L.A. Soft Story Ordinance and Implications for Condominium/Apartment Owners

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

By: Dilip Khatri, PhD, SE | Principal Khatri International Inc.

earthquake property

Los Angeles is on the “Ring of Fire”.  The Ring of Fire circles the perimeter of the Pacific Ocean refers to areas of the high seismic activity because of multiple tectonic plates that have been moving/grinding against each other for millions of years.  It’s no surprise that we are in the center of seismic activity with total unpredictability.  The Earthquake risk element affects every aspect of life in Southern California, most notably our buildings where we live, work, and entertain, because it poses a threat to our very existence.

The Soft Story Ordinance, passed by the City of Los Angeles in 2016, encompasses residential and commercial buildings (4 or more units) that have a weak story line which leads to potential catastrophic circumstances:  The entire upper level may collapse on the weak first story.  In order to minimize this structural calamity, the Soft Story Ordinance requires building owners to upgrade/fix/enhance their buildings to reduce this risk.

Khatri_Figure1

Figure 1

Figure 1 demonstrates this principle and shows the collapse mechanism.  It’s no different from having a heavy object on “stilts”.  A lateral force applied to the upper floors will cause the structure to tip over.  The objective of the Ordinance is not to save the building/property.  Rather, the prime and single goal is to save the People inside the building.  Many property owners don’t realize this objective, and its important to be clear that the Ordinance is not trying to save property values, it’s main object is Life Safety.

The L.A. Ordinance officially affects approximately 14,000 buildings but that number is changing because new buildings are being added to the list, and other Cities in Los Angeles County are decidedly passing similar Ordinances.

Khatri_Figure2

Figure 2

There are several engineering options available to resolve this dangerous condition.  At least five repair options are to be considered:

  • New Steel Moment Frames
  • Strengthening existing Steel Moment Frames
  • Strengthening existing Wood Shear Walls
  • New Wood Shear Walls
  • New Steel Flagpole Columns

Figures 2 and 3 show a few schematics of a Steel Moment Frame and Wood Shear Wall.
My advice to owners is to look at each of these options and evaluate the “best choice” from an economic feasibility standpoint.

Khatri_Figure3

Figure 3

Each property is unique and requires personal attention of a structural engineer and contractor. It’s definitely not a “one size fits all” scenario.  Look around, shop around, and do some diligence before you commit to a specific solution/vendor approach.  The time lines for compliance are 7 Years from the date of notice, 2 Years for plans and permits.  If you are interested to learn more about the Soft Story Ordinance, this author has produced an online video for your reference: https://vimeo.com/194302379

Dr. Khatri has 31 years of civil engineering experience involving land development, subdivision, commercial, residential, multi-family, industrial, and educational facilities. Design, construction, and overall management of major infrastructure improvements comprising sewer, water, storm drain, flood control, and grading design.

INCOME PROPERTY EXPO IN PASADENA HOSTS HOWARD JARVIS TAXPAYERS AND REAL ESTATE EXPERTS TUESDAY, MARCH 14TH

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

INCOME PROPERTY EXPO IN PASADENA HOSTS HOWARD JARVIS TAXPAYERS AND REAL ESTATE EXPERTS TUESDAY, MARCH 14TH  

Surviving California’s Hostile Business Environment, The Soft Story Ordinance,
Property Taxes, Legal Issues & Other Seminars – Admission is Free

ExpoPhotos_PressReleasePASADENA (March 3) — Commercial and residential property owners, managers and investors can learn what’s new in financing, strategies and products at the 5th Annual Income Property Expo at Pasadena Convention Center, 300 E. Green Street, Pasadena, CA 91101 on March 14, from 9:00 a.m. to 4:00 p.m. Admission is free.

“This event offers experts, resources and strategies for cost-effective management and maintenance of rental, multifamily and commercial properties,” said Paul Smith, producer. Howard Jarvis Taxpayers Assoc. president Jon Coupal will discuss surviving the hostile business environment, plus experts seminars on the seismic retrofit ordinance, market analysis, rent control, landlord/tenant and property law and more will be held including:

  • Kathy Fettke, Real Wealth Network
  • Jon Coupal, Howard Jarvis Taxpayers Association
  • Dilip Khatri, PhD, P.E., S.E., Khatri International Structural & Civil Engineers
  • Robert “Rusty” Tweed, Tweed Financial Services
  • Tony Watson, Robert Hall & Associates
  • Elizabeth Harris, Exeter 1031 Exchange Services, LLC
  • Dennis P. Block, Law Firm of Dennis P. Block & Associates
  • Gene Guarino, Residential Assisted Living Academy
  • Steven Duringer, Duringer Law Firm
  • Brian Gordon & Vince Medina, Lotus Property Services, Inc.
  • Mike Brennan, Brennan Law Firm

Nearly 100 vendors will showcase the latest in building products, services, materials, energy systems and maintenance. The expo also features all-day networking with industry professionals and sponsors including Apartment Management Magazine, Real Wealth Network, Chase Bank, Robert Hall & Associates, Exeter 1031 Exchange, Duringer Law Group, Tweed Financial Services, Khatri Structural and Civil Engineers, Provident Bank, HD Supply, CIC Tenant Screening, and The Howard Jarvis Taxpayers Association.

