The Power of Strategy -- Mastering 1031 Tax Deferred Exchange Concepts

Wednesday, November 7 -- 8:30 - 10:00 a.m.

Instructor: Bill Angove

REALTORS® and SAR Members $10/ All Others $15                    

In this popular class, Bill will enlighten participants in the many important advanced aspects of Internal Revenue Code Section 1031.  The class is comprehensive and covers all pertinent regulations and recent developments in the tax deferred exchange realm. His class is always entertaining and demonstrates Bill's knowledge as a qualified intermediary. The following items plus much more will be highlighted:  

• 1031 Tax Updates
• Vesting
• How Long A Property Should Be Held
• Seller Financing
• Reverse & Improvement Exchanges
• Parterships & LLC Issues
• Like-Kind Property Options (Including Vacation Homes)

 Call Brian at 916-437-1210 to register or use this form.

REGIONAL EVENTS

STATE ARCHITECT ISSUES DRAFT REWRITE OF ACCESSIBILITY STANDARDS 

The Division of the State Architect (DSA) has released to the public draft building standards for disabled accessibility in commercial and government buildings. As a reminder, the DSA has decided to rewrite California's Disabled Accessibility Standards, using the Federal Department of Justice regulations as the basis for our state regulations.

DSA's rewrite includes amendments to DOJ's regulations where California's current standards are more stringent. Over the past 8 months, the California Business Properties Association has participated in DSA stakeholder meetings throughout the state and provided comments. The draft regulations released on Friday (10/26) incorporate the changes suggested by BSC's Advisory Committee. The public has until December 10th to review and provide comments on this regulatory proposal. Click here to read and comment. (CBPA)

BOMA REALEASES NEW ANSI-APPROVED MIXED-USE STANDARD

The Building Owners and Managers Association (BOMA) International recently released revised Mixed-Use Properties: Standard Methods of Measurement (ANSI/BOMA-Z65.6-2012), which assists property professionals in accurately measuring for the floor area in mixed-use properties. This most recent version has received accreditation from the American National Standards Institute (ANSI).

These methods for measuring floor areas are intended for mixed-use properties, which bring together two or more use components-including, but not limited to, office, retail, industrial, residential, institutional, civic and hospitality -- in a planned integration. BOMA's new Mixed-Use Standard addresses these challenges, guiding property professionals from the proper application of pre-existing governing documents to the allocation of mixed-use common areas (MUCAs).

"Mixed-use properties have become the norm rather than the exception, as businesses, developers and communities recognize the opportunity to maximize space and provide density in a smart and efficient manner," explained publication author Bill Tracy, AIA, MBA, Principal for Building Area Measurement, LLC and Vice Chair of BOMA International's Standard Method of Floor Measurement Committee. Learn more about this and other BOMA Standards here.

by Michael Beckerman  

Recently, The News Funnel conducted a poll on the impact of social media on the real estate industry, both commercial and residential. We polled a broad group of professionals via a variety of methods, including email, LinkedIn, Twitter and general outreach, in order to understand how much of the industry is using social media. The results were surprising - they even surprised me, and I am someone who is highly focused on the digital space and its convergence with the real estate industry.

What was most surprising is how many real estate professionals are actually using social media. The real estate industry is widely considered a laggard when it comes to embracing social media. But our poll results absolutely contradicted this notion. Here is a short summary of what we found:

• LinkedIn was by far the most widely used social media tool according to our survey, with almost 98% of those polled having created a profile on the site. The next most popular sites were Facebook, followed by Twitter and then YouTube. All of these sites combined though did not equal the popularity of LinkedIn by real estate professionals.
• Over 65% of those surveyed say they spend between 15 minutes and an hour on social media each day. Even more surprising was that 25% of those polled said they spend an hour or more a day on social media sites, and only 2% said they never use social media.
• Real estate blogs are not as popular as LinkedIn, Facebook and other social media sites. Less than half of those polled said they do not follow any blogs.
• In terms of how these real estate professionals are using social media, the majority said they use it to forge new business connections. The second most popular reason given was to stay current on news. (Real Estate Tech Bits)  Social Media Findings

With the election only one week away, many commercial real estate professionals are considering the current state of the market and searching for signs of recovery as they contemplate their final electoral decisions. According to historical data trends from BOMA International's annual Experience Exchange Report (EER), while market growth has been slow, income has increased and expenses have dropped. BOMA International concludes that the commercial real estate industry is recovering and indeed better off now than it was four years ago.

