The Right Equation for Responsible Development: Spotlight on Rock Row Phase 1 Retail Center

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 2020, 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 Pittsfield to Bangor, with each receiving special recognition at MEREDA’s 2021 Virtual Spring Conference on May 20th.

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 2020 Top 6 recipients include:

Rock Row Phase 1 Retail Center, Waterstone Properties Group (Westbrook)
82 Hanover Street, Port Property Management (Portland)
Hospice of Southern Maine, Zachau Construction / SMRT (Scarborough)
Solterra, Portland Housing Authority (Portland)
One Merchants Plaza, Sky Villa Properties (Bangor)
Puritan Medical COVID –Building Expansion (P2), Puritan Medical Products (Pittsfield)

Please join us this week in celebrating Rock Row, Phase 1 Retail Center.

MEREDA:  Describe the building and project.

Waterstone: Rock Row is unlike any other development in the world. Situated on 110-acres, the $600 million Rock Row development in Greater Portland features more than two million square feet of mixed-use office, medical and research, retail, food hall, restaurants and residential space—all designed around a magnificent, 400-foot-wide natural stone quarry that is filled with water.

When complete, Rock Row will be the second largest retail and mixed-use development in New England. Highlights include:

• 400,000 sq. ft. of Modern Class-A Office Space, including Maine’s first Cross-Laminated-Timber (CLT) Office Tower
• 200,000 sq. ft. Medical & Research Campus anchored by New England Cancer Specialists
• 300,000 sq. ft. of Retail, Dining, Entertainment & Services featuring local, regional and national brands in an open-air, downtown-block shopping district
• 20,000 sq. ft. Food Hall featuring 550 seats, 15 stations, 7 spirit tasting rooms, live music, onsite brews and exciting events
• 20+ Restaurants ranging from cool-casual to chef driven
• 750 Distinctive Studio, One- & Two-Bedroom Residences

With more than six million guests expected to visit Rock Row each year, a key element of the project is Maine’s First CLT Office Tower—a stunning, 200,000 sq. ft., six-floor, cross-laminated-timber tower that promises to be one of the top office location in the Northeast, fueled by Rock Row’s modern mix of amenities and assets that drive talent acquisition and retention.

The tower’s unique CLT attributes promote workplace health and productivity while delivering 66% less energy costs, greater sound absorption/noise cancellation and unobstructed site lines to the quarry via 12’ floor-to-ceiling windows that cascade streams of natural light to nearly every work area.

““It’s not an overstatement to say that 100 Rock Row will be the most innovative, collaborative, and healthiest work environment in all of New England,” said Josh Levy, co-founding principal of Waterstone, the owners and developers of Rock Row. “More than an office address, 100 Rock Row is a business advantage that promotes business success. Bright places spark bright people. Fresh air promotes fresh thinking. Add the unobstructed quarry views, unmatched amenities and thought-sharing events at Rock Row and you get a place that people want to be at long after the workday is done.”

Another top attraction at Rock Row will be Maine’s Largest Meeting & Convention Center—an 8,200-person capacity, state-of-the-art venue that’s sub-dividable to host more than 200 public and private events year round, including performances from A-list artists through a partnership with LiveNation.

MEREDA:  What was the impetus for this project? 

Waterstone:  While factors like location and market-need certainly came into play, the quarry was an impetus for the project.

When Waterstone purchased the former quarry in 2017, it was being permitted for a big-box retail store by developers. Completing that process and taking “the easy route” was never an option for Waterstone. It was quickly determined that the natural features of the quarry should be leveraged to create a gathering place for all that was exciting and memorable; a destination that would make a positive impact on the lives of everyone who live, work, shop and visit in the region.

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

Waterstone: Unlike most developments where you get approval and build, this is a dynamic project that is unfolding in multiple phases. While that in itself poses challenges, it also offers great opportunities. For example, an area that was originally targeted for office and residential turned out to be the perfect location for the integrated Medical & Research Campus that is starting construction this fall. The City of Westbrook could not be better to work with as we navigate through the development design. We work with the mayor and city leaders very closely and have a tremendous amount of respect for the project, and each other.

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

Waterstone: Having more than two-million square feet of mixed-use space available at Rock Row, we are absolutely obsessed with using each square foot the right way and fitting each square foot with the right tenant. Our goal isn’t to fill space, but to create amazing, unexpected and ongoing experiences at every turn. We want this to be an extension and elevation of life for all who work, live, shop and play here. So far, our efforts are paying off.

Phase One of Rock Row, which is community-retail focused, started in 2017and is nearing completion. This phase is reaching 100% lease capacity with tenants that include an 80,000 sq. ft. state-of-the-art Market Basket supermarket (open), REI, Firehouse Subs, Big Fin Poke, The Paper Store (open), Chase (under construction), Chick-fil-A and Starbucks.

