Do Rising Interest Rates Affect Commercial Real Estate? by Kevin Sanz, CCIM, MSIRE

With current interest rates at historic lows due, in part, to the impact of the COVID-19 pandemic, the reality is that rates can only go higher from here.

In broad economic terms, rising rates make borrowing more expensive and have the potential to reduce investors’ returns on their investments. Within the realm of commercial real estate, there is a correlation between interest rates and cap rates. However, any fears that higher rates could cause property values to decline are unfounded. Rather, rising rates signal a strengthening economy and increased demand for commercial space, which, in turn, can command higher rents to bolster operating income and counterbalance any potential decrease in property value that may occur due to interest rate hikes.

The one area of CRE for which this rule does not apply is real estate investment trusts (REITs), which not only rely on a lot of debt to operate but also require 90 percent of taxable income to be paid back to investors in the form of regular dividends.

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.

Why Invest in Commercial Real Estate in Times of Uncertainty by Christopher Sanz, JD, LLM

Asset diversification is a critical component of a sound investing strategy. To counterbalance the volatility of stocks, bonds, and mutual funds traded on the public equity markets, astute investors often turn to commercial real estate and its proven track record for retaining value, preserving capital, and generating passive income.

Commercial property generally involves long-term leases, including triple-net leases for which tenants bear the responsibilities of maintaining the property and covering operating expenses, including utilities, property taxes and insurance. This allows investors to generate rental income without getting their hands dirty or reaching into their pockets to pay for building upkeep and repairs. Moreover, these long lease terms tend to protect commercial real estate investors from pricing instability that can occur during recessions and other times of economic stress.

Historically speaking, commercial property with a good mix of tenants in a growing market can withstand unexpected economic challenges and continue to generate passive income while delivering longer-time appreciation.

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.

Florida Real Estate Market is Red Hot by Kevin Sanz, CCIM, MSIRE

The pandemic and resulting shift to remote work has helped to spur a migration of winter-worn northern residents and businesses to sunny, tax-friendly Florida. According to the Florida Realtor’s Association, February’s existing single-family home sales were up more than 15 percent from 2020, while sales of condo-townhouses increased more than 28 percent over the same period last year.

This population growth also bodes well for the state’s commercial real estate market, which is seeing an uptick in activity to pre-pandemic levels. In fact, the number of companies that have relocated and expanded in South Florida alone over the past year is unprecedented. Moreover, with many of the state’s newest residents coming from more expensive cities, more disposable income can be spent on retail, restaurants and service providers.

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.

Patience Pays Off for Commercial Real Estate Investors by Christopher Sanz, JD, LLM

It has been one year since the start of the COVID-19 pandemic and prediction of a surge in commercial property defaults that never materialized. Instead, rent delinquencies have declined while landlords renegotiated lease terms to their advantage and reaped the rewards of 6.8 percent commercial property price growth in February, according to Real Capital Analytics. Now, as vaccines continuing to roll out across the country, commercial real estate investors that remained patient through a volatile time, are well-positioned to yield even greater growth from a rebounding economy.

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’s Ahead for CRE in 2021 by Kevin Sanz, CCIM, MSIRE

The continued rollout of vaccinations across the U.S. provides a beacon of hope that consumers and businesses may begin returning to many of their pre-COVID-19 routines and a post-pandemic economic recovery is possible. Looking at the commercial real estate landscape, things are quite different today than they were one year ago before government-mandated business closure.

As businesses continue to look for ways to free up cash flow and deploy capital where it is most needed, we expect the volume of sale leaseback activity to remain strong throughout the new year. These transactions allow businesses to unlock 100 percent of the value of their corporate-owned real estate while providing investors with tax benefits and passive income over lease terms that typically exceeds 20 years. We also expect a continuation of the pandemic-spurred exodus from dense urban metropolises to more spacious and affordable suburbs and secondary markets. However, because neither businesses nor consumers are willing to give up the conveniences of city living for larger space in the suburbs, we expect that outparcels and other easy-adaptable properties will remain in demand. We are already seeing significant activity from credit-quality tenants competing to fill these spaces and establish themselves in prime geographic locations with longer-term triple net leases.

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.

Florida Keeps 2021 Sales Tax on Commercial Leases at Prior Year Level by Christopher Sanz, JD, LLM

One more consequence of the COVID-19 pandemic has been the inability of Florida lawmakers to enact legislation reducing the state’s sales tax on office, retail, warehouse and certain storage property leases in 2021. Consequently, owners of commercial real estate located in Florida must continue to charge and remit to the state a 5.5 percent sales tax on the rent they receive from their tenants, plus any local surtax. It is expected that the state’s legislature will continue to reduce the commercial rent tax rent in 2021, especially as out-of-state residents and businesses continue to flee high tax states and relocated to Florida.

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.

Potential Tax Changes Affecting Real Estate Investors Over the Next Four Years by Kevin Sanz, CCIM, MSIRE

A new presidential administration and Democrat-controlled congress could mean significant changes for real estate investors over the next four years. Some of the policy issues mentioned in President Biden’s campaign promises and which real estate investors must watch closely include higher income taxes for top earners, increases to the corporate tax rate and the capital gains rate, and reforms to the tax benefits investors can currently realize from Section 1031 like-kind exchanges and investments in qualified opportunity zones. More specifically, Biden’s plan calls for real estate investors with income above $400,000 to be exempt from 1031 tax deferrals on sales of investment property when sales proceeds are reinvested into another property for real estate investors with incomes above $400,000.

While some investors will be extremely cautious and look to accelerate property sales to take advantage of current tax laws, others will be more patient, especially with 1031 exchanges which do not currently rise to the administration’s list of priorities during the first year. Moreover, the administration recognizes that any significant modifications to 1031 exchanges, which have been a part of the tax code for nearly a century, would have negative implications on the greater economy, which is struggling to stay afloat during the pandemic.

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 Ends 2020 with Acquisitions Totaling More than $226 Million by Christopher Sanz, JD, LLM

Orion Real Estate Group today announced it invested more than $226 million to acquire 75 single-tenant, net-lease properties in 19 states during the last half of 2020.

These transactions included the deployment of a $70 million fund to purchase a portfolio of 65 free-standing properties with high-credit-quality, essential business tenants already in place, including drug stores, restaurants, grocers, banks and auto-service retailers. Additional acquisitions during the third and fourth quarters included 16 Huddle House restaurants, 11 Car-Mart used-car dealerships and 11 International Car Wash Group (ICWG) locations throughout the Southern United States, as well as big-box retail space already under lease at Millenia Center in Orlando, Fla.

According to Orion President Kevin Sanz, “Each of these tenants represent frontline businesses that continued to generate traffic and sales through the COVID-19 pandemic. Not only are the properties located in thriving and growing geographic markets, but as outparcels, they have been able to adapt more quickly to consumer demand for drive-through services and dedicated parking spots for order pick-ups. We expect our transaction activity to continue through 2021 as we focus on sustaining profitability and value for our 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.