Features

By Linda Terrill, Esq. In the nearly 200 years since the U.S. Supreme Court’s ruling in McCulloch v. Maryland, pundits, attorneys, courts and others have deliberated Chief Justice John Marshall’s assertion that “the power to tax is the power to destroy.” Today the issue is front and center in Kansas, where the state Legislature seems poised to enact sweeping reform legislation governing tax appeals. The contemplated measures would provide substantive due process in an attempt to level the playing field for taxpayers that seek to challenge state and local property, excise and income taxes. The current tax appeal system in Kansas combines informal hearing processes at the county level in property tax issues and at the state level on appeals involving excise and/or income taxes. These are followed by an appeal to the Kansas Court of Tax Appeals (COTA), an administrative agency in the executive branch of state government. If a party is displeased with a COTA decision, the prescribed recourse is a direct appeal to the state Court of Appeals. Mounting Concerns Over COTA Tax consultants and commercial taxpayers alarmed by recent COTA decisions originated the call for reform. The grassroots effort spotlighted COTA’s efforts to deny taxpayers the …

NEW YORK CITY — Whether it be multifamily properties in secondary markets or trophy assets in gateway cities, the world's largest and most liquid market for commercial real estate investment is the United States. According to Jones Lang LaSalle's (JLL) International Capital Sources report, the U.S. closed more than $38.7 billion in foreign real estate investments during 2013 — a 40 percent increase over 2012. Canadian, Chinese and Australian investors led the way for investment in the U.S., and they're not the only ones. Fresh new sources of capital are eyeing the U.S. with bigger appetites than ever before. “Every year, we break a new record for foreign investment into U.S. commercial real estate,” says Steve Collins, international director at JLL. “International capital is plentiful, placing money into markets across the spectrum including Manhattan, Los Angeles, Chicago and other top-tier cities. But even select secondary markets such as Dallas, Houston and Seattle are getting in on the game.” To view a larger version of this chart, click here. According to JLL's Global Real Estate Transparency Index, two big factors are driving foreign investment in the U.S. — increased allocations to international pension funds in countries such as Australia and Malaysia …

By Matt Valley WASHINGTON, D.C. — U.S. commercial real estate markets continue their gradual recovery from recession in the form of improving fundamentals, transaction volume and capital flows, and will likely remain on a modestly upward trajectory during the coming year. That’s the takeaway from The Real Estate Roundtable’s latest sentiment index. Yet, the survey also reveals a lingering wariness among senior industry executives about prospects for a sustainable economic recovery. Despite a brightening economic outlook and recent bipartisan cooperation on the federal budget and debt ceiling, various policy risks continue to weigh on real estate markets. These risks include the scheduled sunset of the Terrorism Risk Insurance Act (TRIA) on Dec. 31, which could spark a job-killing commercial real estate credit crunch; tax reforms that could cause major dislocation in real estate markets; and the economic conditions surrounding future interest rate hikes, which could put renewed pressure on valuations, complicate loan refinancing and impede debt servicing. Chicago-based FPL Advisory Group conducted the first-quarter sentiment survey on behalf of The Real Estate Roundtable. The survey measures the views of CEOs, presidents and other top executives regarding current conditions and their future outlook on three topics: overall real estate conditions, access …

Construction employment jumped by the largest monthly amount in nearly seven years in January, bringing industry employment to the highest level since July 2009, according to an analysis of new government data by the Associated General Contractors of America (AGC). Association officials note that, at the current rate of growth, it would not take long before many firms begin having difficulty finding enough skilled workers to meet demand. “Despite a second month of unusually severe weather in much of the nation, contractors more than offset the job losses that occurred in December,” says Ken Simonson, the association's chief economist. “All segments of the industry added workers for the month, and the sector has increased employment at nearly double the all-industry rate in the past 12 months.” Construction employment totaled 5.92 million in January, the highest total in 4.5 years and an increase of 48,000 from a month earlier — the largest one-month gain since April 2007, Simonson notes. For the year, construction employment rose by 179,000, or 3.1 percent, compared with an increase of 1.7 percent for total nonfarm payroll employment. Nonresidential construction firms added 31,300 new jobs in January and 57,100 (1.6 percent) over 12 months while residential firms …

By Sharon DiPaolo, Esq. Pittsburgh-area commercial property owners who received dramatic increases in their 2013 real estate assessments may see those taxable values go even higher. This wave reflects the growing nationwide issue of changes in property values and how they are assessed. In the case of the Steel City, Allegheny County’s first revaluation in 10 years dramatically increased assessments, which had remained static even during market highs in the mid-2000s and the crash in 2008 and 2009. While the overall increase in county assessments was 35 percent, commercial owners bore the brunt of the increase, seeing their assessments rise 54 percent overall. More recently, however, local legislators enacted an unusual deadline extension that has effectively put property owners — especially commercial owners — at risk for even higher assessments. Note that, rather than rely upon a central tax authority, each of Pennsylvania’s 67 counties sets its own assessment. Because the state lacks a mandate for periodic revaluation, counties normally only undertake revaluation when a taxpayer files suit but will occasionally do so on the county’s own initiative. Historically, reassessments are so infrequent in Pennsylvania (sometimes a decade or more passes between reassessments) that property values spike when a county …

