A Unique Sale

3660 William AveLast week I sold a home in Coconut Grove which is unlike any other: it is the first certified Fortified Construction and Energy Star home built in Miami-Dade County. The developers and sellers, Rochester Builders Inc., set out to build an affordable product with a construction standard that goes far beyond what is called for in Florida. They wanted to make the home energy efficient as well. They achieved their goal and I found them a lucky buyer.

The Insurance Institute For Business & Home Safety, or IBHS, is the independent, non-profit organization that designates the Fortified Home certificates. There are three levels of designation: Bronze, Silver and Gold. Gold represents the highest standard for disaster protection, which the developers received. The methods and materials employed in the construction of the home ensure the utmost protection from hurricanes and other potential disasters. The Environmental Protection Agency designated the property a high Energy Star rating due to its energy-efficient appliances, lighting, heating, cooling, and ventilation systems. These ratings are not just accolades; they also translate into thousands of dollars in savings for the homeowner due to lower home insurance and utility costs.

Selling the house involved a three-month process from the day I got the listing to the day it closed.  I used various methods and tools including listing it on the MLS, advertising it on our website, speaking with the pastor of the neighborhood church to get the word out to the community, as well as doing a mass mail-out through the Postal Service. The challenge was to inform the public of a unique product that had not been available before in this market. And that is exactly what I did.

As my broker, Tom Dixon, says “being a real estate agent is about problem solving”, it is about finding unique solutions to unique issues. The combination of our various methods prompted a lot of activity and interest in the house and it came down to choosing the right buyer.

So if you have a unique real estate problem or simply need representation in the sale or purchase of a property, give us a call and we will find you a solution.

Roger Lopez
Dixon Commercial Real Estate
[email protected]
305.443.4966

 

 

 

 

 

A Strange Discovery

As commercial real estate brokers, when we list a property for sale, the first step is to properly identify the property’s address, legal description and owner’s name.

When we market the property, we may include a location map, aerial photos, copy of the plat showing the recorded information about the site,  a legal description, a survey and exhibits from the office of the Property Appraiser.

On the surface, this seems very simple; a property has an address and this tells you where the property is located on a map.  But it is not quite this simple. In the process of listing a 3.3 acre site, with industrial zoning located near the Airport Expressway and NW 27th Avenue in Miami-Dade County, we encountered a strange situation.

Usually, the address is confirmed by a review of the legal description and plat.  However, in Miami-Dade, because of the 90 year age of some plats, the information on the plat is different from the information at the site.  For the property we are selling, the plat shows the west edge of the property being  NW 29th Avenue, but maps and other exhibits show the western  boundary as being NW 30th Avenue.   One of the buildings has a listed address of 2990 NW 40th Street,  but according to the original plat, it should be addressed as 2890 SW 40th Street.

We don’t know how this happened, but further investigation found that in this part of Miami-Dade, some avenues on maps are missing.  For example, there is NW 27th Avenue with the next avenue to the west being not NW 28th Avenue  -which you would expect – but NW 29th Avenue.  NW 28th Avenue is missing or skipped.

Another example is found in old plats in the Brickell area of Miami. These old plats show what is now SW 8th Street being listed in the original plat recorded in 1901 as SW 20th Street.  An apartment developer friend turned this to his advantage.   He built an apartment on what is now known as SW 15th Road in Brickell and when looking for a name, saw that the original name for SW 15th Road was Broadway.  So he named his building “One Broadway”.

Another strange artery is “Coral Way”.   It starts out as SW 13th Street, then becomes SW 3rd Avenue, then SW 22nd  Street, and in Coral Gables, becomes Miracle Mile. After it goes west past Coral Gables, it becomes SW 24th Street.

We don’t always have the correct address but we know how to find the right property for our buyers. 

-Tom Dixon

Everybody Is Looking For Something That Doesn’t Exist

It is amazing how many students from my Commercial Brokerage class call and say they have an investor with $5,000,000 looking to purchase a commercial property showing a return of 10% on the investment. Or they ask do I know of any triple net lease properties with national credit tenants for sale with a return of 8%. In the real estate market today these types of properties are just not available for these kinds of return on investment.

Traditionally, real estate investors have been seeking investments with returns in the range of 8% to 10%. However, with the very, very low interest rates on savings deposits sellers are less willing to sell their properties in this market. Their position is that if they sell their property the net amount to reinvest after income taxes will not yield the same income as the property they now own.

