Investment Property

November 26, 2024 by Peter Maclennan Leave a Comment

Recent Real Estate Transactions Overview

Here’s a summary of some recent real estate transactions we have been working on.

For Lease: 3930 Pacheco Blvd, Martinez Office Space

3930 Pacheco Blvd offers a charming single-story brick building along with an additional building currently configured as an open office. This property consists 5,260 sq. ft. in two buildings which could function as a small campus.

For Lease: 3380 Vincent Rd Ste 101, Pleasant Hill Warehouse

3380 Vincent Rd, Suite 101 is ±6,563 sq. ft. of light industrial warehouse and office space. With a dock high door for easy truck unloading, this space is ideal for distribution, assembly, and storage.

Front view of warehouse/flex space with a high dock door.

8,000 sq. ft. Antioch Warehouse for Lease

exterior photo of 511 Wilbur Ave Suite B4 Antioch CA a metal warehouse building

This Antioch warehouse space contains multiple power meters and three (3) roll up doors. The clear span warehouse allows for easy movement, storage, and assembly.

Tenant Representation: 2 Walnut Creek Office Spaces

Space 1 – 1,100 Sq. Ft. Office Lease

Our client was seeking office for their nascent home health care business. We toured multiple locations and identified the property in the Shadelands as the most ideal for their needs. We were able to negotiate successful lease terms and get them into their space.

Space 2 – 1,700 Sq. Ft. Office Lease

A past client contacted me regarding their expiring lease. They realized that they could function in a much smaller space. After touring multiple properties, we determined that a smaller space within their same project at Shadelands would be the best fit. We were able to negotiate an acceptable rent and tenant improvement package to get them into their new space.

For Sale: 24,000 sq. ft. Warehouse Building in Concord, CA

The building at 5135 Port Chicago Hwy in Concord is a great leased investment for the discerning buyer. The tenant mix is varied and includes substantial rental increases for many of the tenants.

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Contact Peter Maclennan today to discuss how he can assist with your real estate needs.

May 23, 2019 by Peter Maclennan Leave a Comment

The Opportunity Zone

Qualified Opportunity Zones

Established by the IRS to incentivize investment in low-income areas, the Opportunity Zone program is relatively new, and many investors are still unfamiliar with the benefits it provides. As of April 2018, the IRS offers tax benefits on long-term real estate investments purchased within Qualified Opportunity Zones. So what does this mean for long-term investors? Today we dive into the basics of Opportunity Zones and their three major draws.

What’s an Opportunity Zone?

Qualified Opportunity Zones or QOZ are economically distressed areas in which the government has designated certain tax incentives for investors. Typically, this means a capital gains investment is tax-deferred and the deferred gain is eligible for a partial exemption after five years or more. As described on IRS.gov website:

An Opportunity Zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service.”
https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions

See a map of Qualified Opportunity Zones

The preferential tax treatment described above only applies to purchases made with capital gains, and only for investment properties. In other words, homebuyers who plan on living in the house are ineligible for preferential tax treatment even if it is within an Opportunity Zone.

In order to establish an investment in an Opportunity Zone, investors must establish a Qualified Opportunity Fund (QOF) as a vehicle for investment property funds.

EIG.org provides a great resource for understanding Opportunity Zones.

Why invest in an Opportunity Zone?

1. Deferred tax

Okay, this one is obvious. After all, deferred tax is the primary incentive to investors, and is effective immediately upon investing.

Investors can defer tax on any prior gains invested in a Qualified Opportunity Fund (QOF) until the earlier of the date on which the investment in a QOF is sold or exchanged, or December 31, 2026.”
https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions

This means that the investor has seven full years to defer on the reinvested gains before tax is owed. An investor may be able to defer taxes further with a 1031 exchange before the 2026 deadline.

2. Tax exemptions

In addition to deferring taxes, Opportunity Zones incentivize long-term investments by adjusting the basis on which tax is owed:

If the QOF investment is held for longer than 5 years, there is a 10% exclusion of the deferred gain. If held for more than 7 years, the 10% becomes 15%. Second, if the investor holds the investment in the Opportunity Fund for at least ten years, the investor is eligible for an increase in basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged.”
https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions

This is where things get good. The tax-deferred gains you invested are eligible for 15% exclusion after seven years, meaning you only owe tax on 85%. Additionally, if the investment is held for ten years, it is eligible for a step-up in basis to the fair market value. If the property was sold shortly after the ten-year mark, the investor would be paying no capital gains tax on appreciation. This is a huge incentive for someone already interested in long-term investment.

