Meet EXP Realty Advisors at ICSC New York

InterFace Net Lease

Top NNN investors and investment brokers will discuss the heated and high-priced net lease investment market in a highlight session at the 4th annual InterFace Net Lease conference on September 12th in New York.

How to position 1031 deals, the availability of product and the stiff competition 1031 exchanges face against competitive products like DSTs and REITs will be discussed in a high-level 1031 market update.

How Best to Position Net Lease Properties for 1031 Exchanges

Robert James President EXP Realty Advisors	Pamela Michaels VP Asset Preservation	Sean Shanahan CFO Iridium Capital	John Glass SVP Investments Marcus & Millichap

The Art of the Deal: How Brokers Get the Job Done

NEW YORK CITY-The dynamic RealShare Net Lease event gathered the industry's top players, who shared their views on the sector. The event united around 300 industry professionals who took advantage of networking opportunities throughout the day. Click through for images from the event.

ICSC: New York Next Generation Program

Thursday, January 10th 2013

ICSC HEADQUARTERS

1221 Avenue of the Americas, Floor 41 

New York, NY 10020

NNN Retail Investments and 1031 Exchanges

Single tenant investment properties play an important role in the retail world and continue to be a highly valued segment of the industry for
developers, retailers, investors and brokers.  Although a small piece of the puzzle in the retail industry, these bite sized deals can add up to
big bucks for tenants, owners and brokers who play in this arena.  Learn what investors are looking to buy, how 1031 exchanges are
structured, where CAP rates are trending, and how much financing one can expect for your next NNN deal.  Come join us for this dynamic
panel discussion and hear from our experts about the ins and outs of the most actively traded asset class in the retail world! 


Panelist: 
Robert P. James, Founding Principal, EXP Realty Advisors, Inc. 
Marc A. Perel, Principal, ARC Properties, Inc. 
Matthew K. Scheriff, Executive Vice President, Legal 1031 Exchange Services, Inc. 
Moderator: 
Elliot Nassim, President, Mason Asset Management, Inc. 


The Next Generation program is specifically designed for real estate professionals who are seeking to develop their careers and  
build relationships in the shopping center industry.  Professionals have the unique opportunity to meet and interact with their peers,  
share experiences, exchange ideas and provide or obtain advice.  Next Generation is also open to and welcomes seasoned professionals 
 who wish to give back to the industry. This event is available to both Members and Nonmembers.  Advance registration will be closed 
 three days prior to program date, however, on-site registration is subject to availability. 

New York Next Generation Program

The Beauty of The Ground Lease - Shopping Center Today - October 2012 Issue - By Ben Johnson

When Milton Cooper speaks, people tend to pay attention. As executive chairman of Kimco Realty Corp., the largest owner of neighborhood and community shopping centers in North America, Cooper made the firm one of the first REITs to trade on the New York Stock Exchange some two decades ago. So when early this year Cooper cited ground leases as an example of the firm’s focus on quality on an earnings conference call, he managed to turn a few heads. He pointed to Kimco’s ownership of some 750 retail land parcels. “These ground leases for the most part have escalations in rent,” Cooper said. “It’s a wonderful, safe, quality investment, despite rents being low when compared to store leases.”

Cooper also put forth a particularly profitable example. “For years we have had a net effective annual rent of less than $100,000 per annum on a 100,000-square-foot store in Staten Island [New York],” he said. “A new ground lease has become effective for the same facility to a large national retailer at an annual rental of $2 million a year. I think you get our point,” he said.

Ground leases are anything but groundbreaking. In fact, they almost seem to have been around since the creation of dirt. Essentially, a commercial ground lease is a lease of land for a relatively long term of up to 99 years. They are typically triple-net in nature, meaning all the expenses of the property are the obligation of the tenant.

It is not possible to quantify just how large the ground-lease market may be, but sources say it is huge. Lance Marine, first vice president of retail services at CBRE, points out that the typical shopping center has two or three outparcels, and the vast majority of outparcels are ground-leased. Marine, who specializes in brokering ground leases in the District of Columbia area, says he has completed about 100 of those over the past few years. “It’s a substantial income stream to developers,” said Marine.

Ground leases provide tenants with several major advantages, Marine says. First, many retailers favor ground leases over traditional-space leases, because the former can free up capital that can be spent on the buildings rather than stay tied up in land. “Retailers across the board are very focused on having their brand and their identity in their unit, and having four sides to personalize benefits them much more than if they had taken an end cap or in-line space,” said Marine. And further, all rent payments made under a ground lease are deductible by the tenant for income-tax purposes, he says.

For owners, ground leases carry three basic advantages over selling the property outright: A ground lease is a way for the landlord to avoid realizing a gain from a sale to the tenant, the landlord retains long-term ownership, and the landlord may retain certain controls over the development and permitted uses of the land. Many ground leases require a tenant to develop, construct and operate a specific type of commercial project and not to change the nature of that project without the landlord’s approval.

There are some disadvantages too. Rent paid is income and is taxed at ordinary rates rather than capital-gains rates. If ground leases are not written correctly, the landlord may have little or no control over land use and development. And many ground leases contain provisions that either are restrictive or prohibit the landlord from borrowing against the land.
Tenants also have disadvantages in doing ground leases. The cost of ground-leasing property is usually higher in the long term than if the tenant purchases the property up front. Typically, a tenant will have somewhat less flexibility over the development, use and operation of the property because of restrictions that may be contained in the ground lease. Also, the tenant may not be able to pull all or part of its equity from the project through refinancing. A tenant’s leasehold interest is essentially a “diminishing asset” in that the value and marketability of the project will diminish as the end of the term nears.