Admission is free. Seminar seating is limited. For information, please contact Jordan Smith at (800) 931-6666
or email RSVP@IPMEXPO.com. Pre-register at www.incomepropertyexpo.com.

RED FLAG WARNING for Commercial Property Owners – a $45B Problem

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

By Kathy Fettke | RealWealthNetwork.com
Commercial Building

This may be the year that billions of dollars in commercial mortgages go belly up. These loans were financed in 2007 and are maturing this year. That means some commercial property owners will be faced with huge balloon payments and for some, a major headache to pay them off.

The Federal Reserve stated in its semiannual Monetary Policy Report to Congress on Tuesday that commercial property prices were becoming a “growing concern.”

Specifically, the report said, “”Commercial real estate (CRE) valuations, which have been an area of growing concern over the past year, rose further, with property prices continuing to climb and capitalization rates decreasing to historically low levels,”

While commercial property debt remains small compared to the overall economy the report said that the rising “valuation pressures may leave some smaller banks vulnerable to a sizable CRE price decline.”

According to Reuters, commercial real estate loans by U.S. banks surpassed their pre-financial crisis levels in September 2015, and at last reading for January stood at a record $1.97 trillion. Small banks hold nearly two-thirds of that total, some $1.22 trillion.

Commercial property values in the U.S. have more than doubled from their 2009 low, according to Green Street Advisors’ Commercial Property Price Index. Things started slow down in 2016, with just a 3% rise in values.

And this all comes at a time when there’s also a concern about a tidal wave of commercial loans that will come due this year. Lending standards in 2007 were lax and real estate investors jumped in with both feet, taking on huge amounts of debt in that red-hot market. Back then it was difficult to see anything but skyrocketing real estate market.

Then, the impossible happened. The residential real estate bubble burst, and property valuations plummeted back to earth, and even below the water line. We know now that many homeowners lost their property because they couldn’t make the payments or because banks simply failed.

This is the year we could begin to see the same fall-out on their commercial loans.

While commercial property in the most populated metro areas like New York City and San Francisco are seeing record high prices for real property,  the real-estate recovery has been a little lopsided.

There are many U.S. markets where valuations have not caught up yet. It’s those landlords who might have trouble refinancing their monster balloon payments, and if they can’t refinance because they are underwater on the loans, they might have to sell at a loss.

Bloomberg says that prices for suburban office buildings are still 4.8% below their peak compared to Manhatten skyscrapers that have surged 50% higher than they were at their previous peak. So when it comes time to refinance loans for buildings that aren’t worth as much, lenders may want landlords to cough up the difference… and that may not be easy to do.

Borrowers may also have to pay higher interest rates, or they may run into lenders who are now pickier about what the buildings they are willing to finance. Bloomberg writes that lenders may not be eager to finance retail properties, especially malls, as e-commerce takes a bite out of their sales.

Lenders may also have to retain a 5% stake in any loans they make to comply with the risk retention rule under the Dodd-Frank Act. That prevents them from making risky loans and selling 100% of the risk. It also makes banks more selective about the loans they grant.

The fate of the Dodd-Frank Act is uncertain however. President Trump has signed an executive order to begin the unraveling of those regulations and the risk retention rule is sure to be reviewed. But those changes won’t happen over night and maybe not in time.

So just how hard will commercial property owners get hit?

Bloomberg says the delinquency rate is expected to hit 5.75% this year,  after several years of declines. Because these mortgages are packed into bonds, there could be more bondholder losses as well.

According to Bloomberg, banks sold $250 billion worth of commercial mortgage-backed securities to institutional investors in 2007. But not all of them are maturing this year because many have already been refinanced or the properties sold. Property owners with less desirable properties and weak financials have already defaulted.

Using data from Morningstar, Bloomberg says the amount of debt that will actually come due this year now stands at about $90 billion dollars. From there, Morningstar is estimating about “half” of those remaining loans will run into refinancing roadblocks!

For people faced with this situation, it’s critical to have a back-up plan. You shouldn’t wait until the last minute or you might end up losing your property. It’s best to start working now on refinancing, or selling the property before you run out of time.

If you are looking for commercial investments, be careful about paying too much and accepting low cap rates. If you just wait a bit, you could find much better deals.

And all this is happening just as the economy is in a major shift. Baby boomers are turning 65 at a clip of 10,000 per day. Their spending habits will change and that will affect commercial property. Plus, technology and innovation is quickly making some industries obsolete practically overnight.

