By Cris K. O’Neall, Esq. Assisted living is moving to the forefront of the ongoing debate over the role of intangible assets in property taxation. Over the past 10 or more years, property tax professionals and the courts have focused discussions of intangible assets on hotel and resort properties, which tend to rely on brands, assembled workforces and other intangible assets in their operations. Intangibles are exempt from property taxation in most states, so hospitality property owners have fought to exclude the value of those intangibles from their property assessments. The courts have resolved the question of whether the value of intangibles can be included in the value of hospitality properties, establishing case law through key decisions such as those by California’s Supreme Court and Court of Appeal in Elk Hills Power vs. Board of Equalization and SHC Half Moon Bay v. County of San Mateo. In those cases, the courts have explained that assessors must remove the value of non-taxable intangible assets and rights from a property’s value so that only real property is assessed for property tax purposes. Owners should take page from hotel playbook Now tax industry professionals are asking whether the principles used to exclude intangibles …
Scott Reid According to the MBA’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations, a decrease in loan originations for retail and multifamily properties led to a 2 percent decrease in overall commercial/multifamily originations in the second quarter compared with the same period a year ago. The 2 percent decrease between the second quarter of this year and the second quarter of 2013 included a 10 percent decrease in the dollar volume of loans for retail properties, a 10 percent decrease for multifamily properties and a 6 percent decrease for office properties. Loan originations for retail and multifamily properties in the second quarter of 2014 were 34 percent higher than the first quarter, due to the increase of hotel property originations by 91 percent, a 78 percent increase for health care properties, a 64 percent increase for retail properties and 44 percent increase for office properties. Jamie Woodwell, MBA’s vice president of commercial real estate research, says there are a variety of factors at work. “Low interest rates and improving property fundamentals are prompting borrowers to act, but the relatively low volume of loans hitting maturity is checking overall demand.” Among investor types, the dollar volume of loans originated for government-sponsored …
By Haisten Willis With the completion of the Panama Canal expansion on the horizon, REITs could reap the benefit of asset exposure to the U.S. ports that stand to immediately benefit from the canal's increased traffic. Ports along the Gulf of Mexico and the East Coast of the United States are prepping for the opening of the expanded Panama Canal. The project is expected to be completed in early 2016 and will cost an estimated $5.25 billion. The new system of locks will allow new ships to pass through that will be capable of hauling at least two-and-a-half times the cargo of vessels using the canal today. It is estimated that container traffic will increase 5 percent to 15 percent in ports that can accommodate the new ships, according to a July 8 article in The Wall Street Journal. With expected increases in cargo volume for U.S. ports, the Journal reported that several major U.S. ports have been preparing to accept the new supersized ships. Six of the top 25 ports for waterborne foreign trade by metric ton volume in 2013 are taking measures to ensure immediate benefit from the expansion. The port of Houston was ranked first for waterborne …
By Haisten Willis Shale zone communities have discovered another benefit from their surging economic growth: more of everything. Small towns like Williston, North Dakota, which has relatively little retail, are now catching the eye of major brands like Whole Foods Market and Trader Joe's. With $80 billion expected in annual investments over the next six years and rapid population expansion, local infrastructure construction and real estate development in shale formation areas like the Bakken in North Dakota and Eagle Ford in Texas are turning small outposts into genuine boomtowns. According to JLL’s 2014 North American Energy Outlook, major metropolitan areas are benefitting too, with “surge cities” fuelled by oil and natural gas production growing at more than twice the pace of their peers. “The energy boom is having a dramatic effect on the infrastructure of these boomtowns and on the economies of the hubs that support the oil and gas business,” says Bruce Rutherford, international director and head of oil and gas practice for JLL. “Sites like Williston and Midland, Texas, or Hobbs, New Mexico in the Permian Basin are having a tremendous influx of workers, and those workers need to eat, they need places to shop and they need …
By Danielle Everson In the eyes of Bob Bach, director of research for the Americas with Newmark Grubb Knight Frank, the employment sectors most important to commercial real estate performed well during July based on the latest data from the Bureau of Labor Statistics (BLS). For example, in the office-using sectors of information, financial activities, and professional and business services, U.S. employers added 56,000 nonfarm payroll jobs during July, slightly less than the prior six-month average of 68,800. The July employment report also spelled good news for the leasing market as a whole, adds Bach, “indicating that occupier demand for space will continue to grow at a moderate pace over the next few quarters.” Despite the gains, the jobs report in July fell short of economists’ expectations. Nonfarm payroll employment grew by 209,000, including 198,000 jobs in the private sector. Analysts surveyed by Bloomberg prior to the release of the latest data by the BLS had expected the U.S. economy to create approximately 230,000 jobs in July. Bach says the latest figures are “easing fears in the financial markets — at least temporarily — that the economy was accelerating too rapidly.” July marked the sixth consecutive month in which employers …
