Shopping Center Owners Win as Big Box Retailers Scale Down

Posted on February 12, 2019

Many big-box retailers, including Walmart, Target, Nordstrom and Kohls, are following their online competitors to establish small footprint brick-and-mortar stores in more locations that reach consumers in dense urban areas.

By downsizing inventory in these locations, retailers are able to reduce their real estate footprints and open more mini stores where customers live and work in high-traffic, often high-rent areas. Retailers adapting this strategy are able to generate significant sales when they narrow their focus on products and offerings that meet the needs of local shoppers and combine it with the convenience of delivery services. For example, Ikea is opening a 17,500 square showroom in New York City, its first on the Island, which is significantly scaled down from its average store size of 300,000 square feet, while Aldi’s grocers are subleasing space from Kohl’s stores, which has partnered with Amazon to sell and accept returns from the online superstore.

The good news for commercial real estate owners and investors is that this personalization and localization of multi-channel shopping experiences means more opportunities to attract stable tenants, maintain occupancy, improve foot traffic and increase the value of their properties.

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.

 

Online Retailers May be Coming to a City Near You

Posted on February 07, 2019

According to the National Retail Federal, there was a record 65 percent increase in buy-online, pick-up-in-store sales during the 2018 Thanksgiving and Cyber Monday shopping weekend. Judging by these results, it is apparent that brick-and-mortar stores continue to play a vital role in consumers’ retail shopping habits. While the internet and social media have made it easier for would-be shoppers to conduct research and become more educated about the products they wish to buy, it appears that consumers still want to physically touch, feel and experience those products before making a purchase.

Interestingly, when investigating this multichannel shopping experience, the International Council of Shopping Centers (ICSC) found that having a physical store not only improves a brand’s name recognition it also increases retailers’ share of web traffic. This is perhaps just one of the reasons why many pure e-commerce players are increasingly partnering with venerable brick-and-mortar brands and/or opening physical stores where they can make genuine connections with shoppers and strengthen their brands.

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 depreciation deductions?

Posted on January 30, 2019

Commercial real estate provides investors will an opportunity to create passive income from an appreciable asset while at the same time reducing the amount of that income subject to tax, thanks to depreciation deductions.

Depreciation refers to an asset’s decline in value over time due to general wear and tear. Under U.S. tax laws, commercial property, excluding land, is depreciated over a 39-year period. This annual reduction in the property’s value is deductible by property owners, thereby decreasing their taxable income. For example, a taxpayer who in 2019 has $1 million in income and $400,000 in depreciation deductions will be taxed on only $600,000 rather than $1 million. Therefore, while the investor can enjoy higher income from a property’s appreciation in value, he or she can also increase income by claiming depreciation deductions that reduce the value of the property that is subject to income tax. Depreciation begins in the year in which the investor puts the property into service, and it ends when the investor sells the property or when he or she fully recover the costs incurred to build, buy or renovate the 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.

 

Are Opportunity Zone Real Estate Investments Right for Me?

Posted on January 23, 2019

Despite the prospect of significant tax breaks, investments in Opportunity Zones (OZs) are not for everyone. Investors must consider their exposure to a higher level of risk in distressed neighborhoods that often do not have a proven track record of rehabilitation success. In Florida, more than 90 percent of Opportunity Zones are in severely depressed areas of extremely high poverty and low resident income. According to the Urban Institute, many of the Opportunity Zones across the country have not experienced socio-economic change over the past 16 years and, as such, have not benefitted from the country’s 10-year long economic expansion. In addition, to yield the greatest tax benefits from the OZ program, investors should be prepared to hold onto their Qualified Opportunity Fund (QOF) investments for seven to 10 years. As a result, it is critical that investors have other forms of liquidity available to them during the holding period.

Finally, like all investments, QOFs require investors to conduct due diligence under the guidance of experienced tax and real estate professionals and understand how these potential opportunities may fit into their larger investment and estate-planning strategies.

