Commercial Real Estate Remains the Great Investment Portfolio Diversifier by Kevin Sanz, CCIM, MSIRE

For 30 days in March the global stock markets shed 34 percent, jolting equity investors who just a few weeks earlier were celebrating once record market highs. While the equity markets have generally recovered, the pandemic’s long-term impact on the economy and their portfolios will undoubtedly leave a lasting impression. High net worth investors using this time to assess their existing portfolios and their exposure to market risks are finding private commercial real estate investments to provide the stability and diversification they need to ride out the highs and lows of the market.

Commercial real estate is best suited to patient investors with long-term investment horizons and easy access to other sources of liquidity, which tends to increase portfolio volatility. Although real estate investors cannot convert their investments to cash in a pinch, they do receive the stability and longevity of an appreciating asset that can continue to generate income even during times of economic uncertainty.

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.

Curb-Side Pick-Up Expected to Drive CRE Tenant Growth Long After COVID-19 by Christopher Sanz, JD, LLM

Restaurants, grocers and retailers that pivoted and successfully adapted their brick-and-mortar business models for curbside pick-up during the initial impact of the COVID-19 health crisis are finding that the methods they employed are continuing to drive sales even as the number of virus cases continue to surge nationwide.

The demand for contactless shopping and dining has not necessarily stymied consumers’ desires to visit physical stores. Rather, consumers appear to enjoy every opportunity they have to shop online and leave their homes to pick up their orders in person at a physical store location. In many instances, curbside pickup has become more popular than pure e-commerce home delivery services throughout the pandemic. According to a recent survey by consulting firm McKinsey & Co., 75 percent of consumers have tried a new shopping method during the pandemic, and 70 percent intend to continue buying online for curbside restaurant/store pickup in the future. Good news for commercial real estate owners and their brick-and-mortar tenants.

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.

Dry Powder Fuels Commercial Real Estate Deals During COVID by Kevin Sanz, CCIM, MSIRE

Trying to time the public equity markets and buy on the dips can be a losing proposition. Instead, investors chasing yield often turn to commercial real estate to generate a steady stream of passive rental income while maintaining its underlying value over the long-term. As evidenced by the Great Recession, even if a property’s value decreases in the short-term, rents under long-term leases tend to remain stable, having little to no impact on investors’ monthly cash flow.

In the current COVID environment, however, the key to commercial property buying opportunities depends a great deal on an investor’s dry power, or the amount of cash reserves and liquid assets on hand and available to deploy for the right deal that can achieve desired results. That is where real estate investments firms play a critical role, having raised hundreds of billions of dollars in dry powder during the past decade of economic expansion. By leveraging their deep pockets of investment funds with market expertise and long-standing relationships with property owners, developers and tenets, these real estate firms have the ability strike quickly deploying capital when prudent opportunistic acquisitions arise, including distressed sales at the right time and the right price point.

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 Reverse 1031 Exchange? by Kevin Sanz, CCIM, MSIRE

Commercial real estate investors have long relied on Section 1031 of the tax code to defer capital gains taxes on the sale of appreciated real property when they reinvest sales proceeds into the purchase of similar, like-kind property within a very specific timeframe. However, it is not uncommon for investors to identify and even acquire a new, replacement property before they sell an existing property. This is known as a reverse 1031 exchange. It is critical that investors work with experienced advisors and qualified intermediaries to ensure they meet all the criteria to qualify for tax deferral. For example, a taxpayer will need to identifying property to sell with 45 days of acquisition of the replacement property and closing on that sale within 180 days. During this period of time, the acquired property will need to be transferred to the QI to avoid tax exposure.

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.

Reducing Recessionary Risk in Commercial Real Estate Investments by Christopher Sanz, JD, LLM

Despite the economic volatility and uncertainty caused by the current health crisis, investor activity in commercial real estate remains strong, especially in the net lease space.

Most investors recognize that commercial property with strong fundamentals is generally a part of longer-term portfolio-diversification strategy that is not impacted by the short-term effects of changing economic conditions or wide swings of the public equity markets. By sitting tight and avoiding the urge to sell, patient commercial real estate investors will not record any losses during times of market uncertainty. This is not to say that property investors should sit on their hands and wait-out the pandemic. Rather, investors should use this time to assess their portfolios, shore up capital reserves to take advantage of discounted buying opportunities and build up their resiliency. One way to do this is to put forth efforts to strengthen tenant relationships, helping them adapt their businesses and the property to changing consumer behaviors. These efforts can give you leverage to renegotiate lease terms now, which can pay off in dividends when the economy recovers.

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.

How Can Investors Calculate NNN Lease Expenses? by Kevin Sanz, CCIM, MSIRE

Triple net leases (AAA) allow commercial real estate owners to pass to their tenants most of the responsibilities for managing a property and paying all the related expenses. However, it is critical that property owners carefully calculate and record all the expenses covered under a NNN from the onset.

Generally, tenant expenses can be calculated by adding together property taxes, insurance and estimates of utilities and common area maintenance (CAM) and dividing that amount by the total square footage of the building. The result is the additional NNN price per square foot above rent that tenants will pay to the property owner each month. At the end of the year, an audit of expenses should be conducted to ensure accuracy and allow owners and tenants to reconcile any overpayment or shortfalls for that year and into the future.

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 Considered Like-Kind Property in a 1031 Exchange? by Christopher Sanz, JD, LLM

Section 1031 of the tax code provides commercial real estate investors with an opportunity to defer capital gains tax on the sale of appreciated real property when they reinvest sales proceeds into “like-kind” business or investment property. But what is considered like-kind property?

For tax years beginning in 2018, like-kind properties are limited to improved or unimproved U.S. real estate used in a trade or business or held for investment purposes, regardless of whether the properties differ in grade or quality. This means that taxpayers must first consider their purpose and intent for holding the property. Aside from that, the IRS takes a fairly liberal interpretation of like-kind property to include properties of the same nature. For example, investors may exchange an apartment building in one state for a shopping center in another state, or for a vacant lot, unimproved raw land or several industrial warehouses, provided the replacement property is of equal or greater value than the relinquished property. If replacement property is of less value than the property sold, the investor is responsible for paying tax on the difference.

Because the tax laws are complex and constantly evolving, it is important that commercial property investor work with professional advisors with experience in facilitating and closing 1031 exchanges within the time constraints allowable under the law.

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 Can Consumer Trends Tell Us about CRE Eight Months into the Pandemic? by Kevin Sanz, CCIM, MSIRE

As states across the country continue to lift coronavirus restrictions, many businesses are reopening their doors to both employees and consumers eager to get their lives back to normal. However, the harsh reality of the past eight months is that consumer behavior has changed. How this will impact commercial real estate and business operations over the long-term remains to be seen.

What we do know is that not all businesses will be turning their lights back on. In fact, industry insiders insist that the pandemic helped to accelerate the closings of a glut of underperforming retail stores and restaurants that were already struggling to adapt to consumers’ changing needs – both before and during the virus. Other businesses pivoted rather quickly, transitioning easily to work-from-home (WFH) policies that have change their use and need for physical office space in the future. Those policies combined with safer-at-home orders have forced consumers to transform their homes into self-contained work/school/play hubs for their entire families. Consequently, a significant number of U.S. families are leaving dense urban areas in favor or more spacious single-family homes in the suburbs. While it is still too early to tell if this will lead to a more long-term suburban revival, investors with commercial property in secondary and tertiary markets appear well-poised to reap the rewards of a suburban shift.

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.