realstreetEX - Commercial Real Estate Journal

Memphis Reappraisal Logic

2009-04-13T10:10:00.001-07:00

We are researching commercial property sales for our clients to help them get their reappraisals where they NEED to be.

Here's what we're finding.

In 2005 many properties seem to have been appraised BELOW the market. In fact we're seeing many appraisals at 80% - 85% below market sales in 2005.

Now in 2009 we're seeing appraisals coming in AT or ABOVE the market. Not a good time to tell people their properties are worth more than they really are nor is it a good time to use a different standard of valuation.

The assessor's office has provided a system to resolve these issues.

Are you unhappy with your reappraisal? Take the first step, file for an informal review as soon as possible. If you need the comparable sale data go to www.memphiscomps.com

Great! My Commercial Property Appreciated 25%!

2009-03-19T09:15:00.001-07:00

Isn't it great when you can sit back and make LOTS of money just by owning a measley commercial property? No renters. Just owning. Rocking back and forth in your rocking chair, making money.

According to the most recent Shelby County Reappraisal some commercial property owners saw their properties had gone up in value while EVERYONE else's all around them had gone DOWN!

How fortunate to be one of the chosen.

The reappraisal is supposed to evaluate the "market". Isn't it interesting how the "market" doesn't agree with the reappraisals?

Enough of the satire. Nobody is perfect and there is something you can do.

It is called an Informal Review. You can do it online. All you need is documentation on recent commercial sales in your immediate area.

Here is a link to the Shelby County Assessor for more information on the process.

Stay tuned...Monday we will be launching a new website to get you the Commercial Comparable Sales you need. www.memphiscomps.com This online tool will save you the $2,500 it will cost to get a full-blown, private appraisal.

Related links -

www.wreg.com

www.wmcstations.com

www.memphisdailynews.com

www.myeyewitnessnews.com

Memphis - 19th Strongest Housing Market

2009-01-16T12:55:00.001-08:00

Housing = A key indicator of the health of the underlying economy.

The Memphis Area Association of REALTORS reported today of a 22% increase in December over November home sales.

Thursday the Memphis Business Journal reported on a Forbes.com article which ranked the US housing markets.

Here's a blurb.

"Memphis is the 19th strongest housing market in the nation, according to Forbes.com which ranked America’s 25 strongest housing markets.

Forbes used numbers from Moody’s Economy.com to determine which of the country’s real estate markets are closest to recovery."

Click here for access to the complete article from the MBJ.

It's not all roses though...Memphis housing market is not expected to bottom out until the end of 2009 according to the report.

Real Estate Outlook - Memphis

2008-12-22T07:14:00.000-08:00

During the good times everyone talks about how Memphis is somewhat resistant to the big swings up.

And down.

Now the rest of the country is in a pretty big "down" and we hear about it every time we turn on the news.

Fortunately for us the economic thinkers still feel the same way. Check out this article with an appropriate title,

Real estate outlook calms Memphians

Dismal 2009 won't be quite as bad here

Hey! That's my car!

2008-12-10T17:38:00.000-08:00

Remember maps? Remember when you used to reach under your seat and pull out the dog-eared version of ol' Rand McNally? He was a trusty (and perhaps ketchup-stained) faithful friend that you would call on at a moments notice to get you out of a jam. If you ever needed him he was there, right on top of the now-furry, petrified banana in your trunk.

Google Street View, have you heard of it?

Now, from Google Maps you can zoom in a little further than before and wa-la you're down at Street View. Now we're REALLY on the map per se.

http://maps.google.com/

Jingle Bell Rock - Your Best Bet

2008-12-03T08:11:00.000-08:00

Everyone likes a bargain and right now they're everywhere. Commercial foreclosures are popping up right and left.

Right now we have a contract on a commercial foreclosure (good deal), a buyer with 20% down and excellent credit.

What's the problem you may ask.

We can't get funding. Banks are now hinting about 25% down and looking cross-eyed at properties that don't perform like a Rolex watch.

Here's a little tip - Find the Jingle Bell Rock in the WRVR 104.5 contest and sell the van. It will be faster than waiting on bank financing these days.

Just Invented - Town Squares & Mixed Use Developments

2008-10-17T12:32:00.000-07:00

Everywhere you turn in the commercial developing world you hear jibber jabber about "mixed use developments" and "town centers". Like it was something new. Like the developer, Mr. Smarty pants invented the term.

'just a little tip...Mixed Use is not a new concept. Remember Main Street USA with retail down and residential up? Remember the town square? That's where the old guys used to sit and talk about cows and hay and rhubarb pie. That's where you went on Memorial Day to watch the VFW color guard. That's the place your where your mom would let you ride and not worry about being hit by a logging truck.

I guess the nice thing for us is that developers are finally figuring out that we liked that stuff.

The Elusive "Rate of Return" Issue Strikes Again

2008-10-13T05:33:00.000-07:00

Here is another question I was asked today.

What is a typical or expected rate of return on a real estate investment?

“A "rate of return" is a broad stroke for a term that can have several meanings. Expected returns vary by property type, investor demand, region of the country, risk, availability of financing, etc.

I think it is important to make sure your definition of "return" is clear. Typically real estate investments are offered on a cap rate which is expressed as a ratio of net operating income to sales price excluding the impact of debt. In many cases this is not the complete picture of "return on investment" or ROI. There are many other influencing factors such as depreciation, duration of hold, cash-on-cash return, internal rate of return, capital accumulation during hold, etc.

Since we don't have the benefit of analyzing your prospective investment here is a rule of thumb - more risk should demand higher return and vice versa.

One more point. Once you understand "return on investment" make sure the investment is being offered as such. For instance, some investments are advertised with X cap rate. When you dig in you find out it is based upon "scheduled income" or they used an inadequate vacancy factor or no vacancy factor at all! This is key to your successful valuation and evaluation of the offering.”

Holy Cow Batman - What do we do now?

2008-10-10T12:27:00.000-07:00

Someone recently asked me the following question -

Given the current global financial crisis, what adjustments have you made (or are you considering) in regards to your company's corporate real estate strategies?

Here is my answer.

“There are three areas we are focusing our attention in this challenging and changing commercial real estate environment. (1) Be Proactive - It is extremely important for buyers (who have ability to purchase) and sellers (who have motivation) to see that we are willing to be more proactive than our competition to find the right solution to meet their needs. (2) Be Creative - Especially in financing this is the time to explore creative sources of funding and creative alternatives through second mortgages, seller financing, short term lease purchases, etc. (3) Stay Positive - At least in the Midwest there are a TON of deals still being done. Users still need space and people dissatisfied with the stock market are income producing real estate (such as multi-family housing) an excellent safe harbor for cash.”

Economic Crisis Questions Every Day

2008-09-18T08:49:00.000-07:00

Every day I'm asked about the economy and its impact on my business.

Trying not to seem over-confident I say something like, "It's great. I'm busier than I've been in a long time."

I think people expect to hear something whiny and sad. But it's just not the case.

Remember, this whole thing started with hyper-appreciation and general hyper-ness in hot coastal markets. We're in Memphis.

The plumber still needs a bigger warehouse, the day spa still needs to expand and the tenant moving here from Nashville still needs to relocate.

No whining here.

Social Networking For Business

2008-08-21T18:48:00.000-07:00

Alright, I've said enough.

What is your opinion of the social networking craze? Is it applicable for business persons such as yourself?

I'll have to admit it is alluring to say the least. To think that yesterday I had 100,000 peeps in my network and now I have 120,000. That is crazazy.

I need feedback.

NNN Investments - Market V. Investment Approach

2007-02-10T13:09:00.000-08:00

Are you buying or selling a NNN investment?

If so, make sure you analyze the value.

What?

Let me explain.

When buying or selling a NNN property with a credit tenant the value is in the creditworthiness of the tenant combined with the remaining term on the lease. In this case the investment value usually exceeds the market value of the real estate alone. In many cases the investment value FAR exceeds the real estate value.

What about a scenario were the tenant is credit-worthy but the remaining lease term is short? Now our emphasis needs to shift to the remaining term and weigh this against the real estate value.

In this case we need to consider the spread between the "lease value" and the "real estate value". Another way to say this would be, "How much more am I willing to pay for this lease above the cost of the real estate alone? As the remaining lease term decreases this spread also decreases. Theoretically, the day the lease expires the value of the lease (which is now zero) meets the value of the real estate.

The challenge before us as investors and brokers is to pinpoint the value of our NNN investments by analyzing their position in the value "spread".

REITs DELIVER MARKET LEADING PERFORMANCE

2007-01-18T11:33:00.000-08:00

U.S. REIT Index Delivers 34.35% Total Return For 2006

The National Association of Real Estate Investment Trusts (NAREIT) reported today that the primary U.S. REIT index delivered a total return of 34.35 % for 2006, outperforming all other major U.S. equity market benchmarks for the seventh straight year. NAREIT said the 2006 performance of the FTSE NAREIT All REITs Index exceeded the S&P 500 at 15.79%, the Dow Jones Industrials at 16.29%, the Russell 2000 at 18.37% and the NASDAQ Composite at 9.52%.

For more please visit www.nareit.com

The State of Our Economy - 2.2 M Foreclosures Report

2006-12-20T04:38:00.000-08:00

Report Reveals 2.2 Million Borrowers Face Foreclosure on Subprime Home Loans

Billions of Home Ownership Wealth to be Lost by Minority Americans; Chart Contains Detailed MSA-Specific Projections of Home Foreclosure Impacts

WASHINGTON, Dec. 19 /PRNewswire/ -- A new Center for Responsible Lending (CRL) study reveals that 2.2 million American households will lose their homes and as much as $164 billion due to foreclosures in the subprime mortgage market. Titled, "Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners," the CRL study is the first comprehensive, nationwide review of millions of subprime mortgages originated from 1998 through the third quarter of 2006.

CRL's research suggests that risky lending practices have triggered the worst foreclosure crisis in the modern mortgage market, projecting that one out of five (19.4%) subprime loans issued during 2005-2006 will fail.

Source: Center for Responsible Lending, Raleigh, N.C.

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Many of us who operate in the retail sector need to pay special attention to these signals as this type of activity will have an impact on available disposable income.

Starbucks - Everywhere

2006-10-26T06:58:00.000-07:00

With a Starbucks now slated for our little town of Oakland, Tennessee they truly ARE going to be EVERYWHERE!

"Starbucks Corp.'s recently announced goal of having 40,000 stores worldwide isn't just about spreading green awnings through middle America, the Middle East and other areas of the world not yet tempted by easy access to mocha Frappuccinos and pumpkin spice lattes.

The coffee chain's aggressive growth also hinges on what the company calls "infill" _ adding stores in cities where its mermaid logo is already commonplace. In some cases, that means putting a Starbucks within a block of an existing store, if not closer.

While Starbucks knows there's plenty to lure people into their stores, they also recognize that many people can't be bothered to walk very far _ or wait very long _ for an optional and pricey treat.

"Going to the other side of the street can be a barrier," said Launi Skinner, senior vice president in charge of Starbucks' store development.

