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Ownership of real estate carries with it the threat of litigation from tenants, guests or even passers-by. In 2002, New York City increased property owner liability for injuries sustained on sidewalks. Moreover, property owners also face liability based upon lead paint, mold and other environmental risks. Now an additional threat exists based upon a newly strengthened New York State scaffold law. For years, property owners have known that Labor Law §240(1), more commonly known as the scaffold law, imposes liability on a property owner for elevation-related injuries to a worker on the property. These injuries include those involving the use of scaffolding, hoists, stays, ladders, slings, hangers, blocks, pulleys, braces and ropes. The most common injuries covered are falls from scaffolding or ladders or injuries that occur when a worker is hit by a falling object. This law has broad reach because most multifamily buildings must utilize scaffolding and ladders. Most important, this liability is absolute; the owner is liable even if he did nothing wrong. The duty created by this statute to provide safe working conditions is nondelegable, meaning a person may not transfer that obligation to another party to avoid responsibility. The property owner himself is held liable …

Although your leasing agent is an independent contractor, you really should think of him as an employee. When you are paying an employee, you want him to be as efficient with his time as possible. The same is true for your leasing agent. As a result of higher productivity, you increase the probability of getting more space leased more quickly to higher quality tenants at higher rents. Listed below are 10 steps that property owners can take that will make them better clients. Lease and Zoning Restrictions: Tell the leasing agent about any known restrictions that exist. It is a waste of the leasing agent’s time to be out courting and meeting with tenants that violate existing leases, covenant condition restriction documents or zoning restrictions. Too many times, a landlord will only tell the leasing agent that these restrictions exist after the leasing agent has spent way too much time working with a tenant. Be proactive, and help prevent this from happening. Keys: It is best if all locks in the center are on a master key. This saves the leasing agent a lot of grief from having to sort through a bunch of keys in order to figure out …

Did you ever play kick the can when you were a kid? If you didn’t, don’t worry; real estate bankers and commercial real estate owners have a chance to play it once again. However, if you are an investor in commercial real estate looking to make a killing in the $1.4 trillion of real estate debt coming due through 2012, this is going to be a very painful game to watch. The FDIC quietly issued a ruling recently that essentially enables banks to classify real estate loans that have spotty debt service coverage or whose property values have fallen below the loan balance as “performing.” With commercial real estate values down in some places as much as 40 percent, this is a true leap of faith on the part of the federal government. The government is hoping that by keeping these loans in the performing column, banks can “kick the can” farther down the road until private real estate values re-inflate. The FDIC is quietly trying to avoid a replay of the early 1990s, when the creation of the Resolution Trust Corporation resulted in deep-discount pricing of real estate loans and assets. As a result, banks are “pretending and extending,” …

The secondary impacts of a recession frequently create an entirely new set of difficulties beyond credit crunch and cash flow problems. These ripple effects move through the marketplace in sometimes unexpected ways. One of those secondary impacts is the issue of how to maintain adequate insurance for the sudden glut of vacant commercial properties. Faced with an overabundance of vacant or partially occupied commercial space, owners and insurers are wrestling with how to structure policies, where to go to secure a new policy if an existing traditional policy no longer applies, and how best to make the kind of operational and financial changes necessary to mitigate the liabilities that are inherent to these buildings. With vacancies in commercial properties escalating everyday, the need for sophisticated, flexible and effective commercial insurance policies is evolving. Understanding risk exposures in today’s changing commercial real estate environment is the first step toward crafting policies that meet the needs of both the insured and the insurer. Vacant or Partially Occupied Guidelines One of the core issues surrounding vacant or partially occupied commercial property insurance is a lack of available coverage options. There are not many companies that want to insure a partially occupied building. In …

The construction loan market from 2000 to 2007 was extremely profitable for banks. Loan spreads were strong, opportunities were plentiful and there was no shortage of buyers for finished properties. The permanent loan markets, including commercial mortgage-backed securities (CMBS), government-sponsored agencies (GSE) and life insurance companies were all aggressive and accommodating for the buyers. Defaults were virtually non-existent. Even poorly executed deals were bailed out by the ever-growing needs of real estate investors. When the real estate transaction world slowed to a crawl in mid-2008, the pain started for permanent loan holders of CMBS, mezzanine and whole loans. Values dropped, and holders were forced to take markdowns on their financial statements. The slowdown in transactions and falling values will have an even greater impact on the banks that originated construction loans between 2005 and mid-2008, as these loans were based on ever-increasing rent rolls and even lower cap rate exit assumptions. A few facts about construction loans in the current market: * Most apartment construction loans have a 3-year term with two built-in extensions for a year each. The terms for obtaining the extensions varied widely between asset type and lender. Loans originated in 2005 have already expired on the …

