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September 20, 2022 at 6:00 am · · Comments Off on The Right Equation for Responsible Development: Spotlight on 40 Free Street (Portland)

The Right Equation for Responsible Development: Spotlight on 40 Free Street (Portland)

Each year, the Maine Real Estate & Development Association (MEREDA) recognizes some of the state’s most “noteworthy and significant” real estate projects, completed in the previous year. The exemplary projects from across the state, completed in 2021, not only embody MEREDA’s belief in responsible real estate development, but also exemplify best practices in the industry, contributing to Maine’s economic growth by significant investment of resources and job creation statewide.

This year, MEREDA honored projects from Portland to Biddeford to Bangor, with each receiving special recognition at MEREDA’s 2022 Spring Conference on May 24th.

In a multi-part series exclusive to the Maine Real Estate Insider, we’ll provide an up-close look at the most notable commercial development projects of the past year that are helping to fuel Maine’s economy in terms of investment and job creation. MEREDA is proud to recognize responsible development based upon criteria including environmental sustainability, economic impact, energy efficiency, difficulty of the development, uniqueness, social impact and job creation.

MEREDA’s 2021 Top 7 recipients include:

Harold Alfond Hall, Husson University (Bangor)
Harnois & Emery Apartments, Westbrook Housing, Westbrook Development Corporation, and Anew Development (Westbrook)
Thornton Heights Commons, South Portland Housing Development Corporation (South Portland)
Riverdam Mill Complex, Port Property (Biddeford)
40 Free Street, JB Brown & Sons & Ryan Senatore Architecture, (Portland)
Deering Place, Zachau Construction & Avesta Housing, (Portland)
Children’s Museum + Theatre Maine, Zachau Construction (Portland)

Please join us this week in celebrating 40 Free Street.

MEREDA:  Describe the building and project.

40 Free Street: Located in Portland’s Old Port, 40 Free Street is a new construction mixed-use building made up of five retail spaces at the street level and 51 market-rate apartment units on its upper floors. Prior to its development, the project site was occupied by a surface parking lot which limited density in Portland’s downtown urban core and fractured the historic streetscape along Free Street. Through development of an energy-efficient building, offering environmental, economic, and social benefits, the 40 Free Street project provides an architecturally holistic solution for its site and for downtown Portland.

MEREDA:  What was the impetus for this project?  

40 Free Street: We felt the break in the pedestrian street wall was problematic, as were cars entering and exiting between buildings. This, coupled with the need for housing, we felt the project would be successful.

MEREDA:  That sounds like quite a process.  How long were you in the planning stages before construction started?

40 Free Street: We started the planning/development process in early 2019, commenced construction in the summer of 2019 and opened in April 2021, so the full process was about 27 months.

MEREDA:  Tell us about the most challenging aspect of getting this project completed.

40 Free Street: Site work is always a challenge as is the final punch list for obtaining a Certificate of Occupancy, which was further complicated by the Pandemic.

MEREDA:  Something unexpected you learned along the way was….

40 Free Street: That you can plan for typical bumps with any project, but the Pandemic was a new twist that we needed to manage through.

MEREDA:  Now that it’s complete, what feature of the project do you think makes it the most notable? 

40 Free Street: How the building fits seamlessly into the urban fabric of Free Street.

September 6, 2022 at 6:00 am · · Comments Off on The Right Equation for Responsible Development: Spotlight on Harnois & Emery Apartments (Westbrook)

The Right Equation for Responsible Development: Spotlight on Harnois & Emery Apartments (Westbrook)

Each year, the Maine Real Estate & Development Association (MEREDA) recognizes some of the state’s most “noteworthy and significant” real estate projects, completed in the previous year. The exemplary projects from across the state, completed in 2021, not only embody MEREDA’s belief in responsible real estate development, but also exemplify best practices in the industry, contributing to Maine’s economic growth by significant investment of resources and job creation statewide.

This year, MEREDA honored projects from Portland to Biddeford to Bangor, with each receiving special recognition at MEREDA’s 2022 Spring Conference on May 24th.

In a multi-part series exclusive to the Maine Real Estate Insider, we’ll provide an up-close look at the most notable commercial development projects of the past year that are helping to fuel Maine’s economy in terms of investment and job creation. MEREDA is proud to recognize responsible development based upon criteria including environmental sustainability, economic impact, energy efficiency, difficulty of the development, uniqueness, social impact and job creation.

MEREDA’s 2021 Top 7 recipients include:

Harold Alfond Hall, Husson University (Bangor)
Harnois & Emery Apartments, Westbrook Housing, Westbrook Development Corporation, and Anew Development (Westbrook)
Thornton Heights Commons, South Portland Housing Development Corporation (South Portland)
Riverdam Mill Complex, Port Property (Biddeford)
40 Free Street, JB Brown & Sons & Ryan Senatore Architecture, (Portland)
Deering Place, Zachau Construction & Avesta Housing, (Portland)
Children’s Museum + Theatre Maine, Zachau Construction (Portland)

Please join us this week in celebrating Harnois & Emery Apartments.

MEREDA:  Describe the building and project.

Harnois & Emery Apartments:  Harnois & Emery Apartments is a two-phased, 91-unit apartment complex at 67 & 70 Ruth Hunton Court in Westbrook. Completed in January of 2021, Phase I is the 5-story, 61-unit Robert Harnois Apartments. In November of 2021, Phase II was completed; the 4-story, 30-unit Lewis Emery Apartments. These combined 91 apartments serve low-income Westbrook seniors with high-quality, beautiful, and affordable homes at a time of unprecedented housing need in the community. Resident amenities include outdoor gathering spaces, universal accessibility, a beautifully furnished 2,000 s.f multi-purpose room, a fitness center, laundry and community rooms, and a meandering nature path with benches set at scenic viewpoints.

The Harnois & Emery campus is set high on Deer Hill in a quiet, idyllic wooded setting providing residents with a calming connection to nature. At the same time, it is a short walk to Westbrook’s Main Street shopping district including the Kohl’s and Rock Row plazas as well as a Metro bus stop providing easy access across greater Portland.

Harnois & Emery Apartments were funded by a complex stack of capital sources and financial instruments made possible by MaineHousing, Boston Financial, the City of Westbrook, Westbrook Housing, and Saco & Biddeford Savings Institution. Westbrook Housing and Anew Development are grateful to the Harnois & Emery design and construction teams. Benchmark Construction provided excellent planning and oversight as the project’s Construction Manager. Archetype Architects, Gorrill-Palmer provided the innovative design and engineering services that
physically transformed the property and the attorneys at Drummond Woodsum guided the project with expert legal counsel.

Thanks to the combined efforts of the entire Riverview Terrace team, these 91 units of quality senior housing have been developed to serve Westbrook area seniors for generations to come in an environment that supports them not just with financial security but with independence, comfort, safety, social connectivity, and health and well-being.

MEREDA:  What was the impetus for this project?  

Harnois & Emery Apartments: Westbrook Housing recognized a unique opportunity to address the unmet housing needs of lower-income Westbrook Seniors by developing a roughly 5.5-acre parcel of urban infill land using a blend of available Federal, State, local and private housing resources.

MEREDA:  That sounds like quite a process.  How long were you in the planning stages before construction started?

Harnois & Emery Apartments: Conceptual planning and due diligence began in 2013 and the project was finally fully permitted and funded by 2019.

MEREDA:  Tell us about the most challenging aspect of getting this project completed.

Harnois & Emery Apartments: The challenges facing the project were many. It started with the physical challenges presented by the site. Steep slopes, ledge, cross easements, and traffic control all presented significant design challenges. The project would never have moved past a concept without the skill and dedication of the design team at Archetype Architects and the engineering oversight of Steve Bushey at Gorrill Palmer. Given the high development costs created by the infill challenges presented by the site, the project was more difficult to fund than many. If not for the steadfast dedication of MaineHousing, Boston Financial, the City of Westbrook, and Westbrook Housing, the project would never have been possible.

MEREDA:  Something unexpected you learned along the way was….

Harnois & Emery Apartments: The project taught us once again the massive importance of assembling a winning project development team. Affordable housing development is seldom or predictable but with a high-capacity, dedicated, and well-coordinated team of regulators, funders, designers, builders in place, challenges to the project’s success can be overcome.

MEREDA:  Now that it’s complete, what feature of the project do you think makes it the most notable? 

Harnois & Emery Apartments: As developers, we have spent nearly 10 years planning and negotiating Harnois & Emery’s complex interplay of dollars, dates, and details. At the end of the day, however, the most notable outcome of the project is the immensely positive impact it has on its residents and the community at large. The 91 seniors who now call Harnois & Emery home now live with improved economic security, physical comfort, and social support. All of the developers’ hard work and challenges melt away in memory when they meet residents and hear them explain how important the project is to their lives and to members of their families and community support networks. While Harnois & Emery are, on their face, real estate developments, at their heart they are great feats of human and community development.

August 30, 2022 at 6:00 am · · Comments Off on Lewiston-Auburn Multifamily Market Update

Lewiston-Auburn Multifamily Market Update

By Noah Stebbins, Associate Broker, The Boulos Company

The multi-family market is always evolving. Rising interest rates, inflation, and government policies have caused some commercial real estate investors to re-trade or pull out of deals altogether, as they navigate the tumultuous economic environment we find ourselves in. However, the ballooning costs in the for-sale housing market hasn’t slowed down (yet), leading to increased demand in the apartment rental market, which benefits multi-family owners by driving up valuations through increased rents as prospective homebuyers get squeezed out of the housing market. Lewiston-Auburn is no exception to these market conditions. According to the Vitalius Real Estate Group’s 2022 “Multi-Family Forecast for Southern Maine,” Lewiston-Auburn has experienced 25% rent increases over the last couple of years, while multi-family sale prices have increased by nearly 35% from 2020-2021.1  Furthermore, investors have taken notice. There are several new multi-family projects in the pipeline, and investors who traditionally avoided the twin cities are now beginning to look at the LA market with fresh eyes.

YIMBYest City in the Region?

As cities and towns across the state and the country enact governmental policies in favor of NIMBY opposition regarding new development projects aimed to combat the housing crisis, the city of Auburn has taken a different approach. Auburn has goals to increase its population by more than a quarter over the next few years while they construct 2,000 new housing units by 2025. According to a recent article by Discourse Magazine, 2,000 new housing units may seem relatively small, however, to put it in perspective, “it would be like New York City adding 800,000 new homes and more than 2 million new residents.”2  So far, Auburn seems on track to reach its goal. As of June 2022, there are several permitted construction projects in the works, including 106 single family homes and duplexes and 285 new apartment projects.3  Furthermore, Auburn offers incentives aimed at increasing new housing developments. In efforts to entice developers, Auburn offers a maximum of $250,000 per project to assist with substantial development since Auburn’s City Council has allocated $1 million toward downtown redevelopment projects.