The income properties which do come on the market are being sold because of issues with the property or issues with the owners of the property. Issues with the property could be it needs to be improved, re-marketed, has lost tenants or the market area has changed. Issues with the ownership could be partnership disagreements, lack of capital to improve the property, mortgage finances, a desire to reduce management responsibility or ownership is seeking to change/diversify investments.

This leads to a strange market condition in which the availability of properties for sale have returns on investment lower that the market is willing to accept “prices are too high” and buyers with expectations which cannot be obtained “investment returns are too low”.

Over time buyers become more willing to accept a lower return and are willing to pay higher prices. I guess you could call this price creep. We see this when we buy gasoline. Three years ago the price of $3.00/gallon was too high and we were aware of the this high price. Today the price is approaching $4.00/gallon and we just accept that this is the cost of driving.

Therefore, as the overall real estate market improves buyers must become more willing to pay a higher price if they want to invest.

A Different Way To Measure Things

As a real estate broker, when some one calls about a For Sale sign, I’m always asked, “What is the asking Price?” Usually, they expect a price based on cash to the seller. But lately my thinking has changed. Maybe the answer to this question should be, “It will cost you $$$ per month to own this property.”

This brings up the very interesting concept of price vs. value. Price is the measurement in dollars of something, whereas value is the actual benefit of your purchase. Let me give you an example. When I was a kid, my dad, an Air Force Colonel, enjoyed having a rum cocktail after a hard day at the base. I remember his explanation of how he had developed a system of converting price into value. Back then, he could purchase a bottle of rum for $5.00, and this bottle provided a benefit. Then when he went to buy a pair of shoes, he would compare the benefit or value of a pair of shoes priced at $10, converted to the benefit of two bottles of rum. So, when he went to buy something for $100, it translated to a value greater than 20 bottles of rum. (Needless to say, back in those times, he did not buy a lot of things for $100.)

This way of thinking about measurements applies to a lot of situations. A cruise ship is not 600 long, it can be better described as being as long as two football fields. A building is not 1,250’ tall, but is described as being as tall as the Empire State Building. When we travel by air, the trip is not described as being 1,000 miles, but as a trip of 3 hours. Think about the things we consume. Coca-Cola ads never show the price, it shows the benefit of satisfying your thirst.

Another way to measure something is to describe the cost or benefit in terms that are more understandable. For example, comparing the mileage of one car to another. Let’s say you drive a car 20,000 miles per year. If one car gets 20 miles per gallon and another gets 25 per gallon, what does this really mean? Over a distance of 20,000 miles, this will be an additional 200 gallons of gas. At $4.00 per gallon, this will be $800 more per year for the car with the lower mileage/gallon. Maybe this is the reason more expensive, super-economical cars with fewer creature comforts are not as popular as we think they should be.

Then there is the strange benefit of ownership satisfaction. Consider the difference in the price of watches. They all do the same thing, with the same degree of accuracy; yet sell from $20 to $20,000. There must be an emotional benefit of possessing a watch costing $20,000. The price is $20,000 – but for someone to buy the watch – they must receive a benefit equal to or greater than $20,000.

Call us we know how to measure the difference between price and value.

2014 Industrial Market Report

Last week, Andrew and I presented the 2014 Miami-Dade County Industrial Market Study to over 170 members of the Commercial Industrial Association of South Florida and guests. This is the 18th year we have reported on the industrial market conditions in South Florida.

The Market Trends Section reported a growth in industrial space for the year of 2012 of just over 456,000 SF a decrease of 336,000 SF from the prior year. The industrial employment sector shows an increase of 6,800 to over 172,300 employed. For the year of 2013 projected total freight at the Port of Miami decreased by 1.6% while freight through Miami International Airport increased by 3.3%.

The Market Activity Section shows volume of warehouse sales over 10,000 SF at 137 properties, with an increase in the average sale price to $56/SF. While the dollar amount of sales increased by 54% to $397,870,850 with an average building size of 49,000 SF.

Summary:
Although the market continues to improve, there is concern that rental rates and sales prices are reaching a peak. This results from an increase in the supply of quality industrial buildings coming online in 2014 and sales prices of existing buildings not supported by rental rates.

