The income approach to value results in the valuation of a going-concern business for an operating hotel. For almost any practical application, the going-concern value is what is needed. Only in the application for ad valorem taxation purposes is it necessary to isolate the value of the real estate separate from the going-concern value, and therein lies the dilemma. There are several ways to accomplish the valuation issue, but unfortunately the way that has been most commonly used by fee appraisers and assessors is typically know as "the management fee approach."
As dollar stores continue to pop-up everywhere across the country, they are single-handedly changing the net lease investment market traditionally dominated by drug stores and fast food restaurants. According to the CoStar Group, triple net leased retail outlets have always proven to be popular with investors because of the minimal property management involved (triple net leases typically pass all expenses on to tenants), and the usually longer term leases favored by drug store and fast food users.
After abandoning the idea during the recession, almost every shopping center and mall owner is now exploring the idea of adding a hotel component to existing projects. According to ehotelier.com, the driver behind this trend is simple; the right hotel added to the right project can boost retail sales by 20-40%, and the retail shopping can boost hotel Revenue per Available Room (RevPAR) by a comparable amount over a competitive set.
The elimination of Idaho's personal property tax on businesses could turn out to be more costly than originally thought. According to the Idaho Statesman, business groups and many politicians are seeking elimination of the tax, which brought in an estimated $141 million in 2012, saying it is the state's most hated levy and difficult for businesses to administer. The question that remains, however, is how to make up for the lost revenue if eliminated.
Paradigm Tax Group and Ad Valorem Solutions, LLC (AVS) today announced they have entered into a definitive agreement for Paradigm to acquire AVS. The acquisition bolsters Paradigm's traditional industry strength and expands its position as California's most experienced and credible property tax consulting practice. "AVS' California clients include many of the nation's largest owners, managers and developers of commercial property portfolios," said Del Kolbe, Regional Director and Principal of Paradigm Tax Group. "In seamlessly integrating their local expertise with Paradigm's outstanding national practice, the combination of these two market leaders will allow clients to benefit from a state-of-the-art online reporting system and enhanced geographic property tax services across the entire nation; all delivered through a single point of contact.”
Growing demand, constrained new supply, and rents rising faster than inflation make for pretty positive times in the multi-family industry. According to the National Real Estate Investor, for the next few years, most analysts foresee rising rents, higher net operating income, modest price gains, available capital and an active transactions market. Still, despite the current warranted optimism, there are potential challenges around the corner.
The share of community banks' assets devoted to commercial real estate loans has drastically increased over the last 20 years. According to Columbus Business First, commercial real estate loans made up about 26.7% of all assets at community banks in 2011, up from 19.6% in 2000 and from 14.5% in 1990. This is significantly higher than larger banks, which have shrunk their portfolios to 8.8% in 2011, down from 9.9% in 2000 and 12.1% in 1990.
Personal Property Taxes in Michigan are one-step closer to being phased-out, and it is believed that economic growth will follow. According to Michigan Information & Research Service, last Thursday, the Michigan House of Representatives began passing a package of 12 bills to limit and phase out the Personal Property Tax and to use a complex reimbursement plan to replace funds for local governments. The suggested plan takes a moderate approach and would not start for over a year.
After a strong third quarter, commercial real estate prices saw very little movement in October. According to the CoStar Group, though prices have improved from a year earlier, recent fluctuations in prices likely signify a more cautious attitude among investors stemming from uncertainty over U.S. fiscal policy heading into 2013. Multi-family properties continued their upward pricing trends, while all other sectors remain a drag on overall perceived value.
Commercial and multi-family mortgage debt outstanding increased in the third quarter of 2012 by $6.6 billion, or roughly 0.3%. According to RealEstateRama, for the fourth quarter in a row, the net increases in lending by investor groups has outpaced a decline in the balance of commercial and multi-family mortgages held in commercial mortgage backed securities. Commercial banks continue to hold the largest share of the total outstanding debt at $819 billion, or 34% of the total.
New York City council passed a bill to help homeowners whose properties were severely damaged by Hurricane Sandy. According to the Gotham Gazette, the bill extends the deadline for homeowners to pay their next property tax bill from January 1, 2013 to April 1, 2013, interest free. Only homes that have been determined to require major structural repairs by the Department of Buildings, or that must be demolished, are eligible for the extension.
Commercial Real Estate experts predict that the industry is slowly but surely recovering and looking up in 2013. According to The San Diego Union-Tribune, banks are lending, though preferring borrowers with excellent credit; apartment investors are happy as demand rises, supply tightens, and rents rise; and retailers are retooling to compete with e-commerce, confident that consumers are eager to be done with frugality fatigue.
Washington, DC has released revised building codes set to alter the way new buildings are constructed and their effect on the environment. According to the Washington Business Journal, both the regulators and the regulated will have much to get used to, most notably an unprecedented set of green building codes that will apply to all new or substantially renovated commercial buildings larger than 10,000 square feet and multifamily residential four stories or taller.
The Ohio Senate has passed a bill that will boost private investment in low-income communities across the state. According to the Dayton Business Journal, Senate Bill 327 would expand Ohio's New Market Tax Credit Program, launched in 2009, raising the tax credit cap from $10 million to $50 million and spurring more than $437 million of investment in Ohio's poorest communities.
Healthcare reform is revising the traditional medical office models and moving away from solo practitioners and single-specialty practices in small offices. According to GlobeSt.com, aging facilities and a move towards managed-care systems for the past two decades have caused consumers to pay more attention to the location and condition of the facilities they use for healthcare. This led to joint-ventures with hospitals for new campuses and for refurbishing existing facilities to become the norm.
Iowa Governor Terry Branstad has said that cutting commercial property taxes is a priority for next year. According to the DesMoinesRegister.com, the state's treasury is strong enough that it can replace whatever tax revenue local governments lose when commercial businesses pay less in property taxes. Iowa's property taxes are the third highest in the nation, and predictions call for the state to take in 3% more in tax money in 2013 compared to 2012.
Over the course of 2012, the commercial mortgage market has improved greatly as deals once thought impossible to refinance are actually being pushed through. According to The Wall Street Journal, strong investor demand for yield in a low-interest rate world has unleashed a lending boom in commercial mortgages, producing the most favorable conditions for borrowers since 2008. There is expected to be $46 billion in new CMBS issues in 2012 and as much as $65 billion in 2013.