On the contrary, other cities and towns throughout Maine have taken the route. The city of Portland, who implemented a new Inclusionary Zoning Provision and arguably one of the strictest rent control policies in the country, has exasperated several new housing development projects, leading to higher price points, fewer buyers, and less affordable residential housing. Further down the coast, Kittery officials blocked a proposed $300 million housing development earlier in July. The Dennett Landing development would have brought 900 new housing units with 10% of the units being classified as affordable housing along with over $3 million a year in tax revenue to the town.4

Maine desperately needs new housing as we currently have the oldest housing stock in the nation. According to Representative Ryan Fecteau, Speaker of the Maine House of Representatives, “we need to be building about 1,000 units each year to meet demand. From 2014-2020, we were building only 25% of that on average.”5  Lewiston-Auburn has stepped up, as there are several new housing developments in various phases of the development pipeline.

Across the River

In 2021, the city of Lewiston received a $30 million federal Choice Neighborhoods Implementation Grant from the U.S. Department of Housing and Urban Development. The grant is expected to leverage $100 million in additional development money from tax credits and other sources aimed at revitalizing the Tree Street neighborhoods. Last spring, the city of Lewiston approved the first redevelopment project under the grant, which will be a new 74-unit downtown housing development. This is the first of several projects in the works to transform the downtown area.6

Notable Sales

A few notable sales that have taken place over the past year include the following:

84 Lisbon St, Lewiston
• Sale price=$745,000
• #/units=6 (included one 1st floor commercial unit)
• $/unit=$124,167

79 Ridgewood Ave, Lewiston
• Sale price=$710,000 (asking $600,000)
• #/units=6
• $/unit=$118,333

1 Buckley St, Lewiston
• Sale price=$925,000
• #/units=8
• $/unit=$115,625

1172 & 1176 Lisbon St, Lewiston
• Sale price=$3,404,000 (asking $3,199,000)
• #/units=37
• $/unit=$92,000

251 Minot Ave, Auburn
• Sale price=$700,000
• #/units=12
• $/unit=$58,333

According to comparable sales provided by MLS from 2020-21, there wasn’t a single multi-family sale in Lewiston-Auburn that sold for over $100,000/unit. It’s important to note from 2021-22, record low interest rates, inflation, and pent-up demand from the investor community likely led to record-setting sales; however, I don’t anticipate a slow-down in Lewiston-Auburn’s multi-family market for the coming year.

Prediction

As rent control and NIMBY organizations restrict new development and deter outside investment in other areas of the state, I predict investment activity in Lewiston-Auburn to only increase, while following a similar trajectory as Biddeford-Saco. Biddeford is now one of the hottest markets in the state, largely due to the redevelopment of the vacant mills and the removal of the former MERC site. There are still several underused or vacant mills, especially in Lewiston, which will lead to plenty of redevelopment opportunities. The time has never been better for investors to consider expanding their portfolios into the Lewiston-Auburn market as there are deals to be had, and the competition pool is limited compared to other areas of the state.

Sources:
1. https://vitalius.com/documents/Vitalius-2021-Multi-Family-Report.pdf
2. https://www.discoursemagazine.com/politics/2022/05/18/the-yimbyest-city in America/
3. https://www.sunjournal.com/2022/07/01/auburn-notches-another-banner-year-for-growth/
4. https://www.wmtw.com/article/kittery-officials-kill-proposed-dollar300-million-housing-development/40608524
5. https://mereda.org/wp-content/uploads/2022/01/2022-MEREDA-Slides-Speaker-Fecteau-Keynote.pdf
6. https://www.sunjournal.com/2022/05/18/lewiston-approves-contract-zone-for-first-choice-neighborhoods-redevelopment-project/

Original article published July 27, 2022, https://boulos.com/lewiston-auburn-multi-family-report/

August 16, 2022 at 6:00 am · · Comments Off on The Right Equation for Responsible Development: Spotlight on Riverdam (Biddeford)

The Right Equation for Responsible Development: Spotlight on Riverdam (Biddeford)

Each year, the Maine Real Estate & Development Association (MEREDA) recognizes some of the state’s most “noteworthy and significant” real estate projects, completed in the previous year. The exemplary projects from across the state, completed in 2021, not only embody MEREDA’s belief in responsible real estate development, but also exemplify best practices in the industry, contributing to Maine’s economic growth by significant investment of resources and job creation statewide.

This year, MEREDA honored projects from Portland to Biddeford to Bangor, with each receiving special recognition at MEREDA’s 2022 Spring Conference on May 24th.

In a multi-part series exclusive to the Maine Real Estate Insider, we’ll provide an up-close look at the most notable commercial development projects of the past year that are helping to fuel Maine’s economy in terms of investment and job creation. MEREDA is proud to recognize responsible development based upon criteria including environmental sustainability, economic impact, energy efficiency, difficulty of the development, uniqueness, social impact and job creation.

MEREDA’s 2021 Top 7 recipients include:

Harold Alfond Hall, Husson University (Bangor)
Harnois & Emery Apartments, Westbrook Housing, Westbrook Development Corporation, and Anew Development (Westbrook)
Thornton Heights Commons, South Portland Housing Development Corporation (South Portland)
Riverdam Mill Complex, Port Property (Biddeford)
40 Free Street, JB Brown & Sons & Ryan Senatore Architecture, (Portland)
Deering Place, Zachau Construction & Avesta Housing, (Portland)
Children’s Museum + Theatre Maine, Zachau Construction (Portland)

Please join us this week in celebrating Riverdam.

MEREDA:  Describe the building and project.

Riverdam: Riverdam consists of two 19th century industrial buildings, nestled along the banks of the Saco River in Biddeford’s vibrant and evolving Mill District. Built in 1842 to produce machinery for the area’s booming textile industry, the historic Riverdam Mill Complex had been mostly underutilized and vacant but for two commercial tenants in recent years. This renovation project revitalized the Riverdam Mill Complex into the distinguished living community it is today. Riverdam is now fully leased and features 71 modern units and a variety of local commercial tenants, including restaurant and brewery, Blaze Brewing Co. and wellness co-op space, ToGather.

