From a small northwestern observatory…

Finance and economics generally focused on real estate

US Global Leadership Coalition

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This may sound wildly off the subject, but last week I had the very real privilege of attending (via Zoom) the US Global Leadership Coalition’s annual Global Impact Forum, followed up by a day-long “virtual” visit to Capitol Hill to meet with several members of Washington State’s congressional delegation and/or their staffs. I was invited to join the Advisory Council for USGLC back in 2020, and I’ve thoroughly enjoyed and appreciated the interaction.

Yes, my focus is on real estate finance and economics, and we usually think of real estate as being highly localized. However, real estate finance and investment is truly global. Just take a peek at a the holdings of any random sovereign wealth fund to confirm this. The vigor and vitality of America’s real estate market depends in no small part on America’s economic leadership in the world, and USGLC is focused directly on that.

Speakers at the Forum included a panoply of luminaries, such as former NATO commander Admiral Jim Stavridis, CEO of “Save the Children” Janti Soeripto, Deputy Sec. of State Wendy Sherman, Sen. James Risch (R-Id), “CARE” CEO Michelle Nunn, UN Foundation CEO Elizabeth Cousens, among many others. USGLC brings together more than 500 businesses and non-profit organizations to engage policymakers in D.C. and around the country to build support for America’s International Affairs Budget. “In today’s interconnected world, America must use all its instruments of national security and foreign policy to ensure we keep our citizens safe, strengthen our economy, and save lives. Our nation’s civilian tools of diplomacy and development are underfunded and undermanned, which is why the USGLC supports a strong and effective International Affairs Budget.” Former Sec. of State Gen. Colin Powell (USA-Ret) heads up the Advisory Council, and Admiral Jim Stavridis (USN-Ret) and Gen. Anthony Zinni (USMC-Ret) head up the National Security Advisory Council.

America’s international aid budget takes up a surprisingly small portion of our overall fiscal picture — less than 1%. However, we gain enormous leverage via that chunk of the budget, and any top military leader will tell you that diplomacy is cheaper than bullets. Our strong military, coupled with our international leadership, sets the stage for America’s powerful economy. “America’s diplomats and development workers help put the building blocks in place so that U.S. companies can expand their exports, reach new markets, and create more jobs here at home. With 95% of the world’s consumers outside of our borders and the fastest-growing markets in developing countries, it’s vital that we stay competitive in the global marketplace, ensure a level playing field for American businesses, and reach more customers.”

John A. Kilpatrick, Ph.D. —

Written by johnkilpatrick

June 23, 2021 at 8:58 am

Posted in Uncategorized

Monday, Monday…

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Washington Prime Group (WPG) filed for Chapter 11 reorganization late last evening, saying that COVID-19, “created significant challenges.” The stock dropped 55% in early trading this morning (although had rebounded somewhat by mid-day), and is down almost 60% on the year.

This apparently came as a bit of a surprise to the market. While equity REITs in general had a down year in 2020 (-5.12%), retail REITS performed the worst of any sector, down 25.18% overall, with regional malls leading the way at negative 37.15%. However, as of the end of the 1st quarter (the most recent data available to us), retail REITs were back on track, having clawed back most of their 2020 losses. (Overall, US Equity REITS had a total return of 8.32% in the first quarter, 2021.) WPG had a lackluster year, and from Dec 31 to May 28 was down 56%. However, it was in a rebound mode in June, having tripled in price by the beginning of last week. No analysts were rating WPG as a “buy”, but two were rating it a “hold” as of two weeks ago. Intriguingly, since the first of the year, numerous class-action suits had been filed against WPG, alleging they concealed the true financial picture from shareholders. Notably, as of their annual report in March, they had disclosed some “potential deleveraging or restructuring transactions” with certain holders of senior notes.

WPG owns about 100 shopping malls throughout the US., but mostly east of the Mississippi. They invest in a variety of retail malls, including both open-air and enclosed malls. Major tenants include Signet Jewelers, Dick’s Sporting Goods, Footlocker, Jared’s, Kay Jewelers, and ales Jewelers. As of their annual report, 59 stores comprising 4% of total rents were on their high credit watch list.

At Greenfield, in our in-house REIT fund “ACCRE”, we have purposely avoided long positions in retail since the beginning of the pandemic. For those of you tracking ACCRE, I might note that as of mid-day today. ACCRE was up 7.5% for the month, compared to less than 1% for the S&P 500.

