Features

Savannah Duncan CHARLOTTE, N.C. — Economic conditions in the Carolinas and in Charlotte in particular are the envy of many other parts of the country, according to Sam Chandan, president of New York-based Chandan Economics and professor of real estate at the Wharton School of Business. “A combination of a high quality of life, a low cost of living and an extraordinarily well-educated workforce have combined with a high-quality transportation structure and good quality housing stock to ensure a stronger and more stable recovery than what we see in many other parts of the country.” His comments came during the InterFace Carolinas Conference, held at the Omni Hotel in Charlotte last week. The one-day event attracted more than 225 industry professionals from across the region and featured networking opportunities. Armed with a strong financial services sector, Charlotte is performing much better than other markets in North Carolina that are more dependent on public services. “Local and state governments are beginning to lose jobs as they run out of the federal dollars to fund local government as well as teachers and social service workers,” Chandan said. The unemployment rate in North Carolina reached its peak of 11.4 percent in January 2010 …

Sebastian Rodrigano The idea that Texas offers a favorable business climate is deeply rooted in the business community, but a business must monitor its property tax burden or risk paying unnecessarily high tax bills. It’s understandable that many Texas businesses downplay the impact of property taxes on their bottom line. Late last summer, a survey by Development Counselors International rated Texas as having the best business climate in the nation for the 12th consecutive year. Survey respondents cited the tax climate, pro-business environment and economic development incentives as the top reasons for favoring the state. As a 20-year Texas resident, I considered Texas’ business climate supremacy to be indisputable. When a client requested a quick check of property tax projections to evaluate locations for a new facility, however, I had trouble reconciling the data with my beliefs about the competitiveness of Texas in attracting new business. Big Taxes in Texas: Across a 20-year period, property taxes on four hypothetical commercial buildings, all valued at $200 million in the first year, would be nearly four times higher in Texas than in many other states. The client was trying to decide where to build a $200 million facility, assuming that every available …

ATLANTA — In a period of rock-bottom building prices and record-low interest rates, now is an ideal time for businesses to consider purchasing instead of leasing their real estate. That was the consensus of the panelists on the most recent episode of the “Commercial Real Estate Show,” which provided an in-depth look at the factors making owner-occupied real estate a more attractive option for businesses. Show host Michael Bull, president and founder of Atlanta-based Bull Realty, said the possibility of rent spikes is one reason to consider buying. “These prices are so low, it’s incredible,” he said. “With the lack of new construction [in recent years], I think we’re going to see some huge rents in about five years.” Banks also are enthusiastic about owner-occupied real estate, noted Brant Standridge, a state president for BB&T whose region includes North Atlanta. “It’s very, very attractive for banks,” he said. “Financing is readily available, and banks are requiring less and less equity.” Firms that own their own buildings have a valuable tool for acquiring the funds needed to grow their operations, panelists observed. “Businesses that are looking to expand, particularly small businesses, often use their real estate,” said Brent Baker, a managing …

By Mark Wayne While conditions vary from one individual market to the next, the overall state of the broader U.S. real estate marketplace remains uncertain. On the retail development momentum meter, the needle is hovering somewhere between cautious optimism and lingering uncertainty. Positive news in recent months, in the form of promising economic indicators and a labor market that seems to be showing signs of life, has begun to shake off some of the financial hangover from the U.S. credit rating downgrade and debt-ceiling debate of last year. But with a possible European debt crisis still looming, and a brutal recession not too far in our rearview mirror, real estate and development professionals are understandably leery of overextending themselves. At the same time, thought leaders and innovators throughout the industry have become increasingly interested in finding new ways to become more efficient and add value in-house. Game-changer One of the effects of that lengthy recessionary cycle is that long-term financial planning has emerged as a more relevant and pressing issue for both employers and employees alike. American families and American companies have both been forced to adapt to new financial and professional realities, in many cases restructuring or reconsidering retirement …

By Ben McLeish In leasing a retail center, the key is to fill it with tenants in a way that’s going to maximize long-term profitability. Otherwise, what’s the point? With that in mind, here are six points to consider as you work on your leasing plan for a property: 1. As you consider what you want your tenant mix to be, focus on tenants that will attract customers who visit more than once a week. The type of tenant is a major driver of overall customer traffic for a center, and odds are these customers will start visiting the center’s other retailers. This is why retailers in grocery-anchored centers do so well. Some other examples of this type of tenant include restaurants, fitness centers and educational facilities. 2. Sweat out the details when it comes to the appearance of the center. Are signs looking worn? Are all the tenants using their sign space properly? Is the parking lot well-lit and in good condition? Is the landscaping looking crisp? Are tree canopies hiding storefronts or signage? The first impression of your center is critically important. When potential tenants visit for the first time, will they be impressed? Also, make sure your …

