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Being a commercial property owner right now brings many surprises, but there's one big surprise you want to avoid. If you have renegotiated your commercial property loan in order to reduce the payment terms, you may need to claim the total amount you saved as income on your upcoming tax return. It’s called cancellation of debt income, and you may be liable to pay the taxes incurred on this income. Renegotiating remains an effective strategy to reduce overhead in the short term and improve operations. This can help maintain control of your property and provide some fiscal breathing room for an extended period of time. However, it’s important to include the tax impact when considering this option. Many properties are also being surrendered to lenders to obtain relief from debt. Many of these owners fail to realize, however, that not all of the debt may be extinguished if they are personally liable for that debt. Every case will have its own issues, so we’ll begin with a few generalities. There are three ways property can be surrendered in discharge of debt: Foreclosure: a legally defined procedure for a secured lender to acquire secured property. This can be expensive and time …

Due to the current economic climate and withering demand from office tenants, landlords are seeing vacancies in their buildings skyrocket. Many tenants are downsizing, moving out and closing their doors. Moreover, since most landlords' operating income has taken a hit, refinancing options are scarce, which may further jeopardize the ownership of buildings with maturing or adjustable rate loans. These conditions should give tenants the distinct upper hand in negotiations with landlords, but when it comes to lease renewals, landlords are still stacking the deck. Here are some helpful tips to increase your odds of negotiating a successful lease renewal: Quantify, quantify, quantify Data is essential when considering a renewal. How vacant is your building? How much are other tenants paying? Are any other tenants downsizing? If you don't know what tenants next door are paying, how will you know if you're being offered renewal terms 20 percent higher? Talk to real estate professionals, neighboring tenants or others in your network. This is one of the most important decisions to your company's bottom line; don't leave it to chance or gut feelings. Leverage from thin air The process of renewing a lease is the same as relocating. Even if you intend …

There is no doubt about it: 2009 was a year filled with challenges and hardships elevated to heights no one could have predicted. This was especially true for the commercial real estate industry in South Florida, where boom quickly turned to bust. Many real estate professionals lost clients and jobs, but of all the professionals affected by the commercial real estate crash, perhaps none have been most affected as those who have not yet entered the workforce. Students preparing to graduate will face one of the toughest job markets in modern history — especially students specializing in real estate. Clearly, students of the currently-suffering real estate industry are in quite a predicament. Economic research shows that students who graduate during a recession suffer the effects for decades, and students who are forced to take lower-level jobs or positions unrelated to their education lose ground to their peers; their education becomes more out of date, and their professional networks remain constricted. When the job market does improve, these students will enter their industry at a marked disadvantage in terms of professional experience, acquired skills and wage history. But their misfortune can affect the real estate industry as a whole. For any …

All segments of the economy have been affected by the recent severe financial downturn, perhaps none more so than the real estate market. Shopping center owners and operators have grown all too familiar with the poor economic forecast, but there may be a silver lining to the weak market conditions in the form of property tax appeals. The assessed value of retail properties most likely was set before the economic downturn, so it probably does not reflect current market values. Since taxes are based on a property’s market value, as valuations decline, owners and operators can challenge the assessment of their property in order to reduce their real estate tax burden. The prospects for retail properties in 2010 are not strong, even with indications that the start of a recovery is here. According to Moody’s Investors Service (November, 2009), the All Property Type Aggregate Index recorded a 3.9 percent price decline in September. The index now stands at 42.9 percent below its October 2007 peak. Overall market transaction volume has consistently remained low throughout 2009, with transaction counts totaling less than 400 and average dollar volumes of less than $4 billion per month. All commercial property types have seen a …

Designing, building and operating multiple retail centers in a given market may seem like a counterintuitive strategy for a developer to adopt. At first glance, such an approach might seem like an unnecessary exposure to problems such as redundancy and market saturation. It may seem like competing with yourself for a limited pool of consumer dollars; a particularly relevant concern during a recessionary cycle. But for retail and mixed-use developers, the strategy of developing multiple projects in one market can actually yield surprisingly valuable synergies. From relationships to revenue and from valuable efficiencies to invaluable and enduring financial and strategic leverage, the advantages of building portfolio synergy by developing, redeveloping or acquiring multiple shopping centers in one market can create extremely beneficial economies of scale. At a time when every boost to the bottom line is a precious commodity, taking advantage of portfolio synergy and leveraging those economies of scale is all the more important. In the current precarious financial environment, as banks continue to reclaim projects, opportunities to acquire “package deals” are increasingly abundant. As a result, developers are able to operate in an environment where portfolio synergies are not only more available, but are potentially more effective. Package …

