Tag Archive for: cre investment

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Why CRE Is Proving More Stable Than Stocks, According To One Expert

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The stock market has been on a tumultuous ride as of late, making commercial real estate even more attractive to investors looking for stability amid the chaos.

“I think it gives everyone a little heartburn to see the S&P 500 fall by more than 6% in a little over a week,” says Marcus & Millichap’s John Chang. “But the stock market has been on this trend for awhile.”

Specifically, the stock market is down by 10% over the last month and by 24% from the peak at the beginning of this year. And while it gained 27% in 2021, the losses this year have basically wiped out last year’s gains. The CRE market also had big pricing gains last year, according to Marcus & Millichap data, led by industrial at 17.9%, self-storage at 13.6% and apartment at 8.1% The difference?

“While the stock market peaked at the end of 2021, “commercial real estate kept going,” Chang says.

In the first half of 2022, the average industrial prices went up by 13%, self-storage went up by 10.5%, and hotels increased by 13.7%. Meanwhile, in the first half of 2022 the stock market fell by 20%.  The caveat, however, is that pricing is typically locked in 90 days before a deal closes, meaning second quarter pricing numbers were probably locked in before the Fed began aggressively raising rates.

Chang says the Fed’s press conference after its latest hike on September 21 “will probably impact” CRE pricing, “but the impact will be far less severe than what we’re seeing on Wall Street.”

“In general, CRE values tend to move more slowly than the stock market. They also tend to be less dramatic,” Chang says, adding that quarter-over-quarter pricing swings over the last 20 years have been “enormous” while commercial real estate pricing has largely remained steady.

Total annual returns also drive this point home, with CRE delivering a compound annual growth rate of 7.8% since 2000, beating the S&P at 5.3%.

“It still has its ups and downs, but its amplitude tends to be very modest compared to the stock market,” Chang says.

 

Source: GlobeSt.

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Commercial Real Estate Investment Up 45% Year-Over-Year

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After a banner year of CRE investment in 2021, 2022 is off to a solid start.

Reports from both Colliers and CBRE for the first three months of this year found that investment in CRE is up and, by some accounts, setting records.

U.S. transaction volume hit $161B, a first-quarter all-time high, Colliers found. CBRE clocked total transaction volume at $150.4B, which was a 45% increase over the same time the year before.

Volume was up for all asset classes, but unsurprisingly, multifamily took the top spot, capturing $63B, according to Colliers. That amounts to a 56% increase year-over-year and sets a new record for multifamily, according to Colliers.

By CBRE’s count, multifamily also took the lead, but CBRE found it garnered $57B in investment volume, a 42% increase over the previous year’s first quarter. It is common for brokerages to have different numbers based on their research metrics, including size of deals tracked.

Greater New York and greater LA were in the No. 1 and No. 2 spots for transactions, respectively, CBRE found. New York saw $63B worth of deals, while greater LA trailed closely behind with $62B worth of transactions.

Earlier this year, CBRE forecast that even after 2021’s record highs, CRE investment would continue to grow in 2022.

Though interest rates are moving upward and inflation is soaring, these factors haven’t had an impact on CRE yet, Colliers said, though it also noted those would likely be reflected in data later in the year because there is a lag between interest rates being hiked and deal flow effects.

CRE is often called an inflation hedge, and the interest in CRE this year could be seen as confirmation that investors view property as an investment that could withstand the uptick, but now some investors have begun to make moves that indicate they aren’t sure how much longer that will hold true.

 

Source: Bisnow

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Middle Market CRE Investment Is Ripe With Opportunity

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There is no shortage of capital searching for opportunities in commercial real estate.

In most cases, this has generated high competition, compressed cap rate and pushed asset pricing.

The middle market sector—defined as deals valued at $20 million to $50 million—is a rare sweet spot for CRE investment. Too small for big institutions and too large for many high-net worth individuals, the market segment offers plenty of opportunity.

The middle market is also the playground for Walker & Dunlop Investment Partners, who is finding a lot of success in the sector.

“The middle market happens to be the largest portion of the commercial real estate market,” Sam Isaacson, the president of Walker & Dunlop Investment Partners, tells GlobeSt.com. “It makes up the majority of the real estate in this country. A lot of that real estate is owned by baby boomers, and a lot of them are getting older and are making changes to their real estate holdings.”