As always, if you have any questions regarding real estate in general or your real estate investments, please don’t hesitate to reach out.


Written by johnkilpatrick

June 14, 2021 at 11:57 am

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ACCRE Report, May, 2021

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We have mixed emotions when ACCRE beats the S&P 500. ACCRE is a diversifying adjunct to a well rounded portfolio. Hence, we want to see both ACCRE and the broader index do well each month. After a rocky year, ACCRE put together two great months — April we were up 2.94% followed by a 3.25% return in May. While the broad index had a super April (up 5.62%) it was flat in May, only up 0.55%. The global real estate metric has been positive for four months in a row, most likely emblematic of the continued positive sentiment for real estate as the economy gets back on its feet.

A dollar invested in ACCRE at the inception would be worth $1.61 today. Of course, that same dollar invested in the S&P 500 would be worth $1.78, having enjoyed the great “bull” run that started about 14 months ago. If you had invested that dollar in the S&P Global Real Estate index, you’d have $1.34 today. ACCRE is a carefully curated fund of REITS, with a goal of achieving liquidity, diversification, and superior returns.

Thanks also to the 14-month bull market, the risk-adjusted returns for the S&P continue to dominate, as evidenced by the Sharpe Ratio, as shown below. Again, the Sharpe Ratio measures the average daily returns (daily return minus the T-bill rate) divided by the standard deviation of those returns. In short, it tells you how much return you get for every unit of risk. In long bull markets, with little variation over time, the Sharpe Ratio is expected to be highly positive, as we see below. The correlation between ACCRE and the S&P over time is about 50%. This is our goal — to move in more-or-less the same direction but to offer some portfolio attenuation via diversification.

S&P 500
Average Daily Excess Return0.0494%
Standard Deviation1.2908%
Sharpe Ratio3.8296%
Excess Return0.0389%
Standard Deviation1.1947%
Sharpe Ratio3.2572%
Correlation (life of the fund)51.8333%
Correlation (month of May, 2021)43.0532%
Accre Metrics as of May 28, 2021

As always, if you have any questions about ACCRE, about REIT investing, or real estate investing in general, please drop us a note. We’re always glad to hear from you!

John A. Kilpatrick, Ph.D., MAI —

Written by johnkilpatrick

June 1, 2021 at 10:43 am

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Inflation and Real Estate

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First and foremost, I came of age in the 1970’s, a period that gave rise to the term “stag-flation”. Significant inflationary pressure was real not just in the U.S. but across the globe, and for a variety of reasons. The complexity of the 1970’s is well beyond the scope of a single simple article, but suffice it to say, the past 40-ish years of relatively mild year-over-year price inflation has put the problem out of sight and out of mind for most economists.

That said, the Labor Department reported that April’s consumer price index rose by an annual rate of 4.8%. According to a great article in the Wall Street Journal yesterday by Konrad Putzier, most analysts think this is transitory. I tend to agree. None-the-less, savvy investors should properly be asking the question, “what if?”

Real estate has historically been considered a nearly perfect hedge in times of heightened inflation. Even for the past 40 years, real estate prices/values have out performed the CPI year after year. For example, the median price of a single family home in America in 1970 was $17,000. I’ll let that sink in for a minute. Now, let’s compare the 50-year return on that home to the consumer price index (CPI) as well as the S&P 500 (all three at the end of the respective years).

 House PricesCPIS&P 500
Compound Annual Change5.7%3.8%7.7%

Wow. Plus, this doesn’t come close to telling the whole story, If you had invested in that house, you’d either enjoy rents (net, on average, around 5% – 7% per year) or alternatively you would forego having to pay rent to someone else. Further, there have been and continue to be enormous tax advantages to real estate ownership.

Now, here’s the problem, as well described by Mr. Putzier. An inflation hedge, like insurance, is something you want to have BEFORE the wreck happens. Today, we see investors rushing out to bid-up the prices of every piece of property that comes on the market. It’s likely that some of these purchases will be ill-advised and not justified by future rents. Indeed, as I’ve noted on this blog before, wages since 1970 have not kept up with real estate prices, and given the cost of housing today, it would not be surprising if rent increases in the future lag inflation in general.

Nonetheless, existing, well-curated real estate portfolios will undoubtedly be positive compliments to an overall diversified portfolio of investments. Even with the hot-bid market today, we continue to stay active in this market, looking for value opportunities.

If you have any questions about your real estate portfolio, please don’t hesitate to reach out. We look forward to hearing from you.

