Features

By Nellie Day LAS VEGAS — Some of the nation’s largest shopping center owners and managers took a break early this week from discussing the physical attributes of their properties to focus on their technological infrastructure during RECon 2014 at the Las Vegas Convention Center. While the shopping center is still the priority, much of the conference’s talk so far has focused on the properties’ unseen attributes — its Wifi capabilities, omni-channel presence, appreciation for social media, data analysis, sophisticated information technology systems — in the quest to get more shoppers in the store and ring up more sales. “It takes a huge shift in thinking to say that we as a property, or we as an owner, value technology enough that we’re going to make an investment because we believe that investment is going to keep bringing customers to our shopping centers,” said Corbett Guest, CEO of Dallas-based Imaginuity, a digital marketing agency that works with business-to-business and business-to-consumer companies. “If you just throw a bunch of money at different things and hope they stick, you’re going to spend a whole bunch of money,” said Guest. Therein lies the problem that panelists addressed during an educational session, titled The …

By Matt Valley LAS VEGAS — City Creek Center, a mixed-use development in the heart of Salt Lake City, is this year’s VIVA Best-of-the-Best Award winner in the sustainable design/development category, the International Council of Shopping Centers (ICSC) announced Sunday. The VIVA Best-of-the-Best Awards presentation at the Las Vegas Convention Center capped the opening day of RECon. More than 33,000 retail and shopping center professionals from across the globe are gathered here this week to network, do deals and partake in educational sessions. The largest convention of its kind in the industry, RECon also features 1,000 exhibitors. The VIVA Best-of-the-Best Awards recognize the most outstanding examples of shopping center design and development, sustainability, marketing and community service worldwide. VIVA stands for “vision, innovation, value and achievement.” City Creek Center, which opened in 2012, is owned and managed by Bloomfield Hills, Mich.-based Taubman Centers Inc. (NYSE: TCO).Taubmanco-developed the center with City Creek Reserve Inc., the real estate arm of the Church of Jesus Christ of Latter-day Saints. Callison served as the design architect on the project, while Hobbs + Black Architects served as the production/executive architect. The mixed-use project is a 20-acre urban redevelopment of two city blocks. “City Creek is …

By Matt Valley The U.S. economy appears to be gaining traction, boosting the outlook for the commercial property leasing market in the coming quarters, says Robert Bach, director of research for the Americas at real estate brokerage firm Newmark Grubb Knight Frank. Emerging from their winter hibernation, employers added 288,000 net new payroll jobs in April, according to the Bureau of Labor Statistics (BLS), easily beating economists’ expectations of 220,000 jobs. The severe cold and heavy snow blamed for the meager U.S. GDP growth of 0.1 percent in the first quarter of 2014 is now a distant memory. The BLS also revised the February and March data higher by a combined 36,000 jobs, putting the labor market within reach of a new peak that would erase all recessionary job losses, according to Bach. That new peak could occur as early as the next payroll employment report due to be released by the Bureau of Labor Statistics in early June. The job gains in April were widespread. Among the highlights: • The three primary office-using sectors — information, finance, and professional and business services — added a combined 78,000 jobs, beating the six-month average of 52,700. “If the labor market can …

By Scott Saunders Like-kind exchanges have been a vital part of the Internal Revenue Code under Section 1031 since 1921. A 1031 exchange allows an investor to defer the recognition of capital gains when exchanging one appreciated investment property (the “relinquished property”) for another “like-kind” investment property (the “replacement property”). Most commercial 1031 exchanges today are orchestrated transactions in which an investor uses a qualified intermediary (QI) to facilitate the sale of the relinquished property to one party and the purchase of the replacement property from another party. The capital gain inherent in the relinquished party is not taxed upon its transfer. However, since the basis of the relinquished property becomes the basis of the replacement property, the capital gains tax is not eliminated, it is merely deferred until the property is sold, or exchanged for non-like-kind property. Contrary to popular myth, Section 1031 is not a loophole or a tax savings vehicle. As mentioned above, the capital gains tax is not avoided — it is merely deferred. This outcome is based on sound tax policy. The essential logic is that the investor, in exchanging one appreciated property for another like-kind property, has not realized the gain inherent in the …

