Businesses Seek State Cuts In Commercial Lease Taxes

September 25, 2013 Leave a comment

Governor Rick ScottGov. Rick Scott met with business leaders in Broward and Palm Beach counties last Tuesday to get their input on what tax cuts he should propose to the legislature since the state will have a budget surplus in 2014.

Their biggest concerns included rising personal property taxes and insurance costs, and taxes that affect businesses moving to the state or startups trying to grow.

The stops were part of Scott’s tax-cut tour across the state. Scott has pledged to cut taxes and fees for the state by $500 million in the 2014-2015 budget, the same year he would run for re-election.

“How do we give the money back to you, the taxpayers? I’m putting it back in your hands,” Scott told the group at the Palm Beach County Convention Center Tuesday morning.

Kelly Smallridge, president of the Business Development Board, the economic development agency for Palm Beach County, said when recruiting businesses to the area, Florida’s tax on commercial leases is an issue in being competitive with other states.

“We’re one of the only states that has a tax on commercial leases,” she said.

Real estate broker Robert Goldstein suggested to the governor the commercial leasing tax be reduced by 1 percent each year until it is phased out. “We’re at a competitive disadvantage,” he said. The current tax is 6 percent.

He said the impact on economic and job growth from eliminating the tax would far outweigh the tax revenues.

Several small business owners, including one who provided a sample of his company’s popcorn to the governor, attended the meeting at Broward College in Fort Lauderdale.

Rosana Santos Calambichis, owner of Davie catering company Big Chef, said she would like to see a reduction in the tax on fuel — her business has seven trucks — as well as the state tax included in insurance coverage and the commercial lease tax. “It adds up quickly,” she said.

Broward College radiology student Shelda Simon, 19, got her 15 seconds of fame — and a photo with the governor — after asking him why so many young graduates are unemployed.

“There are plenty of jobs around the state. But you have to get the right degree,” Scott told her.

Life science business owner Ken Kirby said the governor should consider proposing a new life science fund for startup businesses in the sector now that it has invested millions of dollars in Scripps Florida, in Jupiter, and other institutes.

“It seems a shame to waste the momentum,” said Kirby, whose company TransDermal Delivery Solutions Corp., which has developed alternative systems to deliver drugs to patients, opened a new headquarters in Palm Beach Gardens last year.

Florida expects a budget surplus by the time lawmakers draft the 2014-15 budget. A new forecast released Sept. 4 shows a surplus of $845 million in fiscal 2014, even after meeting current enrollment needs for schools and health care programs such as Medicaid and setting aside $1 billion in reserves, according to a draft report released Sept. 4 by legislative appropriation committees and researchers.

The surplus is mostly due to a recovering economy, said Amy Baker, state chief economist. “People here have more money to spend and more tourists are spending money here,” she said.

While general revenues are increasing due to pulling in more sales tax, the budget constraints have shrunk as some state programs were eliminated or reduced during the recession.

But forecasters warn that more than half of the surplus — $449 million — is a one-time windfall.

In recent weeks, Scott has promised to spend an additional $70 million on environmental projects dealing with the Everglades and Lake Okeechobee in the coming year, which could come out of the surplus.

Another target could be auto tag fees that were raised in 2009 when Gov. Charlie Crist was in office. Crist, now a Democrat, is expected to challenge Scott in the governor’s race in 2014.

Gov. Scott made a pledge in 2010 to eliminate the corporate income tax, which generates about $2.1 billion a year. But Florida lawmakers have steered away from the massive tax break, which would benefit mostly larger companies.

The “It’s Your Money” tour continues over the next three days in Jacksonville, Tampa and Orlando.

 

Source:  Sun-Sentinel

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Filed under Commercial Financing, Industrial, Office, Retail Tagged with , , , , ,

Could Proposed Accounting Rules Throw CRE Investors Off Balance?

August 22, 2013 Leave a comment

accounting

Even as new accounting rules propose to bring property and equipment leases onto company balance sheets, the new rules will leave certain other financial obligations, namely service contracts and leases with terms of 12 months or less, as off-balance sheet items, according to a report from Fitch Ratings.

In some cases, Fitch reports, extension options and variable lease payments may also be excluded from being capitalized as a lease liability under the new proposed accounting rules.