A commercial builder asked me if we’d like to finance the construction of an auto dealership in Sacramento, “because the auto industry has been booming.”

After researching it a bit, I told him that yes, it has been booming, but only because of easy financing. But this is the year that many leases will be returned to car dealers and we could very well see a huge glut in cars for sale. My daughter needs a new car and I told her to wait just a bit longer as we could see some steep discounts this summer.

Never base your decisions on the way things have been. In 2005, Fed Chair Ben Bernanke said, ”We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize…”

Bernanke was dead wrong, and made the fatal mistake of not taking into consideration massive debts from easy lending that couldn’t be repaid. We are seeing some of the same debt issues today, just not in residential mortgages.

We expect to see some bargains in the commercial property world over the coming year. If you’d like to be first to know about those, join the network to get on the VIP investor list.  www.RealWealthNetwork.com

Kathy is an active real estate investor, licensed Realtor, certified coach, and former mortgage broker. She specializes in helping people build multi-million dollar real estate portfolios through creative finance and planning. With a passion for researching and sharing the most important facts on real estate and economics, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR, CBS MarketWatch and the Wall Street Journal. She is the author of the #1 best seller, Retire Rich with Rentals, and is host of The Real Wealth Show – which is a featured podcast on iTunes with listeners in 27 different countries.

How to Save on Facility and Construction Project Costs

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

By Corey Lee Wilson

FM Building Cost

In an era of ever shrinking budgets where “doing more with less” is the common denominator for all major cost scenarios—there is a relatively new design-build construction delivery method that can save public and private owners substantial costs on their construction projects. It’s more appropriate for owners and facility managers who are not familiar with design-build projects or may be intimidated by a new team dynamic.

It’s called Bridging and is a hybrid of the Design-Bid-Build and Design-Build contract delivery methods and retains the elements of each that are most advantageous to the Owner and eliminates those that work against the Owner’s best interests. For the last two decades Design-Build has become increasing popular with Owners, Architects, and Contractors vs. the traditional Design-Bid-Build process due to the typical 6% savings on construction costs as well as helping to deliver projects as much as 33% faster than the traditional Design-Bid-Build process.

With the significant benefits of the typical Design-Build contract delivery method well documented in the public and private building sectors—why aren’t more Owners using it?

In the typical Design-Build contract delivery method, the primary team players are the Owner and the Design-Build Contractor (DBC). However, unless the Owner has experience with this contract delivery method—they may be less able to control and manage the DBC as they are more likely to be controlled and/or managed by them. That’s not what we call “being in the driver’s seat” is it?

Moreover, on typical Design-Build projects the design professional is directly under contract with the DBC, and the Owner as such, does not have an “independent” design professional like an Architect acting as its agent. Additionally, the cost of preparing designs sufficient to submit cost proposals in a Design-Build competition may limit the field of interested Design-Build Contractor teams that the Owner can select from.

One approach to address these issues and to help ease the Owner into the Design-Build process is for the Owner to retain an independent Architect, Engineer, or Program Manager to prepare preliminary designs and stay on board during the construction phase to review pay applications, review the work, and certify the completion date. This process is known as “bridging”…

As its name implies, Bridging helps protect the Owner and increases their control by including a third team player and partner, technically referred to as the Owner Design Consultant (ODC). The ODC acts as the Owner’s consultant, protecting and guiding them through the Design-Build process and also ensuring that the Owner’s key design components and performance indicators are included in the final design by the DBC. This third team player (also known as a “Bridging Architect” or “Design Architect” in addition to the “ODC”) is the key to Bridging’s success.

So how can Bridging help save even more time and costs than typical Design-Build contract delivery methods are already doing?

• By allowing Owners to obtain a highly enforceable fixed price for construction projects in about half the time and half the at-risk cost compared to the traditional Design-Bid-Build method. The price obtained by the Bridging method at this earlier point, is more enforceable than a price obtained later by either the CM-at-Risk, GMP, or Competitive Bid contract delivery methods.

• By greatly reducing the Owner’s exposure to construction risks including contractor initiated change orders, claims, and delays/disputes in resolving flaws in the design or construction discovered after occupancy. For Owners and Facility Directors familiar with the Design-Bid-Build process, they know from experience this method’s shortcomings that can often turn a construction project into what they painfully describe as the Design-Bid-Build-Litigation process!

• By shortening the construction time even further on most projects due to the Design-Build Contractor’s more intensive planning and input during the preparation of the final drawings and specifications.

• By reducing final overall costs and improving quality at the same time on most projects. In particular, as much as 40% to 60% of the design costs are eliminated now that the DBC completes the bulk of the design documents (instead of the Architect) utilizing the most cost effective construction systems and efficient methods available that they know best.

• By accomplishing these benefits without any loss of opportunity for creativity, control of the design, control of design details or loss of quality of engineering or construction.

