Chicago: A Haven for Real Estate Development
Throughout the world, the city of Chicago is known for its glorious skyline. After 1871’s Great Chicago Fire, the city needed a massive rebuilding. Some of the largest metropolitan cities, such as New York and St. Louis, dedicated a great amount of resources to the undertaking, and the initiative drove architects from all over to leave their mark on the Second City.
Since those glory days, real estate and Chicago have gone as well together as a Chicago-style hot dog and relish, something which still rings true over a century later in 2019. Now, the latest example of Chicago’s real estate development ambition stems from the locally-based Decennial Group.
Spearheaded by Scott Goodman (of Sterling Bay fame) and Clayco, the Decennial Group is a real estate development firm focused on “opportunity zones”, created by the U.S. Tax Cuts and Jobs Act of 2017. Although they plan to tackle projects in other states, as far as Chicago is concerned, the Decennial Group has their eyes on a South Side redevelopment: Burnham Lakefront.
Named after Daniel Burnham, chief architect of the 1983 World’s Fair, Burnham Lakefront proposes to reimagine an area in the Bronzeville neighborhood, which includes the building that once housed the Michael Reese Hospital. What makes this project so attractive to these mega-real estate development companies is its status as an opportunity zone, which entails three primary criteria:
Deferral of capital gains taxes owed until 2027 (2026 tax year).
A 15% step-up in tax basis when the original taxes are owed in 2027.
No capital gains taxes are owed on any profits from the fund investments after the minimum 10-year hold period has expired.
Although definitely a prime investment opportunity, projects such as these also do tons of good for the surrounding communities. For instance, this particular patch of land in the Bronzeville area has been long seen as economically inept, and a project with this scale could revitalize the area as well as generate job growth.
When evaluated alongside Sterling Bay’s Lincoln Yards, the city of Chicago will definitely see some interesting enhancements over the next decade. Only time will tell us how they’ll take shape.
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