CRE: Beware the Taxman

December 19, 2012 | 7:00 am ET Staff Reporter

The CRE market's New Year's resolution is to steer clear of the taxman. At yesterday's Bisnow Baltimore 2013 Real Estate & Economic Forecast, 325 joined us at the Four Seasons to hear what next year's higher taxes and government spending (or lack thereof) mean for deal flow.

Ready for the big reveal? Here's how to avoid paying taxes on investment sales in 2013: Close your deals this week. Assuming CRE dealmakers, like Congress, plan to take next week off, this is your last chance. In fact, many owners could sit on their properties next year rather than pay the IRS post-sale.

MacKenzie Commercial Real Estate Services prez Bob Aumiller(right, whom we snapped with CBRE multifamily great Bill Roohan) says higher taxes would make his firm less likely to try to sell any of its 2.5M SF of properties. The only thing that'll prompt owners to sell, he says, are the refis coming due. Bill says Fannie and Freddie will enable multifamily refinancings, though, so those owners will hold on to their properties. His team is working on four reverse 1031s, a kind of deal they've never done before, another indication of investors' desire to avoid the IRS. These guys go way back, by the way. Bob was on the committee that signed Bill's CPA certificate.

Manekin CEO Richard Alter says he's even seen contracts in which buyers are obligated to pay premiums if the deal doesn't close this year. (We have a similar deal for neighbor's Christmas decorations that aren't put away by Jan. 1.)

Economic Alliance of Greater Baltimore prez Tom Sadowski(flanked by Miles & Stockbridge's Randy Rutledge and Black Oak Associates partner and bow tie aficionado Dixon Harvey) says BRAC seeds have been planted (the military has relocated its own resources) but not germinated (the government hasn't delivered mission funding). Richard qualifies that contracts have been rewarded, but many of those are year to year, hardly the kind of gigs that prompt contractors to make real estate decisions.

Macroeconomist and Sage Policy Group CEO Anirban Basu says there won't be a recession in 2013. Instead, the next 12 months will be the transition to a better '14 and '15. A large reason: House prices are rising, so buyers will stop waiting for the bottom. All this while mortgage rates are unfathomably low. The US's future as an energy exporter is huge, he says, but while Pennsylvania felt the urgency and hopped on board, in Maryland, "when we see economic opportunity, we study it." Maryland needs to compete better with its neighbors to attract business beyond the government, he says. What becomes of Maryland without federal spending? "We're Rhode Island." (Heavens, no!)

Dennis Kane, CEO of our sponsor Kane Construction, says his firm just wrapped a full-floor, 36k SF buildout for Johns Hopkins Medicine International at Thames Street Wharf. In 2010, he says, he was walking Harbor East with a cup of coffee when he saw the 261k SF building under construction, prominently perched over the water across from Domino Sugar and Under Armour. It overlooked everything that was old Baltimore (industrial properties and Harborplace) while sitting in the hot new Harbor East area. He thought, "We simply have to do a project in that building."

We also snapped Gwen Avery, Ally Happel, Liz Naish, Jocelyn Lynch, and Tina Urquhart from our sponsor Charm City Concierge. Next year marks the 20th anniversary for the company, which helps owners, managers, and leasing teams attract and retain tenants with more than 100 services from shoe repair to Super Bowl tickets. (We're redirecting this letter toward Charm City Concierge, instead: Dear Santa, We've been very good this year. For Christmas, we want Super Bowl tickets and a pony.)

CRE: Beware the Taxman

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