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 Tax Basis?

Posted on January 15, 2019

When an investor buys a commercial property, his or her “tax basis,” also referred to as “costs basis,” is generally the amount he or she paid to purchase the property. These acquisition costs include down payments, mortgage loans and most closing costs, such as title searches and legal fees, while excluding loan closing fees and property insurance. The investor’s basis in a property can rise or fall during the period of ownership due to such things as capital improvements, which increase basis, and depreciation deductions for the decline in a property’s value over its useful life, which decrease cost basis. In general,

It is critical that investors properly determine and regularly adjust their basis in real property because it determines whether or not a sale of the property will result in a taxable profit or deductible loss. In general, the lower the adjusted basis, the more capital gains tax investors will have to pay when they sell the 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.

 

How Can Opportunity Zones Yield Tax Savings?

Posted on January 09, 2019

The Tax Cuts and Jobs Act introduced the Opportunity Zone program to incentive investors to put their dollars to work revitalizing low-income neighborhoods. In return, investors may qualify to defer or even eliminate capital gains tax from the sale of appreciated real estate assets when they roll over those gains into Qualified Opportunity Funds (QOFs) that invest at least 90 percent of their assets in businesses and real estate located in any of the nearly 9,000 newly designated Opportunity Zones (OZ) throughout the country.

The longer taxpayers hold onto their OZ investment, the greater the tax benefit. More specifically, when investors roll over capital gains into a QOF within 180 days of the date of an asset sale, they may defer paying tax on that original gain until Dec. 23, 2026, and potentially exclude from taxation up to 15 percent of the rolled-over gain when they hold the QOF investments for at least seven years. As an added bonus, taxpayers who hold onto their QOF investments for at least 10 years may avoid capital gains tax on the investment appreciation by electing to increase the basis of the QOF investment to the fair market value of the investment on the date they sell their interest in the QOF. However, like much of the new tax law, Opportunity Zones are a complex provision that requires guidance from experienced tax and real estate professionals.

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.

 

Finding Diamonds in Retail Real Estate

Posted on January 03, 2019

Commercial real estate investors are finding a bevy of bargain buys on retail properties in high-traffic locations in emerging secondary markets. Often, these properties are under-leased and under-managed, and they simply need a new buyer’s influx of capital to reconfigure or repurpose them to attract better quality tenants that are willing able to pay higher rents.

In the current market, many restaurant chains and big-box discount stores, including TJ Maxx and Marshalls, view the sizable retail space left in the wake of shuttered Toys R Us and Sears stores as an opportunity to expand their footprints across the country. In addition, medical practices, hospitals and other employers recognize that a former retail space can be repurposed to expand their presence in popular live-work-play centers.

The important factors that investors need to consider when buying any shopping center are the value of the underlying property, based on its size and location, and the ability to have in place experienced and trusted partners who can provide ongoing property development and management services.

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 ABCs of Commercial Real Estate

Posted on December 27, 2018

Commercial real estate offers significant opportunities for investment growth thanks to long-term leases with reliable business tenants and ownership in a physical income-producing property that is not influenced by the large swings of the equity markets. However, it is important that investors know how commercial real estate is classified in order to understand the level of risks and rewards that come with their investment in a particular property.

Class A properties command higher rents because they are generally well-located, professionally managed buildings that were constructed within the past 15 years. Because these properties are so new, investors typically will not need to expend additional capital to improve them. However, Class A properties are exposed to the risk that tenants will be unable to pay higher rents during economic downturns.

Class B properties are considered value-add investments because they are older than Class A properties and may require some capital improvements to increase rents and upgrade to Class A or B+.

Class C properties are generally buildings that are more than 20 years old and require renovations. They tend to be bought and sold at higher cap rates than Class A and Class B properties with significantly lower rental rates.

Investors should meet with qualified professionals to understand how a property’s classification meets with their unique financial needs and ultimate 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.

 

 

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