Throughout the project, it was of the utmost importance to honor the rich history of the buildings and preserve the intricate details of each space. Exposed brick, beams, and high ceilings were combined with elevated community amenities – including a state-of-the-art fitness center, rooftop space, and resident lounge – to create a distinctive and desirable live-work-play environment right on the Saco River.

MEREDA:  What was the impetus for this project?  

Riverdam:  Built to accommodate the heightened demand of Biddeford’s housing market, Riverdam aimed to create much needed housing while fostering community connections within downtown Biddeford. The purchase and redevelopment of the Riverdam Mill Complex contributes to the City of Biddeford’s planned growth of downtown’s historic Mill District.

A primary goal throughout the project was to preserve the authentic characteristics of a 19th century industrial building while offering amenities unmatched in the area – including the uniqueness and individuality of each floorplan within the Riverdam community. Each Riverdam unit showcases an entirely unique floorplan, leveraging the building’s historic features and thoughtful preservation process.

MEREDA:  That sounds like quite a process.  How long were you in the planning stages before construction started?

Riverdam:  The planning stages of this project took about 8 months to complete. Both mill properties were purchased in 2019, with the first phase of construction beginning in early 2020. Our A&D team worked hand-in-hand with our in-house construction team to create floorplans that both embraced and enhanced the characteristics of Riverdam’s “industrial contemporary” design. In 2021, we officially capped off construction on our last round of one-bedrooms and completed final touches to our amenity spaces.

MEREDA:  Tell us about the most challenging aspect of getting this project completed.

Riverdam:  As the Riverdam Mill Complex is a historic property, it did not come without surprises or challenges! During renovations, the interiors of both buildings were fully gutted. We preserved the site’s original brick, beams, and oversized mill windows for reinstallation.

Although challenging, historic rehabilitation projects are always incredibly gratifying as they breathe new life into an underused building and can revitalize the surrounding area. One of the major challenges was a structural issue within Building 3. A 2,000 square-foot area of the masonry wall was compromised, requiring careful attention. This back corner was ultimately reconstructed into a riverfront easement that allowed for the expansion of the RiverWalk – a walking bridge and trail which offers pedestrian access to the Saco River.

MEREDA:  Something unexpected you learned along the way was….

Riverdam:  The impact of collaboration. From the performance of our construction team to the vision of our architecture and design teams, the level of collaboration and quality was at a level higher than we could’ve ever hoped for. One of the most impactful and mutually beneficial elements of collaboration was between our team and the City of Biddeford. Stemming from the structural challenges at Building 3, the City of Biddeford provided financing for the project in exchange for our team’s assistance in expanding the RiverWalk and creating ADA access via an elevator. This was a true win-win situation, as it created an even closer partnership with the City of Biddeford and enabled us to prioritize the surrounding community.

Riverdam highlights the positive impact of a community effort – offering vital housing for the City’s growing population while fostering a riverside destination for neighbors, residents, and patrons within the Biddeford-Saco area and beyond.

MEREDA:  Now that it’s complete, what feature of the project do you think makes it the most notable? 

Riverdam:  It’s hard to pick just one! From the individual floorplans to the historic features to its scenic location, Riverdam is truly unique. Riverdam’s setting may be its most notable feature, as this applies to its geographic location along the Saco River as well as its setting within the Biddeford-Saco community and the nearby RiverWalk.

Riverdam sits directly on the river’s edge overlooking a series of waterfalls. Our direct access to the RiverWalk opens up the community to not only our residents, but to all visitors and neighbors of Biddeford. We’re proud to put forth such a distinct community and to play a role in Biddeford’s economic, culinary and cultural renaissance.

August 9, 2022 at 6:00 am · · Comments Off on Highlighting the Construction Component of the 2022 MEREDA Index

Highlighting the Construction Component of the 2022 MEREDA Index

On May 24, Shannon Richards, Founder of Hay Runner, was a commentator for the Maine Real Estate & Development Association’s (MEREDA’s) 2022 MEREDA Index. Shannon’s comments on the Commercial Sector follow Economist Charles Colgan’s analysis for 2021. 

The MEREDA Index is a measure of real estate activity designed to track changes in Maine’s real estate markets. The Index is a composite of nine seasonally adjusted measures reflecting both new development and transactions involving existing properties and it covers both the commercial and residential markets statewide. The most recent edition covers the year 2020 and provides commentary on the Commercial, Residential, and Construction sectors. The MEREDA Index for 2021 is 116.3

THE CONSTRUCTION COMPONENT:  96.3

[Charles Colgan Analysis] “The Construction Employment Index was up 0.8% in 2021 over 2020. The seasonally adjusted index was strongest in the second and third quarter, but employment tailed off in the first and fourth quarters. The large volume of commercial transactions and growth in square feet together with growth in residential permits should probably have resulted in more of an increase in construction employment than was actually observed. The rather modest increase very likely reflected the overall labor shortages that characterized the economy throughout 2021.”

[Shannon Richards, Founder, Hay Runner]  “I picture construction’s share of the Maine economy like a huge sound system – the volume cranked up too high and base thumping hard…exciting and energizing, but after a while it feels like we need to dial it back a bit. The pressure is high and not letting up. Here’s why:

The construction market in Maine crosses many sectors – industrial, commercial, retail, and residential. While a little different for each, one thing remains constant: more than enough work, not enough bodies. Baby-boomers are retiring in droves, and news flash – there are not enough Gen-Xers to take over. Millennials are starting to fill the gaps, but experience is a desirable and uncommon differentiator. These labor shortages are a critical factor in the success of our construction businesses, and the economy overall. Right now it’s putting a major restriction on how much and how fast we can build… and, trust me, there is a waiting list.