John A. Kilpatrick, Ph.D., MAI —

Written by johnkilpatrick

May 26, 2021 at 11:24 am

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ACCRE Report, April, 2021

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Not a bad month, as all things go, and certain a great month to own the S&P. With that in mind, the real estate sector continues to “figure out” what the post-pandemic world will look like. After two “down” months, ACCRE rebounded nicely in April, although we’re still behind the S&P both on a single-month basis and cumulatively. Nonetheless, some of our metrics (particularly diversification) make us continue to stay the course. So, on with the report…

As shown, a dollar invested in ACCRE at the inception (four years ago) would be worth $1.56 today. For most of the last four years, ACCRE has handily beaten the S&P, but the strong bull market for the past year has really turned that around. Conversely, the S&P Real Estate index languished for most of the last four years, but has performed nicely in the last 12 months.

One of our main goals with ACCRE is to provided positive-return diversification with a fairly low-risk portfolio. Most months, we demonstrate this with a Sharpe Ratio — this is a measure of the average daily excess return (fund return minus the T-Bill return) divided by the standard deviation of those returns. In short, it tells us how much return we are buying proportional to the risk we are taking. A higher Sharpe Ratio means we’re doing well, and if our Sharpe Ratio consistently beats the S&P, it means we’re providing more return than the market as a whole relative to the risk we’re taking.

S&P 500
Average Daily Excess Return0.0498%
Standard Deviation1.2977%
Sharpes Ratio3.8369%
Average Daily Excess Return0.0365%
Standard Deviation1.2010%
Sharpes Ratio3.0393%
Correlation (life of the fund)51.9182%
Correlation (month of April)16.3113%
ACCRE Metrics as of April 30, 2021

The Sharpes Ratios are calculated for the life of the fund, as is the overall correlation. Most months, ACCRE beats the S&P, but as we all know, the S&P has been on a very real bull tear this past year. Certainly, we all hope that continues! The overall correlation (life of the fund) is just where we want it, but the correlation for April, while positive, is surprisingly low. Digging into the data a bit further, we find that the S&P, while doing great, nonetheless had some bounces during the month. ACCRE, on the other hand played the “slow and steady wins the race” game.

We may reconsider some of our positions this month, and of course our subscribers will get immediate notification of any trades. In the meantime, if I can answer any questions about REITs or Real Estate Finance in general, please don’t hesitate to reach out.

John A. Kilpatrick, Ph.D. —

Written by johnkilpatrick

May 5, 2021 at 10:21 am

Posted in Uncategorized

Home Price Paradox

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If there’s a recession, why are home prices still going up? That was the focus of an article last week by Anna Bahney form CNN Business titled “Home Prices Hit a New Record Because There Simply Aren’t Enough Houses for the Crush of Buyers.”

Two things she does not mention. First, this recession is nothing like the last one. Indeed, the last recession was deepened in no small part because because of the surplus of foreclosed homes. (Yes, there were a LOT of other reasons, and we can go into that later.) Second, our studies at Greenfield indicate that since WW-II, home prices generally do not fall during recessions (the last one being the exception). However, this recession is odd in that it is not being felt evenly throughout the economy. The bottom tier of workers — who are most likely to be renters — are suffering disproportionally. At the middle of the economy and above — the folks who are likely to be homebuyers — the recession hasn’t hurt quite as badly. Coupled with that, there is a very real material and labor cost problem.

Not surprisingly, according to Ms. Bahney’s article, the median price of a home in March in the U.S. hit $329,100, up 17.2% from a year ago. The inventory of homes for sale is down 28.2% from a year ago. Worse still, the inventory of homes for sale between $100,000 and $250,000 is down 36.6%.

According to Lawrence Yun, chief economist for the National Association of Realtors, this is resulting in a widening gap between haves and have nots. “You will have homeowners gaining wealth and renters missing out,” he said. He used San Francisco a few years ago as an example. If one middle income household purchase a home a few years ago, and the other did not, the first household are now millionaires. Yun calls this rapid price appreciation an “arbitrary outcome” for family wealth.

Anecdotal evidence suggest something of a flight from urban areas to the suburbs, somewhat as a reaction to COVID and a need for space to work from home and home-school. Since owner-occupied residences are more likely in the suburbs, this suggests an increasing demand, and no real end to the price crunch in sight.

Written by johnkilpatrick

April 27, 2021 at 2:13 pm

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New York Office Space

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Let’s start out by admitting that New York City real estate is unique. In very many ways, what happens in NYC has no bearing on “Anytown America”. However, COVID has put pause to many economic rules-of-thumb, this one included.

