because resources are so scarce.
- Desmone has noticed the size of projects in the pipeline has increased significantly in the past year, and institutional dollars are chasing larger projects now.
- eFacility LLC currently has been focusing on supplying water and power but, with fewer real estate projects, is looking for efficiencies and in industries that are tangent to real estate, things are picking up. Current clients that are very active include the Pittsburgh Water and Sewer Authority and Allegheny Health Network.
- HB Development LLC has three affordable housing developments that are going through financing stages; one has approval and site work in the process of entitlement. There’s a good chance that, weather permitting, two of the three will be built this year.
- HB Development is close to announcing a development partnership with the URA in the lower Fifth Avenue area.
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