Other announced Rock Row tenants include a 122-room boutique Element Hotel by Westin, 12-screen Cinemark Theater, LIVE NATION Maine Savings Pavilion (open) and the previously-mentioned 200,000 sq. ft. fully-integrated Rock Row Medical & Research Campus, anchored by renowned New England Cancer Specialists/Dana Farber Cancer Institute (scheduled opening in late 2023).

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

Waterstone: From a community standpoint, we are continually amazed at how excited people are about Rock Row. Many of our social media posts have received several thousand likes and we are constantly fielding questions of interest, such as “when is REI opening” and “how much office space is available in the CLT tower”. Seeing our community get excited about Rock Row is something that excites us.

From a development standpoint, we discovered that Maine offers so much more than lobster rolls and natural beauty. This is a state that fosters innovative companies and breakthrough thinkers and has a rich history of leadership in commerce and industry. With more residents, workers and businesses leaving big cities and embracing the beauty and lifestyle of Maine, Maine is poised to flourish as an emerging business hub.

As Maine’s premier Innovation District, Rock Row will play a key role in supporting the state’s focus on emerging industries and economic growth by creating a supportive environment that helps people and businesses grow and succeed in every way. Rock Row’s rich mix of physical and networking assets—from educational events that spark growth and innovation, to public gathering spaces that invite collaboration—will combine to create a 24/7 community full of ideas, creativity, risk taking and enriched living. Rock Row will be the shining model of Maine’s new outreach as a “State of Innovation”.

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

Waterstone:  We like to say there is “discovery at every turn” at Rock Row, so it’s hard to choose one notable element of the two-million-plus-square-feet development. Certainly, the quarry will be the most notable and memorable physical feature. Beyond the jaw-dropping “‘wow” of looking at it, guests will come from far and near to see the light and laser quarry spectacular that will be similar in quality to Super Bowl and Olympic ceremonies.

What’s also notable is the human energy that Rock Row sparks. This is a destination that excites all senses and invites interaction, from passively looking at art to more actively climbing rock walls. All lines between work, life, learning and play will be blurred at Rock Row, intentionally. People will come here to drop kids off at day care in the morning…work during the day…interact with colleagues at a sponsored event…shop during lunch…go to a restaurant after work…attend a concert on the weekend…bring the kids to skate or go sailing on the quarry…and so much more.

Our hope is that everyone will have a favorite element of Rock Row that will change from season to season. We want people to connect with each other, and with nature at Rock Row in a way that makes life fuller and better. That’s a big task, we know. But we want every member of the family to always want to be at Rock Row. And to think there’s no place in the world like Rock Row.

Visit www.rockrow.com for more information.

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Maine Real Estate & Development Association (MEREDA) Re-Elects Brian Curley to its Board of Directors

PORTLAND, July 20, 2021 – Brian Curley, AIA, LEED AP, of Portland, and Senior Vice President, Business Practice Leader, Architectural & Structural, of CHA Consulting, Inc. (CHA) has been re-elected to the board of directors of the Maine Real Estate & Development Association (MEREDA), a statewide organization of commercial real estate owners, developers and related service providers.

MEREDA is pleased to announce that longtime member Brian Curley, has been re-elected to its board of directors after a 2-year hiatus.  Brian first joined the board in 2011 and served as a vice president, co-chair of the Conference Committee, as well as a member of its Executive Committee. Brian was twice recognized with MEREDA’s President’s Award in both 2014 & 2016.  

Brian has more than 35 years of architectural experience specializing in corporate and interiors projects for colleges/universities, historic structures, housing, retail, and corporate offices. Brian has a special interest in historic preservation and expertise in complicated renovation/reuse projects that bring new life and energy efficiency to historic buildings. His expertise ranges from space planning and interior fit-ups to historic renovation and new office construction. Brian also works with CHA’s interior designers on corporate offices, renovations, and furnishings packages. His housing experience includes new and renovated multi-family housing of all types.

“We are ecstatic that Brian has accepted our invitation to return to the MEREDA board,” says Shelly R. Clark, Vice President of Operations for MEREDA.  “Brian’s expertise, industry knowledge, and enthusiasm for MEREDA’s mission makes him a great addition once again”!

For further information, please contact MEREDA’s Vice President of Operations, Shelly R. Clark at 207-874-0801 or visit www.mereda.org.
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MEREDA’s Year in Review for 2020-2021

Since its inception, MEREDA has continued to make progress on behalf of the development community addressing the challenges and issues relating to Maine’s real estate activities. MEREDA’s strength has always come from the support and participation of its valued members. While we look forward to the beginning of a new fiscal year, it is important that we take a moment to look back and reflect on our accomplishments, and take time to thank you, MEREDA’s members, (330+) for your investment in the Association over the year. Your continuing support is critical to our ability to maintain and increase our advocacy work, programs and related services, which are all vital to development interests in Maine.

It hasn’t been “business as usual” these last 16 months since COVID 19 shut down the world. That said, we have had a very busy year, and we are excited to share with you our “Year in Review 2020 – 2021”.

MEREDA’s Three Overarching Priorities. MEREDA continues to serve its members’ mutual interests in responsible development by advocating for fair and predictable regulation, hosting events rich with educational and industry insight, all the while providing opportunities to network with a diverse group of real estate professionals.