Troubled residential real estate loans have received a great deal of media exposure, and now banks and the government are recognizing that commercial real estate loans are a serious cause of concern for the continued viability of banks. Credit problems resulting from commercial real estate have been escalating. There is roughly $3.5 trillion in commercial real estate loans held by banks, commercial mortgage-backed securities (CMBS), or other institutions in the United States. More than $2 trillion in loans are maturing by 2013. However, the combination of tightened underwriting standards for new loans and falling real estate values will result in many property owners not qualifying for re-financing. This will lead to many owners looking to sell, resulting in substantial supply of available properties in the market and a further decrease in property values. According to the Federal Reserve, banks hold $1.8 trillion of the $3.5 trillion in loans. In the first quarter of 2007, 1.4 percent of these loans were delinquent. More than 2 years later, that figure is approaching 8 percent and rising. These delinquencies are causing bankers to be overwhelmed with a myriad of issues and a wave of foreclosures, which has contributed to the dramatic increase in …

The use of social media sites to market real estate has exploded during the past several months. Social media offers an opportunity for instant, personalized two-way communication between developers, sales agents and prospective real estate purchasers. As the number of people using social media increases, so does the likelihood that companies engaged in real estate transactions will utilize social media as a secondary storefront or that representatives of such companies will discuss their real estate endeavors on social media. When used appropriately, social media can be an effective, inexpensive way to facilitate real estate transactions. Social media, however, also opens the door to legal liability. For example, if land sales laws are not followed, a brief entry could become the basis of a major lawsuit. Legal issues are complex, in part, because the law has not kept up with advances in communications technology. This article provides a quick overview of the potential pitfalls and emphasizes the importance of a comprehensive training program and policy to minimize legal risks when using social media to market real estate. Legal Representations Social media entries by company representatives can be documented representations about real estate products. While companies can more readily control the content …

As we enter a 2010 that, with any luck, will be kinder than 2009 for commercial real estate, we also look forward to the decennial census. The results of the census will provide valuable insight on population and migration trends in the United States, which will be very useful for government agencies. The information is also of interest to commercial property investors and office investors in particular; demand for office space in metropolitan areas is driven by employment growth, which is in turn driven by economic and population growth. It's almost certain that the U.S. job market will actually lose more jobs than it created this decade, something that has never happened since the collection of such data began. Due to the residential real estate bubble and the resulting financial crisis, office employment has been hit extremely hard in this recession. Still, some regions have fared better than others in terms of economic and office-job growth. Real estate investors can look at these disparities carefully when considering investment and diversification strategies for the coming decade. Some of the best-performing office markets during the last 10 years include those in the CANVFLAZ (California, Nevada, Florida and Arizona) area. For most of …

To put it bluntly, 2009 was one of the worst years for the industrial real estate market. Record levels of industrial space were vacated, and the national industrial availability rate surpassed its previous historic high of 11.8 percent, which was reached in early 2004. The outlook remains uncertain, but 2010 is shaping up to be a better year — not necessarily a great year, but a better one. Strong export activity and increased intermodal transport use are emerging trends that will play a significant role in industrial performance in the coming year and beyond. Trade levels have rebounded, but export growth has so far outperformed import growth. According to the latest monthly trade data, export growth that began in the second quarter of 2009 has reversed 36 percent of the recession-related losses. Imports, which also began growing in the second quarter, have erased only 25 percent of their decline. U.S. goods exports have also increased for 6 consecutive months (through October 2009), while imports have grown for only 4 of these months. This strong export performance is expected to continue. The dollar remains low, making American-made goods relatively inexpensive for foreign consumers. Furthermore, global demand appears to be strong, judging …

In the current market, should a potential seller hold or fold? For real estate companies, one of the biggest challenges is deciding whether to hand on to a money-losing commercial property or to sell it at a deeply discounted price. The decision is risky, nerve-wracking and complex. Methodical analysis is called for, requiring robust financial modeling and realistic market knowledge. The current and future cash position of the company must be determined. The company needs to understand its level of debt, when it comes due and what it costs. Most difficult for the company will be to try to determine the value of each asset. Critically, the company must consider its entire real estate portfolio—not just look at a single property. Despite signs of a nascent macroeconomic rebound, the commercial real estate sector still faces tremendous obstacles to its own sustained recovery. The only properties being sold now are those purchases with nonperforming loans and high-end, one-of-a-kind trophy or foreclosed properties. While differences between buyers and sellers are becoming less pronounced than they were at the peak of the global crisis, the sides are still far apart. Buyers, expecting a rash of commercial properties to flood the market, await a …