I see three other factors driving the construction market and adding to the pressure: cash, remote work, and home improvement. With lots of available cash and rates still low, money is looking for places to diversify and return to investors. This is helpful to commercial and industrial locations… heck, even hotels are bouncing back. Covid may have shaken the tree and helped solidify areas of opportunity. Next, remote workers ‘from away’ are relocating to ‘Vacationland’ and turning it into ‘Staycationland.’ When they come, they bring their salaries and sometimes their businesses. Lastly, Mainers of all types have been on lockdown and want to improve or expand their homes. The trend I have seen is clients are saving more and their spending habits have changed. Family life has changed, too, thanks to the ‘work from home’ model…and oh, yeah, many had ‘kids at school’ working next to them so they desperately needed more space.

Focusing on 2021 residential construction, activity was strong despite Covid – especially along the coast. The aging housing stock in Maine means most existing housing needs to be renovated and many homeowners lack the experience or desire to work on their homes themselves. With a critically low supply of housing and the federal infrastructure stimulus coming, we may see more people settle here, which will only increase the pressure to build new or improved homes. A state with such a modest population is bound to feel changes like this across the board and it’s likely this uncomfortable transition will take years to play out.”

 

August 2, 2022 at 6:00 am · · Comments Off on Highlighting the Residential Component of the 2022 MEREDA Index

Highlighting the Residential Component of the 2022 MEREDA Index

On May 24, Dan Brennan, Director of MaineHousing, was a commentator for the Maine Real Estate & Development Association’s (MEREDA’s) 2022 MEREDA Index. Dan’s comments on the Residential Sector follow Economist Charles Colgan’s analysis for 2021. 

The MEREDA Index is a measure of real estate activity designed to track changes in Maine’s real estate markets. The Index is a composite of nine seasonally adjusted measures reflecting both new development and transactions involving existing properties and it covers both the commercial and residential markets statewide. The most recent edition covers the year 2020 and provides commentary on the Commercial, Residential, and Construction sectors. The MEREDA Index for 2021 is 116.3

THE RESIDENTIAL COMPONENT:  120.8

[Charles Colgan Analysis] “All components of the residential Index showed growth in 2021 over 2020. Existing unit sales and mortgage  Originations grew by about 5% each, but demand clearly exceeded supply in the residential market because the median price index grew by over 14%. The median price for residential sales hit an all-time high of $303,000 in the third quarter. With an Index value over 150 in the second half of the year the median home price in Maine has grown by more than 50% since 2006. This high price probably suppressed sales of existing units to some extent, but it definitely had an effect on housing construction. The index for residential permits grew by 24% over 2020.”

[Dan Brennan, Director of MaineHousing]  “Buying a house in Maine has never been harder. Home prices are soaring, and demand is at a peak. Unfortunately, this red-hot residential marketplace is leaving more and more Mainers out of the equation.That’s why affordable housing in Maine remains an important topic.

Creating enough housing to fill the ever-growing demand has never been more challenging than over the last two years of the Covid-19 pandemic. We also have never had a greater opportunity to make large gains in boosting our total housing inventory, thanks in large part to the support coming from both Augusta and Washington, D.C., as well as our municipal partners in places like Old Orchard Beach and Auburn. While the challenges are many, the future also looks promising with so many new projects on the horizon.

MaineHousing, along with partners across the affordable housing landscape, broke development records in 2021 and currently has the largest pipeline in our history. 524 new rental units were put online, creating more housing for families, older adults, the disabled, and those needing extra support. This represents a $121 million investment that is fueling economies from Belfast to Biddeford. Many of those new units have been opened in Maine’s larger service-center communities of Bangor and Portland, where the housing shortage has driven rents and home prices to astronomical levels.

MaineHousing staff, the construction community, and our development partners – both public and private – have adapted well to the challenges presented by ongoing supply chain and labor constraints. From advances in energy efficiency technologies to fast-tracked zoning changes, we have found innovative solutions that are helping us continue to produce units in these difficult times.

As we saw skyrocketing sales prices and an ongoing inventory shortage in 2021, our single family First Home mortgage products trailed off slightly. That said, we maintained record-low interest rates, below three percent, while issuing 725 new First Home mortgages totaling over $114 million. Most of those mortgages also qualified for our Advantage Program, providing eligible borrowers with a $3,500 grant for down payment and closing costs. That program alone provided $2 million in home buying assistance to 97 percent of those approved for First Home mortgages. While the market remains very challenging, we are optimistic we will eclipse our 2021 production numbers in 2022 allowing even more Maine
families to build equity in a home they own.”

July 26, 2022 at 6:05 am · · Comments Off on Easing the potential burden of abandoned 401(k) accounts

Easing the potential burden of abandoned 401(k) accounts

By David Stone, Manager | CPA, MBA, CFE at BerryDunn

Read this if you are a plan sponsor of a 401(k) plan.

The trend of US workers leaving their jobs and employers struggling with high levels of employee turnover continues to gain momentum. Another 4.5 million US workers quit their jobs in November alone, according to data from the US Bureau of Labor Statistics. Meanwhile, the number of job openings in the US remains elevated at 10.6 million, as companies across sectors and industries continue to have a hard time recruiting and retaining employees.

