Interest Rate Hikes do not Always Spur Rising Cap Rates

Posted on December 05, 2018

The Federal Reserve marked the end of the third-quarter of 2018 by raising interest rates for the third time this year. This 25-basis-point increase brings the federal funds rate to a range of 2 to 2.25 percent, which is the highest level since the start of the recession in 2008. While rising interest rates typically yield upward pressure on capitalization rates, the two do not always follow in lockstep, especially in the short-term.

Rising rates signal a healthy economic environment, in which owners of commercial real estate (CRE) will have an easier time filling vacancies and raising rents, which will affect their ability to grow operating income. Moreover, as 10-year US Treasuries have more than doubled over the past two years, cap rates have hardly moved. In the current environment, there remains a significant number of attractive commercial real estate investment opportunities, especially in secondary and tertiary markets.

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.

 

Orion Grows its Portfolio of Ruby Tuesday Restaurants

Posted on November 29, 2018

Orion Real Estate Group recently completed the acquisition of 20 Ruby Tuesday restaurants in 15 states for $31 million. All of the properties are single-tenant, triple net leased with an average size of 5,000 square feet on one-and-a-quarter acres of land in strong, high-traffic markets.

This is the second portfolio of Ruby Tuesday restaurants that Orion purchased in 2018. Earlier this year, the firm acquired 41 of the fast-casual brand’s properties, of which they have already sold 31 at a profit to investors.

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.

 

Understanding Commercial Leases

Posted on November 19, 2018

Commercial real estate investments typically involve tenants and long-term leases, which can be confusing for new investors to understand. In a traditional lease, a tenant pays monthly rent to a landlord who is responsible for a property’s upkeep and paying real estate taxes, insurance and of the maintenance costs. By contrast, in a net lease, a tenant pays directly to the landlord both their monthly rent and some or all of the typical expenses the landlord would ordinarily pay to operate and maintain the property.

Single Net Leases require tenants to pay to the landlord a base rent plus their share of property taxes. In these arrangements, the landlord covers the costs for insurance, operating expenses and common area maintenance, including janitorial services, property management fees, sewer, water, trash, landscaping, parking lot, fire sprinklers, and any shared area or service.

Double Net Leases (NN) require tenants to pay their base rent along with property taxes and insurance.

Triple Net Leases (NNN) shift all of the management responsibilities and related costs to the tenants, who pay base rent plus property taxes, insurance and all other fees associated with operating the property, including capital expenses. While an NNN can eliminate all of a landlord’s administrative burdens and costs of managing a property, property owners must be careful calculating and recording the additional expenses paid by tenants.

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.

 

Manage Risks with Asset Diversification

Posted on November 14, 2018

No one investment consistently yields stellar returns and eliminates all risk of losses all of the time. Due to this unpredictability, financial advisors recommend investors spread out their investable dollars across a mix of assets, including, but not limited to, stocks, bonds, cash and real estate. However, individual investors may not find it feasible to diversify their portfolios on their own, especially in the complex world of commercial real estate (CRE), which requires significant commitments of time, resources and dollars to manage, maintain and operate successfully.

Commercial real estate includes retail properties, office buildings, warehouses, and multi-tenant apartments and hotels. Each asset class has inherent risks and rewards, as does the property’s geographic location, including the state, city, suburb and even the street where it sits. In addition, the potential returns or losses an investor will recognize from a commercial property will vary based on a variety of external market conditions that are beyond investors’ control. With this in mind, it is crucial that CRE investors work with experienced real estate professionals with deep local market knowledge, strong tenant relationships and the skills and resources to monitor and quickly respond to market risks and opportunities.

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.

5 Traps Commercial Real Estate Investors Should Avoid

Posted on November 08, 2018

Commercial real estate (CRE) has proven to be a stable asset class for investors to balance portfolio risk, generate a steady and predictable stream of income, and yield historically strong returns over the long term. Still, investing in CRE does not come without risks. Before investing your hard-earned dollars in a commercial project, be wary of the following traps:

 

  • Speculating on Property Appreciation. Well-maintained commercial property will appreciate over time. Rather than assessing property based on a speculation of what will be, investors should instead evaluate real estate based on the cash flow it currently generates and the potential income that it can yield in the future.

