Citrus County, Florida is in for a long legal battle with Duke Energy over $16 million worth of unpaid property taxes. According to the Tampa Bay Times, Duke Energy offered last month to pay $27 million of its $35 million property tax bill, an offer that was rejected by the local appraiser. Duke responded by handing the county a check for $19 million this week and saying they will file a lawsuit that explains why it shouldn't have to pay the full amount.
As vacancy rates remain low and rents continue to grow, the multi-family sector of commercial real estate continues its dominance. However, renters could start shopping for deals in the flat housing market while the cost of renting continues to rise. According to the National Real Estate Investor, at the moment, doubts in the housing market and the broader economy are keeping many Generation X and older Generation Y renters from shopping for homes, but that uncertainty won’t last forever.
Michigan officials have proposed a new plan to eliminate personal property taxes businesses pay on computers and equipment used in manufacturing. According to Bloomberg Businessweek, the proposal, that would require voter approval, aims to repeal a tax that hurts businesses and reduces Michigan's economic competitiveness. It would also provide more reimbursement to communities for lost revenues than in a measure passed in May by the Senate.
Property tax is not a fixed expense. It is manageable but often requires hiring someone experienced with these ad valorem taxes to assist. Hotel assets are very sophisticated investments that are typically left to those savvy investors that have specific knowledge of the operations. So the process of choosing a property tax consultant to represent you should entail as much sophistication and savvy as the buying process. The article discusses who the consultants are and the Pro's and Con's of each type; why hotel assets deserve more than just a local consultant; how to compensate the consultants; and how to evaluate their performance. Armed with all of this information, one should be ready to truly manage below the line.
Hotel investors are beginning to pay all cash first for properties, then layering in debt later to move deals along quicker. According to HotelNewsNow.com, a hotel buyer purchasing a hotel all cash and paying off existing mortgages, and then replacing the debt with lower-cost financing is not a new idea, but one that has increased around the industry as the transaction environment has been slow moving over the course of 2012 thus far.
Most commercial real estate companies are avoiding capital investments for sustainability revamps and instead are focusing on self-financed projects with a direct financial benefit. According to Justmeans, even though there is more capital available for energy retrofits and renewable energy installations, real estate businesses tend to favor projects with a more moderate budget such as lighting retrofits and temperature controls as opposed to expensive HVAC upgrades that would save more energy in the long run but are not as obvious to tenants.
Struggling states are beginning to apply corporate income taxes to companies who do not have a physical presence in their state. According to The Daily Chatter, states have started collecting corporate income tax from franchise companies. So while the headquarters may reside in one state and pay income tax there, other states with single store franchises not owned by the main company, are asking for corporate taxes as well.
The possibility of a fiscal cliff at the end of the year is leaving commercial real estate and the economy as a whole with a great deal of uncertainty. According to the National Real Estate Investor, companies are still hesitant to invest in commercial real estate because of a few giant unresolved questions, starting with the fiscal budget. If things continue on as they are, and a fiscal cliff is avoided, there should be slow growth next year for the economy, with the possibility of acceleration in later 2013 and 2014.
Last week's ballot showed several measures in the State of California passing even more taxes on its citizens in an effort to relieve budget pressure on local governments and school districts. According to The Sacramento Bee, a report compiled for the League of California Cities said that overall, 71% of 240 local tax and bond measures, where bond issues are automatic property tax increases, passed.
Commercial real estate investors are beginning to borrow less and expect lower returns due to rising risks that include increases in interest rates. According to Bloomberg, investors are less interested in taking advantage of all the money they can borrow, and more interested in investing their cash. Due to the Federal Reserve's policy of keeping its benchmark interest rate near zero, sales of commercial properties across the US rose 19% in the third quarter from a year earlier to $67 billion.
The New York City commercial real estate market will rebound from the affects of Hurricane Sandy just as it has after disasters in the past. According to SFGate, as bad as the storm was, many executives believe commercial real estate in the city will be back to normal in a years' time. Still, several real estate companies admit they were ill-prepared for the multitude of Sandy and plan to be better prepared for such events in the future.
Though the warehouse market continues to slowly recover, developers are still showing interest in the market to fill a demand for big-box space. According to the CoStar Group, there are about 47.1 million square feet of total warehouse projects under way in 86 markets, up 3% over last year. Still, there was only 17.4 million square feet of positive net absorption of warehouse space in the third quarter, down from 25 million in the second quarter and 36 million from the same period last year.
As a result of the most recent election, three measures passed that will cause a drastic mill levy increase within Denver County, Colorado. According to the Assessor, it appears the passing of the measures will cause the rates to be an approximate 12.4 mills higher next year (about a 17% increase in taxes). We were informed this will affect the “2012-pay-2013” tax bills which come out in January. More information to the extent of this change will be available in the coming weeks.
Cash-strapped Illinois is facing $10 million a year in lost revenue caused by a tax-break for investor-owned hospitals. According to the Daily Herald, hospital industry officials say the tax credit recognizes the free care they provide to the uninsured, but some state officials were puzzled about how for-profit hospitals were able to land a major tax break in the intense closed-door negotiations during a statewide financial crisis.
Industry experts are still claiming that too many things remain unclear at the moment for the commercial real estate industry to make a turn around. According to the Baltimore Business Journal, the two major things that affect real estate decision making are first, jobs and consumer confidence, and second, clarity of regulatory and fiscal policy due to the still divided Government.
Two separate business tax breaks, one in Arizona and one in Florida, both failed to pass this election.
If San Francisco, California voters adopt a gross receipts tax on today's ballot it would cost commercial landlords about 11 cents per square foot. According to the San Francisco Business Times, the amount will be partially applied during the five-year phase in and will only be 1.1 cents at the 2014 implementation date. As an example, the owner of a 300,000 square-foot office building in San Francisco would have to pay an annual gross receipts tax of $32,250.
Thousands of real estate investors will be subject to a investment surtax on rental income beginning New Year's Day. According to The Wall Street Journal, the tax won't affect real estate companies or those who work full-time managing their real estate portfolio, but those investors who dabble in real estate part-time while having other jobs could be subject to a 3.8 percent surtax on rental income from the properties they are involved with.
Although the U.S. added a higher than projected 171,000 jobs in October, the unemployment rate still rose from 7.8% to 7.9%. According to the Atlanta Business Chronicle, the addition in jobs was up from a 148,000 gain in September, and far exceeded the projections from a Bloomberg survey of economists of no more than 125,000.
Connecticut Governor Dannel Malloy has signed three separate Executive Orders concerning property tax extensions due to the devastation caused by Hurricane Sandy. The Orders have been put in place to give residents and business owners some breathing room while they recover from the damage caused by the storm. The Orders are as follows: