A Student of the Real Estate Game (ASotREG)

I've written over 250 articles. Use the search below for any topic having to do with Real Estate and investing.

Try these: passive investing, asset management, real estate

I've written over 250 articles. Use the search below for any topic having to do with Real Estate and investing.

Try these: passive investing, asset management, real estate

Opportunity Space: Unlocking the Value of Public Land and Buildings

Feb 5, 2014 | Innovation, Technology

This is a bit longer than my typical posts, but it’s a worthwhile read, trust me.

Opportunity Space LogoYou know that prime piece of property in your neighborhood that for some unknown reason has remained vacant or under-used? Chances are you own it. Well, not you, exactly, but your government. And what if I told you that your government—the largest property owner in the country—might not have any idea that they own it? Unfortunately, this scenario happens far too often. According to a January 11th  article in The Economist, “data collection on public property is shockingly poor.” Even if they were aware, administrators typically have no incentive to move quickly to find a productive public use or give it up for private redevelopment – it’s not their money, right? Given the current fiscal crises and budget constraints most local governments are experiencing, however, they’re beginning to reevaluate public land and building assets.

An exciting start-up, OpportunitySpace, is working to help governments do just that by analyzing what they own, publishing a user-friendly online catalog of government property, and connecting governments to investors, developers, and residents through a collaborative platform to put these assets to good use.

A good buddy of mine over at The Square Foot recently introduced me to the co-founder of OpportunitySpace, Alexander Kapur, who was nice enough to share more about his new platform.

Tell us a bit about how the idea for Opportunity Space came to be.

The bigger trends at play are 1) governments are broke 2) despite being cash poor, they are land rich 3) rapid urbanization requires that we be smart and coordinated with urban land, and 4) the “opening” of government – new transparency that not only holds government to account on things like development and land use, but also enables private parties to use that access to help solve those tough problems.

Professionally, my background was building transparency into high-value public-private partnerships – large infrastructure upgrades or extractive and energy industries projects. It was exciting to see how better information unlocked investment and improved outcomes, overall.

Living and working in a range of cities – DC, Philadelphia, New York, Miami, and Bogota – I began to see a recurring phenomenon: The revitalization of previously underinvested neighborhoods from the inside out. Some up-and-coming chefs, enterprising retailers, or mixed-use developers plant a flag somewhere, and a whole corridor of like-minded pioneers move in. Or maybe a public infrastructure upgrade begins the transformation of a neighborhood. But, you still see deep pockets of neglect and the pace of change is far too slow.

OpportunitySpace is really a test of how transparency around land-use and redevelopment can unlock real estate investment that makes economic, social, and environmental sense.

Lots of people are interested in revitalization. How did your interest turn into OpportunitySpace?

The idea really took shape in grad school. I took a class at Business School with some friends, and we were tasked to design a business model around some social or governance problem – our team settled on urban blight and redevelopment. Inspired by adaptive re-use of assets like the High-Line or the Presidio in San Francisco, we formed a business plan around a marketplace for redevelopment of public assets.

We got some very positive response from the professors and investors who judged our final project. I ran with that early validation and started looking for willing governments to pilot the technology. I was lucky enough to get connected to the Louisville Director of Economic Growth and Innovation, Ted Smith, who was looking for a way to catalogue brownfield sites and market them for redevelopment.

I connected with a classmate, Cristina, who was very passionate about how real estate as an asset class could drive major impact in communities. We did our graduate thesis together on data-driven public asset management, using Louisville as a case study. The core principles that we asserted in our thesis essentially turned into the mission of OpportunitySpace.

You’ve recently consulted with Louisville, KY, Government. What surprised you most about that project?

Aside from the sheer magnitude of the holdings and the diversity of agencies, districts, trusts, etc. that hold property within a single metro area, what surprised our team the most was actually something very positive. The progressive attitude that the government has and the willingness to experiment have been totally unexpected. Our partners in Louisville could have been threatened by the fact that this process might expose data deficiencies or might make the entire public sector look uncoordinated. Instead, the leadership, especially the Department of Economic Growth and Innovation, along with a slew of technical staff at their GIS department and a local mapping consortium, named LOJIC, have been pivotal contributors. In fact, one of the GIS technicians, Ben Post, had the foresight to gather and consolidate much of this data on his own even before we launched this project. But few people knew about his work!

The public likely does not see the government as an innovation-driver. But, when the government is a willing change agent, the impacts can be exponentially larger than in the private sector. It’s a fun wave to ride when it moves in your direction.

What’s the biggest obstacle you face in analyzing publicly-owned property?

This answer might be surprising. It’s actually not about the technology or the data. Yes, the data are inconsistent, at best. Yes, there is work to fuse the information from some cumbersome enterprise systems and proprietary sources. But, by far the most challenging element of this project is around getting someone to own the issue. When all the data is ready and the information can guide government leadership to make smart choices about real estate, it’s still not clear who will take the reigns. The vast majority of governments don’t have a central real estate function, and if they do, it’s very tactical and reactive – no strategy. So, we have to demonstrate the returns of active land stewardship and public-private engagement, first. Only then will administrators build the policy and the institutional structure – people processes – to make it happen. But I do think that technology can be a key driver of that change, and that’s our game plan.

Excess land and buildings should return to the private market to create economic, social, and/or environmental benefits. Is there an efficient way for private investors/developers to access these deals?

Yes! Through OpportunitySpace – ha! In all seriousness, that is a core part of the value proposition we are building.

Today, you have to trawl through the 12th link of a city’s or state’s Public Works, Economic Development, or maybe, if you’re lucky, a dedicated Real Estate Services page to find public properties that might be tagged as surplus. If it’s online (and that’s a big “if”), surplus is often lumped together with the entire holding. A few sites pop up here and there on LoopNet or Zillow, but nothing consistent, unless the government has designated a broker to the deal – and those case are really only when the property is very valuable.

In most markets, the local, well-connected developers know where the good sites are, and if the federal, state, or local gov is the holder. Beyond these folks we know there are others out there who want to invest in development – out-of-state or national-level developers, well-resourced individuals looking for a real estate project, or even locals who are just not developers but want to get in the game with a smaller re-use or clean-up idea. Regardless of their local market knowledge, they all want a more efficient, effective way to work with the government.

A lot of this property is not attractive to brokers or the traditional market, so we are building the tools that allow interested private parties to monitor assets that fit with their development “aesthetic” or end-use idea, like an old armory or post office or health building or even a tiny sliver parcel. Our intent is to build a smooth channel to help these investors/developers of all shapes and sizes identify properties that interest them and then navigate the channel to make the deal happen.

Where do you see Opportunity Space in 5 years?

Practically speaking, I see that we will be past making initial wins in a handful of cities, which is our near-term goal – like helping to redevelopment an empty armory and a bunch of vacant lots in Louisville, a river corridor in Rhode Island, a streetscape plan in South Florida. We’ll be present in a number of progressive cities working with all types of stakeholders to enable them to apply their resources in redevelopment. We’ll be the new coordinating platform for the new form of urban planning and development activity.

Conceptually, the way we see our company in five years is very much apart of how we see cities evolving.

Mounting fiscal limitations, environmental changes, and civic dynamics all force government to be smarter, more open, and more creative about land use and real estate holdings. These factors will also encourage the public and private sectors to work more cooperatively to create impacts beyond profit.

As real estate stewards for the public, government will squeeze every public rooftop for solar space, or sliver parcel for urban greening/farming or maybe a bike-sharing rack, or perhaps use a public school gym for community health programs during off hours. They will find a way to make pop-ups on unused properties, or generate revenue by renting public park space to free-lance fitness instructors. The public sector land footprint will be smaller, our cities will be even more livable, and the government will make its land available for innovative, adaptive end-uses. And as a taxpayer and resident, I will be able to understand what land the government holds and how it is benefitting me with a few mouse clicks – liquid, relevant, engaging transparency (see: San Francisco Public Utilities Commission’s Digital Arts Wall that displays real-time data on the city’s energy portfolio).

Feel free to share!