Equity capital is also not interested in middle market investments. These players have too much capital to deploy to consider a middle market deal.

“A lot of the institutional owners of commercial real estate, like the pension funds and the endowments, have significant capital to deploy at any given time,” says Isaacson. “When they are looking to deploy capital into real estate, they are not going to look at a $4 million or $5 million equity check on a middle market asset. They are focused on deploying $20 million to $25 million at a time. We see that over and over again. There is less capital chasing those middle market deals.”

As a result, family offices and other mid-tier private investors end up transacting in the middle market space.

“That isn’t to say that we don’t see competitors, but it isn’t nearly as saturated as assets that are $100 million-plus in size,” says Isaacson.

While the price tag is a primary marker of a middle market asset, quality of tenancy and asset functionality are also characteristics to look for in a middle market asset.

“We have been really successful at investing in the older vintage ex-manufacturing facilities in blue-collar markets in the Midwest,” says Isaacson. “We have done really well at repositioning those assets into warehouse and logistics assets from some dysfunctional use. That has been really successful.” Walker & Dunlop Investment Partners is also investing in neighborhood centers with mom-and-pop ownership. “We are fairly bullish on them,” says Isaacson, adding that office is the only asset in the middle markets that the firm is eschewing. “We don’t think the COVID story has run its course.”

 

Source: GlobeSt

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Death Reports Of Retail And Office May Have Been Greatly Exaggerated

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Panelists representing the industrial, office, retail and multifamily sectors of commercial real estate made the case for investment in their respective sectors at NAIOP’s CRE.CONVERGE, the virtual conference recently taking place.

In a real-time audience poll, the attendees cited industrial as the sector they would be most likely to invest in.  However, much of the discussion pointed to the upsides in what, so far in 2020, has been mostly seen as a negative story for the other sectors.

“Retail may be the sector everyone loves to hate, but all that means is that it’s at the bottom of a cycle that is going to rebound,” said Wade Achenbach, executive vice president, Portfolio Management at Kite Realty Group. “The strip sector and the mall business were struggling for a lot of reasons, and COVID has dramatically made them the hardest hit. If you just look at that trend alone, that’s going to be short lived. You have to be very careful of what you’re looking at. There is no online-only retailer that’s making money today, nor has there ever been. What’s really happening when somebody says e-commerce?  It’s more of an omnichannel. Even Amazon realizes the value of stores with its purchase of Whole Foods.”

The old adage, buy low and sell high, applies.

“I think there is more of an opportunity (in retail) than any of the other sectors,” Achenbach said.

Speaking on behalf of the office sector, which many are questioning in light of the shift to work from home, George Hasenecz, senior vice president, Investments at Brandywine Realty Trust, said its demise has been incorrectly predicted in the past — just as it is now.

“When you think about all the economic events and social trends that have occurred, the dot com bust, September 11, the densification of the office and COVID, people have always said that office is dead. Office has always reinvented itself,” said Hasenecz. “Work from home has been successful in response to the crisis, but it’s very difficult to work in a collaborative environment. How do you maintain your culture, bring new employees on and recruit? Work from home really does go against people’s needs and desires to come together. We think that Class A office is going to be in high demand. Companies want to make sure their employees and their talent feel safe. There still is the competition for talent and office space will be used as a recruiting tool.”

A similar story is playing out in the multifamily sector, said John Drachman, co-founder at Waterford Property Company. The pandemic has driven many people out of dense urban areas and into suburban multifamily units. The turnaround has been sharp in large markets such as New York, San Francisco, Los Angeles and Chicago, where vacancies are increasing and rents are falling. One year ago, the main story line in these markets was a lack of affordable housing.

“As with retail and office, a wider perspective will benefit investors,” Drachman said. “People will move back to urban areas. If you can stomach a little bit of pain, over the long term there could be great buying opportunities for urban apartments.”

Rene Circ, senior managing director and COO at GID Industrial and GID Investment Advisors LLC, spoke on behalf of the industrial sector, which to no one’s surprise seems to be strong. He said there are essentially very few people who are not buying things online.

“I would argue that too much capital is allocated to multifamily and way too much is allocated to retail,” Circ said. “Investors will need to invest in industrial.”

The panel was moderated by Will McIntosh, head of Research at USAA Real Estate.

 

Source: GlobeSt.

Top Developers On Their Reasons For Doubling Down In South Florida Market

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For some Miami developers, the last few months have provided an opportunity to “double down.”

