Southern California Industrial Real Estate Blog

INDUSTRIAL SALES VOLUME REMAINS LOW, CAP RATES STRONG

INDUSTRIAL SALES VOLUME REMAINS LOW, CAP RATES STRONG

Edited by Jodi Summers

Industrial property statistics 4 u: investors closed 279 sales of Class A and B warehouse and distribution property in the fourth quarter of 2007 at an average cap rate of 7.1%, according to CoStar.com. The number of transactions dropped sharply in fourth-quarter 2008, with the cap rate rising 100 basis points. First-quarter 2009 is continuing to trend toward a sharp drop in transactions, with the cap rate edging up another 50 bp to a preliminary 8.6% as of March 18.

 

Get it all @ http://www.costar.com/News/Article.aspx?id=805689186917C1830E65776FC4A47B2B&ref=100&iid=123&cid=383F14EEE265B182474DA2442BACBBBF

SUPERMARKETS GO GREEN

SUPERMARKETS GO GREEN

By Jodi Summers

In SoCal, we think we’re so green with Whole Foods and other green grocers, but the Cub Foods in St. Paul, MN, is going for LEED Gold certification from the US Green Building Council – making Cub Foods the second LEED Gold grocery store in the United States–to do so. (Giant Eagle in Columbus, Ohio is the first.)

The 62,900-square-foot Cub Foods store boasts 44 skylights that will illuminate 75% of regularly occupied spaces, using a solar-powered GPS system that redirects sunlight as needed. LED lights are used exclusively in the parking lot.

“We never intended for this story to be green,” says Lee Ann Jorgenson, a community relations manager of Stillwater, MN-based Cub Foods. But President Brian Huff suggested the possibility and the process took off from there, she noted.

Other techniques used at the store include recycling half the waste from demolished buildings on the site, a water-saving landscape irrigation system, and recycling of building construction materials. But those technologies can be used at many other building types.

Because they sell food and other perishable items, supermarkets have special needs require adaptation to be ‘green’. Cub Foods has received an award from the Environmental Protection Agency’s (EPA) GreenChill Partnership at Gold-Level Certification. The award is given for outstanding use of environmentally friendly refrigeration technology. Even lighting refrigerated cases can be managed.

“Our cases use lights that are triggered by motion,” Jorgenson says. The result for all initiatives is a 35% savings on energy.

Packaging is also another important area for sustainability. Johnson Diversey is producing a highly concentrated sanitizer for sinks that automatically dispenses the proper amount of cleaner while reducing the amount of plastic in the store.

Cub Foods is not alone in pursuing sustainability. Corporate parent Supervalu also is building sustainable stores among its other banners, including testing a natural-gas powered fuel cell for its refrigeration system in a Star Market in Newton, MA. Stop & Shop, too, is building sustainable stores, and Fred Meyer hopes to achieve LEED Silver status for a unit in southeast Portland, OR. If it succeeds, the store would be the first grocer in Oregon and parent Kroger’s first unit to do so.

“There is certainly a great deal of interest in building green stores,” says Jeanne von Zastrow, a senior director overseeing sustainability efforts of the Food Marketing Institute, Arlington, VA. “About two years ago, we saw that our member companies wanted assistance to understand this issue.”

The notoriously tight-margin business must carefully track each expenditure, so FMI has created materials for executives to justify the return on investment of green building.

These include simplified carbon calculators to allow companies to assess their energy usage and emissions over a portfolio.

If your grocery store would like consultation, please contact us.

http://www.greenerbuildings.com/news/2008/10/17/giant-eagle

http://www.globest.com/news/1278_1278/insider/175032-1.html

http://www.thefoodtrust.org/…/green.grocery/index.php

http:// www.inspiro.com.au/about_non-woven_fabric.html

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http://www.newsoftheworld.co.uk/news/article19414.ece

GREEN BUILDING INSIDER SURVEY CONCLUDES THAT COMMERCIAL BUILDERS, BUYERS AND SELLERS FEEL GREEN IS GOOD, LEED IS O.K.

GREEN BUILDING INSIDER SURVEY CONCLUDES THAT COMMERCIAL BUILDERS, BUYERS AND SELLERS FEEL GREEN IS GOOD, LEED IS O.K.

By Jodi Summers

The third annual Allen Matkins/CTG/Green Building Insider Green Building Survey reveals that 93.4% of those surveyed agreed that it is worth the time and effort to build green, but only 66.2% believe that obtaining LEED certification is worth the effort.

More than 900 green building professionals – from design professionals, contractors, subcontractors, construction planners to building owners - completed the survey.

Additional findings in the survey were that designers, owners and contractors each offered differing results when assessing the risks involved in green construction or whether green construction adds to the cost of projects.

