Southern California Industrial Real Estate Blog

DISTRESSED INVESTMENT PROPERTY SOLUTIONS

DISTRESSED INVESTMENT PROPERTY SOLUTIONS

By Jodi Summers

Experts in net lease properties and 1031 exchanges say there may be ways to soften the blow of distressed situations, including the tax consequences of foreclosures.

“The biggest challenge is certainly the current market environment, which has so many investors fearful and sitting on the sidelines,” said Ed McRedmond, senior vice president of portfolio strategies for Invesco PowerShares.

Advisory groups such as BRC Advisors, Calkain Opportunity Services, Net Lease Capital Advisors and ES Group LLC have experience structuring exchanges for investors who face losing a property to foreclosure. A good advisor can minimize the tax bill and put the distressed property owner into a new investment.

If an owner is proactive in pursuing a remediation strategy before they are foreclosed on, advises Carl Christensen, managing director of Net Lease Capital Advisors, “They can deed their property back to their lender through a qualified intermediary and do a 1031 exchange into a new investment.”

There are a significant amount of potential replacement triple-net properties that are primarily leased to investment-grade tenants and typically highly leveraged, says Christensen. Though it depends on the financial and tax particulars of each case, putting equity into the new investment can be considerably less costly than paying the capital gains–which, since a foreclosure is considered a sale, includes the discharge of debt above the owner’s basis–and depreciation recapture tax bill, he adds.

“They’re facing a 20% to 25% tax problem. But you can solve that problem for 7% to 13% [equity] and have the benefit of owning your own real estate and saving money,” says Christensen. “The downside is they have to come out of pocket for the cash, because there is no equity in the property in this particular scenario, but what they have to come out of pocket for to buy the replacement property is significantly less than what they’d have to come out of pocket for to pay the IRS.”

Even in difficult situations such as foreclosures, there are options that can help, agrees Calkain president and CEO Jonathan Hipp. “The last thing you want to do is not be smart about your options. Don’t just assume that you’re dead in the water,” he says. “It’s about good tax planning and trying to be ahead of the bus.”

Beyond foreclosures, the strategy could also be applicable to forced-sale situations, when owners can’t put additional equity into a property when refinancing (at today’s lower leverage standards) is necessary and thus are forced to sell at a lower price than what they paid for the property.

“Those folks will have a little bit of equity, they won’t be totally upside down,” says Christensen. “This kind of solution is beautiful for them, because they won’t have to dump more money in to preserve their tax position.”

http://www.globest.com/news/1346_1346/insider/176880-1.html

http://www.thestreet.com/story/10448393/1/new-property-fund-meets-distressed-market.html

flickr.com/photos/ivanilluuu/221910373/

http://www.serious-collector.com/images/swimming_e2es.jpg

http://www.calkain.com/images/CC_logo.jpg

http://i134.photobucket.com/albums/q116/BRCAdvisors/bRCAdvisors_smlogo.jpg

REAL ESTATE DEVELOPERS IMPACT BY BERNIE MADOFF’S “PONZI SCHEME”

REAL ESTATE DEVELOPERS IMPACT BY BERNIE MADOFF’S “PONZI SCHEME”

Several major East Coast Real Estate Developers have been named as victims in Bernard Madoff’s complex Ponzi scheme, which is rumored to have stripped investors of $50 billion in assets.

According to GlobeSt.com this list includes:

· Larry Silverstein, the World Trade Center developer;

· The Wilpons and Rechlers families;

· Brokers at Newmark Knight Frank and CB Richard Ellis–including Stephen Siegel, chairman of worldwide operations there,

· New Jersey developer Fred Daibes is rumored to have lost a significant amount of money;

· Mort Zuckerman, the chief executive of Boston Properties;

· Fred Wilpon, who owns the Mets and is head of Sterling Equities;

· Steven Simkin, a partner at the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison and chairman of the firm’s real estate department;

· A number of limited real estate partnerships in DC are also among the supposed victims.

· Other recognizable names on the list include John Malkovich, Sandy Koufax and Tim Teufel, - if these are the actor and baseball players, respectively, is unconfirmed, as is Larry King, the talk-show host, Frank Lautenberg, the Democratic senator from New Jersey, and Mark Green, a former public advocate of New York City.

Madoff was known to have focused on the rich and famous, sometimes requesting as much as a $20 million minimum.

A large number of the developers who invested with Madoff are reported to have pledged securities held by him for development projects. It has yet to be determined whether the actions of one person, will again impact bank lending criteria.

