Pittsburgh June 2023 Key Take-Aways
• We see opportunities for the bank and developer transactions (Carlos Ainsworth, Dollar Bank)
• Mccandless Crossing, mixed use retail, multifamily and is 100% leased out. Working on a few outparcels. Looking to introduce some retail on it over by the Lowe’s area. Full until the 10 year lease is up. A few big boxes are coming up for lease. (Todd Pifer, AdVenture Development, LLC)
• The accounting market is exploding and has been busy the last ten years. Most people do not file their own taxes anymore (Don Johnston and David Swisher – Grossman Yanak & Ford)
• Converting One Gateway to apartments. Working with affordable new construction with Fourth Street Group as well as redeveloping properties on Penn Avenue – a bunch of apartments above retail and commercial – plenty of parking (David Serbin, Fourth Street Group)
• There will be a tsunami coming when these loans are coming due, a thousand units and a ton of new supply, the problem is not everyone will be able to afford the payment. I would love this group to be part of the solution (Gene Boyer, Burns Scalo Real Estate)
• 9% LIHTC are optimal for brand new construction and complex rehabs and can take several years for the process to be complete and to receive funding. There is a 1 and 8 chance that you will be awarded the first year. Pittsburgh got 6 or so awards of the 9% LIHTC (David Serbin, Fourth Street Group).
• 4% LIHTC can work as well and they are not competitive. They work best in a refinance of a former 9% situation and/or something that needs refurbishments (bathrooms, kitchens etc.). (David Serbin, Fourth Street Group).
• They try not to award more than one developer and they try to spread it out amongst different neighborhoods; the only game in town is the 9% LIHTC for affordability (David Serbin, Fourth Street Group).
• RCAP is also available for residential but they get competitive and do have some limitations. They often kick back applications for minimal errors which can take time and burn interest. It’s reimbuble; therefore, you have to spend the money first and do it all right and then ask for the grant money. Political – you can lobby for this. They focus on steel and want a percentage to be locally sourced. (David Serbin, Fourth Street Group).
• In regards to RCAP, lot of them focus on job creation as well – (Jonathan Altman Metz Lewis Brodman Must O’Keefe LLC).
• Section 8 was a good solution – the government mortgage built the building and guaranteed the rent; however, this was mismanaged which may affect it replicating but it was an easy solution (John Watt, Valbridge Property Advisors).
• TIF (Tax increment financing) is another option – there hasn’t been a TIF in a few years because they had a bad name for a while (did a lot of trial and in neighborhoods that didn’t need it). For instance, Pittsburgh Mills (David Serbin, Fourth Street Group).
• Another previous solution was the Hope 6 program; however, now the buildings are falling apart
• Construction costs are not going back down but thankfully the labor wages are going up (Gene Boyer, Burns Scalo Real Estate).
• There is some push to get affordable workforce housing in place (Carlos Ainsworth, Dollar Bank).
• Workforce housing is between 80-120 AMI, affordable to low and very low income under 80% and under 50% is very low (David Serbin, Fourth Street Group).
• Office to residential conversation – 80% AMI is where we target 60K a year even 80% AMI you still have a delta of $105/square foot which can be problematic. (Gene Boyer, Burns Scalo Real Estate).
• There are a great deal of commercial buildings coming on the market (Gene Boyer, Burns Scalo Real Estate).
• Seeing a lot of deals come through that are interest-only for three years. They want to test the market. Renovate and pay interest only and when the interest rates drop, lock in permanent debt (5-6%). There’s a lot of hoping and praying that this is the case from potential borrowers (Carlos Ainsworth, Dollar Bank).
• Home builders report not being able to get lots fast enough (Gene Boyer, Burns Scalo Real Estate).
• Buildings worth 20-30% less than pre-pandemic/losing the equity that you have in the building – what is the bank going to do with it? 15% occupancy. Lenders don’t want them. (Jonathan Altman, Metz Lewis Brodman Must O’Keefe LLC)
• Bank in trouble/balance sheet – subletting for occupancy cost old buildings can be problematic because of the mechanics being hard to work with and trouble to make into housing – each apartment needs a kitchen (David Serbin, Fourth Street Group).
• Fewer people not cooking these days – possible solutions: not having kitchens and/or co-living spaces. Going all electric now when looking at new development (Terrence Oden, Desmone Architects)
• Urban Planning thoughts – connect Market Square/Penn Avenue find other nodes and viable buildings to build up Downtown. Working on converting a building downtown now that was a previous call center (Brian Gosey, Dollar Bank).
• If you put new housing downtown – people are moving into it (John Watt, Valbridge Property Advisors).
• Desmone Architects has moved into the multi-family space in the last 10+ years in the following areas: Strip District, North Hills, South Hills – essentially has covered the whole region. (Terrence Oden, Desmone Architects).
• Terrence Oden presents on converting commercial space to residential and highlights three renovations Desmone has completed/in process of completing as well as one PHFA funded project (Terrence Oden, Desmone Architects)
o 1st highlight: 11 high end condos in Strip District from 1950’s warehouse building with private garages on 25th and Smallman.
o 2nd highlight: Brewer’s Block project Liberty Avenue Strip meets Lawrenceville large project wrapping up in July 2023 converted from an existing warehouse. A few warehouses had to be torn down – three buildings across from Iron City Brewery.
o A unit facing downtown 2-bedroom getting $4,200/month – the range is $4,500-$4,600 rent. Sassafras – these are renting quite well. 30 people in the next month looking to move in. Includes townhomes for some diversity – “creating cities” creating urban space by including courtyards, swimming pool, rooftop pool, variety.
o 3rd highlight: 327 South Negley -Synagoge/Old Charter school. PHFA funded project. 45-unit building reno (90% are affordable in the Garfield neighborhood which is meeting a demand) 13 million passive house inspired super insulated building. Salvaged the stained glass. Solar panels – 60% of needs. Converted the West and South wing of the school – kept the steel. Rotunda is completely separate and another group is renovating it to be a community center.
o PHFA program has a pot of a million dollars you can get a fraction through the application process.
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