Advocacy

Legislature Set to Adjourn, Sending Right to Food Question to the Voters
The First Special Session of the 130th Legislature is set to adjourn on or around July 19, 2021. That is roughly a month after the anticipated adjournment date of June 16, 2021. Some of that delay can be traced to budgetary negotiations, but much of it stems from procedural timing around a series of vetoes issued by Governor Mills. Unlike her first two years in office, Governor Mills was more free with her veto pen this year and legislators had to return to consider those vetoes (vetoes on major issues were all sustained). The general effectiveness date for all non-emergency legislation is 90 days following the date of adjournment sine die – we therefore expect new, non-emergency, laws to take effect in mid-October.

Among the many resolves passed this session was one that will send a referendum question to voters. Specifically, voters will be asked if they support amending the Maine Constitution to include a “right to food.” The impact of this amendment would be to ask more questions than it answers, and likely lead to years of litigation. MEREDA will send more information on this referendum question in the early fall.

MEREDA’s Strong Engagement Helps Defeat Bad Landlord/tenant Proposals
MEREDA successfully worked to help defeat several bad proposals at the Legislature this year. Specifically:

• LD 418, which would have imposed a graduated real estate transfer tax (and disproportionately impact commercial real estate). This bill was vetoed by Governor Mills at the urging of the real estate community, and the veto was sustained by the Legislature;

• LD 1143, which would have effectively ended the concept of a tenancy at will. This bill was defeated on the floor in the House and Senate;

• LD 1590, which would have treated short-term property rentals as commercial property. This bill was defeated on the floor in the House and Senate;

• LD 1255, which would have disallowed evictions for 90 days following the COVID-19 State of Emergency. This bill was defeated on the floor of the house and senate.

• LD 1296, which would have disallowed evictions during any future state of civil emergency proclaimed by the Governor. This bill was defeated on the floor in the House and Senate.

These bills (with the exception of LD 418) were all premised on the notion that private property rights can and should be easily further restricted in the interest of public policy, without consideration for the potential to fundamentally undermine our system of private property ownership. We were pleased to help successfully defeat them this year, but are on the lookout for future similar efforts, and will work hard to defeat them.

MEREDA Aids in Successfully Enacting CPACE Program, Commission to Study Local Land Use Laws
MEREDA was pleased to join with The Nature Conservancy, Coastal Enterprises, Inc. (CEI) and other industry allies to support LD 340, which will enact a Commercial Property-assessed Clean Energy Program (CPACE) in Maine. The bill was enacted as Public Law 2021 Chapter 142. The new law will enable new financing options for developers looking to install or retrofit a commercial property with clean energy infrastructure. MEREDA engaged closely with many of our members to educate on and learn about this proposal, and we were pleased to support its passage into law this year. The law will take effect sometime in mid-October.

MEREDA will continue to remain diligent in protecting its members’ interests. Our members represent a critical pillar of the state economy, and we will continue to advocate for policies that are fair, practical, and predictable even as we navigate a new, post COVID-19 environment. We encourage all those who are interested in rolling-up their sleeves and helping to further MEREDA’s mission and vision in policy-making to contact Shelly R. Clark, MEREDA’s Vice President of Operations at info@mereda.org.

Education & Insight

Morning Menu Meetings, Networking Events, Conferences – Paramount to MEREDA’s existence, is the offering of top-notch educational programming and must‐attend learning events for members involved in commercial development and ownership in Maine, and pre-COVID 19, welcoming hundreds of commercial real estate experts for some of the best networking in Maine. In March 2020, that all changed and MEREDA responded as most organizations did, by postponing our regularly scheduled events. We quickly transitioned to virtual events and continued to keep our members up-to-date on evolving real estate and development events in light of the changing economic landscape. We were able to offer 13 virtual Morning Menu Breakfast events over the past 15 months! No small feat, as we quickly learned that virtual events were not any easier to pull off than in-person events! We are excited to get back to in-person events this fall and are working on those details now.

Successful Forecast and Spring Conferences – Last summer, it was anyone’s guess as to what the world would look like in January 2021. We anticipated that our annual Forecast Conference & Member Showcase would obviously look and feel a lot different than in years’ past, we knew we wouldn’t be able to gather our usual 1000 attendees in one room, and that the event most likely be in some streaming format. We managed to pulled together a rescheduled virtual “Spring” Conference that Fall, and even tackled what we thought was impossible, by virtually hosting our 2021 Forecast Conference in January, getting over 500 viewers, and our 2021 Spring Conference in May with over 200! Our members really came out in droves to support our efforts and we are grateful for their sustained support!

MEREDA Index – MEREDA is always keeping its finger on the pulse of the state’s real estate market. The Spring 2021 MEREDA Index reflects a solid performance in the real estate market coming in at 113.3.

