Federal Historic Preservation Tax Credit

 Federal Historic Preservation

Tax Incentives

Federal Income Tax Credit Information

Federal Historic Preservation Tax Credit – the benefit is 20% of the renovation cost as an income tax credit (can also be sold on a secondary market) with no cap. The project must be income producing, a substantial renovation and either be landmarked, in a historic district or contributing to one of those (you can check here: http://nrhp.focus.nps.gov/natreghome.do?searchtype=natreghome)

NY State Historic Preservation Commercial Tax Credit – An additional 20% of the renovation cost as a state income tax credit is available – Automatically qualifies if the property qualifies for the federal AND is in a qualifying census tract (90% of Brooklyn and Queens, 20% of Staten Island and maybe 50% of Manhattan qualifies). You can check here: http://www.oprhp.state.ny.us/nr/main.asp

The Façade Easement Program – This is a federal tax deduction (not credit) for donating an easement containing the façade and occasionally the air rights to an architectural trust. It is valued at the difference between the appraised value of the building with and without the easement which is to a degree arbitrary and therefore this credit is scrutinized by the IRS fairly seriously. 

Further info:

Brooklyn Sales Report - 3Q 2011

Massey Knakal's Property Sales Report

3rd Quarter 2011:

Massey Knakal - Brooklyn Sales Report 3Q '11

 

After nearly four years since the economic crisis began, the New York City commercial real estate market is slowly starting to see signs of stability that is expected to continue through the end of the year. New York City dollar volume is expected to reach $25B by year end, a 78% increase over 2010 and a 317% increase over 2009. Property sales are expected to reach 2,000 properties across all boroughs, an increase of 22% from last year, an annualized turnover ratio of 1.26% of the total stock of properties. As expected, Manhattan has led the way with a 93% increase in dollar volume over 2010 on an annualized basis, with Queens not far off at 70%. Manhattan’s $16.7B in sales accounts for 87% of total dollar volume in NYC. All submarkets are expected to see 20-30% increases in property sales volume with the exception of Northern Manhattan which is expected to remain flat in comparison to 2010.



Property Sales Volume & Turnover

During the 3rd quarter of 2011 (3Q11), the Brooklyn property sales market had 147 transactions consisting of 173 properties. The number of properties sold in 3Q11 has decreased 8% over last quarter and increased 25% over 3Q10. From 1-3Q11, Brooklyn has seen 447 transactions consisting of 529 properties. Year-end projections, on an annualized basis are expected to reach 596 transactions representing 705 properties, a 22% increase over 2010. The annualized turnover rate through 3Q11 is 1.08%.



Dollar Volume

In 3Q11, there was $310M of investment sales in Brooklyn, down 23% from 2Q11. Through 3Q11 there has been $1B in sales a 27% increase over 1-3Q10. If we examine this data on an annualized basis, we can expect the Brooklyn submarket to reach $1.4B, an increase of 33% from 2010. Through 3Q11, the average price per property in Brooklyn was $1.9M, an increase of 9% from 2010.
While the volume figures above reflect activity across all property types, below we examine pricing trends based on product type.




Industrial Buildings

• 3Q11 dollar volume is $46M, an increase of 34% from 2Q11, with projected volume for 2011 expected to reach $197M, up 35% from 2010

• 13 properties sold in 3Q11, down 7% from 2Q11, with 55 properties sold in 1-3Q11 down 8% from 1-3Q10

• $/SF through 3Q11 was $273, up 54% from 2010


Elevator Apartment Buildings

• Dollar volume in 1-3Q11 was $197M, an increase of 163% from 2010’s year-end total

• There have been 26 sales in 1-3Q11, with 5 occurring in 3Q11, 2011’s annualized total is expected to outpace 2010’s by 104%

• Cap Rates averaged 6.03% through 3Q11, down 106 bps from 2010, with GRM up from 8.19x in 2010 to 10.55x

