Property Owners’ Rights When Tenants File for Bankruptcy by Christopher Sanz, JD, LLM

Many commercial property owners have had to deal with tenants filing for bankruptcy protection during the COVID-19 pandemic. Despite the challenges of these circumstances, property owners must understand their specific rights and remedies for relief under the law and meet all of the timely court deadline requirements.

Landlords should not view tenant bankruptcies as the end of their lease agreement. Rather, when a tenant files a bankruptcy petition, an “automatic stay” is immediately put into place, which, among other things, requires the tenant to continue paying rent and other obligations under the lease agreement. The tenant has 120 days to decide whether to 1) assume the lease, meet the requirement to pay all delinquent and current lease obligations, and provide the landlord with assurances future rental payments; or 2) reject the lease, vacate the property and allow the landlord to file a claim against the bankruptcy estate. Interestingly, landlords’ rights are strongest when tenants remain in a 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.

The Benefits of Depreciation for CRE Investors by Kevin Sanz, CCIM, MSIRE

While investors often turn to commercial real estate for its appreciation potential, it is the annual depreciation of the property’s value that yields significant tax benefits. In fact, savvy investors recognize that depreciation deductions can be just as important as the income their properties generate.

Depreciation provides one of the most significant benefits to real estate investors because it allows them to write-off, or deduct as an expense, a percentage of a property’s decline in value over time (39 years for commercial property). Those deductions reduce reportable income, which, in turn, reduce investor’s annual tax liabilities. When make certain qualifying improvements to the interior portions of commercial properties placed in service since 2018, they may also take advantage of a first-year 100 percent bonus depreciation deduction that they may use to offset income and even create net operating losses investors may carry back or forward to other years. This bonus depreciation deduction (available through tax year 2026) may also benefit net lease tenants, such as restaurants and retailers, that complete large renovations or build out leased space.

A word of caution: claiming bonus depreciation may require hiring an expert to conduct a cost segregation study and separate out the component of the qualifying improvement property (QIP) from the costs of the building itself. However, these costs are miniscule when compared to the size of the depreciation deduction and tax refund investors can claim today rather than claiming much smaller amounts 30 years from now.

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.

Single-Tenant vs Multi-Tenant Triple Net Lease Properties by Christopher Sanz, JD, LLM

Triple net lease (NNN) properties are always in-demand among both private individuals and institutional investors seeking steady income with few ownership costs and minimal property-management responsibilities. By most accounts, they are the true definition of “passive income investments,” regardless of whether the properties have one tenant or multiple tenants. While some investors believe that the risk of tenant vacancies and disruptions to cash flow are reduced when a property has multiple tenants, research has shown that those risks are even lower for a well-located property with just one, creditworthy tenant.

The key to success with single-tenant properties comes down to investors’ due diligence. Thorough property inspections, cash-flow analysis and proper vetting of tenants’ financial circumstances and credit rating are always required.

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 the Time Requirements Involved in a 1031 Exchange? by Kevin Sanz, CCIM, MSIRE

A 1031 exchange allows investors to postpone the payment of taxes on gains resulting from the sale of a commercial property when they reinvest those sales proceeds into the acquisition of a similar, like-kind property. However, to yield this tax benefit, commercial property owners must abide by very specific restriction on the timing of the exchange.

Investors have 45 days from the date of a commercial property sale to identify a potential replacement property and a total of 180 days from that closing to acquire the replacement property. It is not uncommon for investors to identify more than one property within the 45 days period and close on one or all of them within the 180-day period.

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.

Evaluating Triple Net Lease Properties by Chris Sanz, JD, LLM

Triple net leases (NNNs) are attractive investments because they can provide a steady stream of consistent, passive rental income without requiring investors to pay property fees or become mired in the day-to-day operations and management of the real estate. However, not all NNN properties are created equal. Following are three critical factors to consider when evaluating NNN property.

Physical Location: Ultimately, look for property located in a city or town with a growing population and upward job growth where potential customers will continue to swell over your tenants’ lease terms. On a more micro level, look for properties that are visible and easily accessible from main roads with ample parking and other features tenants and customer may demand, such as drive-though services.

Tenants: You want tenants that will attract customers and regular foot traffic, even in times of economic hardship. Look for anchor tenants with good credit quality that offer essential goods and services, such as groceries, pharmacies, gas stations, convenience stores and even established restaurant chains, that will continue to be in demand during a recession (or even a pandemic) and be able to pivot as needed to meet consumer demands.

Get Expert Help: Because property location and tenant selection are so critical to investment performance, there’s no reason why you wouldn’t want to work with experienced professionals with a deep network of national tenants and a proven track record of success.

Orion Acquires 2 Portfolios of Walgreens Properties for Nearly $200 Million by Kevin Sanz, CCIM, MSIRE

Orion Real Estate Group recently acquired two portfolios of a combined 41 Walgreens pharmacies in nine states for a total purchase price of more than $195 million.

Orion, in a joint venture with Limestone Asset Management, closed on a $133 million purchase of 27 freestanding Walgreens representing 207,000 square feet-of retail space across Florida, Ohio, South Carolina, Tennessee and Texas. Less than three weeks later, Orion closed on an additional $62 million portfolio of 14 Walgreens representing nearly 382,000 square-feet of space across Alabama, Arizona, Florida, Georgia, Massachusetts and Texas.

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 Intimates Interest Rate Hikes May Come as Early as 2023 by Christopher Sanz, JD, LLM

The Federal Open Market Committee concluded its June meeting, keeping interest rates steady and reiterating its position that current inflationary pressures are transitory. However, in a post-meeting press conference, Federal Reserve Chairman Jerome Powell remarked, “As the reopening continues, shifts in demand can be large and rapid and bottlenecks, hiring difficulties and other constraints could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expect.” Should this be the case and the Fed reaches its dual mandate of full employment and 2 percent inflation sooner than expected, investors can prepare for a rate hike as soon as 2023, one year earlier than previously projected.

Rising interest rates due to inflation and strong economic growth could bode well for commercial real estate investors, especially when leases include rent increases that keep pace with inflation or when leases are nearing the end of their terms. One of the keys to successfully managing through these times is working with experienced real estate advisors with well-located properties and deep tenant relationships.

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.

Google Expands into Retail by Kevin Sanz, CCIM, MISRE

In another sign that brick-and-mortar is alive and well, Google in June opened its first physical retail store, allowing consumers to touch and interact with the company’s wide range of products and services, including Pixel phones, Nest smart thermostats and Fitbit devices. This is nothing like the temporary, pop-up stores in major cities that Google experimented with in prior years; the New York store covers 5,000 square feet in the former Port Authority building at 15th Street and 9th Avenue, which the company purchased in 2010 for $1.9 billion. And, this is just the tip of the iceberg when it comes to Google’s portfolio of commercial real estate holdings, which, as of September 2020, totaled more than $39 billion in land and buildings.

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.