Adams Commercial Real Estate Blog: 2009

I guess the moral of the story is that even though it’s a cool trend, the zoning is in place and you have a willing lender, sometimes you should not move forward with a development. This thought came to mind when I read about a rezoning being approved for a mixed use (retail and residential) development in the East Atlanta neighborhood.
The good news about this project is that the residential component will be “rental” rather that “for sale” units and it will be located in an established retail corridor adjacent to two very established single family neighborhoods. The bad news is that there are plenty of retail vacancies in the corridor and the multifamily market here is a bit soft. For this project, the chances are the good will outweigh the bad and it will be a success.

There are several other projects in the intown market that will not be so lucky. I somewhat understand the “irrational exuberance” of the condo developers that were caught up in the condo building frenzy and I understand the economics of having a retail component in your project. What I don’t understand is building a mixed use project in an area with few if any “rooftops” to support your retail. There are several projects that fit this description with 10,000 to 30,000 square feet of retail space available and almost none of it has been leased. The Intown Atlanta market, in my opinion, is still “under retailed”. It’s just that basic market fundamentals matter now more than ever and you need a population with a decent level of income to support retail establishments. Several developers seemed to have forgotten this lesson.

Friday, May 22, 2009

CIRE Magazine :: Demystifying Defeasance

CIRE Magazine :: Demystifying Defeasance

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Friday, May 15, 2009

CIRE Magazine :: Back to Basics

CIRE Magazine :: Back to Basics

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Friday, April 10, 2009

Florida's Economy

I was in Palm Bay Florida earlier this week for the funeral of a cousin. That part of the state is called the "Space Coast", because the Kennedy Space Center is close by. I flew in and out of Melbourne International Airport. If activity at the airport is an indicator of the condition of the local economy, the Space Coast is not doing well. When my flight arrived that morning, I hustled through the airport to the rental car area and was on my way to the funeral service in just a few minutes. I did not pay any attention to the level of activity at the airport.

That afternoon, I arrived back at the airport at about 4:45pm for a 5:45pm flight back to Atlanta and there was no one there. All of the ticket booths and rental car stands had personnel, there were just not many passengers. My flight was a little late leaving. In the hour or so I spent in the terminal, the only airplane to land and take off was our little 50 passenger regional jet. The concourses were empty and there were no aircraft at any of the gates. I have had this experience at some tiny airports throughout the country. I have never had that experience at a medium sized airport like MLB.

When we arrived back in Atlanta there was the usual crush of humanity on the concourses and on the train leading to the terminal. Granted, ATL is a huge hub and many of the travelers were just passing through town. The Space Coast is a good bit smaller population wise than the Atlanta Metro area. Still, if air travel is an indicator of the vibrancy of a local economy, I am happy that I sell real estate in the Atlanta market.

Wednesday, April 8, 2009

CIRE Magazine :: Deal or No Deal?

CIRE Magazine :: Deal or No Deal?

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Monday, April 6, 2009

1031 Exchange Issues

The latest challenge to the free flow of transactions in the commercial real estate market involves a “1031 Exchange”. These transactions, named after the Section 1031 of the Internal Revenue Code allows for a deferral of any gain that results from the sale of a property, if the proceeds of the sale are reinvested in a similar or “like kind” property.
The tax deferred exchange can be simultaneous or it can be delayed. It can also involve multiple parties.

In a delayed exchange, the proceeds of the sale of the “relinquished” property are held by a third party known as a Qualified Intermediary until a “substitute” property is found. The Seller has 45 days after selling his property to identify a several possible new properties and 180 days in which to acquire one of the identified properties. In the meantime, the proceeds of the sale are held by the Intermediary.

In many cases the Intermediary is allowed to invest the money they are holding for a seller in some safe instrument and retain any interest earned on the money. In the last year or so, several Intermediaries have had to file bankruptcy because the investment instruments turned out to be illiquid and the Intermediary was not able to fund the purchase of the substitute property. In this case, a seller may be liable for the taxes in the gain from the sale of the first property and have little or no money left to either pay the tax or buy another property.
The lesson learned here is that is very important to perform proper due diligence on any Intermediary which focuses on the overall financial health of the Intermediary and where your money will be invested until the substitute property is acquired.

Thursday, March 26, 2009

Banking and Real Estate

The following is a brief about banks and real estate that appeared today on the CCIM Institute's web site:

"On March 12, 2009, President Barack Obama signed the $410 billion 2009 omnibus appropriations bill. A provision of this legislation permanently prohibits banking regulators from publishing a rule defining real estate brokerage and management as financial activities and thus permissible lines of business for federally regulated banks. For years, CCIM Institute has opposed changes or interpretations in present federal regulations which would permit any banks or bank holding companies or subsidiaries to enter the field of real estate brokerage and management beyond properties owned by those institutions.In early 2001, the Federal Reserve Board and the U.S. Treasury Department published a proposed regulation that would let national bank holding companies and financial subsidiaries of national banks engage in real estate brokerage and management. Since that time, Congress has passed several temporary bans on banks entering the real estate brokerage and management fields. The legislation signed by Obama will permanently prohibit banks from engaging in real estate activities. "

Monday, March 23, 2009

Happy Anniversary

Today is our 30th anniversary! Although it seems like only yesterday, we were incorporated in the State of Georgia on March 23, 1979. The company was started in the middle of a recession and survived the "Tax Reform Act of 1986" recession of the late 1980's and early 1990's. You old timers remember the S & L Crisis and the RTC. The current mess seems like "deja vu" all over again. Back in the 70' & 80's the banks used to not lend money on "intown" properties so the current "frozen" financial market is also nothing new. We just adapt to the current market conditions and keep on moving froward.

