Another Winner of Amazon HQ2 in Queens? Goldman Sachs

(Bloomberg) -- Amazon.com Inc.’s announcement that it’s opening a major new office in a New York neighborhood sent developers into a frantic scramble this month to snap up real estate nearby.

Goldman Sachs Group Inc. was way ahead.

On the very same day the online retailer concluded its long, highly publicized search for a second headquarters, placing part of it in Long Island City, the bank quietly finalized a deal to provide $83 million for a massive new apartment complex less than a mile away, in Hunter’s Point South.

The timing was an “absolute coincidence,” says Margaret Anadu, the head of Goldman Sachs’s Urban Investment Group, which did the deal. “I didn’t think New York was in the running, much less Long Island City.”

The draw for Goldman? Generous new tax breaks meant to entice investors to plow money into low-income areas across America designated as “opportunity zones.” Institutions and wealthy investors that build in those areas can defer taxes on past capital gains, and avoid them on the future profits from their projects. Much of Long Island City sits in such a zone.

The Urban Investment Group has long focused on backing projects with a social impact. Days after Republicans pushed through the new tax break in December, the firm began funding eligible projects, far ahead of most competitors. The bank has since deployed about $150 million of its own money into the zones, taking equity stakes in deals including the apartments in Hunter’s Point South.

The project, which is being built with the Gotham Organization, has more than 1,000 units. About 80 percent of them are earmarked as affordable for people earning between 30 percent and 145 percent of the area’s median income. Gotham had been working on the project for months before news broke Nov. 4 that Amazon was in advanced talks to move in nearby.

“When this massive development is done, it’ll be one of the largest affordable housing communities in New York City’s history,” Anadu said.

New real estate construction can be perilous. Projects take years to see through, and a recession or jump in interest rates can leave unlucky investors with losses. Developers in Long Island City had also faced the prospect of a glut with more than 4,500 units under construction, according to a study published in April.

Amazon’s expansion into the area mitigates some of that risk. The online retailer is expected to hire more than 25,000 people as it builds out its presence in coming years. Other businesses are bound to follow, creating more demand for housing in the area.

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