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Loopnet: Regional Retail Property Asking Price Index – Sale Trends January 11, 2013

Posted by Erik Swanson in Research/Data, Retail News, Retail Sales Comps, Uncategorized.
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Sept. 12 vs. 3 mo. prior Y-O-Y
State $126.25 -6.8% -15.4%
Metro $166.79 -10.4% -18.0%
County $194.97 -10.9% -16.7%
City $182.17 -13.6% -24.9%

The average asking price for retail properties in the metro area was $166.79 per square foot for the month. This is down 18% from the previous year, and down 11.8% from the end of the second quarter of 2012. Asking prices for retail properties have fallen to a new three-year low this month. The previous three-year low was $181.69, set last month

A 92 Year-Old Solution for Real Estate Investors Facing Higher Taxes in 2013: January 9, 2013

Posted by Erik Swanson in Uncategorized.
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1031 Exchanges Offer Full Deferral of the New 3.8% Medicare Surtax Tax and 20% Capital Gain Tax

By Cris Anderson, Esq.

The familiar adage, “It’s not how much you make, but how much you keep” rings truer than ever for Northwest real estate investors in 2013. Not only have capital gain taxes increased significantly for high earners, but many investors below the top tax bracket face an additional 3.8% surtax on passive investment income like capital gains. Fortunately, IRC Section 1031, a provision which has been in the tax code since 1921, provides critically needed tax relief.

Under the American Taxpayer Relief Act of 2012, the top capital gain tax rate has been permanently increased to 20% (up from 15%) for single filers with incomes above $400,000 and married couples filing jointly with incomes exceeding $450,000. In addition, the new IRC Section 1411 3.8% Medicare surtax on net investment income, which includes capital gains, results in an overall rate for higher-income taxpayers of 23.8% — a staggering 58% increase from 2012 tax rates!

 Four Steps Involved in Determining Capital Gain Taxation

Absent the tax deferral benefits of a 1031 exchange, below is a summary of the four ways investors will be taxed on the sale of an investment property:

1)    Depreciation Recapture: Taxpayers will be taxed at a rate of 25% on all depreciation recapture.

2)    Federal Capital Gain Taxes: Investors owe Federal capital gain taxes on the remaining economic gain depending upon their taxable income. Since a new higher capital gain tax rate of 20% has been added to the tax code, investors exceeding the $400,000 taxable income threshold for single filers and married couples filing jointly with over $450,000 in taxable income will be subject to the new higher tax rate. The previous Federal capital gain tax rate of 15% remains for investors below these threshold income amounts.

3)    New Medicare Surtax Pursuant to IRC Section 1411: The Health Care and Education Reconciliation Act of 2010 added a new 3.8% Medicare Surtax on “net investment income.” This 3.8% Medicare surtax applies to taxpayers with “net investment income” who exceed threshold income amounts of $200,000 for single filers and $250,000 for married couples filing jointly. Pursuant to IRC Section 1411, “net investment income” includes interest, dividends, capital gains, retirement income and income from partnerships (as well as other forms of “unearned income”).

4.) State Taxes: Taxpayers must also take into account the applicable state tax, if any, to determine their total tax owed. Washington has no state taxes, while the other Northwest states do.

Snapshot of 2013 Federal Capital Gain Tax Rates


Single Taxpayer

Married Filing Jointly

Capital Gain

Tax Rate

Section 1411

Medicare Surtax

Combined

Tax Rate

$0 – $36,250

$0 – $72,500

0%

0%

0%

$36,250 – $200,000

$72,500 – $250,000

15%

0%

15%

$200,000 – $400,000

$250,000 – $450,000

15%

3.8%

18.8%

$400,001+

$450,001+

20%

3.8%

23.8%

* The 3.8% Medicare surtax only applies to “net investment income” as defined in IRC Section 1411.

 

1031 Exchanges Help Investors Defer the New 3.8% Medicare Surtax

Under recently proposed regulations, REG-130507-11, taxpayers have received proposed guidance from the IRS that notes: “to the extent gain from a like-kind exchange is not recognized for income tax purposes under Section 1031, it is not recognized for purposes of determining net investment income under Section 1411.” [§1.1411-5(C)(i)(2)(ii)].  Although these regulations are not yet finalized, taxpayers may rely on the proposed regulations to be in compliance with Section 1411 until the effective date of the final regulations.