How are the issues related to what is now called the “Great Resignation” affecting plan sponsors in particular? The current environment not only makes it hard to build and manage an effective workforce, but plan sponsors also may face problems down the road when departing workers leave their 401(k) balances with their previous employers. These abandoned accounts can lead to penalties, additional administrative fees, and administrative challenges for employers.

How can plan sponsors resolve these issues?
Fortunately, there are some easy ways for plan sponsors to limit the potential burden of abandoned 401(k) accounts. Plan sponsors should start by ensuring that they have up-to-date contact information before an employee’s final day with the organization. Cell phone numbers, email addresses, and mailing addresses are critical data points to gather. Email addresses and other digital contact information are especially important in today’s increasingly digital world.

Existing rules can help employers resolve smaller abandoned accounts. By law, employers are allowed to cash out small, vested accounts of $1,000 or less. For vested account balances between $1,000 and $5,000, employers are permitted to move these assets to an Individual Retirement Account.

Currently, there is no specific guidance for account balances larger than $5,000. Because of this, employers have relied on Field Assistance Bulletin (FAB) 2014-01, which is meant for participants in terminated defined contribution plans. Under this bulletin, plan sponsors are instructed to send a certified letter to the participant’s last known address; keep records on attempts to reach the missing participant; ask co-workers how to find the missing participant; and call the missing participant’s cell phone, among other instructions.

To help mitigate these issues in the future, some employers are adopting auto-portability benefits. These tools automatically transfer small balances to new employers. Plan sponsors that offer auto-portability benefits should explain how this tool works to departing employees.

Plan document language on forfeitures and cash-outs
For participants who leave before they are fully vested in a 401(k) plan, employer contributions are typically placed in forfeiture accounts. Employers can write this section of the plan document in a variety of ways, so it is crucial to understand how your specific plan establishes the timing and use of the forfeiture account.

For example, forfeitures can be paid at the time of termination or when the participant hits a five-year break in service. Employers wanting to access non-vested amounts more quickly should consider amending the plan document to allow access to non-vested amounts at the time of termination (as opposed to the time of distribution).

While plan documents can set cash-out thresholds (within the minimum and maximum allowable amounts), plans may elect the small balance cash-out option for accounts under $5,000. Rollover balances also can be disregarded when determining the $5,000 threshold, but the plan document must include this caveat.

Opportunity in the next plan restatement cycle
Every six years, the Internal Revenue Service requires employers with qualified, pre-approved plans to re-write or restate their basic plan documents. The current restatement cycle for defined contribution plans will close on July 31, 2022.

The current restatement cycle provides an opportunity to amend your plan to make it beneficial to employers and employees when team members leave your organization. Your advisor can help review your plan documents and make the most of your plan restatement process in the context of current trends in the labor market and your organization’s objectives. As always, if questions arise, please don’t hesitate to contact our Employee Benefits Audit team.

Original article published on March 8, 2022, https://www.berrydunn.com/news-detail/easing-the-potential-burden-of-abandoned-401k-accounts#overview

July 19, 2022 at 6:00 am · · Comments Off on The Right Equation for Responsible Development: Spotlight on Thornton Heights Commons (South Portland)

The Right Equation for Responsible Development: Spotlight on Thornton Heights Commons (South Portland)

Each year, the Maine Real Estate & Development Association (MEREDA) recognizes some of the state’s most “noteworthy and significant” real estate projects, completed in the previous year. The exemplary projects from across the state, completed in 2021, not only embody MEREDA’s belief in responsible real estate development, but also exemplify best practices in the industry, contributing to Maine’s economic growth by significant investment of resources and job creation statewide.

This year, MEREDA honored projects from Portland to Biddeford to Bangor, with each receiving special recognition at MEREDA’s 2022 Spring Conference on May 24th.

In a multi-part series exclusive to the Maine Real Estate Insider, we’ll provide an up-close look at the most notable commercial development projects of the past year that are helping to fuel Maine’s economy in terms of investment and job creation. MEREDA is proud to recognize responsible development based upon criteria including environmental sustainability, economic impact, energy efficiency, difficulty of the development, uniqueness, social impact and job creation.

MEREDA’s 2021 Top 7 recipients include:

Harold Alfond Hall, Husson University (Bangor)
Harnois & Emery Apartments, Westbrook Housing, Westbrook Development Corporation, and Anew Development (Westbrook)
Thornton Heights Commons, South Portland Housing Development Corporation (South Portland)
Riverdam Mill Complex, Port Property (Biddeford)
40 Free Street, JB Brown & Sons & Ryan Senatore Architecture, (Portland)
Deering Place, Zachau Construction & Avesta Housing, (Portland)
Children’s Museum + Theatre Maine, Zachau Construction (Portland)

Please join us this week in celebrating Thornton Heights Commons.

MEREDA:  Describe the building and project.

Thornton Heights Commons:  Thornton Heights Commons is a new four-story mixed-use affordable housing and commercial building, with associated parking, community open space and three new single-family house lots located at 611 Main Street in South Portland. The residential portion of the building is comprised of 42 apartments and community amenities. The commercial portion of the building includes 7,000 s.f. of dividable space, an outdoor seating area located along Main Street, and a satellite police station. In addition, the property includes a neighborhood open space, community garden, and three new single-family house lots.

MEREDA:  What was the impetus for this project?  

Thornton Heights Commons:  The South Portland Housing Development Corporation (SPHDC) adopted a new strategic plan in 2016 that called for the organization to increase the development of new affordable housing. In response to these goals, the SPHDC identified the 611 Main Street property as an ideal development site for a mixed-use affordable housing development. In addition to the site’s advantageous location and properties, the project would build upon the City of South Portland’s efforts to revitalize the Main Street corridor in Thornton Heights. The City has installed new sidewalks, traffic calming, landscaping, and ornamental lighting. This new infrastructure laid the groundwork upon which Thornton Heights Commons will contribute to the revitalization of the neighborhood.

