Chain Restaurants that Survived and Continue to Thrive through COVID-19 by Kevin Sanz, CCIM, MSIRE

Despite the wreckage of restaurants shuttered in the wake of the pandemic, many well-known quick-serve and fast-casual brands have been able to survive and even thrive through the uncertainty of the past year. As a testament to their agility and resiliency, chain including Chipotle, McDonalds and Papa Johns were able to record sales growth over the past year and even dole out year-end bonuses to their frontline workers. One factor that contributed to these positive results is the typical footprints of these stores. Their locations in strip shopping centers and free-standing buildings made it made it easier to adapt existing space to new normal, introducing outdoor seating and walk-up windows while ramping up drive-through services, mobile ordering and contactless curbside pick-up at a time when large dining rooms were forced to close or limit seating. While the National Restaurant Association reported that 17 percent of U.S. restaurants closed due to the pandemic, fast-casual and quick-serve chains can be critical, positive cash-flow components of income producing commercial property investments.

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.

COVID Vaccine Roll Out Portends Swifter Economic Recovery for CRE by Christopher Sanz, JD, LLM

The sudden uncertainty created by the pandemic in early 2020 negatively impacted all aspects of the economy through the end of the year (and will likely continue through some of 2021). Now, however, with the nationwide distribution of FDA-approved emergency-use COVID-19 vaccines significant there is great promise that the economy, and commercial real estate, in particular, can recover fairly quickly rather than continuing to struggle over a longer period of time.

This is especially true as liquidity continues to free up and interest rates remain at record lows. In the current environment, well-funded investors are finding unique buying opportunities, including sale leasebacks that allow them to capitalize on the current market dynamics to yield short term cash flow and longer-term property appreciation. Yet, despite signs of economic recovery, patience will continue to be the most critical tool investors can wield in 2021.

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.

Sale Leasebacks Boom During COVID-19 Pandemic by Kevin Sanz, CCIM, MSIRE

Large, well-funded chain stores and restaurants have long understood the benefits of sale leasebacks to convert their equity in real estate into cash they can use to finance renovations at existing locations, fund new property acquisitions, or to simply provide immediate liquidity. However, during the COVID-19 pandemic, a company’s ability to monetize 100 percent of the value of their fixed assets is critical to its survival. In this environment, retailers and restaurants, in particular, are increasingly using sale leasebacks to boost working capital and cash reserves. Not only can these arrangements strengthen balance sheets, they also give management the time and resources to adapt to the new normal, revive their brands and execute strategies that position themselves for long-term success. Some of the well-known brands that completed sale leasebacks in 2020 include Bed Bath & Beyond, Big Lots, Cracker Barrel Stores, Gamestop and Rite Aid.  More are expected in 2021 as businesses continue to seek out enhanced liquidity and capital to invest in their companies’ long-term growth.

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.

Sophisticated Investors Continue to Turn to CRE by Christopher Sanz, JD, LLM

Commercial real estate has earned a reputation among sophisticated investors as a wealth-preserving asset that can provide a reliable source of income and a safe harbor from the daily gyrations of the public equity markets. Unlike shares in a public company or even a real estate investment trust (REIT), private equity property has limited price volatility and tends to hold its intrinsic value through economic downturns. Not only does commercial property appreciate over time, but, when it involves long-term leases with high quality tenants, investors can yield significant dividends and cash flow. To effectively manage risk and ensure a return on investment, investors should work with professional and experienced commercial property advisors with deep tenant relationships and a proven track record of deal execution and performance.

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 is a Percentage Lease? by Kevin Sanz, CCIM, MSIRE

The COVID-19 pandemic has given way to some creative commercial lease arrangements that can provide a win-win for both property owners and tenants struggling with business interruptions in a socially distanced environment. One example is a percentage lease, commonly used in shopping malls. Under the terms of a percentage lease, a tenant agrees to pay a fixed, base rent plus an additional amount that varies based on a percentage of the sales it generates at that location. This flexibility allows tenants to pay fixed rental costs below market rates when sales are down while providing property owners with the potential for additional income when sales are up. It is important to note, however, that these types of leases are quite complex and require both tenants and landlords to recognize and fully understand the additional risks they share with these arrangements.

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.

Risks of REITs During Recessions by Christopher Sanz, JD, LLM

Real estate investment trusts (REITs) continue to garner a lot of attention, providing average investors with an opportunity to own a small piece of income producing commercial property. However, REITs are quite different from private equity investments in commercial real estate and therefore do not provide investors with the same benefits through market downturns. Following are five reasons to consider direct investment in commercial property rather than buying shares in a REIT.

1. Direct investment in commercial real estate is not subject to the volatility of public equity markets and is therefore a more stable than REITs for income and wealth-building property appreciation;
2. Direct investment in commercial real estate provides unique tax benefits, including depreciation deductions and lower tax rates on capital gains, which can yield higher after-tax returns for investors
3. REITs come with high management fees, compliance costs and other expenses that dilute investors’ earnings
4. REITs are required to pay out 90 percent of taxable income as dividends, which may force property sales and acquisitions that do not align with stated strategies and increase risk of property appreciation loss
5. Direct investment in commercial real estate offers greater flexibility in terms of operating structure, property selection and strategy to weather market downturns.

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.

Easing the Burden of the CRE Due Diligence Process by Kevin Sanz, CCIM, MSIRE

When considering investments in commercial real estate, it is important to remember that every property is unique, and no two deals are alike. Therefore, investors must be prepared for an exhaustive due-diligence process, evaluating countless data points to ensure a selected property meets established criteria. This involves not just the location of the property but also a detailed assessment of the local market demographics and economic trends, including average age of residents, household income, job growth and property values. In addition, an estimation of the property’s income potential requires a thorough review of the area’s comparable property sales and leases, tenant mixes and vacancy rates. By working with experienced commercial property professionals with deep tenant relationships and a proven track record of investment performance, investors can reduce the stress of the due diligence process and increase the odds that the property acquired will meet their short- and long-term investment needs.

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.

Depreciation in Commercial Real Estate by Christopher Sanz, JD, LLM

One of the benefits of investing in commercial real estate is the ability to depreciate, or reduce, the taxable value of appreciating property over its useful life, which the IRS defines as 39 years for commercial buildings and their improvements. In other words, depreciation deductions allow investors to annually write off a percentage of a property’s decline in value that occurs over time with normal wear and tear. Because deductions reduce taxable income, the more properties an investor owns, the greater the depreciation they may claim to offset income. However, depreciation deductions can also reduce investors’ cost basis in a property. Therefore, special care should be taken to plan ahead for an eventual sale in order to avoid a surprise tax bill. For many investors, a 1031 exchange provides a viable solution.

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.