Since 2008, average total rental income earned per square foot (psf) has increased by $1.56, while total operating expenses-including fixed expenses-have decreased by $.20 psf, according to the report. Total income levels also improved over the past four years, increasing by $1.57 psf to $26.90 psf.

According to the report, 57% of all expenses decreased in cost over the past four years. The largest decrease in expenses was the price of roads and grounds upkeep, which decreased by 4.3% to $.22 psf. The cost of utilities, cleaning and security also decreased. Utility costs dropped 3.7% since 2008 to $2.33 psf, while cleaning and security costs both decreased by 2.8% to $1.39 psf and $.69 psf, respectively.

"These findings demonstrate improving conditions in commercial real estate markets over the past four years," said BOMA International Chair Joseph W. Markling, Managing Director of Strategic Accounts at CBRE. "Much of this recovery has been aided by the innovative ways that building owners and property managers have found to decrease expenses-particularly energy costs-through dedication to sustainable practices and maximize value via benchmarking tools like the Experience Exchange Report. Overall, we remain optimistic about the future of the commercial real estate industry." (BOMA) CRE Has Improved

The commercial real estate outlook for 2013 is looking brighter, with modest gains in leasing, rents, and pricing forecasted in the Urban Land Institute's latest report, "Emerging Trends in Real Estate 2013."

The commercial market is moving forward "bit by bit," says Stephen Blank, ULI's Senior Resident Fellow for real estate finance. "Nothing indicates a quick turnaround for commercial real estate, but it is improving. Those who are patient and willing to rethink their expectations and adapt to market realities are expected to come out ahead this year."

According to the report, recent job creation will likely increase absorption and push down vacancy rates in the office, industrial, and retail sectors. The apartment sector is forecasted to continue to have strong demand, according to the survey.

"With the outlook for commercial real estate continuing to improve in 2013, investors are expected to allocate substantial sums of capital to the real estate asset class, according to our survey respondents," says Mitch Roschelle, U.S. Real Estate Advisory Practice Leader. "As yield in bonds and other financial instruments tighten in a still-volatile market, commercial real estate's income producing and total return attributes offer investors potentially attractive risk-adjusted returns."
The five markets with the best commercial real estate outlook for 2013, according to the report, are:  

1. San Francisco
2. New York
3. San Jose, Calif.
4. Austin, Texas
5. Houston (RIS Media)

by Robert Celaschi

 by Annalyn Censky 
  

 
Economists surveyed by CNNMoney had predicted a 1.7% growth rate for the third quarter, but were still reluctant to celebrate. Growth around 2% a year is in line with the pace of the sluggish recovery, and is hardly enough to lead to robust hiring. "It's a ho-hum number given the environment we're in," said Sam Bullard, Senior Economist at Wells Fargo. "We're looking ahead to fiscal cliff, and holiday sales forecasts this year are lower than last year. We're limping into the final quarter this year."

One major economic theory suggests that the economy needs to grow around 3% a year to bring unemployment down by one percentage point. The unemployment rate was 7.8% as of September.
"Growth rates this low will not reliably lower joblessness in the years to come," said Josh Bivens, Research and Policy Director for the Economic Policy Institute. (Money/CNN) USGDP Index 

by Mark Heschmeyer

The second week after the end of quarter is always a revealing time for commercial real estate. That's when many of the nation's largest bank holding companies go live to discuss their earnings, and how their CRE lending is faring. In this latest go-around, the bank executives provided the clearest picture of CRE conditions that they have in a long time.