By Matt Valley The latest monthly jobs report released last Friday by the Bureau of Labor Statistics (BLS) is well below expectations, but veteran real estate economists say there is nothing to be alarmed about. The net gain in nonfarm payroll employment was 113,000 in January. Economists had expected an increase of 190,000. Upon closer inspection, the private sector added 142,000 jobs in January while the public sector shed 29,000 jobs. The underwhelming net gain marks the second straight month that job gains failed to meet expectations. Employers added 75,000 jobs in December. “The poor data is predominantly due to the cold weather,” says Ryan Severino, senior economist and associate director of research for New York-based Reis. “Nothing fundamental has changed in the economy over the last two months to think that job growth is migrating to a slower vector. We will have to wait until things warm up to get a clearer reading on the economy.” Economists looking for upward revisions to previously released nonfarm payroll data got what they were looking for in November 2013, but the revised figure for December reflected little change. The BLS revised the job gains in November from 241,000 to 274,000, and from …

By Matt Valley After what economist Bob Bach describes as a “clunker” of a nonfarm payroll employment report for December 2013, Wall Street and business executives everywhere are holding their collective breath in anticipation of this Friday’s jobs report to be released by the Bureau of Labor Statistics (BLS) at 8:30 a.m. EST. Bach, national director of market analytics at Newmark Grubb Knight Frank, will be looking closely for possible upward revisions by the BLS to the 74,000 net new payroll jobs created in December, which fell below expectations of approximately 200,000. Private sector growth of 87,000 in December was partially offset by a loss of 13,000 government jobs. Many analysts say the brutal cold and snowy weather, particularly in parts of the Midwest and Northeast, negatively skewed the employment picture in December. The extremely harsh weather continued into the new year, which could bode ill for the January employment report. Detroit Metropolitan Airport recorded 39.1 inches of snow in January 2014, trouncing the old record of 29.6 inches set in January 1978. In fact, it was Detroit’s snowiest month ever, eclipsing the old record of 38.4 inches set in February 1908. The unemployment rate plunged from 7 percent in …

WASHINGTON, D.C. — Fannie Mae has provided $28.8 billion in financing to the multifamily market in 2013. The agency worked with its lender partners to finance 507,000 units of multifamily housing, and approximately 99 percent ($28.5 billion) of the loans were delivered through MBS execution. Fannie Mae met the Federal Housing Finance Agency's goal to reduce multifamily volumes by 10 percent relative to 2012 levels, according to Fannie Mae. “I am proud that Fannie Mae continued to serve the multifamily market in 2013 with $28.8 billion of new acquisitions,” says Jeffery Hayward, senior vice president and head of multifamily mortgage business at Fannie Mae. “The need for quality, affordable rental housing is greater today than it's ever been, and we will continue to do our part by providing liquidity, stability and affordability to the multifamily market and maintaining our credit standards. Over 85 percent of the multifamily units we financed in 2013 were affordable to families earning at or below the median income in their area.” The Delegated Underwriting and Servicing (DUS) lenders delivered 99 percent of Fannie Mae's 2013 multifamily loan acquisitions. The DUS program relies on shared risk with lenders, or “skin in the game,” and provides certainty …

By J.C. Pelusi It’s no secret that the millennial generation is becoming an integral piece of our nation’s workforce. Millennials will dominate the workforce by 2015 and will comprise 75 percent of the workforce by 2030, according to the U.S. Bureau of Labor Statistics. Consequently, millennial lifestyle preferences and work habits will continue to transform economic activity and, more specifically, shape commercial real estate demand. This up-and-coming generation is the primary driver behind workforce urbanization. Following a recent influx to U.S. urban cores, it’s clear that young professionals (born between 1980 and 1997) prefer downtown living, working and shopping. We’re already seeing the economic impact in major metros and in our secondary markets. In fact, space availability is low across the region as a whole, and The Atlantic magazine recently featured Cleveland and Pittsburgh among the top nine U.S. cities “Where Millennials Can Make It Now.” The Atlantic noted that Detroit was already established among those “deemed magnets for young, creative people.” The commercial real estate implications are unique to the young generation of professionals, including the evolution of the collaborative office space, new retail structures that cater to online shopping and, subsequently, more demand for downtown residential space. But, …