The newer industrial buildings feature a minimum 30’of clear interior height, 54’ wide column spacing allowing for 4 loading doors, rear loading truck access with large parking aprons and easy truck access. Interior improvement include T-5 high efficiency lighting systems combined with motion activated switches, EFSR sprinkler systems, windows over the loading door for natural light and high quality interior finishes in the office areas with 9 to 12’ ceiling heights.

Strongest demand is for space between 10,000 SF and 30,000 SF. Landlords should reposition larger blocks of vacant second generation space, or older 24’ clear height product and subdividing these larger vacant spaces into smaller bays in order to target smaller tenants in the market seeking from 20,000 to 50,000 SF.

Some landlords are offering a Rent Abatement. Typically, tenants are able to receive one month of total free rent for every three years of lease terms and two months free rent for every five years of the lease term.

Unlike previous years when we noted that Miami had become a temporary storage and transportation hub, manufacturing is on the rise. Latin America companies are moving their operations to Miami-Dade for political and economic reasons. These include food processing and aviation companies. In addition, medical drug and equipment manufacturing is active, with some tenants purchasing their own facilities.

The market continues to improve, with lower vacancy rates, rental rates $.50 to $1.00/SF higher than last year and continued demand for industrial space from both a rental market and purchase market perspective.
Tenants seem doubtful that the new Panamax Ships/Larger Port will benefit them directly. However, we do see the possibility of larger amount of perishable goods that need cooler space coming through on the ships from South America.

If you’d like more information about the “Commercial Industrial Association of South Florida” send an e-mail to [email protected], or you can view and download the entire Market Report on our website.

2014 Industrial Report

By Tom Dixon

Here A Bank There A Bank

Unless you have been asleep or out of the country, you have noticed the bizarre spread of branch banks everywhere. At the start of the Great Recession five years ago when banks were in trouble and our government bailed them out to protect the United States financial system from failure, the big banks were considered too big to fail but needed help. So the government loaned them money to protect the big banks and the banking system.

Historically banks existed to hold deposits, transfer funds, make loans, collect interest and fees, and to pay interest to depositors and dividends to stockholders. Somehow after the Great Recession all this changed. Banks still hold deposits, transfer funds, collect interest and fees, but pay very little interest on deposits (1/4 of 1% or a $2.50/year for a $1,000 deposit) and provide very few loans.

So what are they doing with all the money they are borrowing from our government? Some are using it to make trades on the Stock Exchange while others are using the money to build branch offices. Yes, they are building branch offices. Not just one or two, but a branch office seems to pop up every mile on major roads. But why build branch offices, when customers can make deposits using their phone, withdraw money at an ATM and do most of their banking electronically?

The growth of drugstores, fast foods and gas stations, is understandable, these all pertain to items that are tangible you can hold them in your hand or in your car. But other than cash, money is not tangible, and there is no real reason to even go to a bank except to deal with a problem or arrange a loan.

So why so many branch banks? One theory is that banks are using the money they borrowed from our government at less than 1% interest rate to invest in their own real estate investments. They are using the money not to make loans to regular businesses, that’s too risky. But instead of making loans they invest in real estate for their own gain, essentially backed by our tax dollars. Yes, banks can legally invest in real estate if it is used for the operation of their business. They cannot buy an investment property like an office building or shopping center. But they can own their bank buildings. One of the regulations for the ownership of real estate by banks states, “A national bank association may purchase, hold and convey real estate for the following purposes, and no others; First. Such as shall be necessary for its accommodation in the transaction of its business.”

So banks are not making real estate loans because they are considered “too risky”, yet at the same time they are investing in real estate, through the ownership of multiple branches. Marketing experts might say this is to build brand recognition and customer loyality. We’re not so sure. The bank where I have my personal account has been Coral Gables Federal, then First Union, then Wachovia and is now Wells Fargo and I haven’t once thought of moving because of the name change. As long as my money is insured, what does the name on the door matter? Call us…we can’t explain everything, but we can provide some insight into real estate issues.

By Thomas J Dixon

Dog Food Via Ups

During the past 6 months, I have changed some of my shopping habits and started doing more Internet shopping. One reason is that there is a greater choice of products to meet my needs and another is simple economics. For example, I needed a special light bulb for a floor lamp at our office. I found a store about 10 miles away that had the bulb in stock for $10. Then I went on-line and found the same bulb for less with no sales tax. I figured that if I drove 20 miles to pick up the bulb (at 20 miles to the gallon) I would use a gallon of gas and the trip would cost $3.50. My alternative was to wait two days and have the bulb delivered by UPS. Guess which one I chose.