Over 230 real estate insiders registered to gather virtually MEREDA’s Spring Conference on May 20th. As part of the Conference, MEREDA released its 15th edition of the MEREDA Index, a key economic indicator for the state of Maine. While the Index saw a dip during the first half of the year as the economy began its sharp decline related to the Covid-19 pandemic, the Index shot upward in the second half of the year, resulting in an overall increase of 2.8% over the annual average of 2019. Beyond the data, the individual components of the Index—commercial, residential, and construction—help paint a fuller picture of a historic year in Maine real estate.

“To say 2020 was a year like no other is an understatement, and when we zoom in on the Maine real estate market we see a truly remarkable year,” says Josh Fifield, MEREDA President. “We have all been watching as the residential market rocketed off the charts. We all felt the impact of vacant office and retail spaces in our communities, and we saw new construction projects forge ahead with increased demand. This is the story the 2021 MEREDA Index tells,” continued Fifield.

Learn more by watching the following video or downloading the hard copy.

The Maine Real Estate Insider –Published by Mainebiz, this weekly e-newsletter provides a valuable source for all things real estate in Maine – including recent transactions, promotions and valuable and informative content for you and your business. It is MEREDA’s pleasure to support our members and the health of this important Maine industry by continuing to provide weekly content to this online newsletter which features news and information from MEREDA as well as from Maine’s real estate community.

MEREDA relies on members like you to help us provide the weekly content for MEREDA’s sidebar. We encourage all members who have an interest, to contact us with any questions or story ideas: info@mereda.org. Articles should be informational / educational items, trends, etc. that pertains to real estate and that would be useful to the membership or general reader.

Networking

The opportunity to connect with a diverse network of real estate professionals and related service providers is a valued benefit of the MEREDA membership. Over the years, many beneficial business relationships have begun at one of our annual social events, conferences, breakfast forums, and even through committee work. Although the Coronavirus pandemic put the kibosh on being able to gather with friends, family, and colleagues, it looks like better days are ahead! MEREDA is anxious to get back to providing these important get-togethers and have rescheduled our 35th Anniversary Gala originally slated for March 2020 to November 4, 2021. We hope to see you there!

DevelopME – Our DevelopME Committee, comprised of our emerging leaders, is now under new leadership and making plans to resume its regular meetings and coming up with some new and exciting opportunities for special projects to cultivate and connect MEREDA’s future leaders within the organization.

Student Scholarships – Although we weren’t able to host our “Strikes for Scholars” Bowl-a-Thon Fundraising Event again this year due to the pandemic, we instead opted for a Virtual Trivia Night and our members turned out once again to support the students! The event consisted of 3 rounds of questions from Current Events to Pop Culture, to a “Name that Tune” category, followed by team networking. Prizes were awarded to 1st, 2nd, and 3rd Place winners.

We are pleased to announce that MEREDA was able to provide 7 $1250 scholarships to the Maine Community College System (MCCS), as well as 1 $1250 scholarship to the College of Science, Technology & Health at the University of Southern Maine. Thank you, MEREDA Members! MEREDA began its scholarship program for students in the building trades and professions 9 years ago and has continued to grow and support the program. Since the fundraiser’s inception, MEREDA is proud to have raised and donated over $133,000 in scholarships helping over 103 Maine students.

Thank you to our faithful members! Your continued support ensures that we can continue to provide value and remain the most active nonprofit helping to promote responsible development in Maine.  If you are not yet a member, but would like to learn more, please contact the MEREDA office.  We wish you an enjoyable summer and look forward to seeing you this fall for more great events beginning in September.

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Highlighting the Residential Component of the 2021 MEREDA Index

On May 20, Joe Dasco, Principal at Reger Dasco Properties, was a commentator for the Maine Real Estate & Development Association’s (MEREDA’s) 2021 MEREDA Index. Joe’s comments on the Residential Sector follow Economist Charles Colgan’s analysis for 2020. 

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 2020 is 113.3

THE RESIDENTIAL COMPONENT:  113.3

[Charles Colgan Analysis] “The driving force in the growth of the MEREDA Index in 2020 was the sharp growth in the residential Index, particularly in both the number of units sold in the second half of the year, and a sharp rise in the median sales price. The Index for the number of units sold in 2020 was up 9.5% in 2020 over 2019 on an annual average basis and 28.9% comparing 4th quarters. The median sales price rose 13% on an annual average basis, while the permits for new construction grew by 16%. 4th quarter permits grew by 58% in 2020 compared with the same quarter in 2019 on a seasonally adjusted basis.

The only part of the residential Index that fell in 2020 was mortgage originations (by 13.6%). The divergence between units sold and mortgage originations is unusual and may be related to anecdotal evidence of a large number of out-of-state buyers entering the Maine housing market in response to the pandemic and these buyers may have financed their purchases with equity taken out of their other homes.”