NEW YORK — The delinquency rate of U.S. commercial mortgage-backed securities (CMBS) contracted one basis point in July, a minimal decrease considering the monthly rate has achieved double-digit improvements for more than a year, according to Trepp LLC. During the course of the month, the delinquency rate dropped to 6.04 percent. Trepp defines a delinquent loan as one that is 30 days or more past due. Loan resolutions, which have ranged from $900 million to $2 billion (excluding the CWCapital sales) this year, totaled only $600 million in July. With fewer distressed loans removed from the delinquent loan pool, newly delinquent loans pushed the monthly total back up. Trepp currently counts $32.1 billion in CMBS loan delinquent, which is down from June's total. “After so many months of steady declines in the delinquency rate, the slowdown in distressed loan liquidations and an uptick in newly delinquent loans put the brakes on the improvement in July,” says Joe McBride, research analyst at Trepp. “Whether the monthly decrease in loan liquidations is an outlier or a true shift to slower workout activity from special servicers remains to be seen but we expect the rate to continue downward.” Seriously delinquent loans, which are …
By staff reports NEW YORK — With vacancy rates and speculative construction back to pre-recession levels, the U.S. industrial sector at mid-year 2014 continues to lead the country’s commercial real estate recovery, according to Cushman & Wakefield. The commercial real estate services firm released its second-quarter industrial market analysis, which also shows strong occupancy gains and rising rental rates in the face of diminishing big-box supply. “With demand for goods from consumers and businesses rising at a healthy pace, e-commerce sales rising by 15 percent a quarter, and manufacturing production and shipments increasing, the national industrial market has, indeed, entered a time of significant growth and progress,” says John Morris, leader of industrial services for the Americas at Cushman & Wakefield. The U.S. industrial vacancy rate continued to compress during the second quarter to 7.2 percent, 80 basis points lower than one year ago and the lowest level since the first quarter of 2008. This is a significant departure from the recent high of 10.8 percent posted during the first quarter of 2010. Two California markets currently have the lowest industrial vacancies in the nation: the San Francisco Peninsula (3.7 percent) and Orange County (3.9 percent). Net demand remained strong …
By Nellie Day FAIRFIELD, CALIF. — The City of Fairfield’s industrial supply has been feeling a little crushed lately as wine-related companies snatch up space at a record pace, thanks to its close proximity to Napa Valley’s wine region. More than 2.5 million square feet of this 37.6 square-mile town is occupied by wine-related businesses, 1 million of which was absorbed during the past year alone. “Fairfield's real estate prices are significantly less expensive and its building fees are one of the lowest in the San Francisco Bay Area,” explains Charles Ching, the city’s economic development specialist. “The city has excellent transportation access to ports, rail and airports. It is bisected by Interstates 80, 680, and Highway 12, making it a good trucking zone and allowing companies to daily move their products on north-south and east-west corridors.” The city’s infrastructure, location and reasonably priced rents have given many wine-related companies reason to celebrate. Fairfield has become so attractive to this industry, in fact, that many companies have chosen to relocate from nearby cities. Encore Glass, a wine bottle supplier, moved its operations from Benicia, 20 miles south of Fairfield, to a 318,000-square-foot building that was just opened by Buzz Oates …
The U.S. apartment market may be well on its way to record-high occupancies, but new development activity poses risks for its strong markets, according to SNL Real Estate. Data from Axiometrics shows a May national occupancy rate of 95 percent, the highest monthly rate it has recorded since it began tracking apartment properties in April 2008. The firm has called 2014 a “top recovery year” as the annualized effective growth rate moves upward, recording its strongest rate in May at 3.5 percent — the highest since February 2013. Second-quarter occupancy figures for multifamily REITs had not been released as of this writing, but the sector delivered a median occupancy rate of 94.8 percent in the first quarter. Over the past three years, the median occupancy rate among multifamily REITs averaged 94.9 percent. The lowest median quarterly occupancy rate during the past three years was recorded in the fourth quarter of 2011, at 94.3 percent. The highest median quarterly occupancy rate over the three-year period was 95.4 percent, recorded in the second quarter of 2011. Investor perception of the sector appears to be strong. The SNL U.S. REIT Multifamily index posted the highest total return year-to-date through July 9 among all …
By Trip Stephens, CIO of ZOM In the aftermath of the housing bubble a few years back, many Americans have changed their views on homeownership. Homeownership rates have dropped from a peak of 69.4 percent in 2004, to just 64.8 percent today — the lowest level the U.S. Census Bureau has reported in 15 years. Demographic shifts are also influencing tenure choice. People in the expanding 25-34 year age group want to live closer to work, be more socially engaged with their peers and prefer the freedom and flexibility of renting instead of owning. Many are also less inclined to own a car. A growing segment of these younger renters are also drawn to top-tier U.S. cities, which offer higher paying jobs, more attractive public spaces and cultural venues and 24-hour lifestyle environments. These trends are driving a surge in demand for higher density, urban apartments, many of which will be developed in mid- and high-rise formats due to land scarcity in the best urban locations. Check Your 'Walk Score' How are developer’s capitalizing on this notable shift in demand? It’s all about location. When developers decide to build a high-rise, they are looking for an extremely attractive location, because …