As we do each quarter, we present the most telling statements regarding bank CRE-related activities from the presentations we heard:  

• For major banks, the recession is receding further and further away in the rearview mirror.
• Provisions for loan losses are falling, which means banks have more money available to lend.
• The disposition values of foreclosed assets are increasing, so banks plan to make more property available for sale.
• Many banks have cleared through their distressed assets and are ready to start growing again.
• They see demand in the marketplace increasing.
• There is pressure on pricing as competition for loans heats up.
• However, lenders view CRE as still inherently risky, but federal banking policies are mitigating the risks, and,
• Conditions will continue to get better, as long as we don't go over the 'fiscal cliff.' (CoStar) 6 Reasons Shops For CRE Loan

by Robert Carr

It is clear that seniors housing construction is in a low trough and will remain so for at least the next year. And, as REITs battle for existing portfolios, building new properties remains the purview of small-to-mid-level firms.

Current construction for seniors housing is down more than 100% from 2007-08, to just over 2% of total inventory, a disparity that's pushed up occupancy to 88.8%. There's also no question that demand is high, with waiting lists at many properties.

The largest benefit of seniors housing, however, is the expected need that's going to just keep increasing for the next 40 years. By 2050, those 65 years old and older in the United States will number almost 90 million, more than double the 2010 census count. Thus, the first companies to get established as the top builders of seniors housing could reap strong rewards for at least another generation.

Zeke Turner, CEO of Indianapolis-based Mainstreet Property Group, says his firm currently has a pipeline of about $500 million of new seniors housing in the works or on the drawing board, mostly for skilled nursing. This includes the recently announced development of four seniors communities in Indiana for $60 million. Turner says the average potential seniors resident doesn't want to receive care in a 30- or 40-year-old nursing home. (NREIOnline) Seniors Construction

by Bendix Anderson

It seems like such good news-apartment rents are rising faster than inflation. That means more profits for real estate investors.

But there's also a risk. When rents rise faster than the paychecks of your residents, then that puts pressure on their budgets. Eventually they may look for other options. If you've carefully marketed your apartment community to a certain set of residents-say retirees or workers at the local hospital-it's bad news for you if those people can no longer afford to live there.

"Landlords need to be careful," says Brad Doremus, Senior Analyst for data firm Reis, Inc., based in New York City. "They can't raise rents forever or they come up against that budget constraint." Property managers should worry about competition from new rental housing, cheaper rental housing and even for-sale housing. Eventually it will become clear to everyone that the for-sale housing market has bottomed and prices are rising, and residents paying sky-high rents will start looking seriously at homes or condominiums.

How high is the pressure on your renters? The cost of housing rose 52% between 2001 and 2010. The cost of transportation rose 33%. Taken together, that works out to a 44% increase. But over the same period, household incomes rose just 25%. Taken together, it adds up to a huge loss of disposable income, according to "Losing Ground: The Struggle of Moderate-Income Households to Afford the Rising Cost of Housing and Transportation," a new report from the Center for Housing Policy and the Center for Neighborhood Technology. And a loss of disposable income is a big problem for many renters. (NREIOnline)  Rising Rents Pressure Tenants 

by Alex Finkelstein

Real estate, and especially commercial real estate, is beginning to play a strong role in the economic recovery of Greece, according to brokers, bankers and consultants in Athens and London.

One big reason is the coalition government led by conservative Prime Minister Antonis Samaras that came to power in June has impressed some investors. Samaras promised to do everything needed to keep bailout funds flowing, easing fears of bankruptcy and leaving the Euro zone.

Even German Chancellor Angela Merkel, who calls the shots on bailout programs for sick Euro zone members, has eased her former position on allowing Greece to default on its debt. Other Euro zone members may be following Merkel's position.