[Joe Dasco, Principal at Reger Dasco Properties]  “2020 with all of its challenges, has seen a continuation of a strong residential market that many had predicted would end in 2019. While Reger Dasco Properties is focused on residential condominiums in urban markets, the theme is the same as in the suburbs: low inventory and strong demand. Many have heard of the on-going bidding wars and multiple offers above asking price for single family houses, trends we feel are not healthy or sustainable. However, this is not the case with condominiums in our sector. Urban condominiums serve a different demographic: empty nesters looking to down-size and live in a walkable and safe community, as well as young professionals realizing that with the low interest rate environment, they can own a highly appointed condominium with amenities for the same monthly payment as they shell out for rent. Due to the pandemic, we are also starting to see increased demand from young professionals who are working remotely and looking to escape the high-cost larger cities, such as San Francisco, New York, and Boston, and choosing Maine as their new home base.

There also has been a continuation of the same challenges that we have faced for the past several years: higher construction costs, higher material costs, and a shortage of skilled labor. Exasperating these challenges in the Portland market are the political winds as they relate to the new referendums. Simply put, while the intentions were good, more housing cannot be built under the new ordinances passed in November 2020.  The inclusionary zoning is simply too burdensome! In our most recently completed project (Hobson’s Landing Phase 1), we were able to build off-site units to meet the 10 % requirement. The new requirement is 25% and the affordability calculation was brought down from 120% of AMI to 80% of AMI. In addition, under the new ordinance, developers cannot build off-site units and if you want to pay the fee in lieu, your cost goes from $100K per unit to $150K per unit. Under the new ordinances that would add $4.1 million in costs to that same project when fully built out. Therefore, longer term, we expect you will see legacy grandfathered projects get worked off and eventually new residential multifamily construction come to a halt.”

Click here to view the 2021 MEREDA Index video and access the full report.

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The Right Equation for Responsible Development: Spotlight on Hospice of Southern Maine

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 2020, 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 Pittsfield to Bangor, with each receiving special recognition at MEREDA’s 2021 Virtual Spring Conference on May 20th.

In a multi-part series exclusive to the Maine Real Estate Insider, we’ll provide an up-close look at thSe 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 2020 Top 6 recipients include:

82 Hanover Street, Port Property Management (Portland)
Hospice of Southern Maine, Zachau Construction / SMRT (Scarborough)
Rock Row Phase 1 Retail Center, Waterstone Properties Group (Westbrook)
Solterra, Portland Housing Authority (Portland)
One Merchants Plaza, Sky Villa Properties (Bangor)
Puritan Medical COVID –Building Expansion (P2), Puritan Medical Products (Pittsfield)

Please join us this week in celebrating Hospice of Southern Maine.

MEREDA:  Describe the building and project.

Zachau Construction / SMRT:  The nonprofit organization Hospice of Southern Maine headquarters is a $6.75 Million, 14,500 SF building built by construction management company, Zachau Construction, and designed by SMRT Architects and Engineers, Portland-based architecture firm. The building is home to the HSM corporate and clinical teams, as well as, a location for training stimulations, grieving services, and a large community room for gatherings and education. Over 600 donors came together to raise the funds for the capital campaign of $6.6 Million to date. Previously located on Route 1 in Scarborough, this new location provides an energy-efficient facility designed to reduce Hospice of Southern Maine’s energy costs by approximately 96%, which creates a full return on their investment within 18 years.

MEREDA:  What was the impetus for this project? 

Zachau Construction / SMRT:  The mission of Hospice of Southern Maine is to provide compassion, care and comfort through the end of life. The nature of their programming, people who have terminal illness and wanting to have good quality of life towards the end creates a positive social impact on the communities and families they serve. This new building provides a location for their teams to gather, work together, grieve, train and organize to fulfill this mission. A notable feature in the building is a training room with two-way glass, providing a location for the team to learn and grow their skills in end-of-life care.

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

Zachau Construction / SMRT:  Almost 2.5 years of planning

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

Zachau Construction / SMRT:  The project provided a unique opportunity to blend a welcoming, home-inspired environment for visitors in conjunction with an open, contemporary office space for their employees.  This was achieved by using building forms and materials that reflect the warmth and simplicity found in Maine and the weaving of colors and textures throughout the interior that soothe and comfort.

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

Zachau Construction / SMRT:  How to deliver a project during a pandemic. When we began this project, we couldn’t have anticipated what the last few months of building would entail for this project. The pandemic created challenges in delivery of materials and the workflow within the building. Despite the challenges, we were able to complete the project on time.

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

Zachau Construction / SMRT:  The building utilizes solar and geothermal systems to supply 100% of the building’s energy needs with clean energy and will dramatically lower CO2 emissions. The building is predicted to be net positive and will transfer additional power produced by the PV panels to the Hospice of Southern Maine Gosnell Memorial House. By creating a building that is 100% self-sustaining, Hospice of Southern Maine, a non-profit organization, will be able to use its donations towards programs and staff instead of office facility overhead. The size and layout of the building also allow for the organization to expand its reach and ability to serve more families.

