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Robert W. Thagard Dealing With Receivers From A Tenant's Perspective A significant portion of office market inventory in most U.S. markets is suffering some kind of economic stress, whether due to owner financial distress, pending foreclosure or management by special servicers or a court appointed receiver. For every office building enduring such financial strain, there are existing and prospective tenants who are greatly affected. They are thrown into a situation that presents immediate instability and long-term uncertainty. However, such circumstances can also create an upside for the tenants. Tenants may have the opportunity to negotiate a better lease situation within the property or seize the chance to look at relocation opportunities in a very competitive office market with other, more financially-solvent landlords who are looking to stabilize their buildings and make deals that may be advantageous to the tenant. In either case, it is imperative that the tenant strategically manages such situations. The tenant should call upon proper legal and brokerage counsel to work with and guide them through the course of action to protect their interests and obtain the best long term solution that safely navigates the uncertain waters of today's office markets. Receivership Issues Inevitably, when a building …

With Thomas R. McOsker REBusinessOnline recently interviewed Thomas R. McOsker, who runs the Tax Receivables Brokerage division of GFI Group, a wholesale brokerage firm. Pools of tax liens trade on GFI’s DART (Distressed Asset Receivables Trading) platform. Wall Street has begun trading pools of tax liens to modernize the old courthouse auction, saving time and money — and providing some investors the possibility of acquiring properties at a fraction of their value. REBO: What are Tax Liens or Tax Receivables? McOsker: A tax lien is a public claim against the tax revenue owed by a tax paying entity on a particular property. These receivables are backed by the underlying property as collateral. In their various forms, tax liens are some of the oldest forms of municipal debt in existence, with history dating back 150 years in some United States jurisdictions, and even further back in Europe. The average size of a lien of this kind in the U.S. is estimated to be around $2,500. REBO: Why are tax liens important? McOsker: Local municipalities and county infrastructures rely heavily upon the collection of ad valorem real estate taxes, which are linked to the value of parcels within their geographical boundaries. Seventy-five …

Todd M. Yates With the nation’s banks sitting on between $1.2 and $1.3 billion worth of capital, they are nevertheless reluctant to lend on commercial real estate because of the elevated level of risk and current valuations of properties already on their books. Many banks own portfolios of commercial real estate whose valuations have declined significantly and do not want to increase their exposure. Currently, banks are under pressure to de-leverage and raise their book capital ratios to assure that they have adequate liquidity to cover losses. This is critical because they are carrying approximately $1.6 trillion in loan balances on commercial real estate. This is 14 percent lower than the 2008 peak, which indicates that banks are writing down and selling loans and not lending as much as they did previously. As long as banks are risk averse, the capital markets will not function at a pace considered to be anywhere near normal. Typically, banks account for half of all lending; CMBS falls between 25 and 30 percent; and insurance companies, Fannie Mae and Freddie Mac combined contribute just 10 percent. Extremely limited capital is available at present to finance speculative construction or significant land acquisitions. If a project …

Scott R. Saunders Congress enacted the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”) to impose a tax on foreign persons when they sold a U.S. real property interest. A foreign person includes a nonresident alien or foreign partnership, trust, estate or corporation that has not elected to be treated as a domestic corporation under IRC §897(i). For U.S. property dispositions subject to FIRPTA, the transferee (purchaser) is required to withhold and remit to the IRS 10 percent of the gross sales price to ensure that any taxable gain realized by the seller is actually paid. The withholding rate is computed differently for other foreign entities, such as foreign corporations and trusts, which are required to withhold 35 percent of the capital gain realized on the sale. For more information on FIRPTA, visit: www.irs.gov and download Publication 515: Withholding of Tax on Nonresident Aliens and Foreign Entities. Who is a Non-Resident Alien? A non-U.S. citizen who does not pass the green card test or the substantial presence test is considered a “non-resident alien.” If a non-citizen currently has a green card or has had a green card in the past calendar year, they would pass the green card …

Carey Webb Retail commercial leases define the landlord/tenant union and govern all aspects of your tenancy. While it both protects and binds you to a location for an extended period, none are perfect nor provide for every contingency. The fact that a lease is a landlord-generated document is, in itself, sufficient cause for any tenant to enter into it with both caution and sound guidance. Knowing what to ask doesn’t guarantee landlord acquiescence, but not knowing can cost you tens of thousands of dollars and potentially impact your business’ success. Awareness of potential pitfalls forearms a tenant with solid decision-making criteria. It is always recommended that any business without an in-house real estate staff avail themselves of the services of a licensed real estate broker specializing in real estate representation. Fees are almost always paid by the landlord in the form of commissions. Common belief is that once a tenant signs a lease and opens for business, the vast majority of the lease will never come into play. As long as the tenant remains open and pays the rent on time, all seems in order. In reality, many things can intervene over the course of a lease triggering unexpected costs …