 

  • Investing with Emotions. Investing in commercial property should involve meticulous due diligence and a laser-targeted focus on the facts surrounding a property, including its location, historic and current operating expenses and cash flow, and the value of the underlying land and real estate assets. It is also crucial for investors to consider how an investment in CRE will fit into their long-term financial strategy and not their immediate emotional needs.
  • Failing to Have an Exit Strategy. Before investing in commercial property, investors should know their end-game and how and when then plan to dispose of the property in the future. Having the benefit of this information from the onset will help investors to meet their individual investment goals, whether they are building retirement savings, generating monthly income or realizing the tax benefits of CRE investments.
  • Failing to Consider and Plan for Tax Implications. Short-term investments will have different tax consequences than longer-term investments. Are you prepared to pay capital gains tax on the disposition on a CRE property, or can you defer taxes through a 1031 exchange? Meet with qualified real estate and tax advisors before investing in a property to understand your liabilities and plan for ways to minimize your tax burden as much as possible.
  • Going it Alone. The number one reason why investors lose money in commercial real estate is that they jump in, feet first, without the guidance of professional advisors who have local market knowledge and deep experience in a particular asset class. Assemble a team early on to help guide you in your decision-making and handle all of the details of managing, leasing and maintaining the property for you.

 

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.

Looking for Passive Income? Set your Sights on Commercial Real Estate

Posted on October 31, 2018

Investors often turn to real estate to help them diversify their portfolios and enhance yield without taking on the excessive risk presented by the volatility of the public equities markets. However, not all real estate is created equal, and different asset classes will require equally different commitments of investors’ commitment resources to realize their intended returns.

For example, investments in residential real estate, including single-family homes, condos and other multi-family apartments, typically require investors to take an active role in the management of the property in order for them to earn income. For example, the owner of a residential, multi-family apartment building must spend a significant amount of time, resources and dollars finding tenants, negotiating leases, collecting rent, and making needed repairs.

Conversely, commercial real estate requires less of an investor’s hand-on attention, thanks to long-term tenant lease agreements and triple net leases in which tenants pay all of a property’s real estate taxes, insurance and maintenance fees. As a result, commercial property investors can sit back and collect a steady stream of reliable and predictive passive income in the form of monthly tenant rent and earn significant long-term profits when they eventually sell a property that appreciates in value.

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.

U.S. Property Owners Can Still Grab a Piece of Foreign Investment Dollars

Posted on October 23, 2018

Foreign investment in commercial real estate deals with an average value of $2 million increased in 2017, while large-cap commercial market transactions with an aggregated value at $10 million and above decreased, according to data from the National Association of Realtors and Real Capital Analytics (RCA).

In 2017, small-cap commercial deals in tertiary Florida and Texas markets attracted the most international buyers, predominantly from China. However, during the second quarter of 2018, this trend began to reverse for the first time in more than a decade, as Chinese investors sold more property than they purchased.

As the geo-political winds continue to shift, property owners and potential investors should tread carefully under the guidance of experienced real estate advisors in order to minimize risks and maximize their potential returns.

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.

 

Investors Looking for Stable Income should Consider Convenience Stores

Posted on October 18, 2018

According to the National Association of Convenience Stores (NACS), nearly 80 percent of stores that sell gasoline reported an increase in in-store sales during the first six months of 2018, compared to the same period last year. How? For one, many gas station/convenience stores have expanded their product offerings and stocked their shelves with healthy snacks, beverages and freshly prepared foods that on-the-go, health-conscious consumers demand.

C-stores have long been an attractive and stable tenant for commercial real estate investments, especially when they are located in high-traffic areas. They typically involve long-term leases and rent increases tied to inflation. Not only do these factors guarantee investors a minimum of 10 years of rental income, they also help investors to boost rental income and increase the value of the underlying property,

While c-store gross sales lag behind other retail categories, they have demonstrated their ability to adapt, survive and sustain growth over the long-term, which, in turn makes them a great tenants for commercial property investors.

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.

 

Menu Title