As Starbucks adds a whopping six stores a day on average, the company says it continues to carefully consider everything from the direction of commuter traffic zipping by a potential drive-through site to how many people are pounding the pavement on a busy urban block."

Click here for access to the full article on Breitbart.com.

Boulder Publishes Q4 Net Leased Report

2006-10-16T06:01:00.000-07:00

The Q3 report published by Boulder Net Leased Funds was not too rosey, showing cap rates were not tracking with rising interest rates. However the Q4 report paints a slightly different picture with the supply of net-leased properties on the rise. This should bode well to get these cap rates a little more in-line with rates.

Not to fear though according to Grubb & Ellis. This trend is not going to continue through the roof. The Wall Street Journal reported last week on a survey of 278 big-time real estate investors. 42% percent of the respondents answered that the market should stay strong while 29% of the respondents think the market will sour within 3 years. About 19% of the respondents feel the market strength will continue for more than five more years.

Here's a link to the Boulder Net Leased Report. This report is worth a read if you find yourself involved in net-leased transactions.

Stupid Complaints Quash Growth

2006-08-26T16:18:00.000-07:00

Memphis has long wished the downtown area would see a resurgence, a revitalization. Memphians always have a keen ear for new of growth and developments that enhance the image and substance of this great city.

One such great enhancement just came to town in unprecedented size and grandeur. The developers of Number One Beale are making an audacious move to further strenghten our downtown market. This project is supposed to be a 468 foot tall mixed-use development including a luxury hotel, Class A office space and other retail and commercial uses.

Oh and here's were the story takes a little downturn. A few nearby residents complained at the Land Use Control Board Meeting. Apparently this huge asset for our city (and step toward putting Memphis on the map) will block their views. Views of WHAT? So now the approval postponed until the developers could figure out a way to become less of an obstruction.

Apparently the Land Use Control Board has not heard the "have your cake and eating it too"- concept. Memphis has to be allowed to grow and we need leaders who won't fold under pressure. Chicago, Atlanta and New York downtown ares are big because the leaders did not fold to stupid complaints about views.

The "MySpace" Ingredients

2006-08-15T14:53:00.000-07:00

Two years ago MySpace.com was virtually unknown by the mainstream internet users and now it has become the top rated and used site on the internet.

In this hyper-competetive environment good ideas catch on and when they do, well, you have phenomenons like MySpace.com. These good ideas usually flourish when people are empowered with information and an ability to create a network.

Another good idea just stepped on the scene I'd like to mention. This idea seems to possess the "MySpace Ingredients". Simply speaking this new concept gives people a new approach to buying real estate with unlimted, user friendly information and an ability to create a network.

The site is www.shackyack.com.

"We're just giving consumers as much information as possible and letting them act on it," said Brock Harris, broker-owner at Brock Harris Real Estate in Los Angeles, the company that operates the ShackYack.com site. "I am pleased to annouce that ShackYack.com is open for business. This is the only real estate site where you can comment and rate the product, just like amazon, netflix, ebay etc."

We applaud this concept and wish these guys the best.

Investing in New Orleans?

2006-07-31T14:18:00.000-07:00

Ok, so you're sitting around with you buddies talking about where to invest your $715 million. The concensus around the table seems to be developing in strong markets such as Atlanta, Houston and Chicago. But just then one guy leans forward and says, "Hey, what about New Orleans?"

Now is it just me or does New Orleans seem a little hurricane-prone? How about flooding, aren't there quite a few other cities around the country that AREN'T built below sea level?

Apparently, Laurence Geller, CEO of Strategic Hotels decided to place his money in the Big Bathtub, New Orleans.

"In a quandary over what to do with the Katrina-devastated Hyatt Regency New Orleans Hotel, Laurence Geller, CEO of Strategic Hotels, the Chicago-based owner, sought the help of Pritzker-winning architect Thom Mayne, FAIA. Instead of just rehabilitating the building, he has created plans for a $715 million, 20-acre multiuse center and park that will include a refurbished Hyatt Hotel, the National Jazz Center, a new city hall, civic courthouse, amphitheater, and residential buildings.

Plans for the project were unveiled in New Orleans on May 30. It is the first major redevelopment announced since Hurricane Katrina. Developers say the project is more of a transformation of a depressed neighborhood than a hotel renovation meant to inspire hope for the city and to inspire the confidence of potential developers."

Click here for access to the complete article.

Fastest Growing Restaurant Chains

2006-07-12T12:34:00.000-07:00

So many restaurant chains to choose from. Who's growing the fastest? Here's the list:

1. Bonefish Grill
2. Moe's Southwest Grill
3. Zaxby's
4. Cold Stone Creamery
5. Smokey Bones BBQ
6. Tim Horton's
7. Caribou Coffee
8. Panera Bread - Not coming to Memphis until 2007 - I already checked
9. Buffalo Wild Wings
10. McAlister's Deli

Source: Technomic

The Dealmakers

2006-07-05T08:09:00.000-07:00

Do you invest in retail properties? Are you looking for cutting-edge ways of keeping your ear to the ground in the retail sector?

Look no further. The Dealmakers newsletter is a compilation of who is looking for space and where they are looking throughout the entire US. The weekly publication includes articles like, "Who's Opening & Where", "New Construction", "Buyers & Sellers", the "Lead Sheet" and much more.

We have reviewed this publication and found it to be an extremely helpful resource for people looking to, make deals.

For more information visit www.dealmakers.net.

Stop Your Whining

2006-06-29T11:46:00.000-07:00

We whine and we cry and we carry on about the "high" prices of prime real estate in Memphis.

Denver has just seen a record commercial transaction, at $531 per square foot! A retail property known locally as Clayton Lane in the Denver shopping district known as Cherry Creek North just sold for $97 million which is about $531/sf. The 182,000 SF property is believed to have commanded the highest per square foot price ever paid for a retail property in Denver. The property is anchored by Whole Foods and Crate & Barrel.

So next time a prime piece of dirt in Memphis goes "through the roof" at $30 per square foot, thank your lucky stars for the bargains to be found in this great city.

A special thanks to Carrick Hill of Crye-Leike Commercial for his input in this article.

Move Over Sears Tower - Here Comes Something Meatier

2006-06-26T05:50:00.000-07:00

The city where the skyscraper was born just can't get enough of these supertowers. The Fordham Spire is the latest in a series of super-tall projects proposed since the mid 1990's. Some, like the Trump International Hotel and Tower, come to fruition. Others, like 7 South Dearborn, do not. Just how far this project will get remains to be seen. But the real estate and political climate in which it is proposed put the odds in its favor.

Its position at the point where the Chicago River drains Lake Michigan puts it in the center of the city skyline, and out in front of any of the thousands of photographs taken by tourists cruising the lake each day. In form, this building lives up to its name. It truly is a spire with a tapering form topped by a needle.

In a New York Times article about the building, it was compared to a drill bit, a blade of grass, and a tall twisting tree. Others have compared it to a lighthouse, which could end up being its nickname because of its location. The inability to quickly categorize the construction is what you come to expect from a Calatrava design -- something both geometric and organic. Something that take a simple form and twists it in the wind like so many of his other bridges and buildings.

In this case, each of the building's floors are anchored to a central column, but slightly off-set. Then each floor is rotated slightly as the tower rises higher. The result is, indeed, something very much like a drill bit. Initial plans call for the bottom 20 floors to be occupied by a hotel, while the rest of the building is filled with luxury condominiums.

The main obstacle to completing this building may be zoning. The parcel of land selected is only zoned for as 540-foot tall building and a 350-foot tall building. However, zoning variances are not all that hard to come by in Chicago, and if Mayor Daley wants it, it will happen.

Thanks to Google for this article. Click here for more information on this project.

The Next Las Vegas?

2006-06-19T06:56:00.000-07:00

Tunica, Mississippi could be getting six more casinos bringing it one step closer to the next Las Vegas.

In a recent article the Daily News reported that the Myriad Botanical Resort is planning a $1.9 billion mega-development. Plans originally released in 2004 keep getting bigger and now include hotels, a convention center, retail space, indoor golf, a spa, nightclubs, water parks and skating rinks.

There you have it, with one roll of the dice the Myriad Botanical Resort could be almost doubling the casino population in Tunica.

The Boom is Over

2006-06-13T16:21:00.000-07:00

According to the National Association of REALTORS the housing boom is over. I guess that means we should all pack up our marbles and head home.

In a press release on June 6, 2006 NAR stated in their opening remarks, "The housing boom has ended..." This statement has drawn some fire from fellow bloggers attempting to pick apart the statement.

In direct conflict the US News and World Report has this on the nations housing markets. “Contrary to popular belief, the housing market hasn’t cooled off that much. In fact, residential real estate prices continue to soar in a number of key metropolitan areas, according to a new study released this week.”

With their finger on the pulse of the industry I applaud NAR for saying the hard thing and coming out with a bearish statement.

Motley Fool columnist Seth Jayson points out that the real problem isn't NAR. "You have to expect these people to spin the facts for their industry, even if that means they're putting their checkbook concerns ahead of yours, and even if it leaves them begging the Fed for an adherence to shortsighted economic policies that could send inflation spiking," Jayson writes.

Shhhhhh Walmart is Moving In

2006-06-07T18:35:00.000-07:00

What an amazing oxymoron. Walmart, the largest retailer in the world may be planning to build a site next door but you wouldn't know it.

Memphis, Tennessee is the home of several Walmarts and they continue to build more; or are they?

Even City officials seem to jump on the "vague" bandwagon as in the case of a possible new Walmart in North Memphis. In November, the Commercial Appeal reported that Robert Lipscomb, chief financial officer for the City of Memphis, said Wal-Mart has been interested in the site for some time and that he has spoken with company officials about a possible move a handful of times. "They could become a new anchor tenant for the mall," said Lipscomb.
A spokesman with Simon Property Group, which owns Raleigh Springs and Oak Court malls, declined to say if Simon has been working with Wal-Mart.

Is it the opposition? Is it their plan to slip in under the radar before the whine-bags with too much time on their hands start picketing?

On Monday of this week a large brigade of earth-moving equipment descended on a large site in Oakland, Tennessee. No signage, no fanfare, no yellow smiley faces heralding the low prices, just a lot of rumors and local chatter about whether or not this could be the Big One, a new Walmart.

For now we wait outside of the "veil" of secrecy, all the while hoping our commercial land "just down the street" was a good purchase. Shhhhh Walmart may be moving in.

Report From the Street - Pre-Packaged Due-Diligence

2006-06-05T06:06:00.000-07:00

In the world of 1031 exchanges and quick-close transactions brokers are forced to find creative ways to save steps. This quest for efficiency has spawned a new type of "investment package" typically provided to the curious investor. These new investment packages are far more comprehensive than their predecessors and leave very few stones unturned. "Pre-Packaged Due-Diligence" information is the new thing for serious investors and brokers hoping to cut-to-the-chase and get the deal DONE.