I was struck by a Business article this morning by Allison Kosik titled “New York City Hasn’t Had This Much Empty Office Space in Three Decades.” According to a Cushman Wakefield report, cited in the article, office space vacancies in Manhattan alone reached 16.3% in the first quarter of this year, up from 11.3% last year. By some estimates, there is about 240 million square feet of office space on that island, so about 12 million square feet went vacant in 2020, directly attributable to the COVID-19 recession.

Now, as Ms. Kosik pointed out, this represents people who are no longer working in an office, but working from home. In my experience (and I “zoom” with folks in NYC a lot) these folks are still busy, but happily telecommuting. What’s more, these aren’t temporary shifts — these shifts are permanent enough to cause their employers to give up the space.

Is this a trend? Will other employers continue to facilitate work-from-home? I would note that even 10 years ago, technology would probably not have supported this on a wide-scale. “Zoom” (and all of the other services, like Team and Webex), ubiquitous high-speed connectivity, smart-phones, and secure cloud servers are all necessary for this to work. However, 100 years ago, the office of today could not have been supported without technology like computers, telephones, and even air conditioning. Has COVID really triggered a sustained shift in the American workplace landscape?

I would have to note that the thousands and thousands of office workers who now work from home previously supported a vast secondary and tertiary network of businesses. Working from home means you don’t grab lunch at the corner deli as often. You don’t buy “work clothes” as often — if at all. Parking garages, busses, and subways all see downturns in business. Demand for Yellow Cabs in New York City has collapsed, and I don’t doubt that is true nationwide.

Offices occupy about 18% of all commercial space in America, and use about 20% of the electricity. This is not a trivial footprint, nor one which shifts quickly. One model proposed by Regus, a provider of flexible workspaces, is a variant on the old “hotelling” model of a few years back. Businesses shrink the office footprint by enabling work-from-home, but then provide some necessary space for customer/client contact and some flex space options for shifting project demands. This is probably a great model for professional businesses (attorneys, CPAs, researchers) but may not be a one-size-fits-all for ever office occupant. Nonetheless, this may very well be an increasing solution, suggesting at least a “flat” demand for new office space for quite a few years to come.

Graphic courtesy REGUS

We’ve actually made some of these shifts at Greenfield, with the attendant problems and benefits. As always, if you have any questions or comments about this, please feel free to reach out.

John A. Kilpatrick, Ph.D., MAI —

Written by johnkilpatrick

April 22, 2021 at 1:54 pm

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ACCRE LLC Report, March, 2021

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We’d LIKE for our fund to have positive returns every month, and to beat the benchmarks more often than not. March was certainly the exception to the rule.

We not only turned negative in the face of a strong, positive S&P, but also we underperformed global REITs. Part of the reason is that we’ve tried to stay defensive on the volatility front, and indeed we did that. However, that also means we may miss important market turns. I would note that this is the first month since we began keeping record that the S&P 500 cumulative SHARPE Index bested us, which is saying a lot for our defensiveness.

The first trades of April (not reflected above) are positive for us, but we’re going to have to go a long way to ameliorate the last two months of negative returns.

S&P 500
Average Daily Excess Return0.0457%
Standard Deviation1.3073%
Sharpe’s Ratio3.4967%
Average Daily Excess Return0.0343%
Standard Deviation1.2058%
Sharpe’s Ratio2.8466%
Correlation (history of the fund)52.2405%
Correlation (monthly)69.4484%
ACCRE Metrics as of March 31, 2021

Undoubtedly, we’ll consider our positions in the next few days, and if any changes are warranted, our subscribers will receive trade alerts accordingly.

Best wishes for a great April, and as always, if I can answer any questions on this or related topics, please don’t hesitate to reach out.