• By overcoming the primary disadvantage and concern that inexperienced Owners have when deciding to utilize the Design-Build contract delivery method (mainly, they are often unable to communicate and/or control the final design parameters which result in construction disputes and change orders between the two parties)—the Bridging method now provides Owners with a safer and more practical means of using the Design-Build contract method so they can reap all of the cost and time saving benefits this contract delivery method affords them while also improving their risk management.

So why aren’t more Owners using the Bridging method so they can take advantage of all the benefits of a Design-Build contract delivery method?

The reason why most Owners are not using it is that they are not yet familiar with or are intimidated by the Design-Build contract delivery method. And because they are not using Design-Build, have never heard of Bridging, or aware of the advantages of both—many Owners are missing out on the potential cost savings and benefits that Bridging can provide them—provided it’s implemented and used properly.

In summary, by properly utilizing the Bridging method for Design-Build construction projects, Public and Private Agencies and Owners and Facility Managers of all types can efficiently and effectively cut construction costs, improve their bottom line, and do more with less. Does this method sound like a must have construction management tool in your tool chest of cost saving measures that could help satisfy board members, improve your balance sheet, and secure much needed construction funding?

If so and you would like to learn more about the many benefits of the Bridging method and Design-Build construction, please contact Corey Lee Wilson at CLW Enterprises at 951-735-2646 andCLWEnterprises@att.net or visit their website at www.CLW-Enterprises.com.

Taxes, Fees, Charges and Assessments: What Difference Does It Make?

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

By Jon Coupal

taxes

What’s the difference between a tax and fee? There is no easy answer and the political class likes it that way. In fact, they would prefer that the public remain confused to the point of apathy.

The political class, of course, consists of elected officials, bureaucrats and their special interest allies who are to the Capitol what insider traders are to Wall Street. Working in lockstep, their approach to increasing the take from taxpayers was best outlined by Jean Baptiste Colbert, Minister of Finance under Louis XIV of France: The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.

But taxpayers are not defenseless because they have approved three constitutional amendments defining – and limiting – taxes and fees. These include Propositions 13 (1978), Proposition 218 (1996) also known as the Right to Vote on Taxes Act, and Proposition 26 (2010) which provides comprehensive definitions of taxes and fees. All three provide effective weapons against an insatiable government ever in search of more revenue.

However, to protect themselves, taxpayers must be knowledgeable, alert and ready to fearlessly protect and exercise their rights.

Therefore, while most taxpayers don’t have a law degree, here are some basics about the difference between a “tax” and a “fee.” There are very few legal limitations on “taxes.” About the only way a tax could be unconstitutional is if it impaired a fundamental right (a “poll” tax on the right to vote) or if it singled out some group for discriminatory purposes. But fees are different. A fee is a charge for something that confers a benefit to the fee-payer that is not available to those who do not pay the fee. A classic example is a charge for entering a state campground.

Until the passage of Proposition 26 in 2010, the legislature could approve fees with a simple majority vote. But in 2011, the Legislature approved, with a simple majority, charging 850,000 rural homeowners an annual “fire fee” of $150. The “fee” was not accompanied by any additional benefit or service, clearly making it a tax requiring a two-thirds vote of the Legislature. This issue is currently being litigated by taxpayers, but it is a classic example of the dishonest ends to which tax raisers are willing to go to wring ever more money from taxpayers.

Moreover, the political class has a habit of pursuing taxes that are not apparent to the general public. Almost any tax on business fits into this category. As Howard Jarvis liked to say, businesses do not pay taxes, “we do.”

As part of Obamacare, the federal government imposed a tax scheme designed to stop employers from offering top quality health plans. Backers of the Affordable Care Act included a 40 percent tax on providers of what were derisively described as “Cadillac” plans.  As these plans disappear, the uninformed will assume that it is their employer who is responsible, when, in fact, it is government.

Here, in California, a major hidden tax is cap-and-trade legislation, not approved with a two-thirds vote, that compels companies to buy carbon credits. Of course, these costs are passed on and drivers feel the impact every time they fill up with gasoline that costs, by the most conservative estimates, an additional 12 cents per gallon with more increases on the horizon. Unaware of the impact of cap-and-trade, many motorists may mistakenly assume that the high cost of gas is entirely due to the petroleum companies.

This is why taxpayers are closely watching a case just argued before the Sacramento appeals court, where opponents argue that cap-and-trade charges amount to an unconstitutional tax. The court is expected to render a decision within 90 days but, regardless of the outcome, the loser is likely to appeal to the California Supreme Court.

CoupalPubPhoto2Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.  

How To Dodge A Tax Hit When Selling Rental Property By Making The Right Move, Sellers Can Sidestep The Capital Gains Tax

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

By: Dwight Kay

Tax - scrabble blocks

The life of a landlord certainly isn’t easy.