"Posh" Walmart - Kicks it up a Notch

2006-05-22T06:28:00.000-07:00

Walmart is shattering the Supercenter world as-we-know-it. Recently unveiled in Plano, Texas Walmart's new store features sushi, deli sandwiches and fresh-cut flowers in the ladies restrooms.

Click here to access a full article on the new concept.

George Jetson Would Be Proud

2006-05-11T05:59:00.000-07:00

Remember the Jetsons? You know, the futuristic cartoon with space cars and robot maid service. Apparently, a few national retailers had "TiVo'ed" the re-runs and are now using them to develop a new approach to your shopping experience.

The following is an excerpt from the San Fransicso Business Journal.

"A company called "Zoom Systems" is wrapping its robotic arms around Safeway and Macy's West, both of which are now testing the company's vending machines in different markets.
Safeway is piloting the robotic-arm vending machines in over 12 stores in Southern California, Las Vegas and Denver. Macy's is trying out two in its San Francisco store.

Zoom machines offer retailers an easy, inexpensive way to sell high-end, branded items that customers want, like iPods, without a big commitment of space or staff. The automated retail machines have revenue ranging from $1,500 to $15,000 per square foot. Typical retail revenue averages between $200 and $500 per square foot, said Gower Smith, founder of the San Francisco-based company.

Customers use a touch screen to shop for products much as they might online, and they swipe their credit cards to buy goods. That activates the robotic arm that dispenses the product. Zoom monitors all transactions and inventory levels from a central network.

Zoom opened its first robotic stores last March, and today has 100 in operation, including those at Safeway and Macy's. Each machine has had double-digit revenue growth each month since it opened, Smith said. He expects the trend to continue as consumers become more comfortable with automated retail."

Could this be a case of the "early-adopters" getting the proverbial, "worm"?

TIC's or REIT's - Sliced, Diced and Served Up in Bowls

2006-05-04T20:32:00.000-07:00

Tenant-In-Common (TIC) versus a Real Estate Investment Trust (REIT) Which one is right for me or my client?

First we need to establish two things. In Uncle Sam’s rulebook TIC’s are generally considered real estate. REIT’s are not. Ok, ok for you guys that HAVE to be sooooooo technical, there are securitized TIC's out there and there are real estate based REIT's but these would be the exception rather than the rule.

A Securitized REIT for example would not be the choice for investors seeking the advantages of 1031 exchanges, passive income, depreciation, etc. Generally speaking REIT’s are considered a security and even though the investment is in real estate it is really more like buying a mutual fund. REIT’s are considered portfolio income and losses cannot be deducted from active or passive income.

TIC’s offer investors an opportunity to buy into large property portfolios without the hassles of management and maintenance. However, much like any other real estate purchase there can be issues of liquidity if cash is needed quickly.

Here’s a link to an excellent resource on the subject by the CCIM Institute’s CIRE Magazine.

Top Ten Considerations for Your NNN Purchase

2006-04-29T19:44:00.000-07:00

1. Location
Does this region of the US have a good history/outlook for this type of investment?
If periodic on-site management is required is it too far away for me or my property manager to give it direct attention?

Does the site (dirt) have good commercial exposure/value without considering the lease or improvements?

2. Tenant(s)
Is the tenant strong? How strong? How do you know?
Is their niche sustainable over the long-haul?
Does the tenant mix compliment the property and the surrounding area?

3. Lease Type
Are there any Landlord responsibilities (roof, structure, parking lot, etc.)?
Will you be delegating the Landlord responsibilities to a third party?
Have you factored the cost of third-party management into your analysis?

4. Lease Term
How long is the base term?
Are there any increases factored into the base term or the option periods?

5. Tax Benefits
Do you have any capital gains from real property that can be applied to this purchased, i.e. a 1031 exchange?

6. Disposition Plan
What is my projected hold period for this investment?
What is my projected sale price at then end of the hold period?

7. Return on Investment
What is my Internal Rate of Return (IRR) in this investment?
What is my Capital Accumulation Rate of Return on this investment?
Compare this investment to other available options

8. Estoppel Letter
Get estoppel letters from each tenant – prove out what you’ve been told on the financials.

9. Local Trends
Is the area trending up or down?
Are their high vacancies?
Is there a lot of new development in the area?

10. Property Condition
Is there any deferred maintenance? How is the daily maintenance going? Trash in the parking lot and piled up behind the property may indicate a problem with tenants or management.

Make sure the real estate broker representing your interests has experience in analyzing NNN investments.

500 Gallons of Gas

2006-04-28T14:02:00.000-07:00

Inman News uncovered this one.

List with "Uncle Sam" and he'll give you 500 gallons of gas.

NewsCenter 5's David Boeri reported that Sam Rounseville is offering free gas for homeowners who list and sell their property with him.

"My pitch is to give back to the sellers 500 gallons of gas to help them out with the sale of their house and help get me a listing," Rounseville said. "That's the way it works."

He said that his promotion is generating a lot of phone calls at his real estate office.

Inman News - Real Estate News and Advice for Buyers, Sellers & Investors

Interest Rates - High and Holding

2006-04-27T17:56:00.000-07:00

What's the latest interest rate hubub?

Mortgage rates rose for the fourth consecutive week, to the highest level in nearly four years, Freddie Mac said today. This is the highest since the week of July 12, 2002.

The AP characterized Federal Reserve Chairman Ben Bernanke as "keeping his options open" today indicating that after one more interest rate increase the central bank may take a break — perhaps only temporarily — from a rate-raising campaign aimed at keeping inflation at bay.

Summary Version - High, Holding, maybe.

Big Winner's In 2005

2006-04-21T19:20:00.000-07:00

Commercial real estate investors were the big winners last year.

In a recent study by the Massachusetts Institute of Technology's Center for Real Estate investors earned an unprecedented 34 percent on their dollars. The performance of real estate surpassed the stock market worldwide as well as government and corporate bonds.

Click here to learn more.

The Big, Fat, Cap-Trap

2006-04-10T14:50:00.000-07:00

When evaluating commercial real estate investment options don't fall into the "Cap-Trap".

Many new investors and brokers have the wrong idea that cap rates measure return on investment. This misunderstanding can be a big problem and catch investors and brokers-alike in the cap-trap.

Cap rates project a narrowly focused return for the first year of ownership. However, cap rates DO NOT consider annual cash flows or changes in property value. Cap rates DO NOT take into account the impact of leverage, taxes or risk. As we know these factors can have a HUGE impact on the investment analysis.

How then can I get a clearer picture of the return on my investment?

There are two excellent methods for reaching a clearer picture of investment return, (1) Internal Rate of Return (IRR) and (2) the Capital Accumulation Method.

The IRR begins with equity into the investment and adds in the cash flows. If your scenario involves a sale, this amount can be added at end of the hold period. The IRR calculation is performed utilizing these factors and gives you an idea of the return on investment of each dollar invested, while it remained in the investment.

The Capital Accumulation Method goes a step further and helps you by comparing total wealth accumulated. This method accounts for the cash that comes out of the investment and incorporates this cash into a final analysis. This method is, by far one of the best and most comprehensive methods on the planet.

The BEST tools for complete investment analysis can be obtained through the CCIM Institute. These tools allow you to calculate the real juicy stuff mentioned above including impact of leverage, suspended losses, cost recovery and taxable income received from investment properties.

Next time you’re evaluating investment opportunities look beyond the cap rates and don’t get caught in the “Cap-Trap”.

Google Moves Further Into Real Estate

2006-04-06T16:35:00.000-07:00

Search Giant Google Adds New Real Estate Features

Ten-ton-gorilla Google is stomping further and further into the real estate arena, now offering real estate-specific pulldown menus leading to expanded search categories and maps in its Google Base product.

If you type "San Francisco real estate" into Google's homepage search box, a new choice appears at the top of the organic search results: "Refine your search for San Francisco real estate," with boxes for location and listing type.

When you make your choices and click "Search housing," the next screen is Google Base, with a San Francisco map and a number of search categories, including listing type, property type, location, number of bedrooms and bathrooms.

Google Base is a Web site where property listings and other information can be uploaded and displayed online for free. In March, it became possible to search Google Base via Google, giving rise to speculation that Google intends to develop Base as an MLS.

This article was published April 6, 2006 by Janis Mara with Inman News. Click Here to access the full article.

The Reverse 1031 Exchange

2006-04-03T12:03:00.000-07:00

"Can I do a 1031 exchange for my property AFTER I've purchased a replacement property?"

Why, yes, yes you can.

It's called a Reverse 1031 or Reverse Starker, named after "Mr. Starker", the 1031 exchange pioneer.

By structuring a reverse section 1031 tax deferred, like-kind exchange transaction, you can acquire your like-kind replacement property before you sell your relinquished property. In reverse exchanges a third-party entity called an "Exchange Accomodation Titleholder" (EAT) acquires and holds legal title to the purchased property.

This procedure is especially helpful in hot markets where now you can breath a sigh of relief knowing that the exchange property is in good hands and won't slip away. The next step is to sell your first property all the while realizing that the replacement problem is solved.

You should always seek competent legal, financial and tax advice prior to entering into any 1031 tax-deferred, like-kind exchange.

Movie Gallery Up

2006-03-24T21:24:00.000-08:00

The classic movie rental tenant in the net-lease industry is feeling a bit of market driven pressure. While Blockbuster, Hollywood Video and Movie Gallery are vying for your video rental dollars will they continue to pass as good long-term net-leased investments?

LOS ANGELES (Reuters) - Shares of Movie Gallery Inc. (MOVI.O: Quote, Profile, Research) rose as much as 8.3 percent on Wednesday a day ahead of the company's fourth-quarter earnings announcement, as investors who had shorted the stock covered their positions, an analyst said.

The No. 2 North American video rental chain has seen its share price drop 90 percent since June on a raft of bad news that followed its acquisition of the Hollywood Video chain.
Facing continued weakness in rental industry revenue, Movie Gallery last week obtained relief from its debt covenants, and on Monday, announced preliminary financial results that were far below Wall Street forecasts.

The company also said it would be late in filing its 10-K annual report to the U.S. Securities and Exchange Commission, and would start subleasing space in about half of its retail stores.
Paul Foster, options strategist at financial information Web site http://www.theflyonthewall.com, attributed the stock's upward movement on Wednesday in part to investor belief that the company's recent actions would produce positive results.

"There are continued restructuring discussions on debt and the subleasing of non-performing stores. There is also short covering in the stock attributed to expected fundamentals improving," Foster said.

Short covering is when investors who borrowed shares and sold them short purchase more shares on the open market to replace the shares they borrowed.

He said investors may expect the company to "give some guidance on how the subleasing and restructuring of debt is going, and how their fundamentals are going" on its Thursday morning post-earnings conference call.

Based on unaudited results, Movie Gallery said it would report fiscal 2005 revenue of $1.99 billion, up from $791.2 million in fiscal 2004.

It expects to post a net loss of $556.3 million, or $17.65 per share, including charges for impairment of goodwill and other intangible assets of about $527.9 million, or $10.88 per share, net of tax.

