Posted on May 26, 2020
Investors who could not complete Section 1031 tax-deferred exchanges of commercial property due to the economic disruption caused by the COVID-19 pandemic may breathe a sigh of relief. The IRS extended the statutory periods of time to identify and/or close on replacement property without losing the preferential tax treatment.
Under guidance issued by the IRS, investors whose 45-day deadline to identify 1031 replacement property and/or their 180-day deadline to complete an exchange fall between April 1 and July 15 may delay these time limits to July 15, 2020. While these extensions provide investors with more time to select the right replacement property that aligns with their unique investment needs and goals, professional real estate and tax organizations have been active lobbying congress to ask for an additional period of time to complete these transactions.
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.
Posted on April 14, 2020
According to the results of Future Branches’ 2019 survey of banking customer, the rise in mobile and online banking has not diminished consumers’ preferences to visit physical branch locations. More than half of the customers surveyed reported visiting a local branch and meeting face-to-face with bankers to conduct common transactions, such as accessing cash, applying for loans or discussing other financial products on a monthly basis. However, as banks continue to adopt to omni-channel strategies, it is likely they will continue to close branches and reduce their physical footprints.
What does this mean for investors whose real estate portfolios include bank branches? As always, location and strong property fundamentals are key to maintaining positive investor returns. Properties in highly visible locations with ample parking and a diverse tenant mix that are close to established or growing neighborhoods will either survive under their current brands, or property owners may have an opportunity to reposition those locations for alternative use, including restaurant dining and/or delivery services, delivery of medical services or in demand experiential retail concepts.
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.
Posted on April 09, 2020
Absorption, or the total square feet of rentable space that is leased and physically occupied during a specific time period, can help investors assess the supply and demand for a particular commercial property, asset class or geographic market.
Net absorption tells investors whether demand is increasing (positive absorption) or decreasing (negative absorption) based on the change in occupied space from one period to the, based on the difference between the total square feet of space tenants moved into, less the total square feet of space that tenants moved out of and vacated during a specific time period. Positive net absorption refers to a situation in which more space is leased than is vacant, whereas negative net absorption occurs when more space is vacant than occupied.
Understanding how to use net absorption to select income-producing investment property requires careful consideration on a wide variety of factors for which investors should seek the assistance of professional real estate advisors.
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.
Posted on April 01, 2020
According to the International Council of Shopping Center (ICSC), there are currently more service-related establishments than retail stores in the U.S. Since 2002, the number of service- establishments at U.S. shopping centers increased by more than 20 percent, while retail locations declined by 4.5 percent.
The most significant growth has come from restaurants and drinking places, which have emerged as shopping center anchors. Location and convenience have also fueled the expansion of personal-service providers, including hair and nail salons, fitness-focused gyms and health clubs, and suppliers of repair and maintenance products and services. Essentially, today’s shopping centers have been the hub of convenience-oriented community activity. Property owners who are nimble enough to alter their strategies and tenant mix along with changes in consumer shopping habits will be better prepared to reap the rewards.
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.
Posted on March 24, 2020
Valuing commercial property, such as office buildings, retail centers and warehouses, is quite different from the way one would value residential real estate, which relies on comparable sales (comps) to determine a home or condo’s fair market value. With commercial property, buyers and sellers must understand terms such as cap rates, gross rent multipliers and cash-on-cash returns.
Cap rates measure the potential return on investment investors can expect to receive from a commercial property over time, based on such factors as its location, quality, existing tenants, lease terms and rent payments. To calculate a property’s cap rate, divide its net operating income (NOI) by the asking price.
Cash-on-cash return measures the expected cash-flow of a property on a pre-tax/after-debt services basis relative to the owners’ invested equity. It can be used to gage investment performance and forecast projected earnings and expenses in the future.
Gross-rent multiplier (GRM) measures the potential income an investor can expect to receive from commercial real estate, based on the ratio of property’s sales price to gross rental income. It helps investors calculate how long it will take for their investment to pay for itself.
When evaluating commercial properties, be sure to work with experienced advisors to guide you through the due diligence process.
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.
Posted on March 18, 2020
Convenience has long been a driver of consumer-spending habits. Not only has it helped to create an online shopping phenomenon, but it is also giving a boost to everyday, neighborhood strip centers where consumers must go routinely to do things they cannot do online.
At a time when the consumers and investors are turning away from traditional malls with big box department stores, well-located strip centers with diverse tenant mixes are staying busy, attracting shoppers who going weekly to even daily to workout at the gym, treat themselves to a haircut or other salon service, pick up prescriptions and get a flu shot and grab a cup of coffee or meal with friends. Property owners are seeking out tenants that provide services or products that fulfill specific needs and are more likely to survive through a recession. Retailers are also recognizing the visibility and potential foot traffic offered by convenient strip center. For example, as part of its reorganization plan, Macy’s announced that it will shutter many of its big-box stores in underperforming malls in favor of smaller footprints in convenient neighborhood strip centers.
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.
Posted on March 12, 2020
A sale-leaseback transaction occurs when a business sells the land or buildings it owns/operates but continues to occupy the space by leasing the property back from the new owner. In recent years, these flexible financing vehicles have increased in popularity as a growing number of businesses look for ways to free up capital and reinvest those dollars back into their operations. For example, venerable retailer Bed Bath & Beyond kicked off the New Year by executing a $250 million sale of approximately 2.1 million square feet of commercial space, which the company will lease back from the buyer under the provisions of long-term lease agreements. According to the retailer, the sale-leaseback will bring enhanced liquidity that it can use to revive its brand and “build a stronger, more efficient foundation to support revenue growth, financial stability and enhance shareholder value.”
By divesting themselves of their real estate holdings, retailers, restaurant operators and even physicians who own medical office can enhance liquidity without carrying debt on their balance sheets and reallocate those assets to their core business needs. By contrast, buyers and investors in these properties receive immediate return on their equity investments, thanks to loing0term leases already in place, and portfolio diversification and stability in asset class that is not susceptible to the swings of the public equity 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.
Posted on March 03, 2020
A ground lease is a long-term agreement between a landowner and a tenant/lessee who pays to rent the land on which a tenant/lessee intends to construct a building. Essentially, a ground lease separates a physical building from the land on which it sits. In doing so, it helps prospective tenants, including banks, restaurant chains and similar franchises, develop stores in prime locations without significant up-front costs or carrying real estate debt on their balance sheets.
Because these arrangements involve very long lease terms of more than 50 years, often with built-in escalation clauses, property owners retaining title to the land receive the benefits of reliable cash flow and rent increases from typically creditworthy tenants. Landowners also receive the value of long-term property appreciation without exposure to income taxes that would be imposed on a property sale. As added savings to property owners/lessors, tenants/lessees bear the responsibility of paying all the expenses for managing, leasing, maintaining and repairing the buildings they construct, including real estate taxes and utilities.
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.