• $/SF through 3Q11 was $145, down 24% from 2010


Walk-Up Apartment Buildings

• 3Q11 dollar volume is $67M, down 35% from 2Q11. Projected volume for 2011 is expected to exceed $344M, up 71% from 2010

• 52 properties have sold in 3Q11, up 4% from 2Q11. 150 properties sold in 1-3Q11. This property class is expected to exceed 2010 totals by 34%

• Cap Rates averaged 7.05%, down 5 bps from 2010. GRM is down from 10.12x in 2010 to 8.79x

• $/SF through 3Q11 was $164, down 5% from 2010


Mixed Use Apartment Buildings

• 3Q11 dollar volume is $47M, down 21% from 2Q11, with projected volume for 2011 expected to exceed $198M, up 34% from 2010

• 47 properties sold in 3Q11, down 19% from 2Q11. 146 properties sold in 1-3Q11 up 17% from 1-3Q10

• Cap Rates averaged 6.82%, down 45 bps from 2010

• $/SF through 3Q11 was $262, down 1.8% from 2010


Retail / Retail Condo

• Dollar volume in 1-3Q11 was $76M, with $36M coming in 3Q11. The $101M projected year-end total is a 46% decrease from 2010

• 17 properties have sold in 3Q11, up 42% from 2Q11. 44 properties sold in 1-3Q11 up 19% from the same time period in 2010

• $/SF through 3Q11 was $337, up 1% from 2010


Office

• Dollar volume through 3Q11 was $23M down 55% from 1-3Q10, with just $750K sold in 3Q11. Dollar volume is expected to end the year down 43% compared to 2010

• 10 properties have sold in 1-3Q11, equaling 1-3Q10’s tally, with only one property sold in 3Q11

• $/SF through 3Q11 was $256, down 5% from 2010


Development


• Dollar volume through 3Q11 was $161M, with $57M coming in 3Q11. Year end totals are expected to reach $215M, an increase of 136% over 2010

• 85 properties have sold through 3Q11, on pace to exceed 2010’s volume by 74%

• $/BSF through 3Q11 was $115, up 14% from 2010


Other Properties

• 13 Specialty Use/Conversion properties sold for $38M in 1-3Q11.
$/SF is averaging $271 in 2011, up 26% from 2010

State Legislature Passes "The Rent Act of 2011"

STATE LEGISLATURE PASSES

“THE RENT ACT OF 2011” 

On June 24, 2011, the New York State Legislature passed The Rent Act of 2011.

Among the Act’s features are the following:

    The rent laws were extended for four years, to June 15, 2015;

    The vacancy increase is limited to one time in each calendar year, notwithstanding the number of vacancy leases entered into in such year;

o       Notably, the Act does not say if any increase, such as a renewal increase, is permitted after the first vacancy increase in the calendar year;

    The rent threshold for deregulation on vacancy was increased from $2000 per month to $2500 per month for any apartment that is or becomes vacant on or after the effective date of the Act;

o       The Act continues the notion that the key is the legal rent that could be charged to the next tenant; even if the amount charged or paid is less than the threshold amount.

    The high rent / high income thresholds for deregulation are increased to $2500 and $200,000 (in each of the prior two years);

o       The $2000 / $175,000 thresholds remain in effect for all proceedings commenced prior to July 1, 2011.

    The individual apartment improvements rent increase (“IAI”) for rent stabilized apartments was amended for larger buildings; that is, buildings with 36 or more apartments:

o       For buildings with 35 or fewer apartments, the IAI remains 1/40^th of the cost incurred by the owner;

o       For buildings with 36 or more apartments, the IAI becomes 1/60^th of the cost incurred by the owner where the rent adjustment takes effect on or after September 24, 2011

The 421-a tax exemption program has been extended, with certain limitations, provided that any eligible project must apply to HPD for a Preliminary Certificate of Eligibility by June 23, 2012.

The Brooklyn Easy

A blog dedicated to commercial real estate and development news with focus on Brooklyn/Downtown Brooklyn, including the local culture and food movements.