While the proposed rules are intended to more accurately reflect the economic substance of leases, the value of the rules hinges on whether they are successful in increasing – or at least not further obscuring — financial transparency for investors and analysts, said Fitch analysts John Boulton, Alex Griffiths and Frederic Gits.

With the Sept 13 deadline fast approaching for public comments on the new proposal, CRE groups and other stakeholders are weighing in, and in some cases doing battle in the court of public opinion, over what they believe will be the dramatic effects the new accounting rules will have on landlords, tenants and the broader CRE market.

While almost all parties agree that it is vital for companies to divulge information about cash payments and the nature of leased assets in ways that allow investors to make judgments in asset financing decisions, how best to do so remains a point of disagreement.

Corporations often adjust their balance sheets in an attempt to reflect a fair estimation of implied debt from leases, however, critics claim that these adjustments are inconsistent, and frequently understate the lease obligations.

Companies implementing the proposed standard will face a heavy administrative burden since they will have to collect and input a substantial amount of data and perform complex calculations to determine the amount to be capitalized. Most companies have not developed a corporate strategy to address the issue or have been slow to start their transition plans, according to a recent white paper by Boston-based tenant representation firm Cresa.

“The bottom line is the need for transparency, and the biggest hurdle is how companies will maintain comprehensive, comparative and valid information in order to perform this analysis,” said Michael Hetchkop, senior vice president of lease auditing at Cresa Washington D.C. “It’s going to be more of a challenge for companies to make sure the information they have is complete.”

Reaching a solution has proved difficult for accounting standard setters, who are faced with conflicting and sometimes contradictory definitions of what exactly constitutes a lease, defining the lease term, and measuring payments, the Fitch report said.

“Add political sensitivity due to the size of the lease market and you have a potent mix. It is no surprise that progress towards a solution has been slow,” Fitch said.

Cresa’s Hetchkop agreed.

“This has been a gut wrenching process since it started four years ago, with 800 comment letters [for the previous exposure draft], then going back to square one. And now, another comment period, and who knows what will happen at the end?”

A recent letter to the FASB and IASB from a diverse group of more than 30 trade organizations, including the Roundtable, International Council of Shopping Centers (ICSC), CCIM, American Trucking Association and Equipment Leasing and Finance Association expressed their displeasure with the latest proposed leasing standard.

“In its current state, it is our opinion that the proposed leasing standard may result in substantial costs to businesses, lack any benefits for investors … will increase complexity, drive economic activity rather than reflect it and will create adverse unintended consequences and pressures upon financial reporting systems. Further, the proposed leasing standard will not result in more decision-useful information compared to that currently available. If our concerns cannot be addressed, then it is our belief that the proposed leasing standard should not be finalized.”

FASB/IASB will begin a month-long series of public roundtable discussions on four continents on Sept 10, starting in São Paulo, Brazil. After weighing the feedback, a final standard is now expected to be issued in early 2014.

The new standards would be effective no earlier than annual reporting periods beginning on January 2017, but would include a two-year look back provision.

 

Source: CoStar

Filed under Commercial Financing, CRE Valuation Tagged with , ,

New Idea: Third-Party Solar Finance For Commercial Property

August 14, 2013 1 Comment

solar

With recent announcements by the White House reinvigorating solar energy goals through the Department of Energy’s SunShot initiative, the costs of solar are expected to continue their trend downwards to eventually meet those of conventionally generated electricity.

The most recent initiative makes it a goal for solar to get there by the end of this decade.

These goals don’t come only from government offices.  Laboratories too are leading the way: technological advances are also helping along the trend, as silicon may be able to be replaced as the main ingredient in solar panel construction.  A recent discovery that a light-absorbing material known for a century may work in solar panels and dramatically increase their efficiency has the industry talking.  Thanks to the combined developments, the cost per watt of solar-generated electricity may fall to the 10-20 cents per watt range where fossil fuel-generated electricity resides.

All that said, the opportunity for commercial space users to take advantage of these new technologies and for commercial landlords to convert their properties into energy-producing ones remains mired in the financial barriers and customs of an industry that views (and pays for) property improvements for multi-tenant buildings in very specific ways.  To answer the question of how the costs and benefits of solar improvements are apportioned usually needs to begin with how such improvements are paid for.