“Our affordable division is extremely active,” Jon Paul PĂ©rez, executive vice president of Related Group, said during The Real Deal’s latest episode of Coffee Talks.

PĂ©rez noted that Related has broken ground on three projects in the last 45 days.

Another guest on the episode, Dezer Development founder Gil Dezer, also remains bullish on building across Miami. Last week, Dezer received the first approval for a massive project at North Miami Beach’s Intracoastal Mall, despite opposition. When asked about financing for the project, Dezer said that his company has been covering all costs.

“We don’t have financing today, but we don’t necessarily need it today either,” Dezer noted.

For PĂ©rez and Related — the largest developer in South Florida — there are opportunities away from the luxury beachfront markets.

“We’re very bullish in Wynwood,” Perez said. “I think that’s one of the neighborhoods that has the most growth potential.”

He noted that Related owns four sites there, which it will transform into 2,000 units, and is finishing a new headquarters in Coconut Grove.

The pair are competitors and collaborators: Dezer and Related teamed up on the Residences by Armani/Casa last year. Closings began in December 2019.

“It was just in time, Dezer said. “We had our opening party, and a week later, Covid happened. Sometimes you have more luck than brains.”

Click here to watch the YouTube video Coffee Talk with Gil Dezer & Jon Paul PĂ©rez for more top developer takes on the Miami market.

 

Source: The Real Deal

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In Coming Wave Of Pandemic-Induced Vacancies, Some See Opportunity

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The pandemic is expected to drastically reshape commercial real estate, leaving thousands of vacant and underused spaces nationwide. But some developers and investors are keen to seize the chance to convert those properties into other uses.

Lord & Taylor’s flagship department store in Manhattan, for example, will soon house office workers for Amazon, and a tourist destination in the heart of Hollywood is getting a $100 million face-lift that includes converting underused retail spaces into offices.

“Nobody ever lets a crisis get in the way of creating opportunity,” said Sheila Botting of Avison Young, a commercial real estate services firm in Toronto, where she is president of the professional services practice for the Americas.

Conversion waves in the past were often localized. For instance, more than 13.8 million square feet in lower Manhattan changed over after the Sept. 11 terrorist attacks in 2001, according to the Alliance for Downtown New York. But those shifts were nothing on the scale that is expected in the next 18 to 24 months, experts say.

In retail alone, at least 7,700 stores totaling 115 million square feet were expected to close this year as of early August, according to data provided by CoStar Advisory Services. Most of these closures will be in malls, which were struggling long before the pandemic pushed department stores like JCPenney and Neiman Marcus into bankruptcy.

At the same time, 172.7 million square feet of Class A office space, typically the highest quality, is expected to come online this year and next. Only 59% of it has been leased, below the average of 74%, according to the CoStar data. And nearly 1 in 4 hotels nationwide faces possible foreclosure as owners fall behind at least a month on loans, the American Hotels & Lodging Association said. Simply put, a lot more space is going to be available out there.

“If there was a sudden drop in demand for Cheerios, General Mills would just pull the Cheerios,” said Victor Calanog, head of commercial real estate economics at Moody’s Analytics. “Then there’s going to be less, and prices won’t have to fall as much. But once you’ve built an office building, you can’t exactly take it off the market.”

Some of the causes of the national oversupply in commercial real estate predate the pandemic. For example, the shift to e-commerce has hastened many stores to the grave in recent years — more than 10,200 stores closed in 2019, according to CoStar.

Also, businesses that use offices have been pulling back on space amid rising digitization and other efficiencies as well as demographic shifts — younger generations in general are comfortable with less office space. The commercial real estate industry’s rule of thumb in the 1980s was 200 to 300 square feet per employee, according to Moody’s Analytics. By 2019, the average had fallen to 126.5.

And industries as diverse as real estate, media, technology and banking have been flirting with more telecommuting for decades. Moreover, a sizable chunk of leased space goes largely unused during the workday anyway — estimates place it at 30% to 40% — as people are out of the office for various reasons. But the crisis has created a chance for some developers to reassess their strategy.

“I think for the real estate community, this represents a moment in time to think about current assets, how they’re being used and what future options might be,” Botting said.