Shares of Movie Gallery were up 6.1 percent, or 14 cents, at $2.42 in afternoon trading on Nasdaq.

Fastest Growing Counties

2006-03-20T05:42:00.000-08:00

The numbers are in. Flagler County, Florida tops the list as the fastest growing county in 2006.

During the 12 months ended July 1, 2005, Flagler's population grew 10.1 percent to 76,410. The population is 53 percent more than recorded in the 2000 census.

Our backyard member of the Memphis MSA, DeSoto County, Mississippi was honored as #45 on the list with a growth rate of 4.8% since the last census.

Wal Mart in Real Estate?

2006-03-13T09:20:00.000-08:00

Mammoth retailer Wal-Mart has a sophisticated and well-staffed real estate division to handle its complex commercial needs. A large battery of attorneys, CCIMs, property managers, and real estate practitioners deal with the burgeoning demands of site selection, acquisition, sales, and leases. Is Wal-Mart ready to enter the consumer real estate market? Or will it wait to posture itself as a banker first?

Walmart's realty web site offers properties for sale from coast-to-coast and includes sale and leases oportunities, land and improved sites.

It remains to be seen if Wal-Mart will become a major player in the real estate game. In the meantime, it sets its sights on banking business here and in Puerto Rico, and bloggers sound a cacophony of caution.

I guess now you can buy a "lot" or "alot" at Walmart.

High-rise planned for U of M area

2006-03-06T06:05:00.000-08:00

We are excited to see the results of our efforts on a deal near the University of Memphis. The following is an excerpt from the article posted Saturday, March 4, 2006.

"Dallas-based Trammell Crow is poised to launch a 12-story, $20 million apartment tower in the University of Memphis area.

The project, being developed by Trammell Crow's Higher Education Services division, will be located at the corner of Highland and Mynders.

"I like the location and I like that it's really close to campus," said Chris Harness, Trammel Crow senior vice president and head of the Higher Education Services division. "There hasn't been anything new built off-campus in a long time."

The one-acre site will have a total of 173 units with a bed count of 339. Regulators have not yet approved construction plans.

The tower, which is slated to have a masonry and stucco exterior, would have a structured parking garage with 340 spaces and about 7,000 square feet of retail space on Highland."

Editorial Note:
We represented the sellers of all five buildings for this re-development project.

Where are Cap Rates Heading?

2006-02-28T18:40:00.000-08:00

CAP rates are still firm in most investment segments of the market. We see CAP's as low as 5.25 in some west coast investments. New Walgreens are holding in the 6.25-6.40 opening price offerings in good locations. Advance Auto and Auto Zones list in the 6.50 range for new store locations. Video and Fast Food new offerings are approaching 7.0 and up. Multi-tenant office and Industrial investments are all over the board depending upon tenant strength, location, the age of the property and base lease terms. Firming of office rental rates has helped that market segment. Retail and Multi-family investments are in greatest demand and are holding near 2005 CAPs.

Thanks to Dan Whipple, CCIM for this contribution.

eMetro is now realstreetEX

2006-02-24T11:27:00.000-08:00

Unveiled today eMetroCommercial is now realstreetEX.

In a move to streamline services and focus exclusively on the needs of individual investors, realstreetEX has emerged as a "Provider of Personal Net-Leased Solutions."

The eMetro Commercial Real Estate Journal will still carry the same, uncompromising, top-shelf, cutting edge material along with some exciting changes, coming soon.

For more information please visit www.realstreetex.com.

Going Up? 1031 Exchanges

2006-02-22T09:34:00.000-08:00

A recent study in Real Estate Investor Outlook shows the use of 1031 exchanges is rising in popularity. This seems to be particularly true as more baby boomers look to shift their holdings into less management-intensive properties, or start planning to transfer wealth to the next generation. One-third of the respondents in this survey have executed a 1031 exchange in the past 12 months, and 44% expect their use of 1031 exchanges to increase over the next five years. Exchanges make is easier for investors to expand, diversify and shift portfolio strategies by buying and selling real estate in different product types and different geographic markets without tax consequences.

eMetro Featured in CCIM Magazine

2006-01-03T11:42:00.000-08:00

CCIM Features eMetro in "Bloggers World"

Many thanks to Carolyn Bilsky of CCIM for featuring our blog in the CCIM magazine.

Click Here to access the article.

Speedy "Look-See" Trends

2005-12-14T12:51:00.000-08:00

There seems to be a trend in commercial real estate, a trend that is shortening due diligence periods on transactions. The causes of the shorter due-diligence periods are driven by such factors as 1031 schedules and more all-cash deals. The squeeze caused by this trend has required brokers to be more responsive and proactive with the due diligence materials.

And now we find ourselves in a new era, an era of "pre-packaged" due dilence materials which is most commonly made available with the investment offering package. Ah yes, there will be on-site inspections, environmental studies and the like but there is doubtless value in the concept as a step toward a smoother, more expeditous transaction.

Hot Dogs

2005-11-19T15:31:00.000-08:00

The November issue of "Retail Traffic" magazine reported on pet-friendly retail developers.

"Prime Retail is encouraging shoppers to bring their pets shopping at its 29 outlet centers. They now provide doggy walks and relaxation areas, hand out free dog biscuits and have watering holes throughout the properties."

I guess the mall owners should also encourage shoppers to carry a pooper-scooper.

How Do I Choose the Right Cap Rate?

2005-11-09T09:56:00.000-08:00

"The short answer is, no one is absolutely sure.

The CAP (capitaliztion) rate for investment properties is set by the market demand and the credit worthiness of the tenant(s)- and other things.

Selecting a CAP rate (e.g. price) for an investment property is both a science and an art. CAP rate is not the IRR or a cash on cash return measure. It is a way the market has of valuing types of investment property based on market demand, quality of tenant, location, terms of the lease, and the property itself.

When buying investment property, buy quality of income stream and location before you select using other measures. If you want more information on current market CAPs, tell us the type of property you want - we can help on current market CAP rates."

Our thanks to Dan Whipple, CCIM for this article.

The Battle for Online Ad Domination

2005-11-07T05:03:00.000-08:00

Microsoft and Google may be going head-to-head in the fight to control the realm of online advertising.

According to the Wall Street Journal the online advertising market is roughly a $15 billion industry and could grow to $150 billion by 2015. Now Microsoft wants to challenge Google's domination of the market.

Microsoft is now creating software that packages personal web-based services such as personalized home pages, web email, IM and virus scanning. The personal version is called Windows Live and the business version is Office Live. Most of these new "web-based" services will be free to the users.

The key word here is "web-based".

Microsoft is banking on the fact that users will use this "web-based" software A LOT. If Microsoft's plan plays out every PC will have the software and we will use it for all of our common web functions.

Microsoft will then sell ads space and will be able to match the ads to the interests and web activities of the users.

We just may be one step closer to reaching that $150 billion mark.

Marion Arkansas Gets the Nod

2005-11-03T12:15:00.000-08:00

Marion, Ark., may have finally landed an auto assembly plant, according to reports from The Wall Street Journal.

The disappointment felt by Marion officials in May when Toyoto Motor Corp. announced it would build its seventh North American auto manufacturing plant in Canada could be washed away by reports that Hino Motors Ltd., an affiliate of Toyota, plans to open its second U.S. assembly plant in Marion in 2007.

Marion, which is located just across the Mississippi River from Memphis, was reportedly Toyota’s second choice for the plant that landed in Ontario. But Hino chairman Tadaaki Jagawa told The Wall Street Journal that Marion is Hino’s choice for a plant that would build 3,000 to 4,000 trucks a year, with the possibility for future expansion.

Invest With Partners

2005-10-25T05:17:00.000-07:00

Their name says it all, "Invest with Partners".

Here's a partnering concept designed to match investors with opportunities. In their own words they are "bringing together people who are seeking high-growth investment vehicles and pool their resources to benefit the entire group."

Investors are given opportunties to join as partners in an LLP set up for each transaction. Potential investors can sign up to receive "Investment Opportunity Alerts" and then follow-up if a particular deal sounds extra juicy.

www.investwithpartners.com

TOD and YOU

2005-10-17T11:49:00.000-07:00

There is a buzz on the street regarding TODs or "Transit Oriented Developments" as they are called.

Here's the concept in a nutshell. Thousands of people travel through our rail and public transit systems on a daily basis. Many of the terminals and rail stops are desolate "islands" from a commercial stanpoint. Developers involved in TOD projects plan to seize the opportunity to become a convenient way point for commuters.

But, who buys your stuff between rush hours?

Investment "Hot Picks"

2005-10-08T11:22:00.000-07:00

Do you have a hot real estate investment property that you'd like to sell? Send us the details and we may feature it on our site as a "Hot Pick of the Week"!

Make sure they are leased investment properties such as multi-family, retail, office or industrial properties with tenants.

The Fate of Video Rental

2005-10-06T14:10:00.000-07:00

Blockbusters, Movie Gallery and Hollywood Video are the top three major video rental companies in US. Each one of them depends on clients to walk into their location, pick out a video or DVD or game to rent, right?

Companies like NETFLIX are coming on strong, allowing customers to order videos on the internet with absolutely no late fees.

Where is all of this headed? Let's just say this, I'm not sure that I'd buy a single tenant, 15 year NNN leased product right now with a video chain as the only tenant.

The Donald - His Blog

2005-10-05T06:51:00.000-07:00

"The Donald" has a blog. Click here to read his opinions and views on business, culture and real estate.

Trulia - The "Google" of Real Estate

2005-10-04T05:45:00.000-07:00

Is this one more web concept spawned by a couple of college buddies? Before dismissing it as another hairbrained idea like "Google" check it out. It's called "Trulia".

As described on the site, "Trulia is an independent and unbiased residential real estate search engine that gives you free and open access to real estate information.

Trulia helps you search homes for sale and other residential real estate property information directly from hundreds of thousands of real estate Web sites. As an independent information source, Trulia offers you tools and unbiased information to compare properties and locations."

Did that say "residential real estate"? Before you balk, groan, scoff and deride these guys, give 'em time, we'll see 'em on the commercial/investment side of the fence soon.

Condo Craze Overshadows Multi-Family

2005-10-01T18:58:00.000-07:00

Condo converters continue to influence the dynamics of multi-family investments nationally as reported this month by the National Association of REALTORS (NAR). The September issue of "Insight" reported a 450% increase in condo conversion activity in a year-over-year comparison. Condo-conversion investors have dominated markets such as Greater Washington D.C., South Florida and San Diego.

"Condo conversion" refers to the acquisition of a traditional multi-family property and selling off individual units.

NNN Exchange

2005-09-22T18:47:00.000-07:00

I've gotta hand it to these guys. Someone has finally developed a web site completely devoted to net leased investment properties.

www.nnnex.com is a site created by Commercial Net Lease Realty, Inc., a NYSE-traded REIT, as an exchange focused on providing information and networking for Owners and Brokers of net lease assets.

The site offers forums for the exchange of ideas, posting of needs and of course the postin of net leased listings-all available to the public.