One California company says they have used real estate legal norms to address this problem. Working with a leading law firm, EPR Squared, a real estate firm specializes in cracking the tough problem of opening commercial rooftops to solar.  In solar improvement,  as with most other features of commercial property usage, the all-important capital source is the third party financier.  But the territory is new and forms and deals have little precedent to work with.  Establishing revenue flows on a tenant or space subdivision basis to cover construction costs and to apportion energy-generation benefit requires a new kind of real estate deal. EPR Squared says they’ve constructed such a boilerplate.

[…] 90 percent to 95 percent of commercial building rooftops remain essentially beyond the reach of third-party financing, according to real estate research firm data cited by Energy Producing Retail Realty, Inc. (EPR Squared, EPR^2) Founder/CEO Chris Pawlik.

“When you have a commercial building with multiple tenants,” Pawlik said, third parties “can’t technically finance those unless the owner takes it on, [and] commercial owners won’t do that.”

Third-party financiers, he explained, “can get an agreement signed or financing in place because they have the credit of the off-taker that takes care of the risk.” With a twenty-year commitment, third-party financiers have certainty that their loan will repaid.

But, Pawlik said, “owners typically own properties five to seven years and tenants are typically in properties five to ten years. You can’t have a ten- to twenty-year agreement in situations like that.”

EPR Squared’s idea is to create a real estate interest on the property and have it be a separate interest from the improvements and from the land.

 It is similar to agreements with property owners for cell tower and billboards, though, Pawlik stressed, the solar legal structure is not identical.

DLA Piper, which Pawlik called “the gold-standard, top-tier law firm” for commercial real estate, “has finalized the form documents we need to take to the owners to show them how this structure would work.”

EPR^2 has “a dozen or so deals in the pipeline with groups that have either portfolios of properties or single properties,” Pawlik said. The first deal, he explained, must be one that demonstrates to the 60,000 California real estate brokers, agents and mortgaging agents that “this is almost identical to a real estate transaction.” When they see commissions in it for themselves, he said, “we can really scale the idea and bring it to a size at which pension funds and insurance companies will start looking at it.”

Source:  Commercial Source

Filed under Commercial Financing Tagged with , , ,

Alternatives to Foreclosure – Part 1 of 5

January 31, 2011 Leave a comment

Even if the government tells you the recession is over, many of you are still feeling it. With over 14% unemployment in Miami Dade County and over 12% statewide, you are not alone. These harsh statistics are well above national averages and they also do not account for underemployment (people who simply stopped applying for unemployment benefits) nor does it account for people who have had their hours and pay checks reduced. If you are a small business owner, you may be feeling it the most, and if you happen to own commercial property that you use for your business, it may be hard to pay your mortgage, property taxes and insurance, while also keeping up with the overhead of your business. If you are an investor in commercial property, small businesses may be your tenants, and your vacancy may have increased significantl and you are likely receiving 1/3 to 1/2 less from your current rent roll.  As a result your investment property may have a negative cash flow. In either case, whether a small business owner or an investor you may be forced to stop making payments, and in some cases your lender may have already taken action.

These are uncharted waters for many, because a recession typically lasts for 2 to 4 years out of a 15 year economic cycle, in which case the majority of the population is trained to handle the boom cycle of the economy. So it is helpful to have someone who understands the process and knows your options, and can navigate these uncharted waters to help mitigate your loss. International Port of Calls around the world require that ships be handled by local tugboat captains who know the local waters and tides, and who understand where the shallows and eddies exist, so that they can provide a safe berth. Likewise in these difficult times, it is best to have a professional who has relationships with your lender and who understands their concerns, their culture, their processes and most importantly their language. Who better to do this than your trusted commercial real estate advisor who knows your property, knows the market, knows additional lending sources, and knows buyers and tenants. A Commercial Real Estate Advisor can act as a third-party communicator to all the various entities involved, which is something your attorney can not do.

Keep in mind that not all Advisors are equal, so be sure to use someone who is currently dealing with banks and assisting their customers in the various stages of foreclosure. Sperry Van Ness is a national platform that is built to service commercial real estate at the highest possible levels. Our Asset Recovery Team is thoroughly versed in the various options that an individual has to mitigate loss.  We can consult with you to solve your commercial real estate needs, so that your business can stay on track and continue to operate. While we are not lawyers, we know the best small-business lawyers and other vendors who are key to forming a successful team to implement your strategy. The longer you wait, the less options you have, and the less time you have to exercise those options.  Call our office now and receive a complimentary valuation of your property and your situation. We can connect you with the right professionals, or if you already have your team in place, we can compliment them with the additional tools and skill sets we bring to the table.   Call Matt at 305-490-6526 and find out more about how you can improve your situation, or if nothing else to talk about the market and the economy, and what is in store for Commercial Real Estate in 2011. 