Mark S. Biskamp Many lenders are using note sales as a way of disposing of distressed loans secured by real estate. The note is sold at a discount to a buyer who is interested in the note at the reduced price or in acquiring the real estate securing the note. Understanding the key elements of a note sale helps in structuring the best deal. In a distressed note sale, the lender sells the note and mortgage covering the real estate as opposed to foreclosing the mortgage after default and selling the underlying real estate itself. The note sale allows the lender to recoup losses without the time and expense of foreclosure and resale of the real estate. The buyer steps into the lender's position under the loan, and after closing, can exercise the lender's remedies under the loan documents for a borrower default, including foreclosure on the real estate. The lender typically sells the note to the buyer “as-is” with few representations and warranties and without recourse against the lender if the borrower fails to pay the note. The buyer will therefore need to conduct due diligence on two levels – on the loan documentation and financial ability of the …

Ronald L. Goss, CPM The number of professional designation, certification and accreditation opportunities are ever increasing as well as the number of people earning them. Why? Because the value of professional designations continues to grow as business, in particular, and society becomes more complex as bodies of knowledge expand. In turn, demand has accelerated for more independent confirmation that the alleged professionals hired are knowledgeable, competent and ethical. The consequences of incompetence obviously are particularly dire in managing commercial, industrial and multifamily real estate. Individuals, business and property owners, corporate executives, government administrators and third-party players increasingly want assurance that their providers of professional services have some basic level of qualifying experience and ethical commitment verified by impartial third-party experts. As a result, a myriad of new certification programs are being established each year to meet the demand for people with independently established, profession-specific credentials. As our industry’s data and experience base expands, such assurance of expertise and skill for coping with change certainly becomes all the more important. For example, events such as 9/11 and the recent Great Recession, and its aftermath, have focused a spotlight on the benefits of competent, nimble management of real estate properties in areas …

William M. Bennett Student housing has become an increasingly accepted investment within the real estate sector, and investors are beginning to consider how many of the macroeconomic risks impact it. For example, on December 9, 2010, Britain’s parliament passed a bill to TRIPLE university tuition, which was quickly followed by students rioting in the streets, setting fires, and shaking up a royal evening. These events caused sophisticated investors to begin asking questions about U.S. student housing: 1. Are U.S. universities at risk of having similar riots? If so, which ones? 2. What is the present and future of government’s role in funding higher education? 3. How does increasing tuition and fees impact student housing investment? The answer to the first question is yes — students rioted at the University of California-Berkeley campus in March 2010 over a 32% tuition increase. Government’s role in funding education is a complex question. In a democracy, a minimum level of education is necessary for the creation of productive citizens. However, education’s benefit not only accrues to the individual, but to society as a whole, so the public financing of university education allows high achievers to become business, social and political leaders that benefit all …

Renata Simril After personnel, real estate costs are typically the greatest expense for public entities. If you’re a public entity, a broker who serves public entities or a real estate professional looking to enter into this broad sector, now is the time to maximize one of the most powerful tools in a public institution’s arsenal: the real estate portfolio. State of the Market During today’s challenging economy, public institutions — cities, counties, states, ports, airports, universities, hospitals and not-for-profits — are under greater pressure to maintain service levels even as their resources become increasingly limited. According to the National League of Cities, for example, U.S. cities in 2009 faced an estimated budget shortfall of nearly 3 percent of their general fund budget. Results from a 2010 survey of federal, state, city, county and other public sector leaders — the breakdown of respondents included city/municipal (39 percent), state (14 percent), federal (13 percent), county (11 percent), quasi-governmental (11 percent) and other entities (12 percent) — to gauge the impact of the recession on public sector budgets and programs, as well as to identify emerging challenges and opportunities, confirmed that government budgets are strained and public officials are looking deeper than ever …

Chris Brockman With an estimated $300 billion in real estate loans coming due in each of the next 5 years and tenant demand that is flat in most markets, many shopping center owners are looking for creative alternatives to selling their holdings at a loss or simply handing them back to their lenders. One solution may be to sell off part of the center in order to raise capital to help refinance the balance of the property. However, that may be easier said than done. Developers and secondary purchasers often do not anticipate having to sell off their centers in pieces and do not structure their underlying documents accordingly. But if you find yourself in that situation, the first two things you need to do (whether you represent the seller or the buyer) is: 1) confirm that local laws allow the center to be sold off in pieces and 2) take a look at the various recorded documents which impact the site. Assuming for the moment that the laws of the local jurisdiction allow the center's owner to sell a portion of the center, and that the requisite cross-easement documents have been recorded to account for access, utility service and …