The dramatic growth in commercial real estate values that peaked in 2007 spurred a wave of development and unquenchable investor demand. As the market cooled, what was a booming real estate market quickly transformed into an ever-growing inventory of distressed properties, foreclosures and seemingly never-ending workout situations. While many read the headlines and see doom and gloom, savvy investors see opportunity. Given the virtual trickle of appropriately priced deals hitting the marketplace to date, many buyers are vying for each offering. Financing for these projects, however, can be a challenge, as credit is no longer widely available and underwriting standards have tightened. For investors who have identified an opportunity, the ability to obtain financing can be a key factor driving, or limiting, returns on equity. Short-term bridge financing is most commonly used for the acquisition, renovation and repositioning of in-transition properties. This financing enables the execution of a business plan that brings the property from an “in-transition” state to a “stabilized” state, upon which the borrower seeks to “exit” the bridge loan via a refinance or sale. Bridge loans can take on many forms and vary from conventional short-term financing provided by a local bank to high yield loans. As …

Dennis Reed While the hotel industry across the nation has been hard hit by the recession, the tough times are not going to last forever. Whether you believe in a u-shaped, v-shaped or w-shaped recovery, an economic resurgence will happen. When the recovery starts, the South, particularly Florida, will move forward before some of the other regions of the country. The pent-up demand for leisure travel, put off by so many Americans who have lost their jobs and have seen their savings decline, will spur visitation in the South more than in other regions. We saw this occur after the terrorist attacks of 2001; total international visitor arrivals for 2001 declined by double digits over the prior year. It wasn’t until the end of 2003 that we saw progressive improvement over 2002 and 2001. In 2009, we are experiencing a similar decline in visitation. The U.S. Department of Commerce announced that 5.1 million international visitors traveled to the United States in July, a decrease of 6 percent compared to July 2008. Specifically, visitation to the United States from the European Union countries declined 11 percent in July. Total visitation in the first 7 months of 2009 was down 10 percent …

Bruce Jackson Water is being fought over in Georgia and around the Southeast, and new laws in Georgia are changing the water-law landscape. Georgia’s General Assembly mandated in 2005 the creation of a comprehensive statewide water management plan. The plan, approved last year, is naturally Georgia-centric in terms of its policies toward water management. However, most major drainage basins are not confined to Georgia’s borders. The result of these water wars could have wide-ranging implications regarding commercial real estate development and the renovation of existing buildings. Georgia is in litigation with Florida and Alabama over the Apalachicola-Chattahoochee-Flint (ACF) basin and with Alabama over the Alabama-Coosa-Tallapoosa (ACT) basin. Tennessee is restless as Georgia eyes the Tennessee basin, a healthy amount of which is in Georgia. With South Carolina, Georgia shares the Chattooga, Savannah, Tugaloo and Seneca basins. Then there is the Floridian Aquifer, which lies under an area of more than 100,000 square miles below South Carolina, Georgia, Alabama and Florida. The interplay between the surface water above the aquifer and the aquifer itself is not well understood. The point of the geographic scope of these water basins and the aquifer is that other states have co-existing claims to virtually every …

Jon Ross Two words — potential and unknown — can be used to sum up the current state of the medical office real estate market. Officials in the real estate and healthcare industries are anxiously waiting for the federal government to decide on a given path for healthcare reform and are hesitant to pursue new deals. At the InterFace Medical Office conference October 21 at the InterContinental Buckhead in Atlanta, real estate brokers and developers joined with healthcare providers and hospital representatives to talk about the healthcare industry. In six panels and a roundtable session, attendees discussed the current lending climate, the state of the market and the future of healthcare real estate. The underlying theme of the day-long conference? Confidence is needed for investors to re-enter the market and for tenants to stop fretting about the future. “Until we get some clarity on healthcare reform and until we get some improvement in the capital markets, I don’t think we’re going to see a ramp-up of transaction volume,” said Scott Evans, managing director of Cain Brothers & Co. On the leasing side, tenants don’t want to make a move until they know how the office market will play out in …

Due to space constraints, the 2009 Chicago Roundtable was printed in edited form in the October issues of Shopping Center Business and Heartland Real Estate Business. The following is Part Two of the complete transcript. Shopping Center Business recently held a Chicago Retail Roundtable hosted by law firm Levenfeld Pearlstein. Despite a lackluster year for retail, turnout at the roundtable was robust and the discussion was again lively, offering a snapshot of activity within the market and a view of general industry trends. In attendance this year were: Adam Secher, Baum Realty Group; Peter Eisenberg, Clark Street Development; Peter Caruso, Intercontinental Real Estate & Development; Lew Kornberg, Jones Lang LaSalle; Marlon Stone, Katz & Associates; Richard Kahan, KB Real Estate; Marc Joseph, Brian Kozminski and Keith Ross, Levenfeld Pearlstein; Terry McCollom, McCollom Realty, Ltd.; Ben Wineman, Mid-America Asset Management; Jim Schutter, Newmark Knight Frank; Robert Rowe, Sierra Realty Advisors; Marc Siegel, SJS Realty Services; Ryan Murphy; SRS Real Estate Partners; Tim Thanasouras, Thanasouras Commercial Properties; Aaron Gadiel and Jonathan Payne, The Jaffe Companies; James Turner, The PrivateBank; Sy Taxman, The Taxman Corporation; Richard Dube, Tri-Land Properties; Glen Todd, U.S. Cellular; and Camille Julmy, U.S. Equities. SCB: Rob [Rowe], you are …