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Road Runner Real Estate Sales & Investments

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We have the green light out in honor of our veterans and the day honoring them tomorrow. Thank you for protecting our freedoms.

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Chicago's Willis Tower To Test Sales Market

Former Sears Tower Could Fetch Record Price of $1.5B

By Randyl Drummer

March 4, 2015


In another sign of the peak market conditions for office property, the ownership group of Willis Tower, formerly known as Sears Tower, have reportedly hired Eastdil Secured to shop the massive 3.8 million-square-foot, 110-story tower to prospective buyers in a deal potentially valued at a record $1.5 billion, or $400 per square foot. 

The sale listing, first reported by Real Estate Alert newsletter, reflects soaring property values in Chicago, a relatively late-comer to the office market recovery, where high-end CBD office pricing has so far underperformed other large U.S. metros. 

The Chicago region has nearly reclaimed all of the office jobs it lost during the recession and will surpass its pre-recession high in the next few quarters, according to CoStar Portfolio Strategy. Meanwhile low interest rates, a tightening office market and strong interest in U.S. real estate by domestic and overseas investors is driving record office sales. 

The Willis Tower listing follows the July 2014 sale of 300 North LaSalle, a 1.3 million-square-foot, 60-story office tower in downtown Chicago, to Newport Beach, CA-based The Irvine Company for $850 million. At $654 per square foot, the sale price set a record for large buildings and has helped restore investor confidence in the downtown Chicago and West Loop markets. 

The 300 N LaSalle sale shattered the previous Chicago office property sales record of $840 million paid in 2004 for the former Sears Tower at 233 S. Wacker Drive by a venture led by New York City developers Joseph Chetrit and Joseph Moinian, along with American Landmark Properties of Skokie, IL. 

Also last year, 353 N. Clark St. was purchased by Chicago-based investment manager Heitman for $715 million, or approximately $604 per square foot for the 46-story office tower. Also according to local media reports, the 80-story Aon Center at 200 E. Randolph St. is also currently on the market. The 2.7 million-square-foot building stands as the third-tallest in Chicago. 

Willis Tower was originally built in 1973 as the headquarters of the Sears Holdings Co. The 1,450-foot tower was the world's tallest until 1998 and now stands as the second-tallest in the U.S. behind 1 World Trade Center in New York City, which is 1,776 feet, including its spire. 

The building was renamed Willis Tower in 2009 after insurance broker Willis Group Holdings Ltd. replaced Sears as the building's anchor tenant. Other major tenants in the building include the headquarters for United Airlines holding company United Continental Holdings Inc. The airline expanded and extended its lease in the building in 2013. Law firm Seyfarth Shaw will move to the building in 2017, further boosting the property's value. 

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President Obama's Budget Proposal and What it Could Mean to You

From the IREM Blog posting by Mike Toner.

President Obama released his budget proposal for the next fiscal year on February 2nd, and as always, there are winners and losers, especially given the political atmosphere and federal fiscal situation. The priorities of the Administration and the issues the federal government is facing are readily apparent in the funding level increases for many departments in the President’s proposal.

On the affordable housing front, the budget proposal shows commitment to affordable housing by providing $49.3 billion in funding to the Department of Housing and Urban Development, which is an increase of $4 billion over what Congress approved for this year. The funding would cover all Housing Choice Vouchers, as well as 67,000 more that were cut in previous budgets. Nearly 300 IREM Members lobbied their Members of Congress to protect and increase affordable housing program funding during IREM’s Capitol Hill Visit Day in 2014. This is certainly something our members can support as IREM Members manage almost 40% of all affordable housing in the United States.

Other good news from the budget proposal comes in the form of a permanent extension of the Section 179D energy efficiency tax deduction. Section 179D allows building owners to obtain a tax deduction for hitting specific energy efficiency measures, and allows them freedom in how to go about implementing the measures.

However, there are also some alarming proposals found in the President’s budget proposal. President Obama has proposed to change Section 1031 like-kind exchanges by limiting the deferral of taxable income to $1 million annually. Limiting the like-kind exchange would negatively impact the property management industry. IREM and its members want to protect this useful tool and avoid any changes to current law that would cap the allowable deferred amount.

The budget proposals also seek to classify “carried interest” income as “ordinary income,” and as a result, tax carried interest at a much higher rate. The treatment of carried interest as capital gains is crucial for creating incentives for real estate ventures to develop and sell new projects, and helps their ability to raise capital. Investing in real estate involves risk; an investor cannot simply move their property to another country for favorable tax treatment. These projects create jobs and tax revenue, and protecting carried interest tax treatment is vital to ensuring a thriving real estate market. IREM strongly opposes this proposal.

The President’s budget proposal is just the first step in the process, and if history is any guide, the final budget will look drastically different. However, the budget proposal clearly shows what the Administration’s priorities are, and what factors will shape the discussion and debate Congress will have on the budget.

For more on IREM's legislative positions, check out our Policy Statements page. Or even better, join us at the IREM Leadership and Legislative Summit April 11-15, in Washington, DC.

Great time with the team watching the super bowl. I am enjoying it folks.

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When Should You Hire a Property Management Company?

Although hiring a property management company has many advantages, using one can be expensive. And, even apart from the cost, relying on a property management company is not for everyone. Consider the following factors to determine if hiring a property management company would be a good decision for your business.

You should consider hiring a property management company if:

You have lots of properties or rental units. The more rental properties you own and the more units they contain, the more you're likely to benefit from a management company.

You don't live near your rental property. If your rental property is located far from where you live, hiring a property management company can be invaluable in dealing with the many issues that you will not be able to handle from afar.

You're not interested in hands-on management. Many landlords look forward to the challenge of finding good tenants and the rewards of maintaining a safe and attractive property on their own. But if you view rental property ownership strictly as an investment and want little or nothing to do with the day-to-day management of your properties, consider hiring help to manage your property.

Your time is limited. Even if you enjoy hands-on management, you may not have much time to devote to your business, especially if landlording isn't your day job. And if you prefer to spend your time growing your business, including searching for new properties, arranging financing for renovations, or changing your business structure, then a management company may be a good way to spend your money.

You can afford the cost. Hiring a property management company is an attractive option if you can afford the fees. When interviewing companies, expect to hear quotes ranging between 5% and 10% of what you collect in rent revenue. If it's a down market and you're able to manage things yourself (or with the help of a resident manager or other employees), you may want to keep doing so until the market turns around.

You're suddenly inundated with management tasks. If your business is growing, at some point you may find that you need a substrantial amount of help to manage everything properly. At that point, it might make sense to hire a management company.

You don't want to be an employer. If you hire a resident manager or other employees to help with your property, you become an employer. You'll have to handle payroll and deal with a host of other legal requirements and considerations. But, because a property management company isn't your employee (it's an independent contractor), and neither are the people who work for the company, by using one you avoid the hassles of being an employer.

Your property is part of an affordable housing program. If you participate in an affordable housing program, things can get complicated. Usually, in these programs the landlord receives financial assistance, which may be in the form of a grant, low-interest loan, or tax
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