Archive for June, 2011

Best Buy Pares Space As Internet Rattles Big Box Stores

Thursday, June 30th, 2011

Best Buy is looking to reduce its 42 million square foot big box footprint by 10% over the next three to five years due to weak sales caused by stretched consumers and competition from discounters and internet rivals. According to the National Real Estate Investor, the consolidation could save the company $70 to $80 million a year. The retailer is also considering subleasing space in existing stores as one way to achieve the reduction.

Sales and earnings for the electronic retail giant were relatively flat in the first quarter of 2011 compared with the first quarter of 2010. Comparable store sales dropped 1.7% in the first fiscal quarter on a year-over-year basis after growing 2.8% during the same period last year. Ever-present economic hardships such as falling home values and rising gas and food prices is accelerating the online buying trend, the largest threat to sales for the brick and mortar segment of the retailer.

To read the full article from the National Real Estate Investor, click here.

Posted in Big Box, Economy, Real Property, Retail | No Comments »

Should Your St. Louis Co. Property Tax Values Really be Frozen in 2011?

Wednesday, June 29th, 2011

For most properties, the recent valuation notice you received from St. Louis County will have “frozen” your 2011 property at its 2009 value. However, it is important to realize that this value takes no account of the continued increase in effective tax rates that we’ve witnessed over the last several years. And since the effective tax rate is a major component of the cap rate used to value income producing properties, simply “freezing” the property’s value isn’t consistent with proven methodologies that generally decrease a property’s value when cap rates increase.

For more information on this important and costly issue, we invite you to view the following brief video, and if then you share concerns that your property’s valuation notice might also be inaccurate, contact the property tax professionals at Paradigm Tax Group for a free review of your property’s assessment.

Posted in Mid America, Paradigm Info, Real Property | No Comments »

Banks at Risk of a Commercial Real Estate Double Dip

Tuesday, June 28th, 2011

Although the commercial real estate apocalypse that analysts feared would hit banks has yet to happen, problems associated with the industry are still alive. According to TheStreet.com, credit quality has started to improve for the CRE sector and with the housing market showing signs of a double dip, there are still more renters than buyers which bodes well for CRE vacancy rates and cashflows. The crisis banks once faced is now not as severe as before because most banks have shored up capital and shrunk their CRE exposure. Those still with high concentration in CRE however, are still at risk.

A double dip could have a detrimental effect to any progress that has been made in the CRE segment. To date, banks have been able to replenish capital with earnings and have cut down on provisioning, giving themselves the belief that they can provide for future losses. A double dip, however, would limit their further ability to earn their way out and may force them to once again increase provisions. Potential CRE losses are staggering with about $1.7 trillion worth of commercial mortgage debt coming to maturity between 2011 and 2015, half of which is expected to be, or close to being, underwater.

To read the full article from TheStreet.com and see specific examples of banks that are at risk, click here.

Posted in Banks, Economy, Financial Services, Real Property | No Comments »

San Francisco Building Sales on Track to Top $4 Billion

Monday, June 27th, 2011

San Francisco, California is on track to see around $4 billion in downtown office building sales in 2011, a clip only surpassed during the bubble of 2007. According to the San Francisco Business Times, approximately $1 billion in deals have closed already this year with another $500 million in contract to sell and another $800 million recently placed on the market. The $4 billion threshold is not too much of a stretch for 2011 given the current investor demand for product.

The financially strapped city is experiencing a nice turnaround in transactions with 134 total worth over $5 million, a 33% increase over the 90 seen all of last year. The city has also collected over $125 million in transfer taxes, a 44% increase over the $83 million gathered last fiscal year. The recent increase in sales activity in the major market of San Francisco affirms the notion that in troubling times, people come back to big markets and Class A office buildings.

Posted in Office, Real Property, Western | No Comments »

Manhattan Office Vacancy Below 10% for First Time Since March 2009

Friday, June 24th, 2011

New office leases totaling 4.3 million square feet were signed in New York during the month of May, the highest monthly total on record. According to the National Real Estate Investor, the surge in new leasing activity has dropped the Manhattan office vacancy rate to 9.9%, the first dip below 10% since March 2009. The 14 million square feet of leased space so far in 2011 is an increase of 35.4 % from last year at this time. Vacant space is now down nearly 2.4 million square feet since the end of 2010.

Asking rents in Manhattan registered at $55.29 per square foot, increasing an average of $0.19 every month since the beginning of the year. Class-A space is going for $63.24 per square foot, up 2.1% since the end of 2010. Downtown has experienced the greatest decline in total vacancy as leasing activity in that sub-market was up 190% year-to-date. Midtown and Midtown South remained virtually unchanged from the prior month but were still down in vacancy from the beginning of the year.

To read the full article from the National Real Estate Investor, click here.