Thanks to our great clients and customers, current and past. Thanks also to our wonderful staff and agents and those of you that have been a part of the company in the past. It's been a most enjoyable 30 years and we are looking forward to 30 more fun filled years!

Friday, March 20, 2009

Adams Consulting

Our "Consulting" division has a nearly 30 years history of working with both the Commercial and Residential property owners in Atlanta. In addition to advising property owners in Acquisition, Disposition and Management decisions, we have also assisted owners in appealing their Property Tax Valuations. We currently are working with several lenders in ascertaining the value of real estate that they have acquired through foreclosure. Some of these lenders have also asked us to look at the value of properties that are in "pre-foreclosure" situations. Lenders from several small banks have asked us for advice in handling some of their "troubled assets", as well performing loans. We had also advised property owners whose underlying mortgages have been acquired by the FDIC or another entity as the result of the failure of their original lender. In many cases there is an opportunity for an owner to re-purchaser the original mortgage at a discount.

We are currently helping tenants whose leases are expiring with lease or buy decisions and we are assisting some tenants in renegotiating existing leases. Contrary to what we hear in the press, there is plenty of opportunity in today's real estate market!

Sunday, March 8, 2009

Amtrak & the Beltline Revisited

I am happy to hear that Amtrak, the Georgia Department of Transportation, the City of Atlanta and the Beltline folks have resolved the issue of Amtrak and the future State funded Commuter Rail service using the Northeast corridor of the proposed Beltline right of way for heavy rail. The parties seem to have figured out that the best solution, as mentioned in my February 1st blog, is the western route, that roughly follows Marietta Street from Downtown Atlanta to the main rail line out near the Atlanta Waterworks complex. Their proposed route along the Northeast corridor would have surly harmed, if not killed the Beltline project. It would have also further eroded the tax base in the neighborhoods adjacent to the corridor. This resolution is great news for every commercial and residential real estate practitioner in the Intown Atlanta market as well as Intown Atlanta residents and their great, historic neighborhoods.

Thursday, February 26, 2009

Commercial Property Values

The panel speaking at today's Georgia CCIM Chapter monthly meeting agreed that the Fair Market Value of most commercial properties in the US has dropped by 30% in the last year.
10% of the drop is due to the decline in Net Operating Income (NOI) resulting from increased vacancies and tenant defaults. The other 20% is the result of increasing capitalization rates.
The increase in cap rates reflects a decrease in demand for commercial real estate along a perceived risk associated with acquiring commercial properties.

Thursday, February 19, 2009

Observations on the Market

The next big crisis in real estate will involve credit and valuations of commercial real estate properties. Many commercial properties have loans with 3 to 5 year "call provisions". With a call provision, the lender has to be paid in full although most of the time the lender will adjust the interest rate and "roll the loan over". The problem is that many commercial properties, especially retail properties, have lost value in the last year. That coupled with the fact that many commercial lenders are afraid to lend to anyone means that otherwise economically viable properties may face foreclosure when their loans come due.
Because, the market has come to a standstill, commercial appraisers are having difficulty finding recent comparable sales to use in their appraisals. This coupled, with stricter underwriting standards by lenders (if they are lending at all), will create a perfect storm for the commercial real estate industry. It will also, as always, create lots of opportunities for those who have a stockpile of cash.

Wednesday, February 11, 2009

The Stimlus Package

It looks like that the House and Senate are close to an agreement on President Obama's proposed stimlus package. I have very mixed emotions about it's potential cost and whether or not it will be effctive. I do, however, feel very strongly the Housing Tax Credit proposal is very wothwhile. As of this posting, the amount of the tax credit is still up in the air.

The Tax Credit should have a positive effect, along with historically low mortgage interest rates, on the single family residential market. It should also have an positive effect on the condo market in Intown Atlanta that reportedly has an oversupply of about 5,000 units. Many of these projects depended on "first time" buyers. These buyers typically had very little cash to put down and many depended on lenders being willing to provide 100% financing. When that source of financing disappeared, the condo market crashed.
Developers that take advantage of the Historic Tax Credits or the Low Income Tax Credits have a mechanism whereby they can sell their credits at a discount and convert the credit to cash that can be used as equity in their project. If a condo purchaser is able to convert his or her tax credit to "cash" at a closing, then conceivably they could qualify for an FHA loan at 96.5% LTV or a 90% to 95% conventional loan. Reducing the inventory of unsold condo units will not have an immediate effect on the unemployment numbers. It would keep these unsold units from going back to lenders and help to stabilize the county's financial system. That would be well worth the cost of the tax credit!

