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THIS WOULD BE A FUN PROJECT TO REDEVELOP: Check out this article

Now, at last, the Old Main Post Office might find a real savior By Joe Cahill : http://www.chicagobusiness.com/article/20141205/BLOGS10/141209834

R. Kymn Harp
ROBBINS, SALOMON & PATT, LTD.
www.rsplaw.com
rkharp@rsplaw.com
www.HARP-OnThis.com
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THE TIC TRAP – SECTION 1031 EXCHANGES – A DANGER ZONE

This is the third and final installment of a three-part series on Section 1031 like-kind exchanges. Part 1 explained WHY you should consider use of a Section 1031 like-kind exchange when selling commercial or investment real property. Part 2 covered the key rules for HOW to implement a Section 1031 like-kind exchange. This Part 3 covers special issues applicable to a Section 1031 like-kind exchange when a Tenant-In-Common [TIC] interest is being acquired.

THE TIC TRAP

A Section 1031 Exchange Danger Zone

All property lawyers learned in law school that interests in real property can be held in a variety of ways. Common ways to hold title include: as a sole owner, as joint tenants with right of survivorship, as tenants by the entirety, and as tenants in common, among others.

Black’s Law Dictionary defines tenancy in common as: A form of ownership whereby each tenant (i.e. owner) holds an undivided interest in property. Unlike a joint tenancy or a tenancy by the entirety, the interest of a tenant in common does not terminate upon his or her death.

RSPA tenancy in common [often referred to as a “TIC Interest”] is well recognized by property lawyers as a real property interest.

Naturally, then, for investors involved in Section 1031 exchanges, the question will arise as to whether a taxpayer can acquire a TIC Interest as a replacement property in a Section 1031 exchange. On its face, the flexibility this would allow, if permitted, would appear to be exceptional.

Consider a taxpayer who (more…)

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Value Investing vs. Momentum Investing

As the commercial real estate market begins to pick up steam, beware the urge to follow a “momentum” investment strategy rather that a “value” investment strategy.

http://www.dreamstime.com/royalty-free-stock-photography-skeleton-keys-image28661257Momentum investing relies on market increases to generate a return on investment. It is the “rising tide floats all boats” investment model. It is the investment model of which all “bubbles” are made.

As momentum investing accelerates, investment fundamentals tend to get lost. Instead of evaluating cash on cash returns using discounted cash flows that underlie “value” investing, a casino mentality takes hold – whereby investors can justify acquiring assets generating even a negative cash return, with the notion that rising prices will yield a profit. As the saying goes: “Any fool can make a profit in a rising market – and many fools do”. The challenge, of course, comes when a market hits a plateau or, worse yet, the market declines.

As a general proposition, value investing is significantly more prudent. If a project is cash flowing, and generating a positive return on investment, today and for the foreseeable future – which is a fundamental precept of a value investment strategy – the potential added return of any increase in value in the underlying asset caused by the “rising tide” effect is icing on the cake. Choose your cake with care.

There are, of course, exceptions to every rule. But, employing an “exception” is wisely done only after sober reflection of the particular circumstance to determine that in that particular case the exception is warranted. When an exception is regularly employed, it is no longer an exception – but, rather, becomes the rule itself.

As in all markets, there will be winners and there will be losers. It makes sense in the coming commercial real estate revival to position yourself and your company as a winner. You may not get another chance.

Exercise all appropriate due diligence. Use readily available and appropriate asset protection strategies. Invest with intentional regard to reliably building wealth though a well conceived value investing strategy – not a roulette table strategy that, over time, is virtually certain to fail.

If this recent economic debacle has taught us anything, it has taught that bad things can happen to good people who lose sight of the fundamentals. Good deals – even great deals – can be made if reliable commercial real estate investment fundamentals are employed.

As a wise mentor once told me: “You have a good brain – use it.”

Good luck.

R. Kymn Harp
Robbins, Salomon & Patt, Ltd.
Chicago, IL
www.rsplaw.com
JOIN MY THOUGHTBOARD: www.Harp-OnThis.com

REPORTING FROM THE FIELD. . .

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Keys to Closing A Commercial Real Estate Transaction

http://www.dreamstime.com/royalty-free-stock-photography-skeleton-keys-image28661257Commercial Real Estate Closings

Anyone who thinks closing a commercial real estate transaction is a clean, easy, stress-free undertaking has never closed a commercial real estate transaction. Expect the unexpected, and be prepared to deal with it.

I may not charm your socks off with industry gossip, sports-talk or movie quotes, but give me a complex commercial real estate deal to close and I’ll get it done.

I’ve been closing commercial real estate transactions for over 35 years. I grew up in the commercial real estate business.

My father was a “land guy”. He assembled land, put in infrastructure and sold it for a profit. His mantra: “Buy by the acre, sell by the square foot.”  From an early age, he drilled into my head the need to “be a deal maker; not a deal breaker.” This was always coupled with the admonition: “If the deal doesn’t close, no one is happy.” His theory was that attorneys sometimes “kill tough deals” simply because they don’t want to be blamed if something goes wrong.