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Like-Kind Exchanges Present a Number of Tax Deferral Options

By S. Andrew Smith, CPA, Principal, Baker Newman Noyes

This article is the first in a 3-part series on the mechanics and tax benefits of Like Kind Exchanges

Internal Revenue Code Section 1031’s “like-kind exchange” rules allow taxpayers to defer the taxable gain on the sale of real business or investment property if they reinvest in similar business or investment property within a specified time frame. Many transactions qualify, ranging from simple swaps to complicated delayed exchanges. Regardless of complexity level or size, all exchanges that qualify under §1031 have the same effect: the deferral of taxable gain or loss and deferral of related taxes.

Background

Like-kind exchanges have been part of the tax code relatively unchanged for a long time, originally created to allow farmers to swap fields with other farmers without immediately incurring tax. However, the Tax Cuts and Jobs Act (TCJA) of 2017 narrowed the scope of property eligible for like-kind exchanges to include only real property. This significant change has complicated transactions that involve both real property and personal property – such as the sales of apartment buildings or hotels. In June of 2020, the Treasury Department issued proposed regulations that defined “real property” for purposes of IRC §1031 transactions. Prior to the issuance of these regulations, there was uncertainty of whether local law definitions or other rules might apply. In general, real property is now defined as land and all improvements to land, such as buildings and other “inherently permanent structures, and their structural components.”

In addition to defining real property, the proposed regulations also gave taxpayers and their advisors a framework to address transactions involving a combination of real property and personal property. As long as the personal property included in the transaction is incidental to the real property, the transaction may still qualify as a like-kind exchange. In order to meet the definition of incidental, the personal property must be of a type typically transferred with real property in standard commercial transactions, and the aggregate fair market value of the incidental personal property cannot exceed 15% of the aggregate fair market value of the replacement property. In this case, the portion of gain related to personal property may not qualify for tax deferral, but its existence will not taint the overall transaction, and the real property remains eligible. We’ll dive into that more with an example in the second article.
What may be more problematic is the possibility that IRC §1031 will be stricken from the tax code completely or limited further under President Biden’s tax plan. Many speculate that deferred gain may be capped as low as $500,000! That coupled with a proposed increase in capital gains rates has led to a flurry of activity in the commercial real estate market, with taxpayers looking to either cash out or diversify using §1031 prior to a potential law change. Though President Biden’s tax proposal increases the capital gains rate retroactively as of April 28, 2021, the §1031 rules wouldn’t change until December 31. That could lead to a greater incentive to utilize §1031 during the second half of 2021. However, everything is just speculative at this point – these proposals are just that: proposals.

Simultaneous Exchange
The simplest form of §1031 transaction is the simultaneous exchange: Taxpayer A swaps asset A with Taxpayer B in exchange for asset B. Assuming the market values of assets A and B are equal, the transaction should be tax free for each party. If a party receives additional consideration as part of the proceeds (money or property that is not of a like kind), any gain resulting from that transaction will be taxable, up to the amount of that consideration. That non-qualifying property is described in tax rules as “boot,” and examples of it are cash, non like-kind property and even alleviation of debt. The presence of boot does not necessarily taint the entire transaction; if gain exceeds the amount of boot received, the incremental gain will qualify for deferral.

Simultaneous exchanges can occur without the presence of 3rd party involvement and may even happen without the taxpayers realizing they completed a like-kind exchange, such as trade of business properties. However, most taxpayers planning to sell an asset are unlikely to find another willing party that has a like-kind asset they wish to exchange, and for this reason, the simplest §1031 exchange is somewhat rare. To defer tax under §1031, they need to engage a qualified intermediary (QI) to facilitate a delayed exchange.

We will dive into the more common and more complex delayed exchanges in the next issue!

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Highlighting the Commercial Component of the 2021 MEREDA Index

On May 20, Cheri Bonawitz, CCIM, a Broker at Malone Commercial Brokers, was a commentator for the Maine Real Estate & Development Association’s (MEREDA’s) 2021 MEREDA Index. Cheri’s comments on the Commercial Sector follow Economist Charles Colgan’s analysis for 2020. 

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 2020 is 113.3

THE COMMERCIAL COMPONENT:  108.2

[Charles Colgan Analysis] “2020 was not a good year for commercial real estate, marking a change from several years of stability or modest growth. The number of sales and leasing transactions was down 3.5% on an annual average basis compared with 2019, and the square footage of transactions declined by 29.3%. Lease rental rates on a square foot basis fell 2.5% but average sales prices per square foot increased by 5.7%.

The unique circumstances of 2020, with a mass exodus from offices in a shift to remote working along with the shutdowns for extended periods of a variety of retail goods and services establishments, were reflected in the commercial real estate market. Office lease  transactions fell from 127 in 2019 to 102 in 2020, a 20% drop. Retail leasing also fell by 12%. But industrial transactions in 2020 grew significantly and returned to the same levels as in 2018. The effect of the ending of the pandemic in 2021 on the office and retail market will be one of the key issues for the commercial sector in the future.”