John A. Kilpatrick, Ph.D., MAI —

Written by johnkilpatrick

April 5, 2021 at 9:54 am

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Real Estate and the Family Business

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I devote a whole chapter in Real Estate Valuation and Strategy to this topic, with some additional insights in other chapters as well. Time and time again I’ve seen family businesses (car dealerships, restaurants, manufacturing, etc.) with a substantial portion of their net worth tied up in the real estate needed to support the business. There is no question that this real estate investment is necessary, but three issues seem to regularly arise:

  1. The value of the real estate changes over time in a different arc from the business itself. In fact, I’ve seen situations where the business value dissipates to near nothing but the value of the underlying real estate increases, to the point where the real estate, if vacant, would be worth more than it is presently worth incumbered with a business. This phenomenon is often masked because the family business fails to account for the imputed rent on the real estate (the rent it would pay every year if it didn’t own the dirt) and all of the so-called profits in the business are really just foregone imputed rents.
  2. The real estate isn’t managed well over time. This includes, but is not limited to, failures to maintain proper insurance, failures to manage environmental issues, and mismanagement of property taxes.
  3. When the business passed thru generations, some family members may want to actively participate in the business, while others may want to enjoy passive income on the assets. Proper allocation of “rents” (business returns versus real estate returns) and proper compensation of the family members who do managed the business can be complicated without realistic value allocations.

Naturally, a lot of these problems get settled at probate, but waiting until then often leads to costly and time-consuming problems For example, waiting for the inevitable limits the options for estate planners to develop orderly and tax minimizing solutions. Further, it often entails wealth dissipation over time, as the underlying real estate is mis-managed.

For example, we knew one extraordinarily wealthy investor who had a bad habit of putting the vast real estate holdings that supported his extensive business interests in his personal name. This became even more complicated when it was found that some net ground leases and other contracts supporting real estate investments were also personal contracts. After he passed away, it took a team of not-inexpensive attorneys a decade to straighten out the problems.

Another family, with substantial real estate holdings underpinning their business, finally asked to have all of the property valued when the principals (several elderly family members with complex joint ventures and family holdings) neared retirement. The real estate had been accumulated opportunistically over many years, and often adjacent to existing holdings (and thus gaining some hidden aggregation values). Most of the holdings were in areas which enjoyed above-average value growth over time. The final valuation came in with some substantial sticker shock, with liquidity implications for any sort of estate settlement.

Over time, the real estate needs of the business may change. For example, the site size may not be optimal, either too much or too little land. Recent word from southern California indicates that Disneyland, thanks to ride-share and such, no longer need as much parking as they did just a few years ago. With that, they plan to convert some parking into new attractions for the park. In a somewhat different example, a manufacturing / distribution firm saw a very significant shift in the highway on which it fronted, necessitating trucks approach the facility from a different direction. This, in turn, had very real implications for truck turning space, parking, and even the location of loading docks and doors.

Family business owners with underlying real estate should, at a minimum, consider the following for internal and estate planning purposes:

  1. Have the real estate and the business valued separately, as if they had separate owners, preferably by different valuers. Then compare this to the value of the integrated whole. Repeat this process periodically, as valuations shift over time.
  2. At least for internal discussions, compute the imputed rent on the real estate (the rent you would pay if you didn’t own the dirt) and then deduct this from the business ledger as if it was an actual expense. Even if you don’t have passive family member-owners, this exercise lets you know how much you earn from the effort of running the business, and how much you’d alternatively earn as a passive real estate investor.
  3. Periodically, review the real estate holdings with a qualified consultant, with an eye to long-term holdings and optimizing both the real estate owned and the business served by that real estate. Such an “audit” should include a review of property taxes and an allocation of the real estate rents.

Obviously, I put a lot more into the book chapter, and if this is a problem you or a client faces, I would encourage more research into the topic. If I can be of any assistance, or answer any other questions, please let me know.

John A. Kilpatrick, Ph.D., MAI —

Written by johnkilpatrick

March 29, 2021 at 9:07 am

Posted in Uncategorized

Litigation Miscellanea

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While much of my writing is on real estate investing, we’re probably better known at Greenfield for our work in complex property-related litigation. Naturally, we keep track key issues in the field as they affect finance, economics, and valuation. Here are a few choice pieces that recently crossed my desk.

Leasehold, Leased Fee, or Fee Simple?

More often than not, the valuation goal in litigation is the determination of market value, but market value of what? The often misunderstood link is the interest being valued. Fee simple is the most common (it is the complete bundle of rights — what you normally think of when buying real estate). Leasehold is the interest held by a tenant, and may have positive value if the lease rate is below market. Leased fee is the bundle of rights retained by the landlord, and it, too, may have positive value. These questions are at the heart of many commercial tax appeals, and the valuation questions are still very much up in the air.