By Karen Christy The retail market in the Carolinas is one of recovery and creative possibilities. That theme was resonated at this year’s ICSC Carolinas Show in Charlotte this week. Cities in the Carolinas that lead population growth are beginning to attract investors from more overbuilt markets in the U.S. and from larger cities where competition has driven down returns. Key cities in the Carolinas attracting retail investors include Charlotte, Raleigh-Durham, Chapel Hill and Charleston. The South Carolina retail market has experienced substantial activity following the last economic downturn, as many of the big boxes left vacant during the recession have since been filled. The vacancies left dark by national closures such as Linens ’n Things, Circuit City and Goody’s provided a unique opportunity for retailers to pursue a flight-to-quality at what would be considered a value price. Meanwhile, some big-box vacancies in less-than-stellar locations have been repurposed for alternative, non-retail uses. This activity has resulted in vacancy rates of less than 10 percent in all major markets across South Carolina. The Carolinas are high on the radar for the restaurant segment, which is active with many national retailers looking to expand. Population growth is the key driver. Raleigh’s population …

By Michael P. Guerriero, Esq. The build-to-suit transaction is a modern phenomenon, birthed by national retailers unconcerned with the resale value of their properties. Rather than simply redevelop existing buildings to suit their needs, the build-to-suit model calls for the development and construction of new buildings that match the trade dress of other stores in a national chain. Think CVS pharmacy, Walgreens and the like. National retailers are willing to pay a premium above market value to establish stores at the precise locations they target. In a typical build-to-suit, a developer assembles land to acquire the desired site, demolishes existing structures and constructs a building that conforms to the national prototype store design of the ultimate lessee, such as a CVS. In exchange, the lessee signs a long-term lease with a rental rate structured to reimburse the developer for his land and construction costs, plus a profit. In these cases, the long-term lease is like a mortgage. The developer is like a lender whose risk is based upon the retailer’s ability to meet its lease obligations. Such cookie-cutter transactions are the preferred financing arrangement in the national retail market. So, how exactly does an assessor value a national build-to-suit property …

Alan Chosed New accounting regulations may soon be enacted that could significantly impact commercial real estate businesses and professionals. Revenue recognition, fair value accounting and disclosure, receivables accounting and disclosures, and goodwill testing could be affected. But the biggest impact will come from the new joint Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) project on leasing. A number of accounting pronouncements implemented during the past 8 or 9 years have been a result of Enron and other corporate scandals, or the intended convergence of U.S. and international accounting standards. The leasing project is both. Existing leasing rules have been criticized for omitting relevant information about rights, and, more importantly, obligations that may meet the criteria to be recorded as assets and liabilities. These new rules will cause these assets and liabilities to be recorded by the lessee in most situations. No shortage of opinions An exposure draft on the new rules issued in August 2010 received so many comments that it was withdrawn for changes and will be reintroduced. The FASB and IASB have had numerous meetings since the release of the exposure draft and have reached certain “tentative decisions” that significantly changed the rules as …

Jack Halpern In this challenging time for shopping center owners, what steps are they taking to increase efficiencies? Here are five tips that have worked for us in our business that may be of help: 1. Review your retail center’s property tax valuation every year: We have found that valuations sometimes don’t match reality. And since your tenants usually pay a pro-rata share of taxes owed, they will greatly appreciate you conducting this review. At two of our Georgia retail centers this past year, we were able to have the property tax valuations reduced by 10 percent and 12 percent, respectively, and these savings were very significant for each center’s bottom line. Consider using tax professionals who are paid as a percentage of tax savings they find for you. We have had good success with this approach, and have been able to pass the fees along to the tenants on a pro-rata basis. Use consultants who are familiar with such factors as the value of other properties in the area, the value of comparable properties in other parts of town, the impact of vacancies and rent concessions on value, and recent sales prices for comparable properties. 2. Consider using local …

Atlanta, GA — In its inaugural forecast of the commercial/multifamily real estate finance markets, the Mortgage Bankers Association (MBA) projects originations of commercial and multifamily mortgages will hit $230 billion in 2012, an increase of 17 percent from 2011 volumes, and continue to rise to $290 billion in 2015. Commercial/multifamily mortgage debt outstanding is expected to also grow in 2012, ending the year above $2.4 trillion, two percent higher than at the end of 2011. By the end of 2015, mortgage debt outstanding is forecast to exceed $2.5 trillion. MBA previewed its forecast of the commercial/multifamily markets today at its Commercial Real Estate/Multifamily Housing Convention in Atlanta. “Our forecast anticipates continued strength in lending by life companies and the GSEs, increased lending by banks and others, and a slow but steady return in CMBS activity,” said Jamie Woodwell, MBA's vice president of commercial real estate research. “Low loan maturity volumes over the next few years, coupled with moderate sales transaction activity, will mean that a relatively robust supply of mortgage capital will be a catalyst for deal activity.” Commercial/multifamily mortgage bankers' originations volumes are projected to rise to $230 billion in 2012, $245 billion in 2013, $265 billion in 2014 …