A key point to understand is that commercial real estate Closings do not “just happen”; they are made to happen. There is a time-proven method for successfully Closing commercial real estate transactions. That method requires adherence to the four KEYS TO CLOSING outlined below: (more…)

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Raising Capital for Real Estate Investment

At long last, the real estate investment market is beginning to show signs life. Commercial and industrial property transactions are increasingly common, and multifamily properties of all sizes are being snapped up by investors. Historically low interest rates, high occupancy rates, increasing rental rates, and rising property values are contributing factors.

RSPEarly transactions have often been cash deals, where the investor paid cash for the property rather than seek financing. This can be a great opportunity to achieve high yields for investors flush with cash, but what about everyone else?   What about potential investors who have limited cash on hand?

Unlike the easy-credit days preceding the Great Recession, real estate investment financing is (more…)

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Asset Protection – Lessons Learned

“The best time to plant a tree was twenty years ago.

        The second best time is today.”

Chinese proverb

http://www.dreamstime.com/stock-image-empty-safe-image27096841For over 35 years, I have represented commercial real estate investors, developers and business owners. Most of that time has been spent helping them acquire, finance, expand, develop, manage and grow their assets and businesses. For the past 5 to 6 years, as we have struggled through the Great Recession, a huge amount of my time has been spent helping clients keep their assets.

Growing up, I was steeped in the practical view that it is not so much what you acquire that counts, but, rather, what you keep. My parents and grandparents were not in the real estate business to make others wealthy. They were playing real life Monopoly®. They played to win. It was less about money for money’s sake than it was (more…)

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LENDING BLIND – SIX YEARS AFTER LEHMAN’S COLLAPSE

Commercial Real Estate Lending:  What You Don’t Know Can Hurt You!

If there is anything commercial real estate lenders have learned during the collapse of the commercial real estate market over the past five or so years, it would be the danger of “lending blind”.  Commercial real estate lending without fully understanding the project is a prescription for disaster. An original version of this article was first published in 2005.  It is eerie how prophetic the warning signs were. Surely lenders have learned. . . . (more…)

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10 Things to Know About Commercial Real Estate Development Agreements

I was invited recently to speak at the Illinois Institute for Continuing Legal Education Annual Real Estate Short Course to discuss what every lawyer should know RSP_LogoFull_2PMSabout commercial real estate development agreements. In preparing for the presentation, a developer client suggested it is not only attorneys who need to know about development agreements – developer clients do as well.

So, on that note, the following is my list of the top 10 things attorneys and developers should know about commercial real estate development agreements.

TOP 10 THINGS TO KNOW ABOUT COMMERCIAL REAL ESTATE DEVELOPMENT AGREEMENTS

1.     Development Agreements are not the same thing as Construction Contracts.

2.     There are no “master form” Development Agreements.

3.     Each Development Agreement is unique to the specific development to which it relates, and must accommodate the sometimes conflicting needs, demands and desires of the constituent stakeholders, including the (more…)

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Information Providers – Can We Sue Them If They’re Wrong?

Of Course We Can Sue Them . . . But Can We Hold Them Liable?

No one knows everything. It’s a simple fact of life. Often, businesses turn to other businesses and professionals to obtain needed information. The range of commercial information providers assisting business owners and real estate investors, developers and lenders gather and analyse information is vast.

Diana H. Psarras Business & Trust Litigation, Shareholder -Robbins, Salomon & Patt, Ltd.
Diana H. Psarras
Business & Trust Litigation, Shareholder, Robbins, Salomon & Patt, Ltd.

The question is: Do we have a legal right to rely on the information they provide? What if the information is wrong? What if we rely on that incorrect information and suffer a loss? Is the information provider liable?

It could be anything from hiring an appraiser to appraise a property to support a commercial loan; hiring a lab to analyze nutrition and caloric content of food products; or engaging a financial consultant to evaluate a company’s assets and liabilities as part of a business acquisition or merger; or seeking out a lending institution to provide information regarding the creditworthiness of a potential borrower. We might hire a structural engineer to evaluate the structural integrity of a building or bridge or other structure; or engage a surveyor to determine the scope and size of a parcel of land, or the location of easements and improvements located on the property, or the existence of rights of way to access the property; or we might retain a person or business holding itself out as a “due diligence” expert to investigate the essential facts necessary to enable us to determine whether to proceed with a particular transaction or project. The list of commercial information providers we rely upon to conduct our affairs is nearly endless.

Another simple fact of life is that people can and do make mistakes. They misinterpret information. Misstate the facts. Fail to discover and disclose all material information necessary to make information they have provided sufficient to enable informed action and decision-making.

What happens when your information provider gives you bad information and you suffer a loss as a result? Do you have any recourse? What if (more…)

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10th Annual Real Estate Short Course – IICLE

TWO DAYS of REAL ESTATE EDUCATION

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The Illinois Institute for Continuing Legal Education (IICLE) is hosting its 10th Annual Real Estate Short Course on September 9-10, 2014 at Harper College in Palatine Illinois.  This is a great program for attorneys, and also for others seeking in depth knowledge of legal issues to be covered. Day Two includes breakout sessions in both a “commercial track” and a “residential track” so attendees can tailor the program to their particular interests. This program includes a wide array of experienced practitioners with diverse areas of expertise who have agreed to volunteer their time and knowledge to advance the cause of real estate education.

I have participated in this program for several years, and will be a program presenter both days on the topic of due diligence in commercial real estate transactions. A complete agenda can be found at the program website:  http://www.iicle.com/resc

I hope you can join us!

Kymn

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