Investments from the Ground Up

Posted on August 15, 2018

Ground-up construction of commercial real estate may seem like an exciting investment, but investors must understand the significant investment of time and money that these projects require.

For commercial real estate investors, combining ground-up development of land acquisitions with sale-leaseback deals often provide an opportunity to diversify their portfolio and enter the commercial real estate market while gaining a steady stream of future rental income. There is strong demand to build properties for franchisees and development agents who want unique properties but want to focus on their business.

These investments can weather market fluctuations well. Should a property decrease in value, investors will continue to receive rental income from franchisee tenants and not realize a loss unless they sell the property. When the property increases in value, a sale could yield significant profits, especially when investors work with experienced real estate professionals who have strong tenant relationship and understand the opportunities and challenges in the local market.

The team at Orion works with investors, real estate 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.

To REIT or not to REIT

Posted on August 09, 2018

Investors seeking to diversify their portfolios often consider commercial real estate (CRE) as a viable option to achieve their goals. However, the universe of commercial real estate investment options is immense. For one, investors have the option to place their money in publicly traded real estate investment trusts (REITs) that invest in a number of businesses that build, own and manage commercial real estate, or they may instead invest directly in specific CRE properties.

No form of investment is completely devoid of risk; investors must evaluate how potential strategies may fit within their existing portfolio and weigh the pros and cons against their unique goals, risk tolerance and time horizon. For example, because most REITs are publicly traded, investors must be prepared to ride out the wide swings and dips they might find in similar investments in the equity markets. As we near end the first half of 2018, REIT performance has not yet met analyst expectations, and many are feeling the negative effects of recent market volatility and interest-rate hikes. Conversely, direct investment in CRE historically has not experienced the same volatility as the public markets and has even delivered recession-proof returns for many investors in recent years. New markets are opening up around the country, and commercial properties are attracting buyers in up and coming secondary markets. The outlook is positive.

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.

Financial Considerations for Foreign Investors in U.S. Real Estate

Posted on July 31, 2018

U.S. commercial real estate yields tremendous opportunities for foreign investors. However, these investments involve significant complexities and challenges that foreign individuals must understand and for which they must prepare in advance. Below are some critical points that investors should consider and plan for under the guidance of experienced real estate professionals before entering the U.S. commercial real estate market.

Currency and Interest Rate Risk

Should foreign investors use the currency of their home country, U.S. dollars, or a mix of both when taking out a mortgage or securing a loan for the purchase of U.S. property? Which option will reduce an investor’s exposure to currency fluctuations? Is there any point during the term of a loan that an investor should convert currency from its initial form?  Addressing these questions during the planning process can help foreign limit their exposure to currency fluctuations and rising interest rates.

Tax Risks

Under U.S. tax laws, foreign individuals may inadvertently meet the criteria to be considered U.S. tax residents who are subject to income tax on their worldwide income. The rules are different, yet equally complex, when considering how the U.S. tax system treats foreign investment for estate and gift tax purposes. With this in mind, foreigners must take precautions to structure their investments in U.S. real estate in the most tax efficient manner while avoiding the risk of double taxation on any gains. Similarly, consideration should be giving to how much time foreign investors spend in the U.S. and whether or not they or their heirs plan to immigrate to the U.S. in the future.

Timing Risks

Interest rates and exchange rates will fluctuate. It’s what they do. Therefore, it is nearly impossible to perfectly time an investment in U.S. commercial real estate. If a property meets an investor’s criteria, then invest. Trying to micromanage elements of an investment that individuals cannot control is a losing battle.

In addition to the earnings potential of foreign investment in U.S. commercial real estate, are a wide range of uncertainties and risks that differ across borders. Engaging the services of experienced real estate professionals during the planning process will go a long way toward minimizing these risks and maximizing the potential benefits.

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.