There are plumbing issues that eat into time and money. There are tenants who fail to pay the rent. There are broken leases and leaky roofs.And the hassles don’t even end when the beleaguered landlord finally decides to sell the property. After the deal closes, the Internal Revenue Service is waiting in the wings to collect a capital gains tax on the profits from the sale.

“Depending on your situation that can definitely end up being a significant hit when tax time arrives,” says Dwight Kay, founder and CEO of Kay Properties and Investments (www.kpi1031.com).
But Kay says with the right planning those landlords – and anyone who sells commercial property – can sidestep paying the capital gains tax.

Here’s how: When they sell their property, they can invest the proceeds in what is referred to as “like-kind” property using Section 1031 of the Internal Revenue Code. Essentially, they are exchanging one piece of commercial property for another, but hopefully one that better meets their needs, Kay says.

“A landlord who decides he’s tired of all the work he has to put in on his rental property could use the exchange to get an income-producing property where someone else is dealing with all the problems,” he says.

All types of commercial properties can be considered “like-kind,” including apartment buildings, vacant land, farmland, office buildings and warehouses among other properties.
One drawback is that the seller has just 45 days to identify what property they are going to exchange into. It’s not always easy to find 1031 exchanges quickly, but there’s also a solution to that, Kay says.

If the seller qualifies as an accredited investor, which is generally defined as an investor with a net worth of greater than $1 million dollars excluding their primary residence, the seller can potentially invest in Delaware Statutory Trust properties. A Delaware Statutory Trust (DST) is a trust that lets investors buy an interest in commercial property, but managing the property is left to professional asset managers. Because Delaware Statutory Trust properties are pre-packaged for 1031 exchange investors, they provide a viable solution for those concerned about meeting that 45-day deadline.

Also, despite the name, the property doesn’t have to be in Delaware. Kay, for example, says his Los Angeles and New York City-based company works with clients and properties in all 50 states. Kay goes on to say, “A Delaware Statutory Trust property could be a property that has a long term lease with Costco or Walgreens or it could be a 200 unit apartment community built in 2014 and located in Denver, Colorado. Investors are able to invest as little as $100,000 into each DST thereby creating a diversified portfolio for there 1031 exchange.”

Kay says there a several potential benefits for investors. Here are just a few:

Eliminating the day-to-day headaches of property management. The Delaware Statutory Trust 1031 property provides a passive ownership structure, allowing the investor to enjoy retirement, grandkids, travel and leisure, as well as to focus on other things that they are more passionate about instead of property management.

Increased cash flow potential. Many investors are receiving a lower amount of cash flow on their current properties than they potentially could be, Kay says. That might be because their properties have under-market rents or multiple vacancies. It could be that they have raw or vacant land that is sitting idle. These Delaware Statutory Trust exchange properties provide an opportunity for investors to potentially increase their cash flow on their real estate holdings.
Portfolio diversification. Often times, 1031 investors are selling a property that comprises a substantial amount of their net worth. They want to reduce their potential risk and instead of buying one property they decide that investing into a diversified portfolio of Delaware State Trust properties is a better fit for their goals and objectives.

Dwight Kay

CEO and Founder

Dwight Kay is the Founder and CEO of Kay Properties and Investments, LLC (Kay Properties). Kay Properties is a provider of DST brokerage and advisory services headquartered in Los Angeles, CA with an office in New York, NY. Registered Representatives at Kay Properties and Investments specialize in helping 1031 exchange clients throughout the country purchase DST properties and are securities licensed in all 50 states, Washington D.C. and the U.S. Virgin Islands. Mr. Kay has personally been involved in over $200,000,000 of client purchases of DST properties and other securitized real estate products.

kpi-real-estate-investment-3d_smallDwight is a published author with multiple published white papers and articles on 1031 exchanges, Delaware Statutory Trust (DST) properties and real estate securities. He has been interviewed on local and nationally syndicated radio stations on the matters of 1031 exchanges and replacement properties. He also is the author of the published book “Delaware Statutory Trust (DST) Properties: An Introduction to DST Properties for 1031 Exchange Investors.”

Dwight began his career in commercial real estate working for a national commercial real estate brokerage firm focusing on multifamily and commercial real estate. Mr. Kay received his Bachelors in Business Administration from Point Loma Nazarene University in San Diego, California, and successfully obtained his Series 7, 22, and 63 securities licenses as well as a real estate broker’s license.

Risks & Disclosures

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum.

This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment.

This website contains information that has been obtained from sources believed to be reliable. However, Kay Properties and Investments, LLC, Colorado Financial Services Corporation and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment.

There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, potential returns, and potential appreciation are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment.

Please read carefully the Memorandum and/or investment prospectus in its entirety before making an investment decision. Please pay careful attention to the “Risk” section of the PPM/Prospectus. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment.

IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes, therefore, you should consult your tax and legal professional for details regarding your situation.