Now there are some things that don’t lend themselves to delivery such as groceries, large construction items and large bulky products, although my son has started ordering his dog’s food online so maybe that’s not entirely true. However, there are also some items that require in-touch decisions such as clothes and fashion items. Some things however such as shoes are easier to find on-line and then have delivered than to go to a store. To get the right size my wife orders two sizes and sends one pair back making sure that returns are postage paid.

I get the feeling that as we go from “bricks to clicks” the demand for certain types of retail space will decline as well as the need to have inventory of goods in local warehouses. The demand for small local warehouse storage space will decrease as logistic companies can move goods overnight from larger central warehouses. For retail space, the number of stores may remain the same but the size of stores will decline as the need for large inventories decline.
These changes in buying habits will have consequences beyond just the real estate industry. For example, in Florida we don’t have a state income tax instead generate state revenues from real estate and sales taxes. If more and more goods are purchased “out-of-state”, sales tax revenues will not increase at the same rate as the population increases. If sales tax revenues decline and demand for state services increases, there could be a movement to increase the sales tax, add a tax on to services, or consider a state income tax. The consequence of an increase in the sales tax may be more “out-of-state” purchases which will only make the problem worse. A similar issue has arisen with the tax on gasoline sales. The maintenance of the road system depends on the gasoline tax. Unfortunately as gas prices rise and cars become more efficient, we drive less by shopping on-line and we use less gasoline resulting in the state collects fewer taxes to support the roads.

So how does this impact real estate investment decisions? We will still go shopping and still have the need for retail/services space. Those things which cannot be delivered will still need space. Personal services such as doctors, barbers, beauty salons, gyms, restaurants and bars are some that come to mind. On the other hand, services which can be done remotely don’t need expensive local space and can be located anywhere. For example, who really wants to go into a bank when you can make deposits and withdrawals at an ATM and pay bills on-line or with your phone?
Unless we see the changes before they happen we won’t know how to get on the right side of the trends. Call us. We are always looking for the impact of future trends on real estate investments.

By Tom Dixon

Your Fair Share in 2013

If you live in Florida and own property, you will receive a TRIM (Truth in Millage) notice in the next 4 to 6 weeks. This notice will give you an estimate of the real estate taxes that the property must pay, based on the assessment and millage rate. The assessment is established each year by the County Property Appraiser using mass appraisal techniques. The millage rate is based on funds the city and county government need to operate. The real estate taxes for a property is then calculated by multiplying the assessment – say $100,000 times the millage rate of say 19 mills, which is really 1.9% or .019. This equals a tax of $1,900. I sometimes think that the use of the term millage rate is to confuse the taxpayer. It would be much clearer if it was expressed as a percentage of value.

As a taxpayer, you are only obligated to pay your fair share and the only part of the real estate tax equation which can be appealed is the assessment. For non-homestead property, the tax year of 2008 is very important because the Florida Constitution was changed to limit the increase in the assessment from year to year. The following is an extract of the new assessment procedure for non-homestead property.
Assessments of non-homestead property shall be changed annually on the date of assessment provided by law; but those changes in assessments shall not exceed ten percent (10%) of the assessment for the prior year. …. such property shall be assessed at just value as of the next assessment date after a qualifying improvement …such property shall be assessed at just value as of the next assessment date after a change of ownership or control and …changes, additions, reductions, or improvements to such property shall be assessed as provided for by general law….
There are serious unintended consequences of this amendment. For example, over time – as the difference between the assessed value and the just value increases – fewer and fewer property owners will be motivated to sell and fewer buyers will be interested in buying because of the impact of the increase in assessment and taxes after a sale. The next problem will be the lack of motive to upgrade, change or improve property because again, this will cause a re-assessment of the property. However, this is the Florida Constitution and unless it changes, you should take advantage of these benefits.
With the general decline in real estate values from land, condos, single family homes to income properties, the year 2008 is the best opportunity to lock in the low valuations so that in future years as the real estate market improves, your assessment and real estate taxes will be at a minimum.
After you receive the TRIM notice, there is usually a period of 25 days to file an appeal petition if you wish to protest the assessment. Then, sometime in the next 12 months there will be a hearing before a Special Magistrate to protest the assessment. As a property owner, you can file the appeal and present your arguments before the Special Magistrate. However, many property owners have found that using a professional is much more effective.
With our 30 plus years of combined knowledge of South Florida real estate valuations as estate brokers, professional appraiser, teacher and economic analysts, we are well equipped to represent property owners in the successful appeal of real estate tax assessments.

