Property Owners’ Rights When Tenants File for Bankruptcy by Christopher Sanz, JD, LLM

Posted on September 09, 2021

Many commercial property owners have had to deal with tenants filing for bankruptcy protection during the COVID-19 pandemic. Despite the challenges of these circumstances, property owners must understand their specific rights and remedies for relief under the law and meet all of the timely court deadline requirements.

Landlords should not view tenant bankruptcies as the end of their lease agreement. Rather, when a tenant files a bankruptcy petition, an “automatic stay” is immediately put into place, which, among other things, requires the tenant to continue paying rent and other obligations under the lease agreement. The tenant has 120 days to decide whether to 1) assume the lease, meet the requirement to pay all delinquent and current lease obligations, and provide the landlord with assurances future rental payments; or 2) reject the lease, vacate the property and allow the landlord to file a claim against the bankruptcy estate. Interestingly, landlords’ rights are strongest when tenants remain in a property.

With offices in Miami, Orlando, New York City and Geneva, the team at Orion works with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.

The Benefits of Depreciation for CRE Investors by Kevin Sanz, CCIM, MSIRE

Posted on September 01, 2021

While investors often turn to commercial real estate for its appreciation potential, it is the annual depreciation of the property’s value that yields significant tax benefits. In fact, savvy investors recognize that depreciation deductions can be just as important as the income their properties generate.

Depreciation provides one of the most significant benefits to real estate investors because it allows them to write-off, or deduct as an expense, a percentage of a property’s decline in value over time (39 years for commercial property). Those deductions reduce reportable income, which, in turn, reduce investor’s annual tax liabilities. When make certain qualifying improvements to the interior portions of commercial properties placed in service since 2018, they may also take advantage of a first-year 100 percent bonus depreciation deduction that they may use to offset income and even create net operating losses investors may carry back or forward to other years. This bonus depreciation deduction (available through tax year 2026) may also benefit net lease tenants, such as restaurants and retailers, that complete large renovations or build out leased space.

A word of caution: claiming bonus depreciation may require hiring an expert to conduct a cost segregation study and separate out the component of the qualifying improvement property (QIP) from the costs of the building itself. However, these costs are miniscule when compared to the size of the depreciation deduction and tax refund investors can claim today rather than claiming much smaller amounts 30 years from now.

With offices in Miami, Orlando, New York City and Geneva, the team at Orion works with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.

Single-Tenant vs Multi-Tenant Triple Net Lease Properties by Christopher Sanz, JD, LLM

Posted on August 24, 2021

Triple net lease (NNN) properties are always in-demand among both private individuals and institutional investors seeking steady income with few ownership costs and minimal property-management responsibilities. By most accounts, they are the true definition of “passive income investments,” regardless of whether the properties have one tenant or multiple tenants. While some investors believe that the risk of tenant vacancies and disruptions to cash flow are reduced when a property has multiple tenants, research has shown that those risks are even lower for a well-located property with just one, creditworthy tenant.

The key to success with single-tenant properties comes down to investors’ due diligence. Thorough property inspections, cash-flow analysis and proper vetting of tenants’ financial circumstances and credit rating are always required.

With offices in Miami, Orlando, New York City and Geneva, the team at Orion works with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.

What are the Time Requirements Involved in a 1031 Exchange? by Kevin Sanz, CCIM, MSIRE

Posted on August 18, 2021

A 1031 exchange allows investors to postpone the payment of taxes on gains resulting from the sale of a commercial property when they reinvest those sales proceeds into the acquisition of a similar, like-kind property. However, to yield this tax benefit, commercial property owners must abide by very specific restriction on the timing of the exchange.

Investors have 45 days from the date of a commercial property sale to identify a potential replacement property and a total of 180 days from that closing to acquire the replacement property. It is not uncommon for investors to identify more than one property within the 45 days period and close on one or all of them within the 180-day period.

With offices in Miami, Orlando, New York City and Geneva, the team at Orion works with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.

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