Sunday, February 1, 2009

Amtrak and the Beltline

Amtrak recently announced that it is considering using the right of way of the northeast segment of Atlanta's proposed Beltline to access the proposed intermodal station in Downtown Atlanta. Of all of the quadrants of the Beltline, the northeast quadrant is probably the most viable in terms of future development. Apparently, for Amtrak, it's the easiest path to get a passenger train downtown. Many individuals, businesses and governments pick the path of least resistance without much thought about the consequences of the decision or looking seriously at alternatives. A great local example is the MARTA rail line. Instead of building rail to population centers and places of employment, MARTA chose to build along existing railroad corridors and the biggest complaint the public has about the system is that it doesn't "go anywhere I need to go."

For years, passenger rail service to New Orleans and the Northeast used the tracks that roughly parallel Marietta Street northwest out of downtown to intersect the main north-south line near Inman Yards and the Atlanta Waterworks. My guess is only reason that Amtrak does not want to use this route is that they may be competing with Norfolk Southern's freight trains for access to the rail lines.

Amtrak needs to seriously look at this and other alternatives. Using the Beltline right of way would seriously damage it's chance for success. This would be a huge setback for the City and it's intown neighborhoods.

Saturday, January 31, 2009

Water Bill Woes

In the last year the City of Atlanta's Watershed Management Depaartment has been installing new water meters capable of being read electronically. For many customers, both residential and commercial, the new meters have been one big headache. The new meters have also exposed the lack of "customer service" in the WMD. Our 13,000 sf mixed office and retail building in Grant Park seems to be a good example of water woes. The building is serviced by 3 separate water meters. One meter serves the office portion of the building. This section of the building has 5 restroom-all with one low flow toilet each, a small "wet bar" area and a little used kitchen. The other two meters serve a hair salon and a restaurant. Historically, as one would expect, both the restaurant and the salon were the biggest water users in the building.

When the "new" water meters were installed last summer, everything was turned upside down.
The water bill for the offices increased by a factor of 20 and both the salon and restaurant's bills dropped. Each water bill has a "bar chart" showing monthly consumption. The bar chart for the offices shot up in August, the first month on the new meter. After checking for leaks and finding none, we called the WMD to ask them to check the meter. Nothing happened. Over the next few months, we would experience "deja vu" all over again. We would receive an astronomically high bill, call the WMD and they would promise to re-read the meter and nothing would happen.
Finally, after about 3 months we called City Council Member Carla Smith's office for help. It took Ms. Smith's office another 2 months to get the WMD to admit that the were misreading the meter. The most recent bill was back to "normal". Council member Smith is known for her great service to her constituents. It's a shame that her office has to spend it's valuable time on something that the customer service folks at WMD should be able to easily handle.

Thursday, January 29, 2009

Property Tax Valuations

If you feel that your property’s value has fallen over the last year or so and that its value is now less than the value that the Tax Assessor has placed on the property, you have a small window of opportunity to trigger a re-valuation by your county tax assessor. Fulton County property owners have until April 1st to file a “return” on your property. DeKalb County property owners have until March 1st.

To file a return, you must appear in person at your county’s Tax Assessors office. You will need some form of identification and the property’s address. It will also be helpful if you have your Property Tax Identification Number from your tax bill. The tax assessor’s personnel will give you a printout of your property’s information and you will be able to fill in an amount that you feel is an appropriate value for your property. Filling out this form and signing it will automatically trigger a re-valuation of your property for tax year 2009. If the county agrees with the new value, your 2009 property tax bill will be based on that value. If the county disagrees with your value, it will trigger the appeal process.

Fulton County property owners can file a return at:

Fulton County Government Center
141 Pryor St., SW, Suite 1047-B
Atlanta, GA 30303
Office Hours- 8:30am to 5pm.
404-612-6440

Dekalb County property owners can file a return at;

DeKalb County Tax Commissioner’s Office
4380 Memorial Drive, Suite 100
Decatur, GA 30032
Office Hours- 8am to 5pm
404-298-4000

If you own property in Metro Atlanta outside these two counties go to our website www.adamscre.com and click on “Resources” to find a link to your county’s web site.

Wednesday, December 30, 2009

Monday, December 28, 2009

Friday, December 11, 2009

Monday, November 30, 2009

Friday, October 9, 2009

Wednesday, October 7, 2009

Friday, October 2, 2009

Tuesday, September 29, 2009

Wednesday, September 23, 2009

Monday, September 21, 2009

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Friday, September 4, 2009

Tuesday, August 25, 2009

Monday, August 24, 2009

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Monday, August 3, 2009

Thursday, July 16, 2009

Wednesday, July 15, 2009

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Thursday, July 2, 2009

Tuesday, June 30, 2009

Monday, June 29, 2009

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Monday, June 15, 2009

Thursday, June 11, 2009

Friday, June 5, 2009

Tuesday, June 2, 2009

Wednesday, May 27, 2009