3. Economically growing areas

Opportunity Zones were designed to help boost economically distressed areas by incentivizing long-term investors with tax benefits. The first zones were designated on April 9, 2018, so we must wait to see if they will offer the long-term economic development expected.

However, what is expected through the program is that the influx of new investments will drive an increase in property value throughout the zone. Investors realize the greatest gain if they establish funds early and stay invested long-term while the property values continue to increase. It is almost a self-fulfilling prediction, but one that benefits the early investors most.

Find a Real Estate Expert

Now that you know more about Opportunity Zones and the advantages they can provide, you are well on your way to making an informed and financially successful investment. Having a knowledgeable agent to assist you will make your process smooth and your returns as high as possible.

To reach Peter Maclennan please call 925.385.8798 or email at peter@maclennaninvestments.com.

This post is for informational purposes only. Contact a tax professional prior to making investment decisions.

January 23, 2018 by Peter Maclennan Leave a Comment

Industrial Real Estate Hottest Sector in 2017 and Hot in 2018

Industrial Real Estate Hot in 2017

According to a report, the hottest commercial real estate class is industrial property.

The industrial sector has emerged as the growth leader in commercial real estate, according to a new report by Morningstar, a notion that’s in agreement with the wider consensus about industrial now leading income-generating real estate. As a darling among owners and investors, apartments may still be strong, but the industrial sector is the rising star.

That’s thanks to Amazon and e-commerce as a whole. Industrial logistics space outperformed office, retail, apartment and even light industrial space in terms of supply, demand, occupancy and rent growth in the first half of 2017, noted the report. Read More… on Commercial Property Executive.

The article details that much of the growth is due to Amazon and other e-commerce companies.

As recent sales of industrial properties indicate, the availability of industrial land in core Bay Area markets is not growing.

Industrial Real Estate Stays Hot in 2018

According to research by NREI, industrial real estate and industrial properties should stay hot in 2018. A majority of survey respondents indicated that they expect the industrial market to continue expanding for at least a year. Almost 23% of respondents believe that the growth will last 2 years.

Fewer respondents were concerned about oversupply in the industrial real estate market. Over 80% of respondents indicated that the supply was just right or that there was too little supply. (Too little supply seems to be the trend in the San Francisco Bay Area.)

The experts that responded ranked the West as the top region, followed closely by industrial properties in the South.

Bottom Line:

All signs indicate that industrial leasing and sales will maintain a strong pace in 2018.

Maclennan Investment Group, Inc. offers leasing, investment, and property management services to clients in Contra Costa, Alameda, & Solano Counties. Our primary markets are along the I-680 Corridor from Pleasanton north to Martinez, including Danville, Alamo, Walnut Creek, Pleasant Hill, Concord, Pacheco, and Clayton. And also along Highway 4 from Concord east to Bay Point, Pittsburg, Antioch, Brentwood, Oakley, and surrounding Delta towns.

Please call today to see how we can help you find space for your business or fill up your building with high quality tenants. You can reach us at 925.385.8798.

November 4, 2016 by Peter Maclennan Leave a Comment

Water-Efficient Fixtures & California SB-407

In 2009, then California governor, Arnold Schwarzenegger signed SB-407 into law. The law requires that water-efficient fixtures be installed in homes and commercial properties.

The law defines non-compliant water fixtures as:

Any toilet manufactured to use more than 1.6 gallons of water per flush.
Any urinal manufactured to use more than one gallon of water per flush.
Any showerhead manufactured to have a flow capacity of more than 2.5 gallons of water per minute.
Any interior faucet that emits more than 2.2 gallons of water per minute.

Residential Property Owners

One of the main features of this law is that as of January 1, 2017 all water fixtures in a single-family home are to be replaced with water-efficient fixtures. Most homes that have undergone a major, permitted remodel after 2014 were required to update plumbing fixtures to water-efficient fixtures to obtain a building permit.

b) On or before January 1, 2017, noncompliant plumbing fixtures in any single-family residential real property shall be replaced by the property owner with water-conserving plumbing fixtures.

and

(c) On and after January 1, 2017, a seller or transferor of single-family residential real property shall disclose in writing to the prospective purchaser or transferee the requirements of subdivision (b) and whether the real property includes any noncompliant plumbing fixtures.