The complete client list of Madoff has been provided by the Wall Street Journal:

http://online.wsj.com/public/resources/documents/madoffclientlist020409.pdf

Info courtesy of:

http://www.globest.com/news/1341_1341/newyork/176748-1.html

https://ecf.nyeb.uscourts.gov/

http://designdepartment.wordpress.com/2006/09/07/

http://marketplace.publicradio.org/display/web/2006/10/27/down_in_debt/

http://www.observer.com/term/25509

http://gothamist.com/2007/09/07/revised_vision.php

http://blog.lib.umn.edu/mcgin017/blog/fall_2008/honors_intro_to_philosophy_fall_08/

BRAVO! LEED v3.0 LOOKS AT THE BIG PICTURE IN GREEN BUILDINGS + LETS YOU LOOK TOO

BRAVO! LEED v3.0 LOOKS AT THE BIG PICTURE IN GREEN BUILDINGS + LETS YOU LOOK TOO

By Jodi Summers

LEED v3.0 – the U.S. Green Building Council’s latest green buildings rating system, has a brave new focus – saving energy on the long term.

“This version reflects the rapid advancements in building science and technology and provides incentives for strategies that have greater positive impacts on energy efficiency and CO2 emissions reductions, among other priorities,” notes treehugger.com.

Known around town as LEED 2009, what’s piquing the interest of the saving-money-thru-green-minded is a new requirement that focuses on facility maintenance during the life span of the building. The new rules mandate that energy and water usage for buildings seeking LEED certification now has to be reported for at least five years.

“One of the major differences with the new rating system is that sharing and reporting this energy use data is now required, as it was optional in the previous rating system,” observed property manager Michael Martz.

USGBC will allow projects to comply with the requirement in any of three ways:

1. To renew LEED certification every two years using LEED for Existing Buildings: Operation and Maintenance.

2. Provide energy and water usage data for the building on an ongoing basis annually.

3. The owner of the property authorizes USGBC to access the building’s energy and water usage data directly from the building’s utility provider.

With LEED v3.0, the USGBC offers a more savvy point rating system. The LEED rating system is increasing from a total of 69 points to 100 points – with an emphasis on what matters most from an environmental standpoint – energy efficiency and CO2 reductions. It the early days, a building could earn the same number of points for installing a commuter bike rack as optimizing energy by 10% or reducing water usage by 20%. Now credits are weighed based on how the course of action improves environmental and sapient health.

The LEED v3.0 vision also does a superior job of calculating the value of refurbishing the value of existing buildings. LEED v3.0 looks at the BIG picture.

Part of USGBC’s goal is to help owners and operators optimize building performance over the building’s lifetime. LEED v3.0 goes with the theory that collecting data is the best way to identify and help correct the common gap between energy modeling during the design phase and the building’s actual energy usage.

For those already constructing or managing LEED-certified buildings, the new requirements won’t be much of a change. Add-ons to current building systems will increase front-end costs a bit, but the big upside is that owners can now micromonitor energy usage. This investment will offer a significant savings in energy usage over the life of the building.

“They can see when the energy use has peaked, when it’s at the low, when it’s at the mean, and then they can adjust their programs or their overall systems,” explains Martz.

With LEED v3.Going forward, small businesses will be able to monitor their energy usage with the sophistication of institutions that consume a lot of energy, such as universities, skyscrapers and industrial manufacturers.

**

http://www.treehugger.com/files/2009/05/leed-30-is-launched.php

http://blogs.nationaltrust.org/preservationnation/?p=525

http://www.socalindustrialrealestateblog.com/?p=407

http://www.usgbc.org/News/USGBCInTheNewsDetails.aspx?ID=2628

http://www.mlive.com/business/west-michigan/index.ssf/2009/08/leed_reporting_requirement_goo.html

http://www.constructionweekonline.com/pictures/gallery/Stock/green.buildings.jpg

http://www.eco-structure.com/Images/FBI1_tcm26-123089.jpg

http://www.ischool.washington.edu/lewis-hall/greenbuilding.aspx

http://www.fullscalearchitecture.com/press/wp-content/gallery/trevvett-images/trevvett_02.jpg

http://www.dennislawgroup.com/Green_Building_Laws_LEED.html

http://twgi.com/images/picIAMUenergyChartLarge.jpg

http://movetolakenorman.wordpress.com/2008/10/17/lake-norman-real-estate-leed-certification-may-add-value-to-your-home/

PRIVATE INVESTORS ARE DOING INDUSTRIAL LOANS

PRIVATE INVESTORS ARE DOING INDUSTRIAL LOANS

by Jodi Summers

Perhaps the reason foreign auto makers are surviving is because they’re getting more creative about their loans. An Orange county investor-developer has refinanced the 345,410-square-foot Nissan Motors building along the north side of the 405 Freeway, lending approximately $11.2 million -  despite the nearly frozen credit markets.