Despite these new tax increases, one aspect of the tax code provides real estate investors with a huge tax advantage. Section 1031 allows property owners holding property for investment purposes to defer taxes that would otherwise be recognized upon the sale of investment property.  Savvy investors use 1031 exchanges to redeploy their investment capital into better performing investment properties.  An exchange provides a fantastic opportunity for investment property owners to defer all capital gain taxes that would otherwise be owed.

Cris Anderson is an attorney and Northwest Division Manager of Asset Preservation, Inc., a nationwide Qualified Intermediary and wholly owned subsidiary of Stewart Title.

 

Jeff Lyon, Kidder Mathews featured in NAIOP video December 5, 2011

Posted by Erik Swanson in Articles, Blogs, Development, Research/Data, Uncategorized, Video.
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KM’s CEO Jeff Lyon hosted NAIOPs 2011 Night of the Stars awards gala last month. Jeff’s appears in a short promotional video with some pretty cool animation featuring Kidder Mathews. You can check out the video here.  

Here are the 2011 NAIOP WINNERS with some links below:  

Public Project of the Year: UW Foster School of Business – Paccar Hall

Public Project of the Year: Pike Place Market Renovation

Community Impact of the Year: Compass Veterans Center

Hospitality Development of the Year: The Alaska Building – Marriott Hotel

Private Education Development of the Year: Seattle University – Lemieux Library & Expansion and Renovation

Technology/Life Sciences (Non-Public) Development of the Year: Swedish Issaquah Hospital and Medical Center

Redevelopment/Renovation of the Year: Terry Avenue Building

Commercial Interior of the Year: Nuance Communications

Multi-Family Development of the Year: LINK Apartments

Mixed Use Development of the Year: The Landing – Renton

Industrial Development of the Year: Harbor Wholesale Grocery Headquarters: Warehouse and Distribution Center at Hawks Prairie 111 Corporate Park

Office Development of the Year: Bill & Melinda Gates Foundation Campus

Market Adaptation of the Year: Stadium Nissan of Seattle

Deal of the Year: Seventh & Madison Building – Polyclinic

Developer of the Year: Vulcan Real Estate

SIOR Industrial Broker of the Year: Wilma Warshak

SIOR Office Broker of the Year: Jesse Ottele

SIOR Investment Sales Broker of the Year: Jon Hallgrimson

Kidder Mathews Bolsters Retail Team September 29, 2011

Posted by Erik Swanson in Research/Data, Retail News, Uncategorized.
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Kidder Mathews has strengthened its retail group in recent weeks with the addition of veteran retail specialists Rune Harkestad, Tom Dillon, Eric and Brad Bissell, and Brian Engleking.

Eric Bissell spent the majority of his 28-year career at CB Commercial and First Western Properties, but was most recently at Cascade Commercial/Wallace Properties.  Brad was also at Cascade and Wallace and will partner with Eric. They will specialized in tenant rep, land acquisition, and investment sales.

Tom Dillion is a 40 year veteran of the industry working on both the client and broker sides of the business. Tom was most recently with First Western Properties. Over the years Tom has represented national tenants such as Car Quest, Cold Stone, Godfathers, Jack-in-the-Box and Radio Shack.

Rune Harkestad is 15 year real estate veteran. He  began working as a commercial retail specialist with JSH Properties in 1998. Later he worked with First Western Properties, where his focus was locating, analyzing and acquiring development sites in Washington State for companies like Walgreens drugstores, KeyBank, and SONIC restaurants.

Brian Engelking has over 14 years experience in retail leasing and tenant representation. Prior to brokering real estate, Brian successfully owned and operated a chain of 15 video rental stores from 1987-1995.

All told, the Kidder Mathews retail team now totals over 20 experienced agents in Washington alone. Welcome gentlemen.

KM’s Seattle Market Update September 20, 2011

Posted by Erik Swanson in Articles, Research/Data, Uncategorized.
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Kent Mueller, Manager of Strategic Research at Kidder Mathews puts together a nice piece that details market activity for the Apartment, Industrial, Office and Retail sectors here in the Puget Sound. Check it out by clicking on the graphic below.  

Puget Sound Investment Review – September 2011 September 19, 2011

Posted by Erik Swanson in Articles, Puget Sound Investment Review, Research/Data, Retail News, Sale, Uncategorized.
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Anchored Retail Draws Buyers August 9, 2011

Posted by Erik Swanson in Articles, Retail News, Retail Sales Comps, Sale, Uncategorized.
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The appetite for grocery anchored retail investments remains strong. Two area centers traded hands over the last couple of weeks. 