The starkest example yet of this approach might be Amazon’s possible plans to convert JCPenney and Sears stores in shopping centers owned by mall operator Simon Property Group into distribution warehouses, which was reported earlier by The Wall Street Journal. The e-commerce giant is also behind the overhaul of the shuttered Lord & Taylor store on Fifth Avenue, turning 676,000 square feet into office space for about 2,000 employees by 2023. Amazon declined to comment for this article.

Last month, DJM Capital Partners, a real estate services firm, and private equity firm Gaw Capital Partners revealed plans to overhaul the Hollywood & Highland, a Hollywood entertainment complex on the same block as the Dolby Theater, which hosts the Academy Awards. Those plans call for carving nearly 100,000 square feet of creative office space out of existing retail.

“When the firms bought the complex last year, they had a low opinion of the future of traditional brick-and-mortar retail,” said Stenn Parton, chief retail officer of DJM. “Then the coronavirus shut down thousands of businesses across the country. If anything, I think it’s solidified our business plan as we’ve seen the record store closures as a result of the pandemic.”

Most conversions won’t be as grand; instead, they’ll involve smaller and less heralded properties. Still, a wide variety of conversion projects is expected.

“Developers see an opportunity in converting hotels into continuing care retirement communities,” said David Reis, chief executive of Senior Care Development in Harrison, New York. “It’s less expensive to convert a property than build from the ground up, especially in expensive markets such as New York. If you can buy space for the equivalent of 50 cents on the dollar less than new construction, then clearly you’re going to be fine when you do a conversion.”

Nationally, new residential construction generally average $225 to $350 a square foot, compared with $150 to $200 for an office-to-residential conversion, according to a report provided by project management firm Cumming. For industrial construction, the average new project costs $125 to $250 a square foot, but that can fall to $75 to $175 for a retail-to-industrial switch.

Despite the potential for lower costs and the emerging universe of options, commercial real estate conversions do pose challenges. Zoning and technical design can stymie some changeovers. And it can be more difficult to draw financing for conversions during the pandemic, when lenders are more averse to risk.

“Core and stabilized assets are drawing financing opportunities,” said Eric Rosenthal, a co-founder of Machine Investment Group, a real estate investment firm. “Transition stories, or when there’s an element of execution beyond just buying it and managing the property, the environment to finance those assets is very challenging.”

Traditionally, the best conversions have increasingly been obsolete properties.

“Typically, if they’re older and they’ve gone beyond their useful life — reduced occupancy, reduced cash flow — they are ripe for transformation,” Botting of Avison Young said.

In an undated image from Related Companies, a rendering of what an office conversion could look like in the Neiman Marcus space at Hudson Yards in New York. (IMAGE CREDIT: Related Companies via The New York Times)

But even newer properties are on the table. Neiman Marcus opened a 188,000-square-foot flagship store at Manhattan’s Hudson Yards just last year as the anchor retail tenant in the nation’s largest private real estate development. Now the Related Cos., owner of Hudson Yards, is pivoting. Philippe Visser, president of Related Office Development, said by email that the store would become “the most exciting office opportunity in New York City.”

The move harks to previous crises that forced a metamorphosis in commercial real estate. In the 1990s, lower Manhattan was racked by high office vacancies and population drain, and William C. Rudin, president of New York landlord Rudin Management, helped lead efforts to rejuvenate the area. More than 4.6 million square feet was converted from 1995 to 2001 — including glassy office buildings no one thought would make decent apartments.

“When things get bad enough,” Rudin said, “it forces people to come together and come up with ideas.”

 

Source: SFBJ

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Year-End Tax CRE Planning And 2019 Outlook

Commercial real estate investors are among the beneficiaries of sweeping federal tax policy signed into law by President Trump last year.

The tax law generally makes investing in and owning commercial real estate — the largest alternative investment class — more attractive than ever. As we head into the fourth quarter of 2018, it’s a good time to recap the tax changes with implications for investors in income-producing real estate.

Investors would be wise to review these issues with their tax and investment advisors as part of year-end tax planning and investing strategy for 2019.

Individual Tax Rates

The Tax Cut and Jobs Act of 2017 (“TCJA”) includes tax rate cuts across the board, with corporate rates slashed to 21% beginning this year. The individual rate reductions are not as dramatic, but do provide relief especially with the wider tax brackets.

Click Here for Tax Bracket Comparison

Example 1

Married taxpayers filing jointly with $450,000 in taxable income would have a tax liability of $124,383 in 2017 versus $108,879 in 2018.