As GlobeSt.com reports, the borrower was able to secure the new financing for the 33-year-old property, a single-story industrial building that is 100% leased to Nissan Motor Corp. The silver lining is that although financing is difficult, a solid buyer and a good purchase team can still secure a number of competitive bids for the financing. The lender in this case was Minnesota Life Insurance Co. The SoCal Investment Real Estate Group can assist you in putting together a strong financing package. Please contact Jodi Summers -  jodi@jodisummers.com for more information.

http://cache.daylife.com/imageserve/08dvfOy8lz30e/610x.jpg

http://www.globest.com/news/1303_1303/orangecounty/175667-1.html

OFFICE BUILDING TITAN GOSSIP UPDATE

Robert Maguire III, developer of many of the skyscrapers in downtown Los Angeles, has abandoned his last-ditch effort to buy the company that he founded and has been forced out as chief executive and chairman, according to people familiar with the matter.

The board of Maguire Properties Inc., under pressure from hedge-fund investors, voted Saturday to replace Mr. Maguire as CEO with Nelson Rising, a former Maguire executive who later ran another real-estate company, Catellus Development Corp., people said.

Read it all @

http://online.wsj.com/article/SB121096909950099407.html?mod=CommercialRealEstateMain_1

The~~ first article…

OFFICE BUILDING TITAN GOSSIP

We were reading the commerical real estate articles in the Wall St. Journal when we came across this interesting tidbit:

“Robert Maguire III, who built much of the Los Angeles downtown skyline, including the 72-story U.S. Bank Tower, is in danger of losing control of Maguire Properties, which he serves as chairman. A number of hedge funds have taken a sizable position in the real estate investment trust and have been threatening to put a new slate of officers up for election if the company is not sold or if the board does not take dramatic steps to forge a turnaround.”

read the whole article @

http://online.wsj.com/article/SB120959154985857475.html?mod=CommercialRealEstateMain_1

Bart Reinhard Becomes Head of AIR Commercial Real Estate Association

 Bart Reinhard Becomes Head of AIR Commercial Real Estate Association

“Nothing is more critical to the brokerage community in the cyclical real estate industry than timely and accurate property information…” observes   Bart Reinhard, the newly named the 40th president of the AIR Commercial Real Estate Association.
 Founded by visionary industry leaders in 1960 as the American Industrial Real Estate Association, AIR has since broadened its outreach while distinguishing itself.
  Reinhard is a 25-year real estate industry veteran who brings extensive brokerage and management experience to the leadership of AIR, having served as senior managing director of CB Richard Ellis’s Los Angeles North region before returning to brokerage.
 In his inauguration message he wrote, “Looking forward, 2008 may be a very challenging year. With the change in the market dynamics, information and knowledge will continue to be critical as we all attempt to maintain our competitive edge. AIR will be focusing on the following key objectives to insure you have the most up-to-date information:
 • The implementation of the new changes to the CDX format and its continual enhancement throughout the year.
 • The continual monitoring of the accuracy and timeliness of our data.
  • The official release of the “Office” data to the entire office brokerage community.
 • The improvement of the functionality of the WIN-AIR forms.”
 An AIR member for 15 years, Reinhard has served on its board of directors for the past seven years, holding posts as education vice chair, computer chair, marketing chair, multiple director/vice president, and long-range planning chair. The 48-year-old AIR, with headquarters in Downtown Los Angeles, comprises nearly 1,770 brokers in more than 400 offices in the five-county Los Angeles Metro area.
 Reinhard sites expanding membership as one of this year’s goals. Since 2004, AIR’s membership has increased from 1,470 to 1,769, and from 350 to 406 offices.
During 2008 the objective for the organization is to intensify its membership outreach. He notes that this includes the addition of board members for greater demographic coverage, the roll-out of office data for Los Angeles County, making all industrial properties in the area available via an Internet-based property data system and the provision of all AIR data via hand-held devices.
 Joining Reinhard as 2008 officers are Douglas C. Earnhart, senior vice president at Lee & Associates in Ontario, who is president-elect and long-range planning chair; Chuck Noble, founding principal of Lee & Associates-Orange, who is vice president and multiple chair; Joseph Vargas, executive managing director and area leader at Cushman & Wakefield, who is Southern California education vice president; and David M. Harding, senior vice president at CB Richard Ellis in Universal City, who is secretary/treasurer.
Reinhard, a senior vice president in the Ontario office of CBRE, succeeds Stan Mullin, as AIR president.