MEREDA:  That sounds like quite a process.  How long were you in the planning stages before construction started?

Thornton Heights Commons:  The planning stages started in the fall of 2017 and completed with the start of construction in the summer of 2020.

MEREDA:  Tell us about the most challenging aspect of getting this project completed.

Thornton Heights Commons:  The most challenging aspect of completing Thornton Heights Commons was overcoming the NIMBY response to the proposal. Like many multifamily, and affordable housing, developments in the State, Thornton Heights Commons needed a zoning change to increase the allowed residential density.

While the site fronts on US Route 1, the rear portion of the property abuts a neighborhood of single-family and duplex homes. Anticipating that there would be opposition, the SPHDC planned an extensive neighborhood involved process that was intentionally open-ended in terms of time and design outcomes. In sum, the project would not progress to the zoning application stage until collecting all neighborhood input and exploring all design avenues.

In addition to the design team, SPHDC hired a professional facilitator to moderate the neighborhood meetings. The facilitator created a meeting environmental in which all parties felt comfortable expressing their opinions. Too often, opponents to a development speak the loudest and this intimidates and shuts out supporter input. The facilitator also promoted constructive input that resulted in multiple design iterations and a final design that formed the basis for what was ultimately constructed. The SPHDC also held site visits to existing properties to show the organization’s high level of management and maintenance. Finally, SPHDC help property tours and discussions with City Councilors to relay the project’s positive potential for housing and neighborhood revitalization.

The result was that during the City Council rezoning hearings the SPHDC was able to speak to the extensive public design process and the benefits to of the project. Equally as important, the Council received testimony both against and for the project from neighborhood and City residents. Without this balanced testimony, the project would not have moved forward.

MEREDA:  Something unexpected you learned along the way was….

Thornton Heights Commons:  The project site housed an existing religious campus that included a very large church structure and a school/office/monastery building that contained hazardous substances and thus represented significant costs to redevelopment. The SPHDC, with the assistance of Credere Associates of Westbrook, ME, the Greater Portland Council of Governments Brownfields Assessment Program, the City of South Portland’s CDBG program, the Maine DEP and US EPA, put together $800,000 in funding to convert this blighted and contaminated property into a redevelopment site. What was unexpected was how eager and capable all of these agencies were in providing expertise and funding to turn properties into sites of new investment for public benefit.

MEREDA:  Now that it’s complete, what feature of the project do you think makes it the most notable? 

Thornton Heights Commons:  The most notable feature is the building’s mix of residential, commercial and public uses. Mixed-use development is touted by public policy, planning and smart growth advocates for its positive social and environmental benefits. However, it is very difficult to develop and adds significant complexity to any development project. SPHDC has put a significant amount of time and resources into developing Thornton Heights Commons as a first-rate mixed-use project that will benefit its residents, the neighborhood and the City of South Portland. We are very proud of the project.

July 12, 2022 at 6:00 am · · Comments Off on Office Conversion Projects And A Plan to Make Them Affordable

Office Conversion Projects And A Plan to Make Them Affordable

By Nate Stevens, Partner, Broker, The Boulos Company

When discussing the current and future status of the commercial real estate market, no topic is more heavily debated and difficult to predict than the office market. With the pandemic-driven rise of working-from-home and subsequent implementation of hybrid work models, it could be months or years before we understand the full effect of this trend on the overall office market. If there’s one notion I’ve come to understand over the last couple of years, it’s that every company, every industry, and every office is different in how they are affected and how they implement a work plan. This makes it even more difficult to predict the change in office space needed per employee as compared to before the pandemic. However, one aspect most experts can agree on is that there will be a drop in the amount of office space required nationally – resulting in increased vacancy for office buildings, specifically older and outdated office buildings. I could write several articles about workplace trends alone, but for now, I’ll address a creative solution for vacant office buildings where the demand may not return anytime soon: residential conversions.

(Pictured is 45 Forest Ave in Portland, ME, an office building slated for residential conversion by Redfern Properties)

I recently attended the National Association of REALTORS Legislative Meetings in National Harbor, Maryland, where thousands of REALTORS and members gathered to discuss and advance the real estate industry through public policy. As President and representative of the Maine Commercial Association of REALTORS and a commercial real estate broker, there are often topics that do not relate directly to me, my clients, or our membership. This year, however, the commercial brokers and leadership in attendance often discussed the increase in vacant office buildings. On the other side of the hall, the residential attendees discussed the lack of supply and the desperate need for more housing. The obvious solution is to adaptively reuse vacant office buildings for residential purposes. While this isn’t necessarily a new trend, there is now a greater need for housing and more office vacancy, and these conversions are needed on a greater scale. Office buildings are, for the most part, single-use purpose-built buildings, and their large floorplates, life safety code, layouts, etc., do not easily conform to apartments, making these conversions expensive and difficult. Additionally, increases in construction costs over the last 24 months mean that only owners uniquely positioned in an office building will be able to afford a full conversion. One speaker at the conference stated that, on average, office ownership groups are invested in their office buildings at a cost-basis of around $150-$200/SF, depending on the market. To afford a full conversion, in light of current construction costs, an owner/developer needs to have a basis of closer to $75-$100/SF. Although every building and every project is different, there is likely a significant delta too wide for most developers to bridge by themselves. In the policy meetings held in National Harbor, the conversation included federal assistance as a solution to bridge this gap.

