This and That – Commercial Real Estate News – GRS Group

Janice Carpi is the National Underwriting Counsel for GRS Group

It’s too hot in Richmond to focus on anything for more than a few minutes, and besides, the power just might go out again, so this week we’ll do a selection of news bites, kind of like the evening news, only dealing with real estate.

Changes in Virginia Recording Taxes.

As of July 1st, the state recordation tax on deeds of trust given to refinance any existing debt has been amended.  The exemption for amounts refinanced with the same lender has been eliminated, and tax will now be charged based on tiers of the debt, starting at $0.18 per hundred on the first $10 million of value.  Counties and cities can also charge a recordation tax, and this too will go up because it is tied to the state recordation tax.  Also, the deed of trust is taxed based on the value of the security interest.  Where the value of the security interest is greater than the value of the property, the tax will be limited to the value of the property.

ALTA Forms Committee is at it Again.

At a meeting last week, the ALTA Forms Committee approved a final version of Commercial Participation Interest Endorsement.  This endorsement, which is designated as the 30.1-06, addresses the case where the loan documents provide the lender with “Participation Interest” based on the borrower’s equity in the title, the increase in value of the title or the cash flow.  It is the commercial property equivalent to the ALTA 30-06 dealing with shared appreciation mortgages on one to four family residential property.  The 30.1-06 must be approved by the ALTA Board and go through a 30-day comment period before it can become officially adopted as an ALTA form.  This will probably not occur until after the ALTA fall annual meeting.

Single Family Residential Property Values are Climbing –

A recent Wall Street Journal article mentioned the fact that at least one company that was in the business of buying foreclosed homes and renting them out has now started selling off the properties due to the nascent recovery in the residential resale market.  Landsmith LP, which had acquired  a portfolio of more than 250 rental properties in the Phoenix area is reported to have sold a package of 75 home to an institutional investor for a price of $7.5 million.  This was a substantial increase from the$5.3 million that the company paid to acquire the homes over the past year.  Initially, Landsmith had intended to keep the properties for around five years.  According to James Breitenstein, Landsmith’s chief executive, “. . [I]f the people are willing to pay a price that lets us realize an upfront return, we don’t need to wait.  The potential for this asset class is being realized sooner than we thought.”  I would presume that situations like this one are happening in other hard-hit areas of the country like Las Vegas and Miami as low interest rates make homes more affordable again.

As Apartment Rentals become Stagnant

The Dow Jones All REIT Equity Index, which tracks the stocks of 133 real-estate investment trusts, delivered only a total return of 4% in the second quarter, down sharply from the first quarter’s return of 10.5%.  Part of this was caused by a decline in rent and occupancy grown in the apartment market, as multi-family landlords worry  that they won’t be able to increase rents anytime soon due to the sluggish economy.  According to a July 3rd article in the Wall Street Journal, the apartment sector, which has been one of the top performing REIT sectors for the past few years, delivered a total return of only 0.91% for the second quarter, compared with 8.6% for the first quarter.  Rent growth has slowed due to a number of factors, including stagnant wages, a slight pick-up in home buying as mortgages reach low interest rates that haven’t been seen in generations, and increased competition from newly constructed apartments.

 

Janice Carpi is the National Underwriting Counsel for GRS Group

http://grs-global.com

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