Dimitris Manoussakis, Head of the Athens office of real estate consultant Savills, recently told the media the Greek government's new stance in selling state assets, including real estate as a condition of its bailout over the next several months, may start to convince some investors they will be getting a fair price on property transactions.

Greek investors, especially those living abroad, are becoming interested again in commercial property like hotels and retail, with demand even coming from the US, South Africa and Australia. Six months ago, that same interest was lacking, according to global real estate analysts. (World Property Channel) Greek Investors

by Randyl Drummer

Demand for office space in the U.S. held steady in the third quarter as leasing activity and absorption of available office space continued to pick up momentum following a lackluster start at the beginning of 2012, CoStar Group reported this week in the company's Third-Quarter 2012 Office Review & Outlook.

The overall U.S. office vacancy rate edged down and net absorption rose to 15 million square feet during the quarter from 13 million square feet at mid-year 2012. The relatively little new office supply and continued low levels of new office construction supported the balance in supply and demand.

Meanwhile, office tenants continued to enjoy a 'holiday' from rent increases as office rents in most market have yet to budge much from their market trough tipping point, according to analysts for Property and Portfolio Research (PPR), CoStar's analytics and forecasting division. "The recovery is only one-third of the way there in the office sector, we still have two-thirds to go," said Walter Page, PPR Director of Research, who was joined by PPR's Managing Director Hans Nordby and Manager, U.S. Market Research Aaron Jodka, in dissecting the third-quarter numbers for CoStar clients.

If there was a surprise for the quarter it was on the upside. Page said he had expected demand to fall off a bit in the quarter, based on anecdotal reports of companies postponing hiring and expansion decisions due to economic and political uncertainties created by this fall's hotly contested presidential election and the unresolved budget impasse. (CoStar) Market Recovery Continues 

The recent economic downturn has dramatically affected businesses as well as homeowners. Many small business owners have commercial loans that are no longer affordable. Although there are many more loan modification programs available on residential loans, it is possible to modify commercial loans too. Lenders have over leveraged themselves and now find it in their best interest to work with borrowers rather than allow foreclosure of commercial loans.

With the risk of these defaulting and distressed loans turning into a second wave of foreclosures following the recent residential real estate meltdown, banks are now more open and willing to work with commercial borrowers to avoid bankruptcy and save the bank the expense of going through the foreclosure process.

A commercial loan modification may lower a borrower's monthly payments so they can continue effectively owning and operating their properties. A loan modification will allow borrowers to avoid losing their assets and destroying their credit with a bankruptcy or foreclosure. Additionally, the commercial modification will allow banks to stay in the business of lending and not property management and brokerage.

Often a commercial loan modification can reduce the amount of interest paid by the borrower or even lower the principal amount still owed on the loan. A loan modification is available to both businesses and individuals that own commercial properties such as strip-malls, shopping centers, apartment buildings, office buildings, industrial complexes, gas stations, entitled land, raw land or properties under construction. (Examiner) Help With Commercial Loans 

by Hortense Leon
 

Hong Kong is often referred to as Asia's World City and one of the premier global locations for doing business. Studies have also shown it to be the preferred location for global office occupiers. Perhaps unsurprisingly, it is therefore the world's most expensive office location.

This is not only due to strong occupier demand, but also due to an acute shortage of office space. In a unique collaboration between a property consultant and an Asian equities research team, CBRE and Daiwa capital markets have produced a major multi-year outlook report that quantifies the shortage of Grade A office space. The report also goes a step further by proposing specific solutions to the issue to help safeguard the city's longer term prosperity.

The report investigates:

• How much space will actually be required through to 2020 based on projected GDP growth
• What Grade A office supply is required over and above the forecast pipeline
• Which sites can realistically be fast-tracked to cover the shortfall
• What is the existing developer capacity to assume developments of this magnitude. Download the report. (CBRE)