Disclosure on Transfer (Sale)

This law requires that the seller must disclose to buyers if the fixtures in their home are in compliance with this law.

Do you know if all of your fixtures are in compliance? I certainly don’t. This will likely require you to either update all the fixtures to low flow, or have an inspection certifying that they are low flow.

Commercial Real Estate and Multifamily Properties

Commercial properties and multifamily real estate have to be in compliance by January 1, 2019. For purposes of the law, the authors defined commercial real estate and multifamily real estate:

(a) “Commercial real property” means any real property that is improved with, or consisting of, a building that is intended for commercial use, including hotels and motels, that is not a single-family residential real property or a multifamily residential real property.

(b) “Multifamily residential real property” means any real property that is improved with, or consisting of, a building containing more than one unit that is intended for human habitation, or any mixed residential-commercial buildings or portions thereof that are intended for human habitation. Multifamily residential real property includes residential hotels but does not include hotels and motels that are not residential hotels.

Duplexes, Triplexes, and Fourplexes

Based on the definition of multifamily residential real estate as containing more than one unit intended for human habitation, most duplexes, triplexes, and fourplexes should fit into this category.

Disclosure on Sale or Transfer

Again the law requires that the seller of commercial real estate or multifamily property disclose to the buyer if the property is in compliance.

Plumbing Police?

Does this mean that the state is going to create the plumbing police? Beats me. The law does allow for local communities and water retailers to enact ordinances to enforce compliance. Check with your local municipalities and water district to see if they have an enforcement mechanism.

If you are considering selling residential real estate in the near future you will need to work with your real estate professional to comply with this law. Hiring a property inspector can go a long ways towards this.

It looks like the plumbers, handymen, and handywomen of California are going to have a lot of faucets to fix.

February 2, 2016 by Peter Maclennan Leave a Comment

Residential Landlords and Mold – Senate Bill 655

A Moldy Wall – by Matti Mattila*

Senate Bill 655 Housing Standards Mold

Senate Bill 655 was signed into law on October 9, 2015 and went into effect on January 1, 2016. This law adds mold to the list of habitability issues that a tenant can use in defense of an eviction case.

How is mold defined under SB 655? “Mold” means a microscopic organism or fungi that can grow in damp conditions in the interior of a building.
The California Apartment Association boasts that this law protects both the landlord and the tenant. The tenant is protected from the harmful effects of exposure to mold over an extended period of time.

The landlord is protected from eviction defense attorneys using “mold” as a last minute defense in an unlawful detainer proceedings. To qualify as a habitability issue, the mold must be visible, the landlord must have been notified of its presence, and it must NOT be attributable to the tenants misuse or neglect.

Dealing with Mold in a Rental

From the California Association of Realtors® (CAR) Q&A on the law:
QUESTION: “If the landlord suspects that the tenant’s failure to keep the property clean and sanitary has contributed substantially to the mold problem, should the landlord nonetheless repair the mold problem?”

ANSWER: “Yes. Even where it’s clear that the tenant’s own negligent actions have led to the mold problem, the conservative course of action from a risk management perspective, is to act quickly to repair the problem. Afterwards, if it’s clear that the tenant had caused the problem, the landlord may bill the tenant for the cost.

Recall that a landlord has a duty to maintain the habitability of the property. This obligation is found under common law, by statute, and often in the terms of the lease agreement. Failure of the landlord to maintain the property in a habitable condition may allow the tenant various legal remedies such as rent withholding, termination of the rental agreement, discounted rent and other rights and damages. Because the risk of liability is high, it’s prudent to take a cautious approach by remediating first, and assessing costs afterwards.”

CAR® Form on Mold

The California Association of Realtors® provides a standard form, “Lease/Rental Mold and Ventilation Addendum”, for dealing with mold issues when you are leasing a unit. You can use it to address some of these issues when a new tenant takes occupancy.

You should always address tenant issues with your legal counsel to get their advice on matters pertaining to law.

925.385.8798

Recent Real Estate Transactions Overview

For Lease: 3930 Pacheco Blvd, Martinez Office Space

For Lease: 3380 Vincent Rd Ste 101, Pleasant Hill Warehouse

8,000 sq. ft. Antioch Warehouse for Lease