Stay Tuned for Part 2…

Filed under Commercial Financing

Sperry Van Ness – Largest Loan Advisory in the Nation

November 19, 2010 Leave a comment

Sperry Van Ness Enters Commercial Loan Sales Market

Sperry Van Ness Asset Recovery Team announces strategic partnership making it the nation’s largest loan sale advisory firm.

Quote start“While many firms talk about their ability to provide full service solutions to financial institutions in regard to distressed assets, few truly have the capability to do so,” said Kevin Maggiacomo, President and CEO of Sperry Van Ness.Quote end

Irvine, CA (PRWEB) November 19, 2010

Sperry Van Ness International(“SVNI”), one of the world’s leading commercial real estate advisory & brokerage firms announced today the Sperry Van Ness Asset Recovery Team(“SVNART”) has entered the commercial loan sales arena. This expansion into the commercial loan sales marketplace occurred as a result of an exclusive strategic partnership formed with Benewolf, a premier provider of loan sale advisory services. As a result of this strategic partnership, SVNART immediately becomes the nation’s largest loan sale advisory team in terms of trained advisors.

SVNART provides lenders with a single source solution to distressed asset sales at any stage of asset impairment from performing loans, to non performing loans, to litigation, to bankruptcy, to foreclosure and through the deed in lieu or title recovery process. With the newly added capabilities SVNART can advise a client on maximum asset recovery, selling one off or pooled loan assets, conduct date certain sales, electronic auctions, live outcry real estate auctions or single negotiated real estate transactions.    

“While many firms talk about their ability to provide full service solutions to financial institutions in regard to distressed assets, few truly have the capability to do so,” said Kevin Maggiacomo, President and CEO of Sperry Van Ness. Jerry Anderson, CCIM, Executive Managing Director of SVNART added, “We are now able to advise financial institutions at every stage of the asset recovery continuum whether they should sell the physical asset or the underlying loan and then provide the expertise and platform to assure a certainty of execution – few firms have this capability and certainly not with the scope and scale that we now offer.” Anderson further added, “no other commercial real estate firm offers a fully integrated array of advisory services including brokerage, leasing, asset & property management, work-out & restructuring services, loan sales, electronic loan review & bidding platform, and real estate auction services, which are state specific real estate license compliant in every state.”

While many firms in the industry are consolidating, Sperry Van Ness is again bucking the trend by continuing aggressive expansion plans. “We continue to look for strategic opportunities that place us in a position to better serve our clients, and our new relationship with Benewolf gives testimony that we’re not just talking about growth, we’re delivering it,” noted Maggiacomo.

Moreover, Anderson stated that “because we are now the largest trained loan sale advisory sales force in the world, lenders can leverage a totally integrated distressed asset disposition system to help them through any phase of impairment while maximizing lender recoveries whether dealing with a performing or non-performing loan or even REO assets.” Best of all added Anderson, “All of this happens within the Sperry Van Ness model of compensated cooperation and collaboration which is revolutionary in the loan sales advisory arena.”    

To learn more about the Sperry Van Ness Asset Recovery Team, please visit our website at http://www.svnart.com, or call (877) 765-3786

About Sperry Van Ness
Sperry Van Ness International, headquartered in Irvine, CA. Ranked as one of the most recognized commercial real estate brands in the US by the Lipsey Co., SVN is also one of the largest commercial real estate franchisors in the world with franchisees in 3 countries, 38 states, and 153 markets. Sperry Van Ness franchisees and their Advisors have completed more than $39 Billion dollars in sales volume on more than 12,000 transactions in the last 4 years alone.

Media Contact:
General media inquiries and interview requests should be directed to:
Kristina Allen
Sperry Van Ness International
18881 Von Karman Ave, Suite 800 | Irvine, CA 92612
Phone 888.311.0605 | Fax 949.606.8319

Filed under Commercial Financing