Cox v. Grady Hotel Investments (Missouri Court of Appeals. Western District, July 28, 2020, 605 S.W.3d 575) addressed this very question. Grady purchased hotel improvements located on land leased from the Kansas City International Airport. Note that the land is exempt from property taxation. The County assessed Grady’s leasehold interest in the property at $13,447,000, but the state tax commission hearing officer demurred, holding that Grady had a possessory interest and as such the appropriate value was the purchase price less any costs toward new construction, or $7.3 million.

The full commission set THAT aside, and concluded that Grady did indeed have a leasehold interest, but the airport still owned the fee simple interest in both the land and the improvements. Thus, the commission held that the proper valuation should use the “bonus” method, which is the difference between the economic rent and the contract rent. Based on that, the Commission assigned a bonus value of zero. The Assessor appealed, and the Circuit Court held that the zero value was arbitrary and not supported by law, and thus the bonus value was not applicable. The Court ordered the commission to consider the sales price as evidence of value. Grady then appealed. The Court of Appeals concluded that the that the language of Grady’s original quit-claim deed was unambiguous, that Grady had purchased the “leasehold improvements” and that the title to the land and the title to the improvements were to be treated as separate items and that the bonus method was inappropriate.

Do the birds like it?

In 2002, Pollard Land Company purchased over 2000 undeveloped acres along the Savannah River north of Augusta, Georgia. It conveyed 463 acres to the Champions Retreat Golf Founders LLC which built a 27-hole golf club open only to members. Champions also sold 66 homesites on 95 acres and left 57 acres along the river undeveloped. The property is home to several rare species of birds, to the southern fox squirrel, and to several rare plant species. In 2009, Champions contributed a conservation easement to the North American Land trust covering 348 acres, including the golf course and the 57 acres (but not the course buildings and homesites). Notably, while the general public cannot access the land directly, they can view the land from the river, and across the river there is a large national forest.

The IRS and the Tax Court disallowed the conservation easement deduction, and Champions appealed. The IRS’s valuation expert agreed that many birds do use the property but opined that the habitat itself was not “relatively natural” due to the fairways and greens, which contained non-native grasses. The IRS also argued that the land was not open to the general public. However, in Champions Retreat Golf Founders LLC v. Commissioner of the IRS (11th Circuit Ct of Appeals, May 13, 2020, 959 F3d 1033) the appeals court found that Champions was entitled to the deduction, noting that members of the public could canoe and kayak thru the easement, and birds do live on the property and “apparently find the habitat quite suitable.”

Is the easement in perpetutity?

Hoffman Properties of Cleveland, Ohio, donated a historic façade easement to the American Association of Historic Preservation, and took a tax deduction of $15 million. One requirement for such a deduction is that the easement must be in perpetuity. However, Hoffman and the Association included a caveat in the donation that Hoffman could alter, reconstruct, or change the appearance of the façade upon approval of the Association. Further, if the Association failed to give or deny approval within 45 days, then approval was deemed to have been granted.

The Court held that this caveat constituted a lack of perpetuity to the easement. Further, the Appeals Court held that the 45-day clause went even further, divesting the Association of the power to enforce protections if it failed to act within a narrow window. Thus, the deduction was disallowed in Hoffman Properties II LP v Commissioner of Internal Revenue (6th Circuit Ct of Appeals, April 14, 2020, 956 F3d 832).

Is a rezoning likely?

In Helmick Family Farms LLC v. Commissioner of Highways (Sup Ct of Virginia, August 29, 2019, 297 Va. 777) the key issue in valuation for a highway department condemnation was whether or not the rezoning of the ag land to commercial. The Commission valued the land, which zoned agricultural and used for cattle grazing and growing hay, at $20,281. However, Helmick offered expert testimony and valuation that the county had planned for several years to redesignate this for commercial or industrial use, and that the market value was thus actually $321,000. At the trial court level, the Commission successfully moved to have Helmick’s expert testimony excluded, holding that it was speculative. On appeal, the Supreme Court noted that Virginia law had never directly addressed this, but that there was a “avalanche of authority” from other jurisdictions that such testimony was generally permitted. The key element was that this rezoning was likely, and therefore a willing buyer, with reasonable knowledge of this, would factor it into the purchase price and thus this testimony should be admissible.

Thanks to Benjamin A. Blair, JD, of Faegre Baker Daniels LLP, writing in various recent issues of The Appraisal Journal for bringing these to my attention. As always, if we can elaborate on any of this, or answer any of your questions about these or other complex property cases, please let us know.

John A. Kilpatrick, Ph.D., MAI,

Written by johnkilpatrick

March 19, 2021 at 12:45 pm

Posted in Uncategorized

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