CALL US — WE CAN MAKE SURE THAT YOU ARE ONLY PAYING YOUR FAIR SHARE OF REAL ESTATE TAXES.

The Shadow Inventory is Real

Over the past months the reported inventory of homes for sale in the South Florida market is very small, prices are rising and sellers are getting multiple offers above the asking price. Some buyers have never even viewed the home. These are facts which are true. Although these facts may be true they need to be considered with other information.
Being active in the residential and commercial market I have an account to make on-line offers to purchase properties at the Miami-Dade County foreclosure auction. These foreclosure auctions are held daily and permit a buyer to make bids for properties on line. With a deposit of 5% of the amount of your bid you can bid for properties with the understanding that you must pay the balance within 24 hours.

My analysis of this electronic bidding system shows that between April 15th and July 1st of this year the county is scheduled to auction over 7,500 properties, mostly condos and single family. If the 1,200 properties listed for “Short Sale” are deducted, the inventory of homes for sale will increase by 6,300 homes. This compares to the Multiple Listing Service list of approximately 11,900 condos and homes for sale in mid-April. Therefore, in the next several months the inventory of homes and condos for sale could easily increase to 18,300 or an increase of over 50% as the foreclosed properties are placed on the market.

The listed homes which have been selling are generally in good condition with sellers motivated to maintain their property to maximize the sale price, whereas most of the foreclosed homes have issues which make them difficult to sell because of their physical condition. These physical conditions will affect the purchase price so we might see a decline in prices as foreclosed properties are placed on the market. Again the facts will show a change in pricing but other factors need to be considered such as property condition at the time of sale.

Years ago I tried to convince an apartment builder to buy land to build an apartment building. His comment was “where will the tenants come from?….do you see anyone sleeping on the streets”. There are only so many buyers who can afford the all cash or 20% down-payments and a history of good credit. The real estate boom years of 2005 to 2008 came about because there were NINJA loans (No Income, No Job, no Assets) with a 3% or smaller down-payment, rapid speculative price increases and television shows on how to flip houses. Unless we get an influx of new residents the demand for these foreclosed properties may reach a saturation point.

Facts can be both true and misleading. Yes there is a shortage of homes listed for sale, but there is also a very large shadow inventory or pool of homes coming to market which will have an impact on the future price of housing. We interpret facts to help us make knowledgeable decisions to help our clients.

By Thomas J Dixon

Is Your Money Really There?

Every time I make payments towards my retirement account I think about the stories of Bernie Madoff, MF Global and other investment schemes, where the investment money was “lost”. To date MF Global is missing roughly $1.6 billion, JP Morgan had trading losses of $2 billion and I’m sure there will be other horror stories. Once a month I receive my retirement statement that some months show increases and some months losses of my funds. This is only a printed document from a national financial company. I trust that these statements are correct and the money will be there when I retire.

However, to be on the safe side, with my son Andrew we purchased a duplex, for investment, to rent out and receive the benefits of appreciation, cash flow, tax depreciation deductions, with returns greater than the ½% interest we are receiving from our bank. But the most important part of this real estate investment is the knowledge it is there. We can physically touch our investment.

In the United States, ownership of real estate is protected in the sense that it is very difficult for it to be stolen, it cannot be taken by the government without compensation, with its financing provides leveraged returns and its ownership is recorded in the public records. This combination makes real estate purchased at the right price a very good long term investment.

The question is how to make an investment at the right time and the right price. Many investors say the most important factor is location, location and location. While location is important, timing and price are also very important. The best timing is when the market is near the bottom and will rise over time. The right purchase price is when the rental income less expenses will give a positive return. I believe we are near the bottom of this real estate cycle and now is the time to consider the purchase of investment real estate.

The negatives of owning real estate are the issues of property management, paying bills, collecting rent, overseeing maintenance and here in South Florida worrying about hurricanes. The positive is the security of knowing the investment is really there and it is yours.

Let us help you make sure “YOUR MONEY IS REALLY THERE”

Tom Dixon