By Scott Fisher After each commercial real estate downturn, the real estate industry tries to learn from its mistakes and take the hard lessons learned into the next cycle. An important lesson learned by investors in the most recent real estate downturn was that they need more control of crucial decisions when a joint venture is in critical economic condition. At that juncture, the perspective of the partners in the venture may be quite different. The promoter/developer (the “promoter”) may be looking for ways to preserve its increasingly distant back-end “promoted economic interest” while avoiding personal liability. Its judgment may be influenced by the absence of an economic upside. Simultaneously, the partner(s) that provided the equity to the venture (the “investor(s)”) is trying to preserve its investment and maximize the likelihood of a return on that investment. The impact of the investor’s preferred course of action may be to push the promoter’s interest further down the capital stack. The perspective that prevails ultimately depends on the terms of the management sections of the joint venture agreement. Before 2006, typical real estate joint ventures allocated to the promoter the right, subject to “major decisions” requiring investor approval, to run the day-to-day …

Construction employment expanded in 175 metro areas, declined in 106 and was stagnant in 58 between February 2013 and February 2014, according to a new analysis of federal employment data released this month by the Associated General Contractors of America. Despite the gains, construction employment remained below peak levels in all but 19 metro areas. “It is encouraging that contractors added workers in so many locations despite severe weather that delayed some project starts,” says Ken Simonson, the association's chief economist. “At the same time, it’s clear that the upturn in construction is far from universal. Activity is flat or declining in many metro areas, while contractors in the hottest locations are having trouble finding skilled workers.” Houston-Sugar Land-Baytown, Texas added the largest number of construction jobs in the past year (9,600 jobs, 5 percent), followed by Santa Ana-Anaheim-Irvine, Calif. (8,600 jobs, 12 percent) and Los Angeles-Long Beach-Glendale, Calif. (8,000 jobs, 7 percent). The largest percentage gains occurred in Monroe, Mich. (65 percent, 1,300 jobs), El Centro, Calif. (32 percent, 600 jobs); Reno-Sparks, Nev. (31 percent, 2,600 jobs) and Pascagoula, Miss. (26 percent, 1,400 jobs). The largest job losses from February 2013 to February 2014 were in Gary, Ind. (-4,700 …

NEW YORK — The delinquency rate for U.S. commercial real estate loans in commercial mortgage-backed securities (CMBS) fell 24 basis points in March to 6.54 percent, according to New York-based Trepp LLC. The last time the delinquency rate was below this level was more than four years ago in January 2010. Today's rate is 288 basis points lower than where it stood a year ago. Trepp credits some of the month-over-month improvement to the ongoing CWCapital distressed asset sales. In the first three months of 2014 alone, the CMBS market saw 114 basis points of downward pressure on the delinquency rate due to previously delinquent loans being resolved with losses. While not all of these resolutions are a result of the CWCapital assets, they have contributed significantly to the rate's improvement. “The CMBS market had the pleasure of singing the same happy refrain in March, as delinquencies continued to fall,” says Manus Clancy, senior managing director at Trepp. “We had anticipated a large drop in the rate due to the CWCapital assets, but that descent has been extended, as the notes didn't really begin to make it through remittance cycles until [early 2014]. We suspect the rate will stabilize somewhat …

By Michael Bull, CCIM What’s up with seniors housing? Consumer demand, investor interest and sales prices — that’s what. With more than 10,000 baby boomers turning 65 years old on a daily basis and the ranks of the newly insured growing, the seniors housing industry is certainly poised for growth. Those were a few of the points made on a recent “Commercial Real Estate Show” episode about seniors housing. I interviewed a few industry icons about the current and future performance of this property sector. Something for Everyone “When you consider the main types of seniors housing products, assisted living has had the most investor demand,” said Rob Whitmire, president of the national seniors living group at brokerage firm Bull Realty Inc. You can break down the four basic types of seniors housing based on care delivery. With its community-oriented feel, independent living offers housing for seniors that are mostly able to take care of themselves. Assisted living is a state-licensed facility with 24-hour medical care that varies based on the needs of the individual. These properties focus heavily on the social aspect as well. Skilled nursing offers state-licensed, 24-hour medical care. Finally, continuing care retirement communities allow a person …