[Cheri Bonawitz, CCIM, Broker, Malone Commercial Brokers]  “As we are all aware, 2020 was a year like no other. Throughout the pandemic the commercial real estate market was very active in certain sectors and suffered setbacks in others. The office market in Greater Portland had an overall vacancy factor at the end of 2020 very similar to the numbers at the end of 2019 (6.97% vs 6.34%). At the start of the pandemic, most of Maine was working from their often hastily prepared home offices. As the year wore on, we saw a number of workers begin to return to their offices, while a large faction of people continued to work from home. The impact on leasing of both large and small vacant office space has yet to be determined, but we are seeing some promising signs that there still is a desire to maintain a connection with the normal workplace. There were a number of significant office sales and office leases signed in 2020; including the office lease of Berry Dunn for 87,906 SF at 2211 Congress St.

In the retail market, a number of Old Port retailers have closed, but there are many others who managed to hang on throughout the pandemic and are hoping to rebound during 2021. The Maine Mall experienced a number of retail closures which may continue until people are more comfortable shopping in a mall environment. However, several of the larger vacancies were filled in 2020 by furniture retailers whose sales have increased dramatically during Covid. Covid dealt a hard blow to venues such as wedding businesses, concert halls, movies, gyms, and larger indoor spaces. Meanwhile, there were other retailers who benefited greatly from Covid, typically those that offered any type of home improvements. We saw that many restaurants were able to pivot to curbside or takeout service to offset some of their losses, while there was a boon for grocery stores, liquor stores, and retailers selling home and outdoor recreation items.

The industrial market remains strong with very low vacancy rates which continued throughout 2020. The legalization of cannabis growers and retail sales continue to impact the lack of industrial availability throughout the state. Also, the continued growth of the life science sector and craft brewing is also filling potential vacancies. We expect to see some signs of recovery in commercial markets as vaccinations increase and our normal routines are restored.”

Karen Rich, a fellow broker at Malone, contributed to this commentary.

Click here to view the 2021 MEREDA Index video and access the full report.

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Maine Real Estate & Development Association (MEREDA)Elects Benjamin Brennan to Board of Directors

PORTLAND, Maine (June 17, 2021) Benjamin Brennan of Portland, and Sales Executive for KONE Elevators has been elected to the board of directors of the Maine Real Estate & Development Association (MEREDA), a statewide organization of commercial real estate owners, developers and related service providers.

An active member of MEREDA, Ben serves on its Local Issues Committee and most recently took a leading role as co-chair of its DevelopME, working to engage the membership and create professional development opportunities within MEREDA for the next generation of industry professionals. 

As a Sales Executive for KONE Elevators, located in Westbrook, ME, Ben is responsible for new equipment business development & project management and partners with stakeholders of new and existing real estate developments.   From providing AIA continuing education, design assistance and pre-construction services to ensuring smooth transition through all stages of project execution, Ben is involved throughout a project’s life cycle.

A graduate of the University of Maine, Ben was hired in 2013 by KONE to deliver energy efficient elevator solutions to the Northern New England market.  As a green energy advocate, Ben’s interests lie in finding a medium between green technology & affordability.

“We’ve seen Ben become really engaged in a short amount of time, and are impressed by his can-do attitude and interest in MEREDA’s initiatives,” says Shelly R. Clark, Vice President of Operations for MEREDA.   “We welcome Ben’s enthusiasm and look forward to his active participation in furthering MEREDA’s mission of promoting responsible real estate development throughout Maine”.

For further information, please contact MEREDA’s Vice President of Operations, Shelly R. Clark at 207-874-0801 or visit www.mereda.org.

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The Right Equation for Responsible Development: Spotlight on 82 Hanover Street

Each year, 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 2020, 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 Pittsfield to Bangor, with each receiving special recognition at MEREDA’s 2021 Virtual Spring Conference on May 20th.

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.

Our 2020 Top 6 recipients include:

82 Hanover Street, Port Property Management (Portland)
Rock Row Phase 1 Retail Center, Waterstone Properties Group (Westbrook)
Hospice of Southern Maine, Zachau Construction / SMRT (Scarborough)
Solterra, Portland Housing Authority (Portland)
One Merchants Plaza, Sky Villa Properties (Bangor)
Puritan Medical COVID –Building Expansion (P2), Puritan Medical Products (Pittsfield)

Please join us this week in celebrating 82 Hanover Street.

MEREDA:  Describe the building and project.

Port Property Management:  82 Hanover is a mixed-use commercial building located in the West Bayside neighborhood of downtown Portland. Designed to offer a lively community hub for existing residents and incoming neighbors, 82 Hanover combines local history and modern innovation in the form of a multi-use redevelopment. Through a collaboration with the City of Portland Planning and Public Works staff, residents, and other stakeholders, 82 Hanover is an urban destination built to serve the local neighborhood and foster community engagement.

The surrounding area has historically served as an industrial and municipal area of the Portland peninsula with little to offer for residents. With several nearby buildings and vacant lots being redeveloped into housing (we are currently developing 170 residential units directly adjacent to the site), 82 Hanover provides crucial infrastructure and employment opportunities to help sustain the new housing stock and the growing community of West Bayside.

