Category: (3)

By Brian Ward, Trimont Real Estate Advisors

ATLANTA—It’s easy to feel uncertain about what this year will hold for the commercial real estate industry. After all, the industry is facing challenges from meta-trends like Airbnb (where do we begin?), e-commerce, even self-driving cars (and Uber’s legal showdown in California). Then there’s the broader, mature CRE market cycle, global liquidity and the continuing search for yield, and major uncertainties with the changing global political landscape. Will the CRE industry prosper or stall? Time will tell, but let these key trends for 2017 be the starting point.

1. Higher Capital Costs

We may see an increase in liquidity and leverage. If the incoming Trump administration is able to repeal or dilute regulations imposed by Dodd-Frank, Basel III and the like, the floodgates for capital will further expand beyond what we witnessed in 2016. While Wall Street and banks will benefit,  the US central bank will be caught squarely in the middle and may have a tough task of balancing monetary policy, stable growth and a globally competitive US dollar.

These challenges will have broader ramifications beyond commercial real estate. We will see inflationary pressure, but it remains to be seen whether sustainable GDP and wage growth can be achieved to the level suggested by the incoming administration. If not, we are exposed to stagflation risk. Either way, we are likely to have higher capital costs for commercial real estate. In the near term, we doubt higher capital costs will translate into higher cap rates as the weight of liquidity and lack of investment alternatives will keep the pressure on. That could change in 2018.

2. Brexit Effect

Although we’ve had a continuing decline in the sterling post-Brexit vote, we have not yet seen a corresponding increase in UK investment activity. We believe this is due to continued uncertainty around the broader implications of Brexit—though it is too soon to draw definitive conclusions from this slowdown. It could be merely a pause in the market, with activity resuming in 2017 once further clarity on Brexit is communicated. The Brexit event is notable in terms of how quickly the uncertainties of politics and policy can erode investor confidence, or can at least be translated into a material pause in investment activity.

London will remain a global financial leader, although we wouldn’t be surprised if metros such as Frankfurt and Amsterdam see an increase in investment activity over the next few years, particularly as a result of their airports, favorable business climates and multi-lingual accommodations. Assuming Brexit happens, companies will diversify their UK positions into leading EU markets. There is concern that the average U.K. consumer could be hurt as a result of Brexit due to the rapidly increasing cost of consumer goods and declining sterling. A drop in UK consumer spending will most certainly hamper their GDP growth. We see the potential for parallels between the UK and the US when it comes to foreign investment, as well as potential adverse impacts for the average consumer.

Currently, foreign investment into US commercial real estate is at an all-time high. We don’t think that will change much during the first half of the year, but thereafter it becomes less clear. We are hearing words of caution from foreign capital on investment into the US. However, these cautionary comments are offset by the general belief that today, the US remains the best risk-adjusted market for commercial real estate investment in the world. That could change if, similar to the UK, uncertainties persist and risk-adjusted alternatives crop up.

3. Disrupt or Die

Technology advances are significantly changing the way we work and live, shifting how the industry imagines investment strategies. However, we are seeing a slow-reacting asset class. On retail, the loss from e-commerce has resulted in distribution gains. Malls will continue to become distribution spaces and the experiential consumer will encourage further blending of entertainment with apparel.

Transformation of the hospitality industry via Airbnb and VRBO will continue to face local regulations that may inhibit the threat they pose to commercial real estate. But the sharing economy is here to stay. With regard to transportation, driverless cars will present far-reaching social implications when you consider 17 million jobs are tied to individuals driving vehicles. The design of parking spaces is another area of investment that is shifting. There will be an increasing demand for these projects to be built as flat spaces, as it will be easier and more cost-effective to repurpose than the traditional ramp parking garage. We see these designs common in urban areas, but over the next few years, we may see more of these commercial projects pop up in suburban areas.

In the next decade, these technology advances will totally alter the thought process around real estate, how investment occurs, and how we buy and manage projects. If the industry doesn’t keep up, it’ll be decimated by the transformation.

Brian Ward is CEO of Trimont Real Estate Advisors. The views expressed here are the author’s own.

*This content is brought to you by Sable International, specialists in securing secondary residency and citizenship for South Africans. Sable can help relocate yourself and your family, along with your business to the UK.

By Andrew Rissik*

The new year is a perfect time for South Africans to start planning how they will make use of their discretionary allowances to transfer large sums of money overseas without a tax clearance certificate. If you’re married, or have children over 18, you can move much more than R1 million without a tax clearance certificate in a calendar year.

Understanding your annual discretionary allowance

The single discretionary allowance (SDA) allows a South African (18 years or older) to send R1 million out of South Africa annually. Since various SDA subcategories were eliminated in April 2015 you can now use your allowance for any legal purpose abroad.

This is what SDA allows you to do:

  • Invest or advance R1 million to foreigners and South Africans living abroad, without obtaining a tax clearance certificate
  • Spend some of the R1 million per person on overseas travel, provided that the aggregate spend does not exceed R1 million per year

But how do you transfer R2 million over this period?

It’s quite simple really.

All you need to keep in mind is that every year you are given a discretionary allowance of R1 million. Your partner, if they are a South African citizen, receives the same amount. This means that over 2017 you can together send R2 million. You can choose to send this in one lump sum, or you can choose to stagger the payments over the year.

Not having to obtain a tax clearance certificate means you can transfer these funds with very little admin. The large amount that is permissible under current regulations makes it easier for you to make a serious offshore investment, rather than having to do it in dribs and drabs. But that’s a decision that you can make depending on your circumstances.

