By Brian Eliason Just 7 years ago, $200 million of equity flowed into Tenant-in-Common (TIC) properties — now, that figure tops $3 billion. Why? The IRS got things rolling in 2002 when an IRS ruling provided guidance for TIC properties to be able to qualify as viable 1031 Exchange options — expanding the pool of commercial properties available for this tax-deferred rollover. This, in turn, made the 1031 Exchange more accessible to small, individual investors. The Basics — TICs and 1031 Exchanges A 1031 Exchange allows an investor to roll over the capital gain from the sale of one investment property into a “like-kind” investment property and defer the capital gains taxes indefinitely into the future. A TIC is a form of real estate ownership in which: two or more people co-own a property ownership shares do not have to be equal ownership interests can be inherited owners may receive a steady cash flow owners are not bothered with the day-to-day hassles of managing the properties The IRS, by allowing TIC 1031 Exchanges into fractional ownership structures, gave investors the opportunity to pool their proceeds with other investors toward the purchase of larger, more diverse investment properties such as multifamily …
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By Bruce Gibson and Lisa Silvers, Senior Housing Group ‘ CB Richard Ellis There have been numerous headlines about the recent credit crunch and the real estate downturn. However, it should be noted that the impacts are reflected in different ways depending on the fundamentals, relative pricing/return levels, and supply and demand of each real estate sector. Senior housing is one sector of the real estate market that may behave a little differently than the others. The recent slide in the residential market along with the credit crunch has impacted certain segments of the senior housing industry, but to varying degrees. New resident move-in rates for Independent Living have declined as seniors recognize the equity in their homes has been eroded. Some seniors, considering the move to an Independent Living Facility or a Continuing Care Retirement Community, are holding off the move to see what happens in the residential market with the hope that they will regain the equity they recently lost. However, Assisted Living and Skilled Nursing Facilities have not seen a decrease in move-in rates as this type of move is a health driven decision, as opposed to a lifestyle decision as with Independent Living. Silvers Within the …
By Cara Aliek The Residences at Dixon Mills possesses something ground-up buildings will never be able to achieve: status as a historical landmark. This five-building property is the former site of the Dixon Mills factory in Jersey City, N.J., and is in the process of converting apartments into 467 luxury condominiums. But to understand the historic relevance of this project, a dateline should be established. In 1847, inventor Joseph Dixon built a factory in Jersey City, N.J., for his growing pencil company called the Joseph Dixon Crucible Co. Mr. Dixon wanted “a fine American name for a fine American pencil,” and named his writing utensil after Fort Ticonderoga in New York. The Civil War required a need for dry writing pieces and business soared. By 1869, the Joseph Dixon Crucible Co. was the world’s largest dealer and consumer of graphite. In 1982, the Joseph Dixon Crucible Co. merged with Bryn Mawr Corp. to form Dixon Ticonderoga Co., which today is based in Heathrow, Fla., and has manufacturing facilities all over the world. Mr. Dixon’s Jersey City factory was converted into apartments in the late-1980s by New Jersey-based The Morris Company. The Robert Martin Co. acquired the property in 2006 and …
By Kevin Assef, Marcus & Millichap The diverse markets comprising the Western commercial real estate region have been impacted in varying degrees by the credit crunch and subsequent devaluation of the U.S. dollar that manifested itself in the last half of 2007. Despite fallout from the subprime mortgage crisis, prices for well-located Class A product have remained relatively stable and will continue to increase steadily in 2008, particularly in cities such as San Francisco, Los Angeles and Seattle. Investors will monitor smaller, secondary markets and the performance of Class B/C assets closely this year as pricing shifts become more apparent. APARTMENT INVESTMENT TRENDS Denver Renter demand for Denver apartment properties will remain strong in 2008, supported by an expanding pool of renters and the metro’s fifth consecutive year of healthy employment growth. While job gains will be more modest in 2008 than in recent years, population growth will generate additional renter demand, with an annual average of 29,000 new residents forecast to enter the metro in the next 5 years. On the supply side, apartment builders will accelerate construction activity this year, particularly in the Aurora-South submarket, where deliveries will result in a 5 percent inventory gain by year’s end. …
By Norma Sutton, BioScience Specialist, NAI Realvest Just How Big is this Business? The global biotechnology market grew by 12.6 percent in 2006 to reach a value of $153 billion. The forecast for 2011 is $271 billion, an increase of 76.5 percent. Medical products represent 62.5 percent of the revenues and the Americas account for 58.3 percent of the revenues generated in this market. This is truly the great growth industry of our time. It has been said that the 21st century belongs to Molecular biology and the Human Genome. What does all this mean? Maybe that the quest for knowledge, control and immortality is surging. Maybe that technology is advancing so quickly that there will be a burst of new diagnoses, treatments and preventions in our lifetime. And surely that this industry is the darling of all. We have moved from the industrial age to the informatics age and now it appears we have moved to the biotechnology age. Life sciences and biotechnology are terms you see everyday now in the media. There is so much to report on — so many discoveries that no one can keep up much less quantify their importance and potential for our benefit. …