Securities offered through registered representatives of Colorado Financial Service Corporation, Member FINRA / SIPC. Kay Properties and Investments, LLC and Colorado Financial Service Corporation are separate entities. OSJ Address: 304 Inverness Way S, Ste 355, Centennial, Colorado. 303-962-7267.

Kay Properties & Investments, LLC, is registered to sell securities in all 50 states.

DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than $5 million dollars). If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor.

6 Strategies to Scale Down your Maintenance Management Costs

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

By: Lindsey Walker

building-maintenance

Are you looking for ways to trim your ever-increasing maintenance management costs?

Are your maintenance expenditures wiping out all the profits you are striving to make?

Struggling to make the most of an ever-dwindling budget?

If these problems sound like your own, here is a simple 6-step strategy that you can use to reduce maintenance management expenses without compromising on production:

  1. Streamlining the Maintenance Schedules

As a maintenance manager, you should not be surprised if the senior management keeps a constant check on your department because maintenance management is a controllable department in any commercial facility to cut costs. However, as procedures continue to grow complicated over time, you may have to modify certain procedures. While it may need you to remove some redundant steps and add a few extra details, it is important to ensure that the job description does not get complicated and confusing. Several research studies have shown that the human mind faces difficulty when processing more than 7 things simultaneously. Identify the important steps and clearly specify them so that performing maintenance tasks becomes fast, easy and accurate.

  1. Ensuring that Your Technical and Non-Technical Staff is Adequately Trained

Major accidents and injuries mainly occur in the absence of education and this can cost your facility in more ways than one. Ensure that all your equipment operators and maintenance technicians receive proper training on safe work practices. Educating non-technical staff to identify unusual sounds and technical flaws will ensure that you prevent expensive and untimely repairs and replacements while extending the service life of your machinery.

  1. Creating Equipment Maintenance Calendars

Prepare a maintenance calendar for every month and every quarter with predetermined maintenance dates for critical equipment. Calendars will help in avoiding conflicts between predictive and preventive maintenance schedules and help you prioritize your budget for repairs and replacements. Try to leave some buffer time when preparing your calendar for unpredicted fire fighting and divide every week into different timeframes for tackling maintenance tasks that must be done on time and others that need to be done soon.

  1. Stay Prepared for Unplanned Downtimes and Unscheduled Outages

Avoid last minute troubleshooting, outages and disruptions by replacing your reactive “fix it when it breaks” approach with a proactive preventive maintenance strategy. Sudden breakdowns cost 10 more as compared to planned maintenance tasks. In order to prevent expensive failures and keep your vital equipment up and running you should ensure that:

  • Replacement parts are always available
  • PM tasks are well-documented
  • Periodic inspections are scheduled for monitoring equipment condition
  • Degrading performance is analyzed to identify the root cause
  • Regular performance reviews are conducted

The upkeep of vital equipment is critical to operational efficiency and business success. Design a process that implements proactive practices whether your maintenance crew is dealing with unexpected system failures or working to prevent unplanned outages.

  1. Measuring Performance with KPIs

Key performance indicators that are generated from maintenance activities can be used for measuring both business performance and equipment performance. This valuable data can then be used for taking informed decisions related to training, creating accountability, improving practices, introducing troubleshooting checklists and making plant equipment choices.

  1. Take Advantage of Automation

There are various tools that can be used for improving operational efficiency, reducing downtimes, boosting productivity, improving workplace safety, maximizing equipment efficacy and minimizing unplanned outages. A computerized maintenance management system makes it possible to implement top-notch maintenance practices by enabling you to:

  • Process work orders from any location
  • Monitor all vital assets on any device
  • Constantly track critical spare parts
  • Generate precise reports
  • Prepare accurate budget estimates
  • Project maintenance requirements
  • Determine resource allocations
  • Share business-critical information interactively

The benefits of CMMS extend beyond the above-mentioned capabilities. It brings you the power to predict and improvise by offering a real-time view of what’s actually happening in real-time. This empowers you to shift your focus from fixing sudden failures to finding new ways to improve performance and reduce costs.

Author Bio:

Lindsey Walker is the marketing manager for NEXGEN Asset Management. She excels at business development, project management and asset management. Her passion for writing allows her to share her knowledge on asset management, geographic information systems (GIS), software implementation, training curriculum development and similar topics.

What Are the Potential Benefits of Exchanging into a Delaware Statutory Trust Property?

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

By Dwight Kay | www.kpi1031.com

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There are a number of potential benefits of exchanging into a Delaware Statutory Trust (DST) 1031 property. It is important to note that these should be carefully weighed with the potential risks that we have outlined at the end of this article. You should also read the risk section of each DST 1031 property’s offering materials in detail prior to investing.

