Sunshine, nice weather, bargain prices on real estate and no state tax help Florida continue to attract the affluent from around the globe. Collier County (Naples) Florida tops with list with Tampa Bay well represented by Manatee County & Sarasota County.

Affluent continue to move to Florida

View full story at Forbes.com

View slide show from Forbes.com.

From ICSC Website

U.S. lawmakers introduced legislation yesterday that would increase taxes on the percent of the profits investors collect from the deals their firms complete. The proposals to increase taxes on so-called “carried interest” are part a of larger attempt to reform the U.S. financial sector, but could end up hurting the commercial real estate industry just as it is trying to emerge from the worst recession for decades.

Specifically, legislators want to reclassify “carried interest,” which is currently treated as capital gains and taxed at 15 percent. Instead, carried interest would be considered ordinary income, subjecting it to a top tax rate of 35 percent, plus the 2.9 percent Medicare tax. This is likely to rise to 39.6 percent next year. Furthermore, the 3.8 percent Medicare tax included as a last minute addition to the health care will be added on top in 2013. Limited partnerships and liability companies are so common in real estate that the impact would be wide, observers say.

Carried interest — sometimes referred to as “the carry” — refers to the share of profits general partners of such institutions receive as compensation. Typically, general partners also take management, construction or leasing fees, though that is already classified as ordinary income.

Congress initiated the carried tax increase back in 2007 as a way to target perceived excess and abuses within equity and hedge funds. Many in the real estate sector will be unintentionally swept up by the new legislation if it passes, opponents say. If carried interest is taxed as ordinary income, general partners will owe billions more in federal taxes annually. The equity at risk for higher taxation is a traditional part of compensation at real estate development and management companies (which are often partnerships) and also for individuals in private deals, observers say.

Critics point out that most limited partnership managers are not overseers of private equity and hedge funds with billion-dollar returns, but rather more-modest partnerships in which the general partners have a stake in the form of capital investment, sweat equity and reputation.

“Here’s what will happen if this bill becomes law,” said Betsy Laird, senior vice president at ICSC’s Washington office. “Real estate values will be depressed immediately, transaction volume will drop. Risk will get riskier and certain projects our members once may have undertaken will no longer make economic sense.”

Lee H. Wagman, vice chairman of Los Angeles–based CityView, also takes a dim view of the proposal. “The proposal to reclassify “carried interest” as ordinary income instead of capital gains is tantamount to a tax increase on limited partnerships which will be a significant disincentive to take the kind of entrepreneurial risks that have been the hallmark of our industry. By dampening the motivation of real estate developers to undertake new deals, we will put a drag on one of the few robust job-creating sectors in the economy,” he said. “The proposal also makes what I believe is a false comparison between real estate partnerships, where the general partner assumes significant risks in providing things like loan guarantees, upfront risk capital, and carve outs to non-recourse provisions, and the typical private equity structure where the carried interest is much less of a reward for taking on these risks and capital obligations, if at all.”

The House vote on the measure is planned for Tuesday, with the Senate vote due May 28.

The timing could not be worse, says Michael P. Kercheval, president and CEO of ICSC. “Imposing this tax burden would be devastating at a moment when the retail real estate industry, one of the U.S. economy’s biggest drivers, is recovering after the recession,” he said. “ICSC is doing all it can to make legislators aware of the unforeseen consequences of this provision.”

Compiled by the staff of Shopping Centers Today. © May 21, 2010 International Council of Shopping Centers.

Just as commercial real estate is starting to recover… Congress plans to drive a stake through its heart and raise income taxes from 15% capital gains rate to 35% ordinary income rate. Tell your U.S. Senators about the unintended consequences associated with the carried interest proposal.  Please call 202-224-3121 and ask to be connected to your Senators’ offices.  Visit http://lac.icsc.org/icsc/dbq/officials/ to look up your Senators.