Gerrity Holdings purchased the QFC anchored North Lynnwood Shopping center for $10.2 million which is roughly a 7.25% cap rate. The property was originally listed for sale last year at $10,600,000  a 7% cap rate. 

Another recent sale was the 120,860 square foot Canyon Park Shopping Center. The Albertson, Rite Aid anchored center sold for $18,400,000 which equates to $152 per square foot in an all cash transaction. The purchase included the inline space and the ground leases for the Albertson’s and Shell. Retail Opportunity Investment Corporation beat out numerous buyers with a 7.06 Cap rate, all-cash offer with a quick 3 week close.  

It’s been an interesting few weeks with all that’s gone on in the world. The political fight over raising the debt ceiling and the S&P down grade have certainly been a distraction and investors seem uncertain as to the lasting effects on CRE (check out this nreionline.com article). It seems clear that for the foreseeable future well located properties with strong anchors will continue to draw serious buyer interest.

Another commercial real estate industry resource: CRE Radio July 22, 2011

Posted by Erik Swanson in Articles, Blogs, Investment Tools, Research/Data, Uncategorized.
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A few months back, while surfing commercial real estate blogs, I came across “America’s Commercial Real Estate Show”.  It’s an innovative national talk show that focuses on commercial real estate. The Founder, Michael Bull is a 30 year veteran of commercial real estate and owner of Bull Realty in Atlanta.  Bull puts together weekly broadcasts that cover all property types. Topics have ranged from retail leasing strategy to CRE auctions to medical office development. Each show begins with a market update from an industry data provider or news source that helps facilitate a panel discussion.   

The program is recorded each Wednesday and airs Saturday from 10 a.m. to 11 a.m. (Eastern Standard Time) on biz 1190 WAFS and on the Internet at www.commercialrealestateshow.com. The programs are archived as a podcast and available on demand at the same web address. The show can also be accessed with a smart phone.  Below are links to some recent shows:

Land and Development Industry
U.S. Office Market Update 
U.S. Industrial Market Update 
Loan Workout Strategies 
Capital Markets Update 

ACRE’s next show focuses on medical office investments and is scheduled for July 30th. Check it out here.

Cap Rates…Rise or Fall? June 14, 2011

Posted by Erik Swanson in Articles, Blogs, Research/Data, Retail News, Sale, Uncategorized.
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Today, I was speaking with a developer who’s contemplating putting a retail center on the market. This particular asset is stabilized and he’s enjoying increased cash flow after his interest rate has adjusted downward on a variable rate loan.  He believes his tenants will accept their scheduled annual rent increases and expects the operating income will rise accordingly. Life is good, why sell? 

Investors seeking stabilized assets with has contributed to several quarters of cap rate decline. Couple that with a looming inflationary period and the likelihood of rising interest rate environment seem to beg the question, “is it time to sell?”  There are a few dynamics to consider here; the increasing availability of inexpensive debt, the lack of suitable alternative investments, and the sentiment that retailers are healthier. Investors have seen that vacancy rates have leveled off and rent growth, albeit modest, may soon begin. This is putting downward pressure on cap rates as buyers price in these future NOI gains.

Every deal is unique unto itself and obviously needs to be analyzed beyond how the value is affected by today’s cap rates. It seems clear however, that we’ll see rising cap rates in the not too distant future. Click the link to check out an interesting article in National Real Estate Investor  .

Cabela’s coming to the Tulalip June 6, 2011

Posted by Erik Swanson in Articles, Development, Retail News, Uncategorized.
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An already a vibrant retail market will become even busier next year. Nebraska based Cabela’s is planning to build a 110,000 square foot store at the Quil Ceda Village on the Tulalip Tribes Reservation near Marysville. The huge themed hunting and fishing store will join nearby retailers Wal Mart, Home Depot, the 110 store Seattle Premium Outlet Center and the tribal operated 370 room, Tulalip Resort Casino.

The building’s exterior will reflect Cabela’s traditional store model with log construction, stonework, wood siding and metal roofing. The inside will highlight the company’s next-generation layout, which is designed to immerse customers in the outdoor experience and includes conservation-themed wildlife displays and trophy animal mounts. Construction is expected to start later this year. – Cabela’s Press Release

Construction will begin this year and the store will open in 2012. Cabela’s operates 33 stores throughout the USA and Canada and this will be the second Washington store after Lacey opened in 2007.  They recently opened a store in Springfield, Oregon and have 3 more planned for this year.  The Tulalip reservation is 22,000 acres located north of Everett and west of Marysville, Washington.