Eliminating the day-to-day headaches of property management
Many of our clients are at or near retirement, and they are tired of the hassles that real estate ownership and management often bring. They are tired of the tenants, toilets and trash and are wanting to move away from actively managing properties. The DST 1031 property provides a passive ownership structure, allowing them to enjoy retirement, grandkids, travel and leisure, as well as to focus on other things that they are more passionate about instead of property management headaches.

Tax deferral using the 1031 exchange
Many of our clients have wanted to sell their apartments, rentals and commercial properties for years but haven’t been able to find a property to exchange into and just can’t stomach the tax bill after adding up federal capital gains tax, state capital gains tax, depreciation recapture tax and the Medicare surtax. The DST 1031 property solution provides investors an ability to move from an active to a passive role of real estate ownership on a tax-deferred basis.

Increased cash flow potential
Many investors are receiving a lower amount of cash flow on their current properties than they could be, due to their properties having under-market rents, properties that have multiple vacancies and/or that are raw or vacant land sitting idle. DST 1031 exchange properties provide an opportunity for investors to potentially increase their cash flow on their real estate holdings via a tax deferred 1031 exchange.

Portfolio diversification by geography and property types
Often times, 1031 investors are selling a property that comprises a substantial amount of their net worth. They want to reduce their potential risk and instead of buying one property (such as another apartment building) or one NNN building (such as a Walgreens pharmacy or Taco Bell restaurant) they decide that investing into a diversified portfolio of DST 1031 properties with multiple locations, asset classes (property types) and tenants is a better fit for their goals and objectives.

This is similar to how investors tend to invest retirement funds in mutual funds and Exchange Traded Funds (ETFs), as opposed to placing their entire retirement savings into the stock of one particular company. However, it is important to note that there are no assurances that diversification will produce profits or guarantee against loss.

Long-term non-recourse financing locked and in place to satisfy debt replacement requirements of the 1031 exchange
One of the requirements for a 1031 exchange is to take on “equal or greater debt” in the replacement property to what you had in the relinquished property (the property you are selling). In today’s lending environment, it is often hard for investors to obtain non-recourse financing at an acceptable interest rate and terms. Due to the DST 1031 properties’ sponsors typically having strong lending relationships, they are able to secure non-recourse financing at some of the best terms available in the marketplace. The DST 1031 investors are the direct recipient of these financing terms that they would otherwise often not be able to obtain on their own.

Access to Institutional Grade Real Estate
DST 1031 properties provide access to large, institutional-grade real estate that is often otherwise outside of an individual investor’s price point. With the typical minimum investment of $100,000, investors are still able to purchase an ownership interest in large $20 million-plus apartment communities, $5 million-plus pharmacies or $15 million grocery stores, for example. This allows investors access to a level of real estate that they just would not have been able to exchange into before.

That being said, we also have had many clients with very large 1031 exchanges opt to invest in DST 1031 properties because they did not want to place “all their eggs into one basket” by purchasing one single, large investment property.

Unlocking trapped equity
For those investors that have a substantial amount of equity in raw or unimproved land (as well as investors with vacant properties that are not producing any cash flow), the DST 1031 property allows them the opportunity to sell, defer taxes via a 1031 exchange and unlock the trapped equity that they have in their properties. Now this trapped equity is free to produce for the investor potential cash flow on a monthly basis.

Ability to typically close on a DST 1031 property typically within three to five business days of completing and returning subscription documents
This is one of the main reasons why investors in their 45-day identification period “time crunch” often turn to DST properties. They are able to close quickly and complete their exchanges due to the properties being pre- packaged, as opposed to waiting 30, 60 or 90 days to purchase another outside property.

Increased tax efficiency due to depreciation deductions on replacement property
Investors that have owned their apartments and rental properties for longer than 27.5 years and commercial properties for longer than 39 years have fully depreciated the properties, with no more deductions to help shelter the rental income. By purchasing DST 1031 properties that have a greater amount of financing than their relinquished (sold) properties, those investors are creating for themselves a new basis to shelter rental income through. We encourage all investors to speak with their CPA and tax attorney regarding this prior to investing in DST 1031 properties for details regarding their particular situation.

Increased tax efficiency due to interest write-offs
For investors that have fully paid off their properties, the DST 1031 properties with financing in place provide for interest write-offs to help shelter potential cash flows. Many clients in today’s environment are looking for a way to increase tax efficiency due to the burdensome tax system in place in the United States. The DST 1031 can help to potentially solve some of these tax problems.