We discussed a bill that was introduced in Congress last summer as the first step in federal assistance toward addressing this issue. HR 4759, the Revitalizing Downtowns Act, expands the investment tax credit and creates a Qualified Office Conversion Tax Credit to convert unused office buildings into residential or mixed-use properties. This incentive, much like the Historic Tax Credit, offers 20% of the cost of conversion to be covered by the tax credit. In order for properties to receive this credit, they must be located in a Central Business District, have been used as office space for at least 25 years, and at least 20% of the residences in the proposed redeveloped building need to be affordable housing. This tax credit cannot be used in combination with other tax credits, including the Historic Tax Credit. This act works to create more housing in downtown areas, bringing renewed life to defunct and unused office buildings – all while addressing the housing shortage. Currently, this bill has been referred to the Ways and Means Committee for discussion and it’s likely far off from being signed into law, if ever at all. That being said, this is a significant first step in the right direction, and the conversation has reached a national scale as the effects of the pandemic on the office market become clearer.

In Maine, it’s difficult to predict what impact this type of tax credit would have, considering the Maine office market doesn’t quite parallel other markets. For one, most markets nationally have a higher vacancy in the urban areas versus suburban markets, hence this bill is geared toward downtown areas. Our data at The Boulos Company, taken from our annual Market Outlook and additional sources, shows that the suburban markets will likely experience a higher vacancy over the next couple of years than the downtown area, at least in Greater Portland. The significant increase in sublease space over the last 18 months is primarily concentrated in suburban buildings and could be seen as a precursor for the direct vacancy. Downtown Portland has already seen several smaller office-to-residential conversions and it’s the suburban buildings that will be prime for residential conversion if landlords can afford to do so. While I applaud HR 4579 as an important first step, local governments will also need to enact local legislation tailored specifically to their markets to enable more office to residential conversions. Additional ideas discussed in National Harbor included zoning reform to allow greater density, easing parking requirements, and creating local grants specific to life safety upgrades to assist in this costly component of conversations. While the Southern Maine office market is still relatively healthy and vacancy rates are well below the national average, we will need to see more conversations sooner than later in our towns and cities to solve for our own immediate housing shortage and impending office vacancies.

Originally published on May 31, 2022, https://boulos.com/office-conversion-projects-the-plan-to-make-them-affordable/

July 5, 2022 at 6:00 am · · Comments Off on Highlighting the Commercial Component of the 2022 MEREDA Index

Highlighting the Commercial Component of the 2022 MEREDA Index

On May 24, Katie Allen, a Broker at The Dunham Group, was a commentator for the Maine Real Estate & Development Association’s (MEREDA’s) 2022 MEREDA Index. Katie’s comments on the Commercial Sector follow Economist Charles Colgan’s analysis for 2021. 

The MEREDA Index is a measure of real estate activity designed to track changes in Maine’s real estate markets. The Index is a composite of nine seasonally adjusted measures reflecting both new development and transactions involving existing properties and it covers both the commercial and residential markets statewide. The most recent edition covers the year 2020 and provides commentary on the Commercial, Residential, and Construction sectors. The MEREDA Index for 2021 is 116.3

THE COMMERCIAL COMPONENT:  116.7

[Charles Colgan Analysis] “Following little growth in 2020, the commercial Index grew overall by nearly 9%. The principal driver of the growth was a significant increase in lease and sales transactions. There were 575 commercial transactions in 2021 compared with 325 in 2020. Square footage sold and leased also increased by 1.6 million square feet. The rapid growth in supply was most likely a response to the abnormal conditions of 2020, but the supply growth was not met with comparable demand growth, resulting in both the per square foot sales and lease rate indexes to each decline by about 5%.”

[Katie Allen, Broker, The Dunham Group]  “Coming into 2021, we felt a sense of optimism that people would start coming back to the office. While this did happen on a small scale – predominantly in downtown offices – the Delta variant quickly changed people’s ‘back to work’ plans. Office tenants were all over the place and no one seemed to have an answer on how to effectively move forward. As a result of all this uncertainty, two major trends emerged. First, tenants with lease expirations in 2021 (or even later) whose employees could work from home, chose to abandon their space altogether. Second, tenants chose very short-term renewals as a way to kick the can down the road. Most landlords accepted these renewals, often on less than favorable terms, in order to keep vacancy down and to get a shot at future renewals. In my opinion, because of this, the real impact of Covid on the office market has yet to be seen.

In direct contrast, the investment market thrived in 2021 where the overriding theme was lack of inventory. Quality, well-priced investment properties almost never made it to market, but were sent directly from brokers to the ever-widening pool of eager investors. Cap rates at or below 6%-7% became the norm, especially for larger apartment complex sales, and 1031 Tax Deferred Exchanges remained a driving factor in the strength of the market.

Hands down, the shining star of the 2021 commercial market was the industrial sector. With a vacancy rate of less than 2%, every aspect of the industrial market seemed to flourish. Rental rates were up, sale of owner/user properties and industrial investment grade properties set record $/SF sale prices. Even with an influx of new inventory from The Downs in Scarborough, the industrial sector managed to surpass everyone’s expectations and will likely continue to do so for the foreseeable future.

The retail sector was a bit of a surprise. While we saw some bigger vacancies in the suburban market, we didn’t see the panic we expected from Covid. The downtown Portland market sadly lost several restaurants and retailers, but it felt like just as a space would go vacant, someone was there to scoop it up. Tenants who have been trying for years to get into the Old Port now had the opportunity. Also, as Covid drove people out of bigger cities into Southern Maine, their ideas for new restaurants, boutiques, and specialty stores came along, too. Thankfully, it seems that neither online shopping, food delivery services, nor Covid can kill the bricks and mortar stores and restaurants we all love.”