Example 2

A Single taxpayer with $150,000 in taxable income would have a tax liability of $34,982 in 2017 versus $30,289 in 2018.

Qualified Business Income Deduction

Arguably the most beneficial and complex provision in the TCJA, and the one that has the largest impact on commercial real estate investors is the Qualified Business Income (“QBI”) deduction under Section 199A of the Internal Revenue Code.

This provision is far-reaching and potentially affects every taxpayer who reports qualifying business income on Schedules C, E or F on their individual tax return, including from passive income sources.

Qualifying business income is generally any trade or business income that is not from a B“specified service” business, which is defined as a business relying on the skills or reputation of the owners or employees. (Architects and engineers are specifically excluded from this definition.) Many of the complexities of this provision fall outside the scope of this article, which focuses on the benefits of the tax policy changes for commercial real estate investors.

The QBI deduction is 20% of qualifying income, but a number of factors determine the actual deduction. The first limitation on the deduction is the greater of: (1) 50% of W-2 wages paid for by the qualified trade or business; or (2) the sum of 25% of W-2 wages paid plus 2.5% of the unadjusted depreciable basis of qualified property held at the end of the year.

Since most commercial real estate investments are held in special purpose entities that do not have employees, the benefit is from the alternative calculation based on depreciable basis. Keep in mind that income on the sale of property that is treated as capital gains is not considered qualifying income for the purpose of this deduction.

Before undertaking the analysis, it is worth noting that these limitations only apply to taxpayers with taxable income in excess of $315,000 for joint filers or $157,500 for single filers. For taxpayers below these thresholds, the deduction is the lesser of 20% of qualifying income or 20% of taxable income. This simplified benefit is phased out at taxable income of $415,000 for joint filers and $207,500 for single filers and subject to the rules discussed below.

It’s also worth noting that rental real estate often generates a tax loss in earlier years of the investment because of depreciation and interest expense. To the extent losses are generated they carry forward and offset qualifying income in subsequent years. This deduction is more likely to benefit those who have investments in more mature commercial properties that have been held for approximately 10 years or have very low amounts of debt.

Example 3

Married taxpayers from Example 1 have a 10% investment in an LLC that owns rental real estate. In 2018, their allocable share of rental real estate income is $50,000 (net of any depreciation taken through a Schedule K-1), $0 of W-2 wages and $500,000 of depreciable property. In this example, their QBI deduction is $10,000, which is the lesser of 20% of qualifying income ($50,000 x 20% = 10,000) or 2.5% of depreciable basis ($500,000 x 2.5% = 12,500) since there are no W-2 wages. If the married taxpayers’ liability was $108,879 before, it is now $105,379 with the QBI deduction.

Example 4

Same as Example 3 except the allocable share of depreciable property is $200,000. In this case, the QBI deduction for the year would be limited to $5,000 ($200,000 x 2.5%) instead of based on qualifying income. The 2018 tax liability is $107,129.

The analysis on the limitation above must be done for each separate qualifying business and then combined to determine the total potential QBI deduction. Dividends from REITs qualify for the 20% deduction to the extent they are not capital gain dividends. Losses from one qualifying business can reduce the overall benefit but excess income cannot increase the benefit.

Example 5

Same as Example 4 except that the couple also fully owns a commercial or multifamily rental property that generates a $40,000 loss with depreciable basis of $1.5MM. In this case, total QBI is $10,000 ($50,000 of rental income from the LLC less the $40,000 loss). Thus, the QBI deduction is limited to $2,000 ($10,000 x 20%). The 2018 tax liability is $108,179.

Example 6

Same as Example 4 except that the couple also fully owns a commercial or multifamily rental property that generates income of $40,000 with depreciable basis of $1.5MM. The QBI deduction from this rental property is $8,000, which is the lesser of qualifying income ($40,000 x 20% = $8,000) or 2.5% of depreciable basis ($1.5MM x 2.5% = $37,500). Combining this deduction with the $5,000 deduction from the LLC results in an overall QBI deduction of $13,000. The excess limitation on the depreciable basis of the wholly owned commercial property would not increase the limitation on the LLC QBI deduction unless it qualified to aggregate the activities. This decreases the 2018 tax liability to $104,329.