Dwight Kay

CEO and Founder

Dwight Kay is the Founder and CEO of Kay Properties and Investments, LLC (Kay Properties). Kay Properties is a provider of DST brokerage and advisory services headquartered in Los Angeles, CA with an office in New York, NY. Registered Representatives at Kay Properties and Investments specialize in helping 1031 exchange clients throughout the country purchase DST properties and are securities licensed in all 50 states, Washington D.C. and the U.S. Virgin Islands. Mr. Kay has personally been involved in over $200,000,000 of client purchases of DST properties and other securitized real estate products.

kpi-real-estate-investment-3d_smallDwight is a published author with multiple published white papers and articles on 1031 exchanges, Delaware Statutory Trust (DST) properties and real estate securities. He has been interviewed on local and nationally syndicated radio stations on the matters of 1031 exchanges and replacement properties. He also is the author of the published book “Delaware Statutory Trust (DST) Properties: An Introduction to DST Properties for 1031 Exchange Investors.”

Dwight began his career in commercial real estate working for a national commercial real estate brokerage firm focusing on multifamily and commercial real estate. Mr. Kay received his Bachelors in Business Administration from Point Loma Nazarene University in San Diego, California, and successfully obtained his Series 7, 22, and 63 securities licenses as well as a real estate broker’s license.

Risks & Disclosures

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum.

This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment.

This website contains information that has been obtained from sources believed to be reliable. However, Kay Properties and Investments, LLC, Colorado Financial Services Corporation and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment.

There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, potential returns, and potential appreciation are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment.

Please read carefully the Memorandum and/or investment prospectus in its entirety before making an investment decision. Please pay careful attention to the “Risk” section of the PPM/Prospectus. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment.

IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes, therefore, you should consult your tax and legal professional for details regarding your situation.

Securities offered through registered representatives of Colorado Financial Service Corporation, Member FINRA / SIPC. Kay Properties and Investments, LLC and Colorado Financial Service Corporation are separate entities. OSJ Address: 304 Inverness Way S, Ste 355, Centennial, Colorado. 303-962-7267.

Kay Properties & Investments, LLC, is registered to sell securities in all 50 states.

DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than $5 million dollars). If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor.

3 Innovative Buildings Leading Energy Efficiency in the US

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

Shared Post by: BRENDON O’DONOVAN | Aquicore

The United States ranks 8th in the world as an energy efficiency economy, according to the American Council for an Energy Efficient Economy (ACEEE), with Germany taking the top prize. And, while the United States has made great strides in energy efficiency in the past few years, like many things in life, there’s always room for improvement.

In fact, despite ranking in the top 10, the US still has plenty of motivation to climb the energy efficiency rankings. Energy efficiency is the third largest resource in the US power sector.  It’s an interesting concept – the idea that reducing energy is actually not just savings, but a resource in generation.  If you look at it that way, 18% of the energy used in the US is offset – or generated – by energy efficiency measures. How does that savings manifest in real life?  Here are three of the most innovative buildings that have prioritized energy efficiency in both design and operations.

Berkeley, California: UC Berkeley Jacobs Institute for Design Innovation

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Jacobs Hall opened in 2015 as an interdisciplinary hub for engineering students. The building is home to flexible spaces for both instruction and student driven creation. Even better, it represents energy efficient design at it’s best. The building uses 90% less energy than the median college campus building.  Thanks to a smart passive solar design, more than 80% of the lighting and ventilation comes from free natural resources.  For example an in house solar photovoltaic array that powers 58% of the building’s energy needs. In addition, the university saves on hefty California water costs by conserving 50% of rainfall and using weather sensitive irrigation systems.

Beyond Jacobs Hall, U.C Berkeley as a whole holds a strong commitment towards sustainable buildings. More than 10% of campus is already LEED certified and all new buildings are required to outperform building codes by 30%.

New York City: One Bryant Park

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Built and managed by the Durst Organization Inc.>, New York’s One Bryant Park is the first commercial high rise to receive LEED Platinum certification. Home to Bank of America, the building has more than 10,000 occupants every day. Despite it’s high profile and occupancy, operators are able to keep it as one of the greenest skyscrapers in the world with help from some unique strategies.

The property uses LED lighting throughout, collects and reuses heat waste, and employs highly efficient ventilation. With all this innovation, the building is outperforming expectations. Actual energy consumption is 12.7% less than what was predicted in the design phase.

Washington D.C.: The Millennium Building

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In the heart of the nation’s capital’s business district,The Tower Companies have wowed us with their Millennium Building. Tower Companies is also committed to reducing energy use by 20% by 2020, as a part of the >Better Building Challengereal-time energy monitoring, lighting and equipment upgrades, and installing DC’s first solar array on a large a commercial building.

The Millennium Building is LEED Gold certified, and has earned Energy Star Certification every year. The Millennium Building also won the “Outstanding Building of the Year” for a commitment to sustainability and effective facilities management.

About The Author

Brendon is the VP of Marketing for Aquicore. He is a technology enthusiast with an interest in applying new technologies to solve tangible real-world problems. When not marketing you can find Brendon out on the many cycling trails around Washington D.C., or seeking out the newest local brewery. Brendon earned his BS in Marketing from Penn State University and his MBA from Duke University, The Fuqua School of Business.