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Many real estate investors are ready to buy real estate in any city
Amazon.com
Inc.
chooses for his second seat. Some are not waiting.
Speculators collect funds to invest in real estate located near the winning site – wherever they are – or hold cash commitments in order to start immediately after the winner's announcement. Others buy shares in a real estate company that owns much of the property in a northern Virginia city and that many view as a major competitor.
These investors say that focusing on potential sites of Amazon is a way to bet widely on high growth areas, especially those with a growing pool of technological talent.
"It is guaranteed that HQ2 will meet three criteria: growth in technology employment, growth in technology employment and growth in technology employment," said Bryan Copley, co-founder of the Seattle-based CityBldr real estate start-up, using a shortcut for Amazon's second headquarters. "All other cities from an economic development point of view use wooden baseball bats, and HQ2 uses a metal bat."
Mr. Copley raises $ 100 million for a fund that will buy a residential property in Seattle, Los Angeles and any city that will win Amazon's second head office.
The Seattle-based online giant announced last year that it was planning to invest $ 5 billion in a second seat that could employ up to 50,000 people over two decades. After 238 cities and selected villages, Amazon reduced its list to 20 finalists in January.
The list of 20 finalists includes cities like New York City and Los Angeles, as well as aspiring metropolitan areas that attract technology talent, such as Denver, Pittsburgh and Nashville, Tennessee.
The rush to invest in the winning city is the result of Amazon's unorthodox approach to finding a second home. Amazon has chosen a very public process that allows speculators to place their bets. Usually, companies keep the search quiet for as long as they can, according to economic development analysts.
As metropolitan areas offer specific sites and even suggest certain properties for Amazon's new headquarters, it's as if they were developing maps that real estate buyers could target.
View of the US Capitol in September from the Potomac River in Arlington, Virginia. Its neighborhood Crystal City offers the impression of winning the offer of Amazon.
Photo:
saul loeb / Agence France-Presse / Getty Images
Copley explains that with proprietary software, he can choose the most underutilized properties in all cities. It will take five minutes to pinpoint the top 500 multi-family investments once Amazon has announced a winning city, he added. Then he will bid on a lot of them and hope to bite at least a few.
Others are placing their bets now. Ryan Dobratz, co-lead portfolio manager of the Third Avenue Real Estate Value Fund, believes Washington, D.C., has the best chance of winning, especially the Crystal City neighborhood in Arlington, Virginia.
His company bought shares in
JBG Smith Properties
,
a real estate investment trust that owns a large portion of the commercial real estate located near the Crystal City site, proposed by the northern Virginia authorities, at Amazon's second head office. JBG declined to comment.
JBG's concentration in Crystal City has likely propelled its stock up despite a weak market across the sector, according to a report by Green Street Advisors.
JBG's assets, Crystal City, make it the most direct way to play the Amazon lottery among the office REITs, the report says.
Residential property sales growth in 10 of Amazon's shortlisted countries increased 7% in July compared to 4% in July 2017, according to Realtor.com. (The website is operated by News Corp, owner of The Wall Street Journal, licensed by the National Association of Realtors.)
Pittsburgh's selection as a finalist helped boost a market that was already attracting investor interest, said retired firefighter and owner David Cunningham in the Hazelwood neighborhood, near a former steel production site considered as a possible Amazon site.
Mr Cunningham said that he was receiving many more calls from interested buyers since Amazon announced the finalists, and the offers have never been so high. Amazon "swept the dust of Hazelwood," he said, adding that there were other factors, such as the proximity of universities and downtown.
Other research in high-profile technology seats have sparked a frenzy of real estate purchases. Uber Inc. purchased the former Sears Building in Oakland, California, in 2015 and turned it into an office space of 356,000 square feet, Uptown Station, which was to serve as the new head office for the carpooling company. It was a big win for Oakland, which was starting to attract major employers in San Francisco and Silicon Valley technology. Investors followed.
Uber sold the building for about $ 180 million in 2017, without ever moving in, during a year marked by scandal. Nevertheless, many other investments in Oakland have paid off as the region has continued to grow.
Erick Quay, who runs a hedge fund in New York called Quay Capital, plans to invest in the first six months of an ad on Amazon. He is betting that prices will not move much right away, and said that he would let the investment go in the winner if he did not find the right opportunity.
Craig Kinzer thinks playing at Amazon's headquarters is too risky. The founder of real estate company Kinzer Partners said he heard a speech from Mr. Copley, of CityBldr, that he found "compelling". But he finally refused to invest.
"The real estate is local," he said. "You can be a national company, but in the end, it's really about understanding what's on the ground locally."
Write to Shayndi Raice at [email protected] and Keiko Morris at [email protected]
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