 

Don’t Go It Alone when Investing in Commercial Real Estate

Posted on July 24, 2018

In commercial real estate, as in life, having experienced and trusted advisors guide you through opportunities and challenges can reduce risk and improve the possibilities of achieving your desired goals.

With the recent volatility in the financial markets, many investors are flocking to the safety of commercial real estate. Yet, few understand that investment in commercial property is entirely different from other types of investment, including residential real estate.

While it is possible for new investors to educate themselves online, find deals and generate activity on their own, it would behoove them to seek out advisors with specialized knowledge in commercial real estate to develop a sound strategy to guide their strategic decision-making.

This is especially true when considering that commercial projects are often more complex and require more investment dollars than residential projects. In most cases, commercial deals have specific barriers to entry, such as minimum investment requirements. In addition, knowing the ins and outs of a particular geographic market is not sufficient for handling all of the intricacies involved in getting a commercial deal done efficiently and at a good price. Too often, naïve or unprepared investors fall prey to shady deals or overpay for a commercial property.

To avoid these and other risks, investors should take their time to vet a team of experienced commercial real estate advisors properly, ask tough questions and check references before taking any actions.

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. Commercial Real Estate Market Draws Foreign Investors

Posted on July 19, 2018

Foreign investment in U.S. commercial real estate has risen steadily in recent years. For example between 2015 and 2017, Los Angeles received an influx of more than $8 billion primarily from investors in Asian countries followed by France, Germany and Switzerland.

On the state level, Florida was the top destination for foreign investment in 2016, followed by Texas and California, which also boasted a large number of sizeable transactions ranging from large, multi-million-dollar deals to smaller commercial properties in secondary markets.

The cycle of foreign investment in the U.S. ebbs and flows based on such factors as political instability in investors’ home countries as well as social and economic changes. Today, the U.S. market is seeing more competition globally than ever before as metropolitan cities, such as Prague, Frankfurt and Amsterdam are flourishing.

Foreign investors entering an unknown market can learn about opportunities and gain market insight by working with U.S. real estate advisory firms with both national and regional expertise. This is often done through international partnerships.

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.

 

 

Restaurant Franchisees Can Build on the Success of Local Retail

Posted on July 11, 2018

As a general rule, restaurant franchisees and development agents (DAs) looking for new space are well served when they focus their searches on hard corners, busy intersections and outparcels of successful grocery-anchored shopping centers. Yet, the true measure of a real estate property’s potential comes from an analysis of the existing traffic and sales of nearby businesses.

While restaurants can be a traffic-generating center, it is critical that franchisees and DAs know such factors as whether the grocery store anchoring the shopping center is doing well, or whether the traffic at neighboring projects or outparcels support the restaurant’s sales goals. This market knowledge requires the experience, tenant relationships and investigative skills of real estate professionals who understand the local market and can guide franchisees and DAs through the site selection, contracting and negotiation processes.

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.

Should Investors Shy Away from Big-Box Retail Properties?

Posted on July 05, 2018

The spate of big-box retail bankruptcies and store closures, including Toys ‘R’ Us, has left a gaping hole in the country’s commercial real estate market. While some of these properties located in desirable locations will check all the boxes for a good investment, most are too risky for the average investor seeking a steady stream of passive rental income.

A big-box store can be as large as 100,000-square-feet or more – a size that few other retailers can fill. When these stores close, property owners will have a difficult time finding a replacement tenant that needs that much space. Under these circumstances, landlords may have no other choice than to invest additional dollars to break up and divide the property into several separate, more marketable units.

Conversely, when a retail store or restaurant with 5,000-square-feet or less closes, the property owner will have a long list of potential replacement tenants to market the space to, especially when the unit is located in or near a grocery-anchored shopping center. This expansive universe of potential replacements tenants will increase further when the store or restaurant is located in a high-traffic area and has neighboring tenants with strong sales and staying power.

Before investing in any retail or restaurant property, investors should meet with experienced real estate advisors to ensure they mitigate their risks and maximize opportunities for profits.

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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