A Word from our President - Brad Kitchen
The commercial real estate investment market remains strong due to low interest rates and the vast amount of capital looking for yield and stability. Commercial real estate investments typically earn 10% to 50% or more annually, with a higher annual cash flow than most investments. These strong returns, which are increased even more as tenants pay down investors mortgages, and taking into account tax benefits such as depreciation and the 1031 tax free exchange, make real estate a highly demanded and profitable investment option. As an investor, you can maintain or increase your returns by utilizing some of the tools available such as PACE financing, tax appeals, cost segregation accelerated depreciation, intelligent lease structuring, and strong property management to make sure that you are maximizing your net income and maintaining tenants long term.
Having an effective property manager can make a huge difference in your commercial real estate investment. One of the most important things that a property manager can do is to keep your tenants happy to enable you to keep them long term, which will increase your return. A great property manager also needs to balance this with minimizing expenses and receiving all of the expense reimbursements that the property is due through effective budgeting, gross up and expense reconciliation. A good property manager will also help you to properly maintain the property and aid in planning for capital replacements to be undertaken at the best time such as when it is most cost effective or when possible reimbursements are available from tenants or other programs such as tax incentives.
As an owner and asset manager, I constantly monitor my commercial real estate investments to determine the best time to make improvements, sell, or refinance based on my current or expected lease status and the capital and investment markets. I also monitor all of the properties operating expenses to search for opportunities for savings, especially in real estate taxes. In this newsletter, you will find more information on PACE financing for capital improvements and tax appeals from experienced professionals in the field.
Alterra’s Commercial Outlook:
The commercial real estate market is always evolving with the economy and innovation, and COVID accelerated this change.
- Hotels were one of the most affected commercial real estate classes, and where most of the defaults may occur, but it is expected they will slowly begin to normalize as COVID restrictions are lifted.
- Retail has been evolving for some time now and many retail investments will continue to perform well, but an investor must choose wisely. Some struggling retail properties will become excellent redevelopment opportunities.
- Office buildings have been in flux due to COVID, but it is anticipated they will do well over the long term. This optimistic outlook is largely due to the fact that many have long term leases with generally healthy companies and as such there will not be the large number of loan defaults as many people are anticipating. There will be some short-term disruption in the office market, but high-quality assets are still leasing and subleases will be absorbed. We have already seen office leasing activity pick up significantly in 2021.
- Industrial real estate has been one of the main beneficiaries of COVID as companies realized the shortfalls of the current supply chain which will result in more manufacturing in the U.S. and more warehousing.
- Apartments and Self-Storage investments have continued to do well through the pandemic and will continue to perform long term, but they are more management intensive than other property types.
Alterra Real Estate Advisors manages and leases over two million square feet of commercial real estate, mostly in Columbus Ohio, and we are happy to assist you with any aspect of your commercial real estate investments including acquisitions and dispositions. Some of our current investment sale listings are highlighted in the this newsletter.
Did Your Real Property Taxes Increase in 2021?
By: Laura MacGregor Comek, Esq.
Have you received notice from your County Auditor that your property values have been increased? In Franklin County, it has been reported that a 20% increase occurred across the board. In many cases, values have increased, based upon a computer formula that seeks to forecast values based upon other recent sales.
Higher values mean higher taxes.
If you want to challenge your value and reduce taxes, it must be filed by March 31, 2021 - NO EXCEPTIONS.
There are a few important considerations if you want to challenge a value:
- The County’s computer program is not infallible. Run your own comparables, check recent sales to validate the computer modeling. You can get assistance from your realtor too. If you believe the value is high, consider seeking redress now.
- You can challenge value with an appraisal. That will require three years of rent rolls and financials. Market comparable sales may also be relevant evidence of value.
- The current value may not include recent sales. In other words, if you recently purchased or sold homes, land, lots, buildings, etc., for less than the new value you may file to obtain the sale value. The sale must be a recent, arms- length sale to be valid for this purpose.
- There are rules about WHO may file and HOW OFTEN.
- Real property taxes billed in arrears. Filing now in 2021 is actually to address the tax lien date January 1, 2020. Several Central Ohio Counties just recently performed their triennial updates, so the value of January 1, 2020 will be carried forward for 2021 and 2022 … unless certain exceptions apply.
- There are occasions where being more strategic about your filing has important implications on value. COVID-19 may not be a valid reason to file in 2021 … largely because the events of the COVID 19 Pandemic did not occur until AFTER January 1, 2020. Even then, a case must be proven with evidence of value, losses, etc., for the SPECIFIC tax lien date to which a value applies. It may be worthwhile to wait until 2022 for the prior year of 2021.
Board of Revision Complaints Against The Valuation Of Property must be filed by March 31 of each year. You may only go back 1 year to obtain a new value, so be diligent!!!! Individual persons are only permitted to file complaints on properties they personally own. Consult a legal professional before filing, as professionals are needed for most commercial cases. Excluding a few specific exceptions, property owners can file only 1 time every 3 years in most cases.
Finally, please be mindful and diligent about keeping tabs on values. Even properties in CAUV, or in tax abated areas could be affected in future years. Big consequences may apply.
For specific inquiries, please feel free to contact me.
EFFICIENT FINANCING FOR BUILDING EFFICIENCY
Justin Kale, CEM/Co-founder and Director at Energility explains the benefits of the PACE program. "Commercial real estate owners can add value to their assets by using the CPACE (Commercial Property Assessed Clean Energy) program which enables capital improvements to building systems to be financed through an assessment. Properly designed, energy efficient system retrofits or adding renewable energy systems are eligible to be funded by reducing energy and maintenance costs to pay the property assessment. This cash flow positive investment strategy enables owners to offer best in class spaces for their occupants."
Links For Reference:
Largest Sales 2021 Year To Date
Central Ohio Area
6198 Green Pointe Dr., Groveport, OH
Sales Price: $56,100,000
8355 Highfield Dr., Lewis Center, OH
Sales Price: $31,600,000
3100 Easton Square Pl., Columbus, OH
Sales Price: $18,600,000
1755 S 20th St., Columbus, OH
Sales Price: $17,700,000
6670 Perimeter Dr., Dublin, OH
Sales Price: $14,500,000
7690 New Market Center Way, Columbus, OH
Sales Price: $9,000,000
501 Schrock Rd., Columbus, OH
Sales Price: $5,575,000
2100 Cloverleaf St., Columbus, OH
Sales Price: $5,000,000
5855 Frantz Rd., Dublin, OH
Sales Price: $1,840,000
3911 S Hamilton Rd., Groveport, OH
Sales Price: $1,428,500
4825 Knightsbridge Blvd., Columbus, OH
Sales Price: $1,330,000
445 Phillipi Rd., Columbus, OH
Sales Price: $1,325,000