MEREDA:  What was the impetus for this project? 

Port Property Management: Recognizing that current and future residential projects continue to infill West Bayside, 82 Hanover offers a purposeful solution for local businesses and residents. For years to come, 82 Hanover will continue to offer goods, services, and employment opportunities – playing an integral role in strengthening and connecting the neighborhood.

Another central theme of this project was to celebrate the transformation of old to new while respecting the site’s character and integrity. This project transformed a former industrial Public Works building into a vibrant destination without compromising sustainability or environmental considerations. A critical piece of the project included environmental permitting, engineering, management, and remediation. The restoration of the existing building greatly reduced the need for generation and transportation of new building materials, while the design utilized several methods to raise the floor elevation providing resiliency to sea level rise.

Through a collaborative relationship between stakeholders and community members, 82 Hanover represents a shared, workable vision of the future that simultaneously creates economic vitality and honors local history.

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

Port Property Management:  The planning phase took about four years. We successfully bid on and purchased 82 Hanover from the City of Portland as part of their decision to sell six parcels when Public Works moved out of West Bayside. Following permitting and construction, 82 Hanover was fully leased by November 2019. Some of our earliest tenants included Wilson County Barbeque, Cyclebar, Fortune Teller Tattoo, and Banded Brewing.

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

Port Property Management:  As 82 Hanover was renovated from a dilapidated building, no stone could be left unturned. Given the site historically served as a Public Works maintenance garage, the site housed storage tanks containing hydrocarbons prone to leaks, lead paint, and other contaminant issues. Following environmental site assessments, a sub-slab depressurization system was installed under the new concrete floor and two 20,000 gallons fuel station tanks were removed. One specific hurdle we overcame during the process was elevating the entire first floor of the building. The finished floor was raised from an existing elevation of 12’ to 13’ – this extra foot was critical in providing the building with a level of freeboard in a low-lying neighborhood (which is prone to flooding during King Tides and/or intense rain events). This resiliency technique was successfully applied to the existing building all while maintaining ADA accessibility for all 12 commercial tenants.

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

Port Property Management: The enduring demand for community spaces and shared outdoor environments. Although this demand was not entirely unexpected, the speed at which we filled the 43,000 sq ft space was. 82 Hanover was fully leased in just a little over a year, which speaks to the growth potential and vibrancy of West Bayside. While the pandemic put a temporary pause on activity, local patrons and tenants are eager to safely return to the feeling of camaraderie that 82 Hanover provides. There’s a strong pull from community members to reconnect through public spaces, especially outdoor spaces.

With this in mind, 82 Hanover includes a large courtyard utilized by brewpubs, restaurants, bars, and a public bicycle/pedestrian easement. The presence on the block and surrounding neighborhood has been brought back to life with increased foot traffic and activity created by this space. Eventually, the plaza will achieve a total width of 70’, resulting in an outdoor destination that will undoubtedly become the hub of West Bayside.

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

Port Property Management:  82 Hanover stands out in its dedication to preservation and thoughtful restoration. Prioritizing authenticity and sustainability was a focus throughout the entire project. Rather than scrapping the existing building, 82 Hanover was renovated and restored to maintain its unique historic charm. Also, in order to adapt to a changing climate while maintaining the building’s character, mechanical systems were updated, single pane windows were replaced with insulated replica windows, and insulation was added whenever possible for enhanced sustainability and low-energy costs. The project gives nod to Maine’s industrial age and work ethic on both the interior and exterior; brick facades and interior units celebrate the “modern industrial” revamp with high ceilings and exposed beams. 82 Hanover looks and feels like a fundamental staple of West Bayside, which is a testament to its focus on the local community and how successfully the project supports the surrounding neighborhood.

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MEREDA’s Virtual Trivia Night Fundraising Event to Fund Eight $1250 Scholarships for Maine Students

PORTLAND, June 14, 2021 – Although the Maine Real Estate & Development Association (MEREDA) wasn’t able to host its “Strikes for Scholars” Bowl-a-Thon Fundraising Event again this year due to the pandemic, we instead opted for a Virtual Trivia Night and our members turned out once again to support the students!  The event consisted of 3 rounds of questions from Current Events to Pop Culture, to a “Name that Tune” category, followed by team networking. Prizes were awarded to 1st, 2nd, and 3rd Place winners.

We are pleased to announce that MEREDA will be providing 7 $1250 scholarships to the Maine Community College System (MCCS), as well as 1 $1250 scholarship to the College of Science, Technology & Health at the University of Southern MaineThank you, MEREDA Members!

MEREDA began its scholarship program for students in the building trades and professions 9 years ago and has continued to grow and support the program. Since the fundraiser’s inception, MEREDA is proud to have raised and donated over $133,000 in scholarships helping over 103 Maine students.

Many thanks to our Sponsors AAA Energy Service Co.Bangor Savings Bank, & Machias Savings Bank, as well as to our twenty trivia teams!! Without their involvement, these substantial donations would not be possible.

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