Orion Real Estate Group Closes More than $203 Million in Transactions in Fourth Quarter by Christopher Sanz, JD, LLM

Orion Real Estate Group today announced it invested $203,878,022 during the fourth quarter of 2021 to acquire 85 properties representing 436,898 sq. ft. of absolute, triple-net-lease space throughout the country.

Acquisitions closed during the months of October, November and December included the following:

1. More than $99.15 million for a portfolio of 27 car washes operating under the Mammoth and International Car Wash Group (ICWG) brands
2. More than $38.42 million for a portfolio of 23 properties occupied by brands that include Applebee’s, Chick-fil-A, Wendy’s and AutoZone
3. More than $38.30 million for a portfolio of 10 properties leased back to Equipment Share
4. $28 million for a portfolio of 25 properties tenanted by Friendly’s restaurants

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.

Due Diligence is Crucial for Distressed Properties by Kevin Sanz, CCIM, MSIRE

Commercial real estate priced below market value can offer investors an opportunity to acquire property at a discount and yield potentially higher returns in the future. However, it is critical for investors to look under the hood of these distressed properties to assess their performance and fully understand the rationale behind the purchase price.

For example, a property may be underperforming due to deteriorating physical conditions that a current owner does not have the cash flow nor the time or resources to repair. This means those tasks and expenses would pass to the new owner and eat into returns. Alternatively, the current owner’s life circumstances may require an immediate sale and cash raise, perhaps due to a divorce, death or business dissolution. In these circumstances, the risk to prospective buyers and the expected return on their investments may be negligent.

Navigating these challenges requires the experience of professional real estate advisors with the knowledge and contacts needed to thoroughly assess a property and the financial, tax and legal buyers may face.

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 Pros and Cons of Investing in Gateway Markets by Christopher Sanz, JD, LLM

Commercial real estate investors have a wide array of choices when it comes to where they put their money, both in terms of asset class and physical location. One way to break down location is by gateway and non-gateway markets.

Gateway real estate markets are metropolitan areas with dense and growing populations, diversified economies, a full range of real estate assets (multi-family, office, retail and industrial) and a well-developed system of transportation connecting the downtown area and to surrounding suburbs and other major metropolitan cities. In the U.S., gateway markets include New York, Los Angles and Chicago, as well as Miami, Houston and Atlanta. Each one is an in-demand market with robust real estate activity, which traditionally has made them safe options for generating stable rental income, maintaining property values and providing access to liquidity that comes with a robust market.

However, with these benefits come high barriers to entry, including higher costs of acquisitions and operations, higher taxes and increased competition for available properties. Additionally, the Covid pandemic has expedited years of trending corporate and consumer migrations away from major cities to secondary and tertiary markets, where economic activity continues to thrive and provide investors with the potential for higher returns on their investable dollars.

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 is a Credit Tenant in Commercial Real Estate? by Kevin Sanz, CCIM, MISRE

Tenant selection is critical to commercial real estate investing. After all, landlords seeking want assurances that tenants will pay rent on time, add value by attracting both foot traffic and other quality tenants, and reduce the property’s risk profile. One way to achieve this aim is identify “credit” or “investment grade” tenants with strong ratings from the nation’s major credit reporting agencies, including Fitch, Moody’s and the S&P.

While an investment-grade credit rating can offer investors a degree of confidence in tenants’ financial capabilities, it does not mean that non-credit tenants are bad. It merely means those tenants are too small or not as widely known as the companies that the rating agencies do follow. Moreover, a well-known company with an excellent credit rating today is not completely void of risks during the terms of a lease. Changes to operations or broader economic conditions can result in credit rating cuts at any time. For these reasons, it is recommended that investors work with private equity real estate firms experienced working with credit agencies and monitoring tenants’ credit risks on an ongoing basis.

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.

Fed Accelerates Plans to Raise Interest Rates in 2022 by Christopher Sanz, JD, LLM

In mid-December, the Federal Reserve Bank announced it is prepared to begin raising interest rates earlier than previously announced due to the potential threat of broader and longer-term inflationary pressure. In November, the annual rate of inflation exceeded expectations, reaching 6.8 percent, the largest 12-month increase since June 1982.

From a historical perspective, stocks have not fared well during periods of rising interest rates, when operating expenses and the costs of borrowing money increase, negatively impacting future profitability and stock price. For commercial real estate investors, there is a fear that rising interest rates will cause capitalization rates to also rise, triggering a potential decline in property value and weaker returns. However, investors also must consider that rising rates signal an improving economy that can commanded high rents and help to buoy commercial property values and investor returns over the long term. The key to navigating these potentially challenging times is to work with experienced commercial real estate advisors with a proven record of performance.

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.

Commercial Real Estate Outperformed Expectations in 2021 by Kevin Sanz, CCIM, MSIRE

According to a report released in December by the National Association of Realtors, 2021 was a banner year for commercial real estate with investment acquisitions exceeding both pre-pandemic levels and the peak sales volume of 2006. Among the sectors performing exceedingly well have been retail and food services, especially free standing/single-tenant stores and units conveniently located in neighborhood shopping strip centers. Looking ahead into 2022, we expect demand for commercial property with strong fundamentals to continue along with declining cap rates, indicating lower investment risks and potentially stronger valuations, higher rents and improved returns for property owners.

Despite this optimistic outlook, investors must be forewarned that commercial real estate as an investable asset is entirely different from any other investment class, including residential property. Working with experienced commercial property advisors with deep tenant relationships and local market knowledge can help investors conduct thorough due diligence to minimize risk and help support investment goals.

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.

Identifying Replacement Property in a 1031 Exchange by Christopher Sanz, JD, LLM

Investors must abide by very strict timelines and specific rules to yield the favorable tax deferral benefits of a 1031 exchange of real property. For example, investors generally have 45 days following a property sale to identify like-kind replacement property and no more than 180 days to close on the replacement property without triggering a taxable event. When identifying potential replacement property, investors must consider the following guidelines:

• Investors may identify up to three replacement properties to complete the exchange
• Investors may identity an unlimited number of potential replacement properties as long as the cumulative value does not exceed 200 percent of the sale of the relinquished property.
• Investors may identify an unlimited number of potential replacement properties provided those properties can be acquired at 95 percent valuation.

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 Can You Learn from a Rent Roll? by Kevin Sanz, CCIM, MSIRE

One of the first documents investors will look at when evaluating potential investment property is a rent roll, which lists all of a property’s current tenants, the size of the space each tenant occupies and the percentage that space represented in the total building (net rentable square footage) as well as each tenant’s lease terms and the rental rate each pays per square foot. With this document, investors can glean critical information that includes the potential rental income a property can generate, current vacancies and opportunities for renegotiating lease terms, and how the rental rate compares to that of comparable properties in the same market.

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.