Key Points:

  • The tax increase on carried interest proposed in the tax extenders package will have serious unintended consequences to local communities.
  • This proposal would be the largest tax increase on real estate since the 1986 Tax Reform Act.
  • This tax increase is likely to hurt economic redevelopment and job creation in our most economically deprived communities because it captures real estate development.
  • While the original target was private equity and hedge fund managers, this proposal will disproportionately impact the real estate industry because it will increase the tax on the general partner’s share of profits in a real estate partnership.
  • Unlike hedge fund and private equity firms, carried interest in real estate deals is not simply compensation for services.  Rather, it is the return for taking on the tremendous risks and liabilities associated with real estate development projects, such as environmental concerns, lawsuits, operational shortfalls, construction delays and loan guaranties.
  • This potential tax increase does not recognize the entrepreneurial risk and personal guarantees that the managing partner offers on behalf of the real estate partnership.
  • Quite simply, if this legislation is enacted, the managing partner’s incentive to take-on the risk is greatly diminished.  Projects with brownfield, mixed-use, or low income components will be most impacted by the carried interest proposal because they are the most risky.
  • This tax increase will also hit small to medium size developers the hardest.  These developers are already struggling with the current credit crisis, and this proposal will further limit available capital in the real estate market.
  • With the commercial real estate industry under serious strain due to current economic conditions, raising this carried interest tax on real estate will not only threaten economic development projects, but it will also jeopardize the related jobs that those projects create.

The Apartment Finance Today conference was a great opportunity to share ideas with the best and brightest in the multi-family investment, development and finance industry. The final session of the conference was a panel with three economists focused on answering the key question on everyone’s mind:

  • What are the best & worst nationwide markets for apartment investment?

If you would like to view these PowerPoint presentations they are available from the box.net widget on the right hand side of this blog or follow this link to the folder: http://www.box.net/shared/zmttpnc3hh

NOTE: These are not my work product, they were prepared by:

  • Sam Chandan, Global Chief Economist and Executive Vice President, Real Capital Analytics
  • Ryan Severino, Economist, REIS
  • Greg Willett, Vice President, Research & Analysis, MPF Research

The Geography of Jobs – TIP Strategies

Watch this 30-second animated map showing job creation starting in 2004 and massive job loss starting in 2008.

Posted using ShareThis

Scion of legendary real estate billionaire family explains the slow-motion car crash happening in commercial real estate finance.

Harrison LeFrak’s summary:

* There’s $3.5 Trillion of Commercial real estate debt

* $1.7 Trillion on books of community, regional & sub-regional banks

* $850 Billion in the CMBS market

* CMBS issuance went from “Hero to Zero” ($250B to less than $9B YTD)

* Both the holders of the debt and the quality of the debt itself are distressed

The problem will get really bad in 2010 because:

* Underwriting standards departed from reality in 2005-07 with 5-10 Yr loans made

* It could bring down more than 500 community/regional banks in the next 12 months

* Their commercial mortgages are not marked to market but waiting for maturity defaults

* There’s an $850B problem in the CMBS market w/ extension issues, everybody hands tied

* The shadow banking asset problem migrates onto the banking balance sheets, like RMBS

By DAWN WOTAPKA and A.D. PRUITT in Wall Street Journal

NEW YORK — After 15 years and more than $150 million invested, Taubman Centers Inc. has been dealt a major setback on its proposed Mall at Oyster Bay on Long Island.

BLOGGER COMMENT: $150 million of developer’s risk capital evaporates… no big deal… that is capitalism. Now consider the hundreds of millions dollars of construction materials and construction wages that will never be paid. Now ponder the annual impact of this decision: no mall means no jobs for hundreds of potential retail employees and the loss of massive real estate taxes that will not be paid over the useful life of this mall. New York just gave a Bronx Cheer to over a Billion Dollars in economic stimulus! Environmentalists take note… this is no virgin park, but the site of a former wire factory!

The New York State Court of Appeals — the state’s highest court — recently said it won’t consider the developer’s case to build a high-end mall that local activists bitterly oppose.

That leaves Michigan-based Taubman with a tough decision: admit defeat and sell the land, consider a mixed-use development or try again, increasing one of the most expensive mall tabs in Taubman’s nearly six-decade history.

Investors and analysts expect more details and, possibly a decision, in the company’s earnings discussion expected later this month.

A spokeswoman for Taubman, which has seen its stock plunge by more than 50% in the last year, said the company was disappointed and is “reviewing our options.”

It had requested permission to appeal an earlier ruling siding with the town’s demand for more environmental review, lengthening the development timeline.

The fight has taken a financial toll: In its fourth quarter, Taubman recognized a $116 million impairment charge, as it reported a quarterly loss.

“So far, it’s been cash out that went somewhere else instead of shareholders, so that’s a negative,” said Todd Lukasik, a Morningstar analyst. “Any payout from this is going to be years down the road, if ever.”

Taubman first discussed plans for the showpiece on a former wire-factory site just off a main highway in 1994.

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