Big Payoffs For Big Easy Investors

2005-09-22T04:54:00.000-07:00

Just days after Hurricane Katrina struck New Orleans, real esatate investors began posting dozens of inquiries about properties for sale on the craigslist.org Web site, hoping speculation purchases would result in pay offs down the road. These so-called property “vultures” may be behind a 45% rise in investor inquiries for properties in Louisiana, Mississippi and Alabama reports LoopNet and echoed by The Boston Globe last week.

This article was contributed by Dan Whipple and eMetroInvestments.com.

Manage Your NNN Taxes Carefully

2005-09-10T07:52:00.000-07:00

There are several good reasons to appeal the property tax assessments of your NNN leased real estate investments. Tax appeals have these advantages.

Plan your appeal to avoid taxation of tenant improvements. Many tax appraisers use the cost approach which may include interior tenant improvements - some of which may have been installed by your tenant.

Obtaining lower tax appraisals will lower your cost of holding a vacant space until a new tenant is found.
By obtaining lower tax appraisals, you help your tenant by lowering thier cost of taxes through out the year. This builds tenant goodwill.

Lower tax appraisals assist you in achieving higher base net lease term rental rates. This makes your property more competitive in the market when lease incentives are needed to get that sought-after tenant.

Thanks to Dan Whipple of www.eMetroInvestments.com for contributing this post!

Matchmaking Service For Real Estate Partnerships

2005-09-06T06:08:00.000-07:00

We at eMetro are seeing a surge in partnering initiatives. We all have seen and may even be a member of investor organizations such as the Real Estate Roundtable or other local investment groups such as the Memphis Investors Group. Now, there are even more new networks for commercial brokers and principals alike.

Myhalfhouse.com has just announced the launch of a real estate investor destination -- www.MyHalfHouse.com -- a web-based business designed to connect individual investors from around the world for the purpose of forming successful real estate investment partnerships.

"Forming a real estate partnership is a great strategy for sharing investment risks," said Robert Nagle, Founder and President of MyHalfHouse.com. "The first thing you must determine is what you can bring to the partnership. Will it be investment capital, your time or the specialized skills that you possess? There are many people looking for what you have to offer, but if they don't know you exist, you have to find a way to let them know who you are. This is where MyHalfHouse.com can help!"

CCIM has also created a progam called "CCIM Partners". CCIM Partners is a business network designed to provide a system and structure for CCIM designees to serve clients more effectively and do more business. Benefits include "dealmaking" events, personal URL's, online member profiles and a dedicated staff to help members do more business.

Other notable examples of these partnerships include the NAR Commercial Alliance and even local commercial networks through your board of REALTORS. If you're not a REALTOR but want to be part of the network, investors can typically join these organizations as "affiliate" members.

If you are a broker or principal looking for investment opportunities in the Mid-South, contact us.

Thousand Oaks Up For Sale

2005-08-31T18:11:00.000-07:00

The Thousand Oaks Office Park near the former Mall of Memphis site is up for sale.

But can rejuvenated complex recoup what its owner invested?

When CB Richard Ellis took over leasing and management of Thousand Oaks Business Center in 2002, the property's prospects were bleak.

Built in phases from the mid-1980s to 1990, Thousand Oaks saw an exodus of tenants in the late 1990s. FedEx, which occupied nearly 100,000 square feet, and other important tenants left.

By 2002, occupancy had dipped to a paltry 24 percent.

"When you're at 24 percent, some people get fired and some people get hired and we were the ones who got hired," said Patrick Reilly, project manager for Thousand Oaks for CBRE.

Now, Thousand Oaks owner Glenborough Realty Trust, a publicly traded real estate investment trust, is selling the 31-acre office park at Perkins and I-240.

This is a condensed version of an article written by Amos Maki at the Commercial Appeal. Click here to access the full article.

How to Structure Sale-Leaseback Arrangements to Avoid Recharacterization

2005-08-22T11:15:00.000-07:00

The following article is a part of a larger, well-researched pool of real estate resources known as www.legalwiz.com. This article, reprinted in its entirety, takes a close look at an increasingly popular tool known as the "sale-leaseback transaction". For more information, please visit www.legalwiz.com

The sale/leaseback is a financing technique that has been used in the United States since the 1940's. Sale/leaseback transactions provide alternative methods of ownership, investment, financing and risk allocation.

The transaction, in its most basic form, involves the sale of a property to an investor who holds title and leases the property back to the former owner. The lease is typically a long-term "net" lease, with the seller/tenant having the option of repurchasing at a later time. The seller/tenant reaps the benefit of favorable 100% "financing" and still retains the use of the property. The buyer/landlord receives the tax benefit of depreciation and a guaranteed long-term rental. A sale/leaseback, however, can turn into a disaster if the seller/tenant files bankruptcy or either party is audited by the IRS. In either case, the transaction can be recharacterized by the Court as a "disguised" financing transaction. This article will attempt to suggest some guidelines for avoiding this recharacterization.

Recharacterization in the Context of Seller/Tenant's Insolvency

If the seller/tenant is unable to make payments on the lease, the buyer/landlord may try to evict the seller/tenant and extinguish his interest. In this case, the seller/tenant can file for protection under the Federal Bankruptcy laws. His attorney will argue that the sale/leaseback should be recharacterized as a financing transaction. If the Bankruptcy Court agrees, the buyer/landlord will be considered a mortgagee, and title will revert back to the seller/tenant. The recharacterization, while beneficial to the seller/tenant, will result in unintended, and often disastrous consequences to the buyer/landlord.

The Bankruptcy Court will look to the intent of the parties to the transaction, rather than the actual paperwork, in determining whether the sale/leaseback was intended to be a financing arrangement. The key factors are:

Whether the seller/tenant originally sought a loan from the buyer/landlord;
Whether the circumstances indicate a normal sale and lease arrangement (or do the circumstances indicate a lender/borrower relationship);
Whether the purchase price reflected the fair market value of the property (or was inflated to a price necessary to finance the transaction);
Whether the lease reflected the fair market value of the property (or was based on the amortization and intended rate of return on buyer/landlord's investment);
Whether the option to repurchase was set so far below market value as to effectively compel the seller/tenant to exercise;

The court will balance all of these factors and take a "substance over form" approach.

Recharacterization for Tax Purposes

If either party to a sale/leaseback is audited, the IRS can recharacterize the sale/leaseback as a financing arrangement. This will result in an immediate recapture of buyer/landlord's depreciation of the property and imputed interest on the seller/tenant's rental payments. The seller/tenant will lose the deduction for his rental payments, since the payments will be reclassified and principal repayment of a loan.The guidelines for IRS recharacterization are not as clear as those for Bankruptcy recharacterizations, and it is clearly a case-by-case analysis. The United States Supreme Court, in the landmark case of Frank Lyon Co. v. United States, stated the following factors to be considered for recharacterization:

The "economic substance" of the transaction based upon the potential risks and gains of the parties, and
Whether there was a purpose other than tax avoidance for the transaction.

Guidelines for Structuring the Transaction

While the above standards set forth by the courts are not crystal clear, there are a few guidelines that we can follow to avoid recharacterization by the IRS or a Bankruptcy Court:

Make certain that the purchase price of the property is for fair market value;
Make certain the lease payments are for fair market rent, and that the lease arrangement is typical of the area and the intended use;
Have reasons (other than tax avoidance) for the transaction and state those reasons in the preamble of your agreement;
If seller/tenant has an option to repurchase, make certain that it is based upon fair market value and not on a declining basis with unusually large rent credits (i.e., make sure it doesn't look like a loan payoff);
Make certain that the buyer/landlord has the rights of any typical landlord in a comparable lease arrangement (including the right to have the property back at the end of the lease!);
Make certain that there is nothing in the sale/leaseback arrangement that prevents the buyer/landlord from selling, mortgaging or assigning his interest or from benefitting from the appreciation of the property.

There is no real way to guarantee that a Court or IRS auditor will agree with your characterization of a transaction as a sale/leaseback. Use your best judgment, follow the guidelines set forth by the courts and remember . . . if it looks like a duck, and it quacks like a duck - well, you know the rest!

by William Bronchick, Esq.
For more information, please visit www.legalwiz.com.

Tennessee Ranks #10 "Most Popular States"

2005-08-12T16:17:00.000-07:00

ROCHESTER, N.Y., Aug. 11 /PRNewswire/ -- Maybe it is the sandy beaches orperhaps the warm weather, but California, Florida and Hawaii are respectivelythe #1, #2, and #3 states that U.S. adults would choose to live in if theycould live in any state in the country. And when it comes to Americans'choices for cities, while the West may again be over-represented, the 'BigApple', New York City, comes in #1 for the sixth consecutive time as the U.S.city people would choose to live in or near.

TOP US STATES
These are some of the results of a nationwide Harris Poll of 2,339 U.S.adults conducted online by Harris Interactive(R) between July 12 and 18, 2005. The next most popular states in which people would like to live areColorado (#4), New York (#5), Arizona (#6), Oregon (#7), Texas (#8), NorthCarolina (#9), and Tennessee (#10).

Since Harris Interactive last asked thisquestion in 2003, there has been surprisingly little change in the top 15states. Oregon moves from #11 to #7, Virginia drops from #9 to #12 andTennessee re-enters the top 15 after falling out of the top tier in 2003.

One interesting thing to note is that eight of the 15 states are in theWest and six of them are in the South. New York is the anomaly, representingthe mid-Atlantic region, and there are no states from the Midwest or Northeastin the top 15.

TOP US CITIES
Following New York City's lead as a top U.S. city people would choose tolive in or near, the next four cities are all in the West -- San Diego (#2),Las Vegas (#3), San Francisco (#4) and Seattle (#5). The Midwest makes thelist with Chicago at #6 and rounding out the top 10 are Denver (#7), Honolulu(#8), Atlanta (#9) and Portland, Oregon (#10).

Returning to the list of the 15 top cities this year are San Antonio at#14 and Nashville at #15. Nashville has not been in the top 15 since 2000.Interestingly, since Harris Interactive last asked the question in 2003, thecities from Florida that were on the top 15 list (Orlando, Tampa and Miami)have all dropped off, perhaps related to the 2004 devastation that occurred inFlorida as a result of hurricane Ivan.

This article was published 8/12/05 by Harris Interactive.

Multi-Family Reaches Out to Latinos

2005-08-12T04:38:00.000-07:00

Markets like Memphis are fast-recognizing the growing Latino population and its positive effect on the Multi-family industry. We're seeing entire apartment complexes are now marketing exclusively to the Latino demographic.

This group is largely family-oriented and work hard to provide for themselves and in many cases for family accross our border. Our discussions with multi-family owners and managers reveal that their Latino residents can be characterized by taking care of the premises and paying on-time.

We are also seeing positive changes in the single-family housing industry. The following is an excerpt from the WSJ-

"Hispanics account for one in 10 households in the U.S., but until recently the housing industry gave them short shrift. No longer. Home builders are loosening their credit standards to accept Hispanic home buyers who don't have long credit histories or who depend upon multiple paychecks to pay the mortgage. They're building homes to house extended families. The Segal brothers' company, CasAlegria, is in the process of translating into Spanish all the documents needed to buy a home. In the first quarter, 49% of Hispanic families owned homes, up from 41% in 1994. Still, that is well below the 69% homeownership rate for the total U.S. population, and the housing industry is looking for Hispanic homeownership to keep rising."