After combining qualifying business activities, the result is then subject to a final limitation. The deduction is the lesser of the combined QBI deduction and 20% of taxable income before this deduction, same as for taxpayers with taxable income below the limits discussed above.

Example 7

The married taxpayers from Example 1 have a combined potential QBI deduction of $100,000 and taxable income before the QBI deduction of $450,000. This results in a QBI deduction of $90,000, which is the lesser of $100,000 based on qualifying income and 20% of taxable income (the maximum QBI deduction). The ultimate taxable income would be $360,000 ($450,000 less $90,000 QBI deduction). This reduces the 2018 tax liability to $78,579 compared to $108,879 from Example 1.

Depreciation Deductions

The most significant changes to depreciation that impact commercial real estate revolve around bonus depreciation. Except for a brief hiatus from 2005-2007, bonus depreciation has been in place since 2001 in order to encourage investment in capital assets including real estate.

The concept of bonus depreciation allows for a percentage of the cost of a capital asset to be deducted in the year it is placed in service, with the remaining basis deducted over its standard depreciable life. This percentage has ranged from 30% to 100% over that time and had an original use requirement. The TCJA brought back a 100% bonus depreciation deduction through 2022, meaning the cost may be fully expensed in the year placed in service for qualifying property.

Another investor friendly change was the removal of the original use requirement for assets acquired and placed in service after September 27, 2017. As a result, both new acquisitions and new construction of commercial real estate can perform a cost segregation study and take advantage of accelerated depreciation on the personal property assets inherent in the building. (In the process of cost segregation, certain costs are broken out as personal property assets, which have shorter depreciable lives and, thus, accelerates the depreciation deduction.)

Another change that would positively impact commercial real estate is an expanded definition of qualified improvement property that is depreciable over 15 years, making it eligible for bonus depreciation. In the haste of writing the bill, tax-writers inadvertently did not update code Section 168 to reflect their intention. Most prognosticators expect this to be addressed before year-end, with Congress passing a technical correction.

Like-Kind Exchanges

For years there has been speculation that Congress intended to significantly restrict the ability of real estate investors to defer taxes on the sale of assets using like-kind exchanges under Section 1031 of the tax code. Fortunately, the new tax law largely leaves like-kind exchanges of real estate unaffected.

Exchanges of real property for real property are still allowed, with no requirement that assets be exchanged for the same asset type (i.e., an apartment complex can be exchanged for an office property).

The major change in the rules eliminates the ability of personal property to qualify for gain deferral. This may have an impact on commercial real estate investments that have utilized a cost segregation study to accelerate depreciation on a portion of a building. In these situations, the proceeds allocated to these assets will be considered boot that cannot be used to defer the gain, resulting in taxable income even if all of the proceeds are reinvested in a replacement property. (The ability for 100% bonus depreciation until 2022 reduces the tax impact if a cost segregation study is completed on the replacement property.)

Interest Expense Limitation

The TCJA introduces a new limitation that restricts the ability to deduct interest expense in certain situations, but commercial real estate is not impacted in most scenarios.

The deduction for interest expense is limited to 30% of taxable income before interest, depreciation and amortization deductions. This limitation only affects large taxpayers that have average gross receipts in excess of $25MM over the prior three years. This is a significant amount of rent when the industry norm is to use a special purpose entity to hold each commercial and multifamily rental property.

For these larger real estate taxpayers, there is an ability to opt out of this limitation. To do so, a taxpayer must use the alternative depreciation system for its assets, which generally will result in reduced depreciation expense. In most situations this should result in lower taxable income compared to being subject to the limitation. The rules for how this limitation may impact an individual investor in an LLC or other pass-through entity are complex.

Tax-Exempt Filers

Tax-exempt filers that have investments in commercial or multifamily rental real estate may be subject to income taxes if certain requirements are not met. The overall rules relative to when rental property income is subject to unrelated business income tax (“UBIT”) do not change under the new tax law, but there is a change in the reporting of these investments that may have a negative impact on investors.

Previously, tax-exempt investors aggregated their allocable shares of the revenues and expenses subject to UBIT from all activities to determine their tax liability. For tax years starting with 2018, losses from any activity are only allowed to offset income or gains from the same activity. This inability to net current year losses with income from other activities will likely accelerate tax liabilities for tax-exempt investors that have multiple investments generating unrelated business income, and may impact the decision to use an IRA to make additional investments in commercial or multifamily real estate.

 

Source: GlobeSt.