Your Daily Digest for Real Estate Investing, 10/30/2020

A new “ecosystem” of workplaces, PetSmart ditches Chewy, two views on possible 1031 exchange tax changes, and the year that was for opportunity zones.

In Today’s News

ULI, EY Predict ‘Ecosystem’ of Workplaces

Post-pandemic work life around the world will be centered on flexibility in activity and location, according to the Urban Land Institute and EY.

Why it matters: CP Executive says the report, based on a survey of real estate professionals around the world, foresees an ecosystem of workplaces that blend uses of residential, hospitality, and office spaces and a shift in language from “office” to “workspace.” Now’s the time to strategize that new normal in your real estate investing.

PetSmart Spits Out Chewy. Why the Winner Matters

This piece posted today on RetailWire looks at the ramifications of online retailer Chewy being split off from brick-and-mortar PetSmart three years after private equity investors put them together.

Why it matters: While neither operation trades publicly, PetSmart is a big tenant in many a real estate investment trust’s (REIT’s) properties around the country. The discussion that follows the main text of this piece is worth a read for those wondering about that ramification.

Net Lease Investors Brace for Biden Victory

The former vice president has proposed ending some tax breaks for investors with annual incomes over $400,000, and it’s assumed 1031 exchanges would be a target. Should that happen, one stakeholder explains to GlobeSt.com why he predicts a rush into triple net lease arrangements instead.

Why it matters: In triple net leases, the tenant takes care of the expenses, making them easier to manage. Lots of retail REITs hold these types of leases. The same net lease specialist in this article also predicts CRE sales in general to slump while owners “opt to hold until they receive a tax basis step-up upon death.” There’s something here about death or taxes, it seems, at least in that tax bracket.

Today on Millionacres

What Would the End of 1031 Exchanges Mean for Real Estate Investing?

A lot, says Millionacres’ Matt Frankel, who goes even deeper with that topic, providing some specific examples of how the absence of 1031 like-kind exchanges would impact taxes on a transaction.

Why it matters: Matt references a study that says 1031 exchanges account for 6% of all commercial real estate sales volume and costs the revenuers $2 billion to $4 billion a year. That’s a lot of impact and argument on each side.

Opportunity Zones: Year in Review

The creation of opportunity zones has been one of the few bipartisan moments in Congress of late, and the program is close to wrapping up its first full year since the IRS issued guidelines for their use by investors.

Why it matters: Millionacres’ Deidre Woollard notes that while the White House says some $75 billion has poured into opportunity zone funds, their promise in revitalizing communities and everything else about them has been through a roller coaster year, and there’s more to come.

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