Click here to access the full article.

Sale-Leasebacks

2005-08-10T07:45:00.000-07:00

Sale Lease-Back Investments sometime provide a way to buy the real estate investment you want or need in your portfolio. These investments provide a way to select a specific location or area, or property types, for investment.

Financial and track record knowledge of the Seller-Tenant and good legal counsel are key to successful Sale Lease-Back investments. A sound SL-B transaction provides the Seller with better use of their capital in their business; and, the opportunity for a long-term quality real estate investment for the investor.

Eminent Domain Fallout

2005-08-03T13:08:00.000-07:00

San Diego Seeks to Confiscate 'Little Italy' Property

SAN DIEGO — The Alsco Laundry in San Diego's Little Italy neighborhood has been cleaning linens for the city's top hotels and restaurants for more than 50 years.

But now, says general manager Mike Scacco, they're being hung out to dry, thanks to a new assertion of eminent domain.

"We have a set of plans that were provided by CLB Partners, a development corporation here in San Diego, for development of townhouses, condominiums for sale," Scacco said.

The city wants to move out the laundry service to make way for the project, which also includes retail stores. But with 150 employees on its payroll and service to 3,000 area businesses, Scacco said the company doesn't want to move.

This article was printed 8/3/05 by Fox News. Click Here to access the full article.

Simon Says...China?

2005-07-27T10:22:00.000-07:00

Retail Traffic Online reported today of a shift in commercial real estate focus-from the US to China. The following is an excerpt from this article.

"In an escalation of its international growth, Simon Property Group Inc. this week became the first U.S. retail developer to commit to the fastest-growing economy in the world as it joins forces with Morgan Stanley Real Estate Fund and SZITIC Commercial Property Co., to develop shopping centers in China. Previously, Simon had talked of working in Japan and Korea, with China being a more long-term goal. But with giant malls going up all over the country -- including projects developed by its Mall of America co-owner Triple Five Group -- Simon has decided to move in. Each project in the joint venture will be an urban, multi-level, retail destination of between 430,000 square feet and 750,000 square feet, anchored in all cases by a Wal-Mart."

To learn more about Retail Traffic Online and other Primedia publications click here.

Profits In Struggling Properties

2005-07-21T20:26:00.000-07:00

The Wall Street Journal reported today on one firm's strategy in shopping for real estate in the less popular markets.

"While other big real estate investors breakfast together in the same fancy restaurants and then bid against each other for trophy buildings in hot markets, David Lichtenstein is more likely to buy in places like Shawnee, Okla., or Lake Jackson, Tex., where he recently picked up shopping malls.

When he does venture into the major real estate markets, it's into weak areas such as Chicago, where his firm recently bought the Ludwig Mies van der Rohe-designed IBM Tower in Chicago, which is one-third empty.

He describes his strategy of avoiding hot properties thusly: "It's like going to a bar where there are 50 guys and two girls," says Mr. Lichtenstein, the 43-year-old son of Brooklyn educators. "The odds of getting her are pretty slim."

Even sticking to the unsexy parts of the market, Lightstone has been one of the biggest buyers of commercial real estate in the last two years, building up a portfolio of 20,000 apartments and 27 million square feet of office and retail space in 28 states that is worth about $3 billion. That makes Lightstone, which is based in Lakewood, N.J., one of the biggest private owners of real estate in the U.S.

"There's a lot of people who are chuckling and saying 'David doesn't know what he's doing,' " Mr. Lichtenstein says. "You know what? They may be right." But he says the properties, which had been through board battles in the last few years, can be turned around, which is as important a part of his strategy as getting a good price."

This article was published on July 21, 2005 by Ryan Chittum in the WSJ. Click here to access the full article.

Slam-Bam On High Court Ruling

2005-07-02T20:13:00.000-07:00

"The House voted yesterday to use the spending power of Congress to undermine a Supreme Court ruling allowing local governments to force the sale of private property for economic development purposes. Key members of the House and Senate vowed to take even broader steps soon.

Last week's 5 to 4 decision has drawn a swift and visceral backlash from an unusual coalition of conservatives concerned about property rights and liberals worried about the effect on poor people, whose property is often vulnerable to condemnation because it does not generate a lot of revenue.

The House measure, which passed 231 to 189, would deny federal funds to any city or state project that used eminent domain to force people to sell their property to make way for a profit-making project such as a hotel or mall. Historically, eminent domain has been used mainly for public purposes such as highways or airports.

DeLay called it "a horrible decision" and said lawmakers' intervention is part of an effort to "assert the responsibility and the authority of the Congress to be a check on the judiciary."

This article was published July 1, 2005 by Mike Allen and Charles Babington with the Washington Post. Click here to access the full article.

Bulk Warehouse Anyone?

2005-07-02T20:09:00.000-07:00

"Real-estate investors are stepping up their purchases of bulk warehouses and other kinds of industrial properties amid better leasing conditions as well as expectations for future growth because of booming global trade.

Investors have spent $10.84 billion purchasing industrial real estate this year as of June 15, 45% more than they did during the same period last year, according to Real Capital Analytics Inc., a New York-based real-estate research firm. Transaction volume will soon top $12 billion, with a deal expected to be announced today. In 2004, industrial real- estate transaction volume totaled a record $20.85 billion, and 2005 sales could well set another record."

This article was published June 30, 2005 by Ray A. Smith with the Wall Street Journal. Click here to access the full article.

New Eminent Domain Law - Is Your Land Safe?

2005-06-30T07:24:00.000-07:00

The Supreme Court recently ruled in a landmark case regarding the use of taking land through eminent domain. Is your land safe?

WASHINGTON — Cities may bulldoze people's homes to make way for shopping malls or other private development, a divided Supreme Court ruled Thursday, giving local governments broad power to seize private property to generate tax revenue.

In a scathing dissent, Justice Sandra Day O'Connor said the decision bowed to the rich and powerful at the expense of middle-class Americans.

The 5-4 decision means that homeowners will have more limited rights. Still, legal experts said they didn't expect a rush to claim homes.

"The message of the case to cities is yes, you can use eminent domain, but you better be careful and conduct hearings," said Thomas Merrill, a Columbia law professor specializing in property rights.

The closely watched case involving New London, Conn., homeowners was one of six decisions issued Thursday as the court neared the end of its term.

Justice John Paul Stevens, writing for the majority, said New London could pursue private development under the Fifth Amendment, which allows governments to take private property if the land is for public use, since the project the city has in mind promises to bring more jobs and revenue."

This article was published July 23rd by the Associated Press.

Click here to read one developer's approach to addressing this issue. How about build a hotel on the home site of Supreme Court Justice David H. Souter?

Themed Megaplexes and the Future of Commercial Development

2005-06-16T04:34:00.000-07:00

"As shopping mall owners turn to increasingly lavish entertainment to attract the crowds once drawn by department stores, an upstart movie chain with opulent theaters that include valet parking, babysitting and restaurants is emerging as a big winner.

Muvico Theaters Inc., founded by an Iranian immigrant who fell in love with Hollywood as a boy going to his local cinema, operates 12 theaters and says it will double that number over the next few years. The company also plans to build what it expects will be the nation's biggest theater by seats -- 6,500 on 26 screens.

The Florida-based chain has found that glitz can overcome, at least so far, declining movie ticket sales that have hurt other chains. At the Muvico Egyptian 24 in Hanover, Md., outside Baltimore, moviegoers are greeted by reproduction hieroglyphs and huge statues. Specific seats can be reserved online and kids can be dropped off in a supervised playroom. At the Muvico Palace 20 in Boca Raton, Fla., valet parking is offered and mint ahi tuna is on the menu at the full-service restaurant. Customers can sink into six-foot-wide loveseats in the balcony to watch the movie with a glass of wine from the bar.

Mixing flash and service seem to work -- attendance at the Egyptian 24 last year was 2.5 million, the company says. Muvico expanded during the sharp downturn in the theater industry while other chains suffered. Now, Hamid Hashemi's theaters are in demand by mall owners who are becoming increasingly creative in finding tenants to replace department stores, which have consolidated in recent years. One solution? Developers are building "lifestyle centers," outdoor malls that try to emulate a neighborhood, complete with entertainment and restaurants in addition to shopping."

Commercial developers must respond to the changing dynamics of consumer behavior. We used to shop in a town square surrounding the courthouse. Now with these "neighborhood centers" consumers are gravitating back to the town square in a modernized approach. EF

This article was published by Ryan Chittum, a staff reporter for the Wall Street Journal. Click here to access the full article.

John Deere - In Real Estate?

2005-06-10T07:31:00.000-07:00

The lawn and landscape industry has recently reported a new partnership between John Deere and a large home developer.

"CARY, N.C. – John Deere and St. Lawrence Homes, a premium North Carolina homebuilder, have partnered on a pilot homebuyer incentive program: The John Deere Signature Community located in Durham, N.C. This marks the first time John Deere has partnered with a homebuilder. As part of the program, John Deere will provide custom landscape packages, standard plant warranties, irrigation systems and top-quality John Deere equipment with every home in the new community."

The article goes on to say, "The St. Lawrence Homes/John Deere partnership goes beyond simply breaking ground on a new home-buying concept - it actually creates a new way of living for people who appreciate the beauty of nature at home," said Tosh Brinkerhoff, customer integration manager, small property owner, John Deere. "Our partnership with St. Lawrence enables homeowners to connect with their property from the moment they move in, and provides the tools and services to cultivate this passion."

Is this the beginning of a trend? Will we see this type of "lifestyle" partnerships creep into the commercial real estate industry?

Already the Wall Street Journal has reported other names joining the teaming concept such as Georgio Armani and Orvis. It is interesting to note that Orvis' partnership is with Cushman & Wakefield, a COMMERCIAL real estate firm.

For all you developers out there, what's next, "Starbucks Office Centre?"

Red Hot Retail

2005-06-01T11:22:00.000-07:00

Red Hot Retail - This was the cover story in CCIM's May/June publication. And that pretty well sums up what we are seeing, at least here in the Mid South. Investors from both coasts are parusing our markets pushing cap rates down and keeping prices rather firm in the retail sector.
The commercial investment real estate article, published by the CCIM organization emphasizes the explosion of national retail chains in secondary markets. "Many retailers recognize that, if they want to expand their brand, they may have to consider towns of less that 50,000 to 100,000 people." This is an excellent indication for owners of small retail locations such as strip centers and land holders in prime commercial locations.

One evident example as the article pointed out is Dollar Generals and Movie Galleries. These stores are popping up everywhere and they're selling just as fast. Both are credit worthy tenants and make excellent investments especially if you negotiate free video rental or paper towels for life.