By Paul White, Professional Investment Advisors As a real estate professional and financial advisor, you pride yourself in providing unique solutions for your clients. One of the most powerful tax saving tools you can use with your clientele is a 1031 Exchange. One day, you receive a phone call from a client asking for your help in finding a replacement property to complete their 1031 Exchange. The client has sold property and has placed the proceeds with a qualified intermediary. Their tax advisor estimates taxes to be in excess of 30 percent due to the Federal and State Capital Gains Taxes, as well as a 25 percent Federal Depreciation Recapture. Your client is in one of the fastest growing demographics in the nation, aging baby boomers, that prefer passive to active ownership seeking to rid themselves of property management and the 3 T’s: Tenants, Toilets and Trouble. This appears to be the ideal set of circumstances for a 1031 Exchange — except one small detail — the amount of your client’s exchange equity is only $500,000. Knowing that this amount of equity may limit your client’s choices, you begin to search for a suitable replacement property. Your client wants the …
By Brian Patton, CCIM, Capital Realty Advisors There are three primary financial terms that affect how we determine the value of real estate. Without a working knowledge of these terms, investors and realtors are at a disadvantage in the market place. These terms may sound difficult to grasp but are an integral part in understanding how we determine the value of real estate and are important for commercial and residential investors alike. Net Operating Income Net operating income refers to the income received from an investment prior to any mortgage debt being deducted from the equation. In general, net operating income (NOI) is defined as the total possible rents minus a vacancy rate and any operating expenses. NOI is used to help compare investments without the uncertainty of what mortgage product you’ll be using. The vacancy rate is a general rule of thumb depending upon market conditions and the type of investment. It is expressed in a percentage of gross rents. Operating expenses are those normally recurring expenses such as property taxes, insurance, management fees, repairs, etc. So, a simple example would be an investment with $13,000 in potential yearly rent, minus a 7 percent vacancy rate, and $2,000 in …
By Rick Seiden, AICP As developers, designers, and real state professionals it is important to understand how technology can differentiate a project, make it unique, safer, and more successful. New technologies are continuously being introduced into development projects, but as in other aspects of current human activities, urban and retail technologies are becoming more ubiquitous and complex. Professionals in the real estate development industry should become aware of what technologies are becoming standard in new projects and which ones are just being considered. By understanding new and emerging technologies, real estate professionals and developers can keep their new developments innovative, safe, vibrant, and most importantly profitable. This article focuses on three technologies selected to illustrate this point: the first is already here, the second is quickly being deployed, and the third is on the horizon. Video Surveillance: Making Your Development Safer Urban video surveillance is being deployed widely in both large and small European projects, towns and communities and is quickly spreading in North America. Many of us are familiar with cameras set atop traffic signals, also called red-light cameras. Video surveillance is basically the same technology, but it is deployed in strategic locations throughout communities, retail spaces, or industrial …
By David Marks, Tower Investments, LLC In today’s competitive real estate marketplace, it is rare to encounter sound solutions to development problems which benefit all parties, as well as the environment. One such trend has emerged naturally from the epic shift of American manufacturing operations overseas: converting cast-aside manufacturing facilities into viable distribution or warehouse hubs. The number of vacant industrial facilities continues to rise across the country, along with industry demand for affordable stateside distribution space. Today’s manufacturers require multiple locations to support their business models — gone are the days of one-house operations, warehousing and distribution. In recent years, a shortage of viable land and increasing construction costs have left companies in need of multiple locations with few budget-friendly solutions. Rather than constructing new buildings, savvy developers are acquiring abandoned or neglected industrials, primarily located in small to midsized inland markets, converting them and passing along the savings to tenants. In doing so, they provide smart solutions for site selection consultants, while also contributing to area industrial revitalization with minimal impact to the environment. Aside from the obvious financial benefits of repurposing manufacturing facilities — which amounts to a fraction of the cost compared to the process of …
By Robert H. Spratt Jr., President, Hill Partners Inc. Commercial real estate developers across the country are being called upon to revitalize historic districts and urban areas in many aging cities. As this demand increases, it is essential that developers maintain a careful and watchful eye for preserving the historic fabric of these landmarks, while also avoiding typical challenges associated with adaptive reuse. Specifically, developers must balance the need for retail visibility, with the subtlety often desired for historic venues. Below are some tips that can help guide a more successful venture for all parties involved. Break new ground, but preserve the old From a design and architectural standpoint, ground-up developments often have a strategic advantage due to not being historically designated. It affords the architect to select designs and other elements that are indigenous to the area, such as integrating aspects of the area, into the design. In the end, the goal should always be for the building to look as if it’s always been there, weaving seamlessly into the fabric of the historic district itself. To do so, however, requires careful planning and a commitment to process. The key to working with historic or architectural committees is to …