Bryan Jackson, chair of the green building and sustainable construction group at the Los Angeles office of the law firm of Allen Matkins Leck Gamble Mallory & Natsis, confided to GlobeSt.com that, “…New LEED requirements being introduced this year include a carbon overlay that should bring many of the survey respondents back into the fold with respect to LEED certification. Another change in the new LEED requirements is that the certification process takes into account regional differences, which should also help the LEED process to regain some of its lost adherents.”

Tools are coming to make communicating green commercial design easier. Building Information Modeling employs computer-aided design to produce three-dimensional models of projects for incorporating green design elements from the very start of and throughout a project. Those surveyed estimate that green construction adds between 1% and 4% to the cost of a project, but those who use can BIM see a better rate of return.

“If you design for green and sustainable elements from the very beginning, you will be able to come out with a project in that could certify to Green, LEED, Gold or Silver without spending any more than conventional construction, which is pretty amazing,” Jackson says.

See the whole survey @ http://www.allenmatkins.com/emails/GreenSurvey/Third%20Annual%20Green%20Building%20Survey_v5.pdf

Info courtesy of:

http://www.globest.com/news/1354_1354/losangeles/177097-1.html

YEAH FOR INDUSTRIAL REAL ESTATE!

YEAH FOR INDUSTRIAL REAL ESTATE!

by Jodi Summers

Yeah, everybody is complaining about the market, but there are still industrial deals in the works.

The latest nod to the sector is that Brookfield Asset Management, a Toronto-based property manager, noted, “The illiquidity of the markets is presenting us with investment opportunities which,” the company said in a letter to shareholders, “should enable us to earn returns far higher than we would normally expect.”

Brookfield Asset Management owns office buildings, hydroelectric plants and timberland and sold over $1.0 billion in assets last year to raise cash as credit markets tightened.

Locally, closings lately have ranged from a $5 million first mortgage financing in Irvine for a 70,000-square-foot industrial property situated on a 5.16-acre lot in Irvine, according. Financing was arranged through seller, Goodyear, and based on a based on a 10-year term and a 30-year amortization schedule.

Above and beyond, a 484,000-square-foot lease brought occupancy to 100% at Kaiser Commerce Center, a ProLogis development of 5.9 million square feet in nine buildings in Fontana. Mike Del Santo, first vice president and market officer for ProLogis, notes that in the past 60 days, the Denver-based REIT has leased just under 1.2 million square feet of recently developed space to major logistics users in the region.

In another recent deal, 282,000 square feet in the Ontario submarket was leased to Columbus, OH-based Safelite AutoGlass. Safelite will occupy space at ProLogis Park Ontario Airport, in a newly constructed, 681,000-square-foot facility.

In a group of leases in Anaheim and Garden Grove in Orange County, six industrial tenants recently signed leases for 200,000 square feet of space at WCV Commercial Properties’ Tower Park complex and at Garden Grove Industrial Park. The leases accounted for approximately 40% of the 245,192-square-foot Tower Park complex and 50% of the 252,184-square-foot Garden Grove project.

And in one of the largest leases in the county this year, noodle maker IHOI Inc. leased a 155,805-square-foot industrial building at 14524 Myford Rd. in the Torrance area.

On the sales side, China-based Winco DWL Industries Co.’s acquisition of a 44,172-square-foot industrial property in Cerritos, will house the firm’s West Coast distribution operations. Winco is a manufacturer and importer of kitchenware and tableware to restaurants and chefs worldwide.

http://www.cityfeet.com/News/NewsArticle.aspx?Id=31995

http://www.forbes.com/2009/02/13/brookfield-asset-real-estate-equity-0213_property_30.html?partner=alerts

ECONOMIC STIMULUS FOR SMALL BUSINESS

 ECONOMIC STIMULUS FOR SMALL BUSINESS

 by Jodi Summers

Everyone is bitching about how the Economic Stimulus Bill does nothing to benefit small businesses. Okay, so maybe it isn’t everything the Republicans had hoped for, but as BusinessWeek.com astutely points out, President Obama’s bill contains several tax provisions designed to assist small businesses struggling through a tough economic times.

Net operating loss carryback. If your business operated in the red in 2008, but paid taxes on profits in the past five years, you can apply last year’s loss to prior-year taxes—and possibly get a refund on taxes you’ve paid in the past. It’s a bit like reassessing your property value.

 Deduct and depreciate equipment. Companies that bought new equipment in 2008 can treat it as an operating expense and immediately deduct the whole amount up to $250,000, a $117,000 increase over its previously scheduled limit.

 Shorter holding period for S-Corps. “This shortens the period that S-corp assets can be sold without paying taxes on built-in gains,” explains BusinessWeek.com. “A built-in gain is the difference between the fair market value of the assets and their tax basis at the time the company put an S-corp in place. The impact of this is that many business owners will be able to retire earlier without facing two layers of taxation.”

http://www.realtor.org/RMODaily.nsf/pages/News2009022401?OpenDocument

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http://images.thestreet.com/tsc/rss/images/itunes_small-business_300×300.jpg

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

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