Why Condo Hotels are a Hot Concept

2005-05-19T10:07:00.000-07:00

From Boston to Los Angeles, developers are busy converting existing hotels to one of the hottest concepts in the lodging and real estate industries today-condominium hotels. These properties typically include mixed uses such as retail, office and even residential units. Why have they become so hot? For starters, the developer is able to pre-sell units and offset the front end costs. This also enable's them to get a higher sales price per square foot which flows back into the cash flow "pot". There are other upsides as well including the positive view from the lender's perspective. Sold units are a much more attractive way to lend and enable to developer to bring less equity to the table.

Here is a short outline of a condo-hotel model. The hotel operator rents units just like a regular hotel. The revenue generated is split (sometimes 50/50) between the owner and the developer. The developer continues to own the common spaces such as restaurants, pools, retail spaces, etc.

The full version of this article was published by Robyn Parets with the National Real Estate Investor.

4 Questions to Qualify Your Tenant

2005-05-17T17:04:00.000-07:00

Do you do leasing? If so, you want to make sure your tenants pay. One good method for researching your tenant is to ask for a credit reference with their bank. We typically ask for the name and phone number of their personal banker.

Here are four questions to ask that will shed some "light" into the dark, hard to reach crevices of their history.

1. How many times in the past 24 months have they had "insufficient funds" in their checking account?

2. Do they have a loan with the bank? If so, have they ever missed a payment?

3. What is the average collected balance over the past 12 months?

4. Would the bank consider them to be a customer in good standing?

This information is a crucial part of your "due diligence" process as you lease up your space. Need help with your commercial leasing? Contact us and we can recommend the top commercial leasing specialists in Memphis and accross the United States.

Overnight Real Estate Rates Fall

2005-05-12T06:35:00.000-07:00

The long-term mortgage interest rates took a dip on Wednesday, and the benchmark 10-year Treasury bond yield sank to 4.2 percent.

The 30-year fixed-rate average dipped to 5.32 percent, and the 15-year fixed-rate decreased to 4.91 percent. The 1-year adjustable was down at 3.72 percent. The 30-year Treasury bond yield also dipped to 4.55 percent.

These mortgage rate figures are published by Bankrate.com, which publishes nightly averages by surveying over 4,000 banks accross the US.

For more information visit www.bankrate.com

Where's Oakland?

2005-05-06T06:01:00.000-07:00

Water-cooler discussions are commonplace in every office, including ours. Generally speaking, these conversations tend to contemplate subject matter pertaining to our line of business. Our line of business is real estate.

During one such conversation yesterday, at a real estate office here in Memphis, I mentioned (let's call him Bob) to Bob that I just drove back from Oakland where I was researching commercial properties. You'd think that Bob, a Memphian, would immediately put "two-and-two" together, figuring that I meant "Oakland, Tennessee" just 15 mintutes east of Wolfchase. But noooooooo, after I said Oakland, I Bob suddenly glazed-over while creating an uncomfortable pause in the conversation. After what seemed like, 4 1/2 minutes, Bob queried in an uncertain voice, "Oakland, California!?"

This has happened on more than one occassion.

Here's my point and question to you. An unidentified representative of Kroger recently stated that Oakland (Tennessee) is our next "Germantown" according to their demographic studies. In 1990 the average household income was $40,383, 2000 it was $57,767 and in 2004 it was estimated to be $61,602. Judging by the apparent absorption rate of upscale single family housing, they may be right.

As an investor, broker or spectator, what do you think? Is Oakland on track to become a recognized upscale destination like Germantown and Collierville or will we be required to continue clarifying to Bob that it is Oakland, TENNESSEE (not California)?

Interesting Signals

2005-05-04T14:59:00.000-07:00

For those sniffing out possible troubles ahead for commercial real estate, add this one: The huge growth in interest-only (IO) loans over the past three years. As of January 1, 55.8% of all fixed-rate conduit loans featured IO periods—up from 5.9% at the beginning of 2002. And 35.6% of these loans are IO for the full term, according to an analysis by Moody’s Investors Service.

Why worry? Because the jump in IO loans may be a signal of loose underwriting standards and emblematic of a speculation-driven market: For a borrower who is intent on flipping assets, IOs make sense: By the time the loan requires him to pay back the principle, he’s on to another deal. As long as it’s a seller’s market, that is. If rising interest rates or other factors stop the price spiral and deal frenzy, IO buyers will be stuck. They will wind up paying the principle—if they can.

This article was published on May 4, 2005 by Parke Chapman with the National Real Estate Investor. Click here to link to their site and the full article.

eMetro Launches New Site

2005-04-29T11:21:00.000-07:00

In response to the growing needs of investment real estate clients, a new Web Site for Investors was launched today by Eric Fuhrman and Dan Whipple, CCIM of Crye-Leike Commercial. The new site, eMetroinvestments.com, is designed to serve commercial property owners, investors and 1031 tax exchange needs by implementing a “team approach” to the buying and selling process.

The eMetro concept offers investors two key services: Personal investor/buyer representation services and targeted marketing and sales of investment properties.

Dan Whipple, a veteran commercial real estate broker of 25 years, commented on the unique elements required to efficiently serve clients. “In addition to experienced brokerage and market knowledge, investors today need a broad scope of services to identify and successfully close the investment or exchange transaction. Beyond the transaction, we want each of our clients to stay on the cutting edge of new developments and research in the real estate investment market. Blog and forum postings at eMetroinvesments.com feature the targeted information our clients request and want today.”

“High-Profile marketing is the key to producing results for our clients,” says Eric Fuhrman, affiliate broker and co-developer of the new concept. “We believe our clients should receive more than just the opportunity to have their properties ‘listed’ with an agent. High-Profile marketing means maximum exposure in a forward-looking investment marketplace.”

For additional information visit www.emetroinvestments.com or contact Eric Fuhrman or Dan Whipple, CCIM at 901-758-5670.

Malls Fall Strips Rise

2005-04-27T13:03:00.000-07:00

The nation's shopping centers shifted into neutral during the first quarter, ending a strong year of improving vacancy rates, according to a new survey. Rents in shopping malls fell for the first time in a year, but rents in strip malls rose.

For mall owners and operators, the business environment is good. The vacancy rate for shopping malls remained at the lowest point in 3½ years in the first quarter, leveling off at 5.3%, according to the survey of the top 62 U.S. markets by Reis Inc., a New York-based commercial real-estate research firm.

But the mall industry, which soared through the economic downturn and stock-market crash on the strength of the seemingly imperturbable U.S. shopper, remains vulnerable to any slowdown in consumer spending.

There's more where that came from! Click here to access the full article.

This article was published by By Ryan Chittum, a staff reporter for the Wall Street Journal.

Investment Dollars Love the Beach

2005-04-20T12:55:00.000-07:00

'love the beach? It seems alot of investors do too.

Sam Zell launched his storied real estate career in Michigan, flipping apartment buildings in the 1960s. Since then, Chicago-based Zell has bought and more recently sold scores of office buildings in secondary markets. While his latest dispositions have coincided with a strong seller’s market, Zell has publicly voiced larger concerns about the future of secondary real estate markets.

“Some major changes are taking place in society,” said Zell, chairman and CEO of Equity Office Properties Trust, addressing a New York University-sponsored REIT conference in Manhattan last month. “And these changes are translating into a series of dynamic, 24/7 cities. That’s where the workforce is going, and that’s where it will continue to be because people won’t gravitate as much to secondary cities.” He identified Des Moines as one such city.

Zell is taking his own advice to heart. In November 2004, Equity Office sold off its five-building Houston portfolio, which accounted for 2.2% of the entire national portfolio. That same month, the firm also parted with its 4.2 million sq. ft. Dallas portfolio — and that chunk represented 3.4% of the firm’s total portfolio nationwide.

Proceeds from these sales have financed several big coastal deals that you can read about by accessing the full article here.

The full article written by Parke Chapman and posted April 20, 2005 at NREI Online.

Highland Re-Development Properties

2005-04-14T18:22:00.000-07:00

This week we unveiled an exciting new listing. Near the University of Memphis at Highland and Mynders stands a series of five (5) buildings now being sold together as a "package". The idea for a potential developer would be to tear down each of the buildings comprising almost an acre! This concept seems to follow the trend we are seeing of re-development in some of Memphis' older neighborhoods.

Click here for more information on this new offering.

New Net Leased Investment Property

2005-04-12T08:34:00.000-07:00

Germantown Parkway - Memphis, TN

New 15-Year Lease Advance Auto Store property! 6888 sf stand alone commercial bullding on corner lot. Located on the best commercial growth corridor for upside investment in Memphis TN. 40,000 plus cars per day. Near top commercial, banking, retail, restaurant, power commercial centers and the Galleria Regional Super Mall.

The annual net operating income (NOI) on this property is $134,995!

Click here to learn more about this property.

Collierville outgrows Germantown

2005-04-06T06:29:00.000-07:00

For those of us in the Memphis metro area, remember when Collierville was a quaint little town for horse-lovers? The "quaintness" may still be there but the "littleness" may be going away...

"Fast-growing Collierville may soon pass Germantown as Shelby County's third-largest municipality, if projections hold true.

"We're projecting about 43,000," said David Smoak, assistant to the town administrator.

The revised 2000 Census counted 32,824 Collierville residents. In a special census the town took two years ago, the population grew to 37,044.

As of Friday, Collierville's second special census of the decade has counted about 11,500 residences and 37,168 people.

But 2,000 more homes sheltering an estimated 6,000 people still wait to be counted, town officials estimate.
An additional 6,000 residents would bring $600,000 more to the town budget from sales tax revenues shared by the state.

It also would push Collierville past Germantown as the county's third-largest city. "

This article was published by Tom Bailey Jr. on 4/5 in the Commercial Appeal.

Eight 1031 Exchange Rules You Can't Ignore

2005-04-04T14:48:00.000-07:00

Tax-deferred exchanges are great ways to postpone capital gains taxes on you or your client's real estate investments. But be sure you follow the rules!

1. Exchanges can be used only for investment properties or properties owned for use in a business.

2. Exhanges must be made between like-kind properties.

3. To meet the IRS guidelines for an exchange you must identify the replacement property for the one you exchange within 45 days of the initial property transfer date. You may identify up to three properties of like value or as many properties as necessary to total the fair market value of the property you are exchanging.

4. You must close on the replacement property within 180 days from the initial transfer date of your property to the other party. Note: The IRS regulations now let you buy the replacement property first in what is called a reverse exchange.

5. If the property exchange isn't simultaneous you must use a qualified intermediary who is often a bank or attorney. They would be tasked to hold the money until the exchange is complete.

6. If you end up with cash to even out the value of the two exchanged properties, often called a "boot", that cash is taxable at current capital-gains rates.

7. All exchanged properties must be located in the US.

8. If the property you receive in exchange is from a person related to you and you then sell the property within two years, the original exchange won't qualify for deferred capital gains.

Are you looking to invest in commercial real estate via a 1031 exchange? Click here and tell us about your needs.