Ultimately, ground-lease transactions are give-and-take on the part of both landlord and tenant, but supply and demand also dictates the balance of the negotiations. “In a market like D.C., where land is limited and demand from retailers is strong, the developer will drive and dictate that decision to a ground lease,” said Marine. “It is not just a retailer’s decision. It is also a developer’s decision. They are both in control of that process.”

The process of writing ground leases can be easier than space leases, says John J. Schupp, senior vice president of development and project management at Jones Lang LaSalle. “We have a number of ground leases that are in process right now,” Schupp said. “It literally can be an easier document to see through the legal process. Everything you can do with a standard space lease you can do with a ground lease.”

Robert James runs one of the leading firms specializing in brokering ground leases. He founded Kimco Exchange Place with Milton Cooper in 1998 and ran it for 10 years before acquiring it from Kimco four years ago. Today the firm is called EXP Realty Advisors and has offices in New York City and Dallas. James estimates that the company transacted some 300 ground leases as a division of Kimco and has closed over 100 deals as an independent company.

“It was Milton’s idea,” said James. “He didn’t know exactly what the business would look like, but I was hired to create a business around 1031 exchanges. It ended up making money as a brokerage business, where we would be able to sell the ground-leased McDonald’s at a lower cap rate than we could the balance of the shopping center.”

James notes that ground leases have long-term upside for good reason. “They are very safe,” James said. “I did retail bankruptcy restructuring for three years before I joined Kimco, and I never closed a ground lease. If the store didn’t work I would sell the ground lease.” Ground leases typically trade at cap rates 75 to 125 basis points below comparable building-and-land deals, James says. “The reason is, that’s a safer income stream, so it should trade at a lower cap rate,” he said. “Generally, the tenants renew every time, but if they go bankrupt, they will sell it to somebody else.”

Though drugstores have driven much of the demand for ground leases over the past few years, other retailers and restaurants are driving more deals these days, says Jeremy Cohen, a partner in the commercial real estate practice of Hartman Simons & Wood, an Atlanta-based law firm. “They all want their one-acre outparcel somewhere out in front of the shopping center, so they can build and control their improvements without worrying about a landlord screwing up their plans,” said Cohen. “I don’t see anything in the future that will prevent them from continuing to happen.”

Robert James to Attend the 3rd Annual Net Lease InterFace

Robert James is President of EXP Realty Advisors, Inc. which is a boutique investment sales business specializing in 1031 exchanges and the exclusive listing of single tenant net leased properties nationally. EXP Realty Advisors has offices in New York City, Dallas Texas and will soon add a California office. Rob has sold over 1.3 billion dollars of real estate in 39 states.

The 3rd annual InterFace Net Lease conference will bring together 250 leading players in the NNN, sale leaseback and 1031 markets to New York City for a day-long information and networking conference on Tuesday, September 11th (Opening cocktail reception on Monday night, September 10th).

Hear from 35+ speakers on seven panel sessions addressing topics such as:

• State of the Net Lease Market: The Outlook for the 4th Quarter and 2013
• Will the Investment Market Continue to See Record Demand, Limited Supply and Cap Rate Compression?
• Where is Pricing and Underwriting, What Debt Instruments are In (and Out of) Demand, How are Conduits Impacting the Marketplace and Will New Capital Sources Emerge in the Coming Year?
• The Retailer Perspective: Tenants Share Their Expansion and New Development Plans and How the Real Estate Industry Can Best Work With Them
• What’s in the Pipeline, Will New NNN & BTS Supply Come Close to Meeting Investor Demand, and What Structures are Being Used to Finance New Development?
• 1031 Market Update: The Potential Impact of Tax Law Change on Private Buyers and a Still Recovering Market
• The Outlook for the Sale-Leaseback Market in 2013
• Keynote Address: Now is the Time for Investing in Net Lease Real Estate Nicholas S. Schorsch, Chairman of American Realty Capital Trust and Co-Founder of American Realty Capital

New 3.8 Percent Tax and the Impact on Real Estate

With potential tax increases looming on the horizon, the value of tax deferral mechanisms, such as Section 1031 exchanges, have never been greater. One example of a potential tax increase which appears likely to take effect is the new Medicare tax, which Congress passed as part of the Health Care and Education Affordability Reconciliation Act of 2010, and was recently upheld by the Supreme Court. The Medicare tax, which goes into effect on January 1, 2013, will impose a 3.8% tax on the net investment income of joint filers with adjusted gross income over $250,000, and single filers with adjusted gross income over $200,000.

The new Medicare tax applies to adjusted gross income (the figure on the bottom of the front page of IRS Form 1040), which includes interest, dividends, capital gains, wages, retirement income and income from partnerships and small businesses. It appears the tax will also apply to dividends, rents, royalties, interest (except municipal bond interest), short and long-term capital gains, the taxable portion of annuity payments, income from the sale of a principal residence above the $250,000/$500,000 exclusion, gain from the sale of an investment property or a second home, and passive income from real estate and investments in which the taxpayer does not materially participate.