Send more than R2 million each year

Parents with children who are over 18 years old can move R1 million offshore under each child’s name without needing to get tax clearance. All you need to do is make sure your child applies, and receives, a South African tax number.

We can do their tax number application to SARS for a nominal fee of R380. Exercising this option can make a huge difference to the amount of money you can send offshore without tax clearance in a calendar year.

You can also apply for further investment allowances that require tax clearance certificates. For more information on these, and other ways of getting your money where you want it to be, pop us an email and we’ll walk you through the various allowances available to you.

Use these allowances while they’re still available

Many analysts are predicting some severe cash outflows from emerging markets following Donald Trump’s victory in the US election earlier this year.

Trump has outlined stimulus packages that could send bond yields higher in the United States. In these cases, volatile emerging currencies, like the Rand, are most at risk.

Add to this the fact that South Africa has had a history of exchange controls and a reversal in our currently liberal offshore allowances could be on the cards.

It’s only in the last decade that these rules were significantly relaxed. Should the government decide that too much money is flowing out of South Africa, it may decide to bring capital controls back into effect.

If you’re thinking about getting money offshore, it’s best to do so while you still can with ease.

We can help you make use of all your discretionary allowances. Give us a call on +27 (0) 21 657 2153 or send us an email saforex@sableinternational.com.

About Zebra REIT

Introducing a new “Asset Class” being Passive Property Investing and Opportunity to Invest in Institutional Quality Commercial Real Estate Backed By Fortune 500 Corporations, Government and other National tenants in the USA.

Our goal for Zebra REIT is to become the global conduit for low risk, quality property investments across international borders for mid-sized institutions, wealth managers, private clients and family offices.

Technology will ultimately drive distribution in real estate (making it more efficient for local and foreign investors to invest globally) and with our proprietary owned technology, we are well positioned in the rapidly growing Real Estate and FinTech investment market space to become one of the first e-REIT funds.

For more information email Bryan Smith invest@ZebraREIT.com

By David Sobelman Jan 04, 2017

While net lease remains one of the most stable asset classes, volatility and uncertainty in the market will present challenges for the sector.

We can all breathe a sigh of relief that the worry and stress of 2016 are over and we can now focus on the year ahead. Politics, interest rates and even sports have made us all wonder what could transpire and should we even try to fathom what the coming year entails.

Every interview from our nation’s leading experts, in their respective fields, begins with an explanation on our nation’s micro and macro economies with the words, “I think.” We’ve all heard it before but give it little attention when it’s spoken. For instance, a moderator asks, “Where are cap rights going in the next twelve months?” and the expert answers, “‘I think they will (insert answer here.)” Or the moderator asks, “What will happen to commercial real estate values in 2017?” and the expert answers, “I think values will (insert answer here.)” You get the picture.

But my colleagues and I, who are asked to opine on the state of the overall commercial real estate market and how tangential and outside influences may either impede or bolster the coming real estate cycle, are wondering ourselves how to navigate our and, in some cases, our clients’ decisions in the coming year.

With the vast differences in answers to the questions we’re receiving, its clear that pinpointing a specific response is 2017’s greatest challenge. Even Hessam Nadji, president & CEO of Marcus & Millichap (M&M), who is a regular face on national television and a historical proponent of bringing into account the strength of the markets, chose to publicly sell 37,296 shares of M&M stock in the final months of 2016 at a value of roughly $2.5 million. “I think” that sale may speak volumes to what his real thoughts may be on the coming market cycle.

But what we should all consider is that net lease investments have become an industry in and of themselves. The asset class is seen as one of the most stable types of commercial real estate investment, with as little as 250 basis points of variance from the trough of the recession to the peak of the market.

Compared to other asset types, that spread is very manageable for most investors. Additionally, the International Council of Shopping Centers has begun to embrace the product type as it has instituted the N3 conference series around the country: panel discussions that highlight various regional topics focused on net lease assets.

ICSC has also established the first education and information session for continuing education (CE) credits at its annual RECon conference in Las Vegas in May. These developments could be a strong indicator that the world’s largest real estate association has now embraced the building type as it has been clearly shown that the issues surrounding that market appeal to the masses. This is drastically different than just 10 years ago when a single-tenant investment was rarely mentioned outside its core practitioners.

2017 will prove to many, in and out of the net lease industry, that even in the most drastic of economic circumstances, a single-tenant property and the growing industry that surrounds the asset type will continue to resonate as the safe haven for landlords and investors.

Few investment vehicles, real estate or otherwise, provide the risk-adjusted returns of triple-net lease properties. Add in the opportunity for an appreciating real estate asset and annual returns could far outpace anything in its peer group. But despite its stability, the sector will face its challenges.

History has shown that the hurdles of the net lease sector are not solely in the ups and downs of the market, but in attempting to precisely time the market—that is this year’s biggest challenge.

David Sobelman is the founder & CEO of Generation Income Properties (a public net lease REIT) and the executive vice president of net lease brokerage firm Calkain Cos.

About Zebra REIT

Introducing a new “Asset Class” being Passive Property Investing and Opportunity to Invest in Institutional Quality Commercial Real Estate Backed By Fortune 500 Corporations, Government and other National tenants in the USA.

Our goal for Zebra REIT is to become the global conduit for low risk, quality property investments across international borders for mid-sized institutions, wealth managers, private clients and family offices.

Technology will ultimately drive distribution in real estate (making it more efficient for local and foreign investors to invest globally) and with our proprietary owned technology, we are well positioned in the rapidly growing Real Estate and FinTech investment market space to become one of the first e-REIT funds.

For more information email Bryan Smith invest@ZebraREIT.com