Hometown Developers of Projects Like Vista Tower, Lincoln Yards and Bank Of America Tower Are Putting Money in Other Cities. ‘We Love Chicago But Are Super Nervous.’
Ryan Ori with The Chicago Tribune reports on why regulatory uncertainty, including the threat of rent control, is chasing development to other cities.
Investing in multiple cities is nothing new for larger developers. It’s a way for them to spread risk, grow their companies and develop valuable business relationships.
But new concerns about the cost of doing business in Chicago, whether real or perceived, could hurt the local economy in the long run, affecting the employment rate, home values, sales of goods and services and the size of Chicago’s population.
Uncertainty over property taxes is paired with other issues already on the radar of big, institutional real estate investors. Those worries include ongoing city and state fiscal woes stemming from soaring pension obligations, as well as potential Chicago policy changes such as increased affordable housing requirements, rent control and tax-increment financing (TIF) reform. Construction costs also have been rising.
John Diedrich, global head of investments for CA Ventures, calls the inability to accurately project future property taxes as “one strike too many” for major investors such as pension funds and insurance companies that use highly detailed underwriting formulas to choose what development projects should get their investment.
Read more here.