Consult your CPA or legal counsel for financial or legal consulting pertaining to your specific situation. This article was condensed from REALTOR Magazine of the National Association of REALTORS. For more information visit their site at www.realtor.org/realtormag

Five Steps To “Check Out” a Potential Tenant

2005-03-31T12:12:00.000-08:00

Are you a landlord? Are you a broker involved in landlord representation? If you answered "yes" to either question then a little investigation on the front-end may save you grief on the back-end. After your investigation you will be able to answer such questions as -

Are they financially stable?
Do they have a history of slow pay or no pay?
Did they "trash" the last place they leased?

The following are five steps for “Checking Out” your potential tenant(s):

1. Require potential tenants to complete written leasing applications with their credit history, employment status and names of former landlords.

2. Verify the potential tenant’s employment status and bank information by contacting employers and financial institutions.

3. Contact former landlords to check on the potential tenant's payment record.

4. Order credit reports on applicants from a major credit reporting company such as Equifax or Trans Union to verify their credit history and possible evictions or convictions.

5. Contact an agency that specializes in screening tenants, such as National Tenant Network, to receive reports on the potential tenant's payment history as a tenant.

Real Estate Secrets From Donald Trump

2005-03-29T07:10:00.000-08:00

Inman News reported this morning on a new book providing 'billionaire lessons' for small investors.

"There should be a law requiring every truly serious real estate investor to read and study "Trump Strategies for Real Estate: Billionaire Lessons for the Small Investor" by George H. Ross. As an observer, first as an outsider acting as Trump's attorney, and for the last 10 years as Trump's right-hand real estate and business adviser, Ross probably knows more about what makes Donald Trump successful than Trump himself does."

Click here to link to the full article.

eMetro In The News!

2005-03-28T09:27:00.000-08:00

eMetro is featured in this week's Memphis Business Journal "Street Talk" section compliments of Amos Maki and Scott Shepard.

The following is an excerpt:

"Eric Fuhrman has taken his place among the pajamahedin, but he's not out to fact-check Dan Rather. Rather, he is talking about commercial real estate.

Fuhrman is an agent with Crye-Leike Commercial and has created a real estate blog at emetrocommercial.blogspot.com focusing on commercial real estate and Memphis.

The idea of a blog came from a conversation with a client.

"I was meeting with a client and he said that during the industrial age other things were important, like how you swing a hammer," Fuhrman says. "But during the information age uniqueness is important."

The blog has all kinds of information on commercial lending rates, real estate investment and available properties."

Click here to access the full article.

Does anyone know what "pajamahedin" means?

The Net Leased Investment

2005-03-21T06:21:00.000-08:00

Net Leased properties are considered by many to be the most liquid and secure real estate investments available. Now with the ability to "exchange" properties and deferring capital gains many investors view these as a "must".

Credit-grade tenants are assigned a rating based upon the S&P credit scoring system. The net leased S&P "Credit" is inversely related to the net leased Capitalization Rate (CAP). Thus, the higher the net leased credit, the lower the net leased CAP and the lower the credit, the higher the net leased CAP.

Here are a few important points:

Net Leased investments can offer a relatively hands-free method of investing in real estate.
Nearly all net leased properties tend to sell very quickly, especially the high net leased credit grade.
Nearly all net leased properties sell at or VERY NEAR their offering prices.
Net Leased properties close fast with a short due diligence since most of the tenant's research has already been verified for creditworthiness.

Let us know if you need help performing a 1031 exchange or if you are looking for a net-leased investment property? Send us an email with your requirements.

HOT Net Leased Investments

2005-03-17T19:28:00.000-08:00

'looking for a net leased property? In today's world of free-standing net leased retail it is pretty easy to find properties capped at 6%, 7% and sometimes 8%. For those "in the market" for a free standing net-leased property, I would recommend taking a look at these.

Horizon is a young company planning to develop 22 locations throughout the southeast over the next few years and they have a very attractive deal if you can stomach the newness of the venture. Two locations in Tennessee just hit the market at a 9.0% cap and a 15 year lease.

It pangs me to refer you to a competetor's site but here you go--Click Here for more information.

2005-03-17T10:03:00.000-08:00

Just listed - Whitebrook Office Complex
This property includes eight (8) two-story office buildings and includes 48 rentable suites. The NOI is running fairly consistent around $80,000 per year. We've got it priced at a 7.0 cap with a very motivated seller.

1031 Exchanges At Walt Disney World

2005-03-15T06:20:00.000-08:00

It's called the 1031 Like-Kind Exchange. It could offer you one of the best ways of deferring capital gain taxes when exchanging property. The event will be the 6th Annual 1031 Like-Kind Exchange Seminar put on by Wachovia at the Walt Disney World Swan Hotel in Orlando, Florida. The dates are May 12-13, 2005. Click here to register online and to learn more about this great opportunity!

New Release - Viewpoint 2005

2005-03-14T11:16:00.000-08:00

Viewpoint 2005, the preeminent real estate economic forecast published by Integra Realty Resources, the largest valuation and counseling firm in the United States, has been released.

This is is an excellent publication which tracks economic and real estate trends in major markets.

Click Here for the free download.

White House Approves Pass for Blogger

2005-03-07T05:03:00.000-08:00

Another signal moment for bloggers is to occur this morning, when Garrett M. Graff, who writes a blog about the news media in Washington, is to be ushered into the White House briefing room to attend the daily press "gaggle."

Mr. Graff, 23, may be the first blogger in the short history of the medium to be granted a daily White House pass for the specific purpose of writing a blog, or Web log. A White House spokesman said yesterday that he believed Mr. Graff was the first blogger to be given credentials.

He is being given a press pass as the editor of FishbowlDC (www.mediabistro.com/fishbowldc), a blog that is published by Mediabistro.com, which offers networking and services for journalists.
Increasingly, bloggers are penetrating the preserves of the mainstream news media. They have secured seats on campaign planes, at political conventions and in presidential debates, and have become a driving force in news events themselves.

Click here to read the complete article published by the New York Times 3/7/05.

Commercial Cash Corner

2005-03-01T10:32:00.000-08:00

The following are excerpts from an interview with Mr. Josh Miller of Union Planters/Regions Commercial Lending Division.

We are a business growing out of our existing space and we would like to purchase a larger facility. How important is our “business plan” and what recommendations would you have for developing one?

“A business plan is a necessity for start-ups. Some important considerations for us would be the experience of the principals and the company’s logic for achieving their projections. For existing companies seeking additional capital it is important to explain the need for capital in the business plan. For instance, expanding companies may outline how the increased capital will be used to enhance the current growth. Companies positioning themselves for a growth phase may find it helpful to outline how the increased capital will be used to accommodate the projected growth phase.”

I have identified a commercial property that includes an established business. What kind of financing would you recommend?

“The rule of thumb for owner-occupied businesses is to provide a five-year note on a fifteen-year amortization schedule. When the loan comes due in five years the owner has the option to pay off the loan or refinance for another five year term. This offers a tremendous amount of flexibility to business owners.”

What kinds of trends are you seeing in commercial real estate lending in the Memphis area?

“The re-financing boom of 2004 seems to have slowed down as we will soon be entering the second quarter of 2005. We are seeing significant increases in acquisitions of existing properties and new construction activity."

What do you view as key qualities in selecting a commercial lender?

“I think that a commercial lender should have a sound reputation and willingness to remain alert to the needs of the business community. On a personal level, I think that it is crucial that lenders possess the quality of flexibility because each client and situation is unique.”

What is your outlook for commercial loan interest rates in 2005?

“Not intending to speak for Chairman Greenspan but from my own observation interest rates appear to be rising slightly in proportion to the rate at which the economy builds steam.”

If you have questions or comments for Mr. Miller at the Commercial Cash Corner please drop us a note.

Memphis Commercial Real Estate - Top Ten Tips for Selling Commercial Real Estate Fast(er)

2005-02-25T09:04:00.000-08:00

#8 - Lights, etc.

Buyers dwell on little things. Have you ever noticed that? Many times during a showing buyers get hung up on the nit-pickiest detail. We need to eliminate distractions for buyers by paying attention to detail before the first showing.

The following is a list of "little things" that most often produce distractions for buyers. Frankly, even before reading this list, think about it, not having these things taken care of can be such a royal pain. They're easy to fix, so get it done on the front-end.

Interior Lightbulbs - 'nothing worse than asking a prospective buyer to imagine what is in that dark room. Even more, the space you are leasing may have a great lobby but if the overhead lights are burnt out you've missed a great opportunity.
Exterior Lightbulbs - Especially for showings in the evening, burnt-out exterior lighting is VERY noticeable and should be addressed.
Locks & Doors - Make sure you arrive to the showing early to avoid the embarrassing situation of flailing about with a 10 lb. wad of keys. Open all doors to rooms you will be showing.

These "little things" will allow you to stay focused on the business points of the transaction and keeping your buyer on-track.

Memphis Commercial Real Estate - Top Ten Tips For Selling Real Estate Fast(er)

2005-02-24T12:55:00.000-08:00

#9 - Ideas

Buyers need ideas. That's why we do what we do.

How Can Ideas Help Me Sell Commercial Real Estate?
Sellers depend on us to find buyers (or tenants) for their properties. We accomplish this in several ways including the development of marketing materials like flyers, postcards, internet listings, etc. In printed and online media, too many times the we focus ONLY on the properties physical characteristics providing dimensions, descriptions and photos. Those things are fine and good and necessary but if that is all we do we are limiting the buyer's ability to see themselves in the property. If we stop with the physical characteristics we are not helping them visualize themselves in the property. They need help with "ideas".

Let's consider an example. Suppose we have a medical office building in Memphis that we would like to sell. Our marketing materials typically would include such things as address, square footage, number of exam rooms complete with photos and pricing. That would be the extent of the typical, boring commercial listing brochure. But we need this property to SIZZLE in the pan not die on the vine!

Help buyers visualize themselves in this facility by sharing ideas with them. Help them visualize owning this prime commercial showpiece! Put ideas into the marketing materials for the property. Here are some examples:

"This is a turn-key medical office perfectly suited for a new medical group."
"Free-standing medical office conveniently located near Baptist Hospital."
"High visibility with signage visible from Hwy. 777."
"Large lot perfect for expansion"
"Ideal facility for a startup medical practice"
"Multi-suite income potential"

Buyers need to visualize. That's why we do what we do.

Memphis Commercial Real Estate - Top Ten Tips For Selling Real Estate Fast(er)

2005-02-23T12:48:00.000-08:00

#10 - Incentives

The law governing the use of incentives for selling commercial real estate varies from state to state. All too often however, what started as an incentive sometimes triggers a negative reaction.

This is an example of a typical incentive to induce buyers to make a move. What is it really saying?

Some may read this as "Price Reduced". But to the savvy investor or seeker of business space this sign says, "We couldn't find a buyer and now the owner is getting anxious and he is even willing to cut into his profits just to get someone to buy this dump."

Now let's consider a far superior approach. Consider offering a true incentive to sell your property. What is this sign really saying?

If you decide to use an incentive, capture the buyer's attention while speaking directly to their motive for gain. Hopefully, this will get you on your way to selling your commercial real estate fast(er)!!