Posted in Eastern, Economy, Leased, Office, Real Property | No Comments »

Maximize Your Tax Benefits with Transaction Price Segregation

Thursday, June 23rd, 2011

For non-REIT hospitality investors, a Transaction Price Segregation (TPS) performed for the closing of your deal provides you with maximum tax benefits in the form of:

Reduced transfer taxes at closing
Reduced exposure to prospective real estate tax increases
Federal income tax benefits from booking the value of the Section 197 intangible assets

The TPS determines the effective price paid for the three major classes of assets that are purchased when buying an operating hotel - real estate, tangible personal property, and intangible personal property. To maximize the TPS, it should be performed contemporaneously with the closing of any hospitality deal, and unlike cost segregation analysis, the benefits start with the closing where the implied price for the real estate can be broken down between land and improvements.

To read the full article and analysis from Paradigm Tax Group, click here.

Posted in Hospitality, Personal Property, Real Property | No Comments »

Florida House Bill 281 Requires Property Tax Payment

Wednesday, June 22nd, 2011

Florida House Bill 281 requires a petitioner before the Value Adjustment Board (VAB) who challenges the assessed value of a property to pay at least 75% of the ad valorem taxes by April 1 of each tax year. Failure to do so will result in the withdrawal of the pending VAB petition, with the taxpayer, appraiser and the department of the decision of the board receiving notice by April 20. The new Bill will be applied to petitions filed for the 2011 tax year.

If the VAB determines that the petitioner owes ad valorem taxes in excess of the amount paid, the unpaid amount accrues interest at the rate of 12% per year from the date the taxes became delinquent. Refunds that are due to the petitioner also will experience the same 12% rate per year on the overpaid amount until the refund is paid back in full. Interest does not accrue on amounts paid in excess of 100% of the current taxes due as provided on the tax notice issued.

To read the full copy of Florida’s House Bill 281, click here.

Posted in Eastern, Personal Property, Real Property | No Comments »

Tax Break Ordinances Have Yet to Spur Job Creation

Tuesday, June 21st, 2011

New property tax exemptions that were passed by voters in an effort to spur job growth in several Florida counties last year have gotten off to a slow start. According to Tampa Bay Online, the adopting counties of Hillsborough, Charlotte and Martin have not tapped into the property tax breaks while Sarasota County has granted the property tax exemptions for four manufacturing companies. Economic development officials across the adopting counties are still high on the program and chalk its lack of success up to the weak economy.

Provisions in the exemptions include such examples as new and existing manufacturing companies in Hillsborough that promise to create at least 10 higher-than-average waged jobs could knock off 50% of their property tax bill for five years. Non-manufacturing companies could get the same break with the addition of 50 jobs in an office setting. The goal of the breaks was to attract higher paying industries like manufacturing, biomedicine and financial services, but the door has initially been left open for unwanted smaller “destination retailers” to get the tax break.

To read the full article from Tampa Bay Online, click here.

Posted in Eastern, Financial Services, Industrial & Manufacturing, Office, Personal Property, Real Property, Retail | No Comments »

Appraisers Having Hard Time Figuring Commercial Property Values

Monday, June 20th, 2011

With the rise of foreclosures and few comparable properties, the traditional factors of a commercial property’s real worth have been decimated, causing increasing difficulty for appraisers to supply values. According to the StarTribune, fewer sales and far more distressed properties have skewed the market, rendering it much harder to come up with a value that’s acceptable to the buyer, seller and lender. Values tend to and have been reflecting the changes in the market, especially one this extreme.

The amount of research needed to correctly value a property in this climate has increased. Most appraisers are now forced to only rely on post-crash sales made in 2009 and 2010. Some lenders are now requiring appraisers to include current listings in their deliberations as a way to arrive at fair value, a method that has come with peril due to the presence of so many desperate, overleveraged sellers in the market.

To read the full article from the StarTribune, click here.

Posted in Economy, Real Property | No Comments »

Rising Cost of Construction Materials Puts Contractors in a Bind

Friday, June 17th, 2011

Those construction workers that were able to survive the slowdown of commercial real estate development in recent years are now finding their profits squeezed by rapidly rising costs. According to the National Real Estate Investor, the supply in commercial real estate caused by the lack of development has made contractors so hungry for work that they are continuing to promise to deliver jobs for almost no increase in price, in spite of their having to pay more for materials. This creates a dangerous situation for contractors who have already cut their margins to a minimum, or in some cases negative territory.

The cause for the increase in prices can be attributed to the run-up in diesel fuel (up 39% in the past year), copper (up 17% in the past year) and steel (up 10.1% in the past year). Petroleum costs are also driving up the price of construction plastics such as PVC pipes and roofing material. The overall price of construction materials is projected to be 5-6% higher in December of 2011 compared to December of 2010.

To read the full article from the National Real Estate Investor, click here.

Posted in Economy, Real Property | No Comments »

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