On April 13, 2016, Gemini Rosemont – a market leader in commercial real estate acquisition and asset management with holdings of approximately 15 million square feet of commercial space in 120 buildings in 21 states across the U.S. – announced its acquisition of the 19-story, 98% leased, 610 West Ash commercial office building located in Downtown San Diego, CA.

The building was purchased through a partnership with Gemini Rosemont and Central Properties for an undisclosed amount. HFF’s senior managing directors Nick Psyllos, Ryan Gallagher and Michael Leggett, who is also co-head of HFF’s West Coast team, and director Nick Frasco, brokered the transaction. Under the direction of Gemini Rosemont’s regional principal Helen Rivero, the company has engaged Cushman Wakefield to handle leasing responsibilities (J.P. Huntington at 858-558-5683 and Brooke Giuffre at 858-558-5647).

“The addition of 610 West Ash to our portfolio is a continuation of our ongoing relationship with one of our capital partners, Central Properties, and expands our national footprint,” said Don Henry, chief operating officer and chief investment officer for Gemini Rosemont.

The company’s latest transaction is part of a three-year, $3 billion acquisition strategy backed by strong financial support from Gemini Investments, a Hong Kong Stock Exchange-listed investment company, with the office tower adding 177,489 rentable square feet of 4 Star Office space to the company’s portfolio.

“The acquisition of 610 West Ash is part of our strategy to acquire high quality assets in primary and select secondary markets,” said Michael Mahony, chief executive officer of Gemini Rosemont. “Adding this property to our portfolio sets the stage for further expansion on the West Coast.”

Since October 2010, Gemini Rosemont has acquired approximately 6.8 million square feet of Class A and B multi-building office assets in select secondary markets valued at more than $950 million. As of December 2015, Gemini Rosemont has sponsored 165 investment vehicles, deployed over $805 million of investor equity to make more than $2.5 billion in purchases, and acquired/managed approximately 30 million square feet of commercial real estate.

Founded in 1992, Gemini Rosemont employs 200 real estate and other professionals. It has 11 regional offices located in Albuquerque, Atlanta, Chicago, Dallas, Denver, Houston, Los Angeles, New York, Peoria, San Antonio and Tulsa. For more information, please visit GeminiRosemont.com or contact Jeanne Hasenmiller at 602-714-9338 or [email protected].

Investment Objectives

Meissner Jacquét Commercial Real Estate Services, with headquarters based in San Diego, is contracted with Gemini Rosemont to provide the property management services. Meissner Jacquét’s network of national, regional and local clients and contacts provides a valuable source of information on commercial real estate market trends and diversity in resolving property issues.

In addition to partnering with Gemini Rosemont in achieving the company’s investment objectives, Meissner Jacquét will enact a strategic commercial property management approach. The approach includes working with the leasing team to maintain full occupancy by leasing any vacant suites and managing future rollover, maintaining operational excellence by focusing on superior tenant satisfaction through service excellence and enlisting a preventative maintenance plan that will deliver a premier physical environment. Most importantly, Meissner Jacquét will work to maximize operating income by focusing on cost effectiveness through accounting and reporting to ensure maximum cash flow in both the short and long terms.

“Creating a smooth transition for the tenants of 610 West Ash is a high priority for Meissner Jacquét,” said Kevin Tagle, principal of Meissner Jacquét Commercial Real Estate Services. “Our proactive approach to a seamless transition involves an organized property management team equipped with a detailed property transition checklist, strong coordination skills, and the desire to attend to every detail to ensure that each aspect of the transition is handled appropriately.”

For information regarding 610 West Ash, please contact Christie Kong, property manager, at 858-373-1227 or [email protected].

Live-Work-Play

Located in the heart of Downtown San Diego’s Little Italy, a hip and historic urban neighborhood, 610 West Ash provides its tenants with a live-work-play environment. At 48 square blocks, San Diego’s Little Italy is the largest in the Nation and boasts abundant shopping, a farmer’s market with artisan foods and fresh, local produce, art galleries, hotels, 30-plus restaurants – including patio cafés and pubs – numerous housing options, and parks that are all within walking distance.

“610 West Ash is well positioned in a highly walkable and evolving submarket of downtown San Diego. We feel the long term growth potential for San Diego as a West Coast 24 hour CBD market is excellent,” said John Caley, Gemini Rosemont’s senior managing director, capital markets.

The building’s location is convenient to San Diego’s primary public transit providers, freeways and San Diego International Airport, and offers panoramic views of the San Diego skyline, San Diego Bay, Coronado Island and the Pacific Ocean.

As evidenced by the institutional investment in San Diego’s commercial real estate landscape, San Diego County is regionally focused on business growth and globally competitive. As one of the top emerging regions in the world, the city is a hub for wireless and biotech, it boasts legendary research institutes and tourist attractions, and land and sea ports of entry that offer incomparable opportunities for forward-thinking businesses.

About Meissner Jacquét

Founded in 1992, Meissner Jacquét Commercial Real Estate Services has the knowledge and experience to provide commercial real estate solutions to office properties, retail centers, industrial parks, and commercial owner associations for institutional and privately-held investors, whether they be local, regional, or national. To learn more about Meissner Jacquét, please contact Brent Williams at 858-373-1113 or [email protected] or visit mjcres.com.

Sources:

Gemini Rosemont Commercial Real Estate

Meissner Jacquét Commercial Real Estate Services

Little Italy, San Diego, www.littleitalysd.com

San Diego Regional EDC

When a commercial real estate acquisition or disposition transaction does not close for one reason or another, fears of litigation typically arise. The reality is that “dead” deals rarely end up in court, but if one does, something has gone terribly wrong.

In purchase and sale deals that have gone awry, buyers frequently accuse sellers of fraud and failure to disclose as a basis to back out of the deal and recover their deposits. Also common are alter ego cases, in which parties seek to disregard the limited liability offered by corporations and limited liability companies. Finally, cases involving lot line adjustments and their effect on pre-existing entitlements are on the rise.

The Best Protection: Preempt the Dispute

Ultimately, there is no “silver-bullet” that will prevent a commercial real estate sales transaction from going sideways when one party is determined to back out. However, some careful preparation can put both buyers and sellers into a better litigation position if that happens. For sellers, a good rule of thumb for avoiding problems is to ask themselves if they want to disclose a particular fact to a buyer. If the answer is no, then it is a good practice to disclose it.

In the current white-hot commercial real estate market, sellers are receiving better offers during due diligence periods, and are trying to trade up to the better deal by looking for buyer defaults as a basis to terminate the original inferior deal. To get out of the existing deal, sellers are focusing on contractual condition deadline issues or even claims that third-party conduct is preventing the sale.

In order to avoid a dispute with sellers looking to trade-up, buyers need to be certain that they know and understand the deadlines in their purchase and sale agreements.

The Best Resolution: Reach a Deal outside the Judicial Process

When deals do end up in dispute, the best resolution is to reach an agreement outside of the judicial process. Mutual agreement eliminates risk and rightfully takes the decision and strategy making powers out of the hands of the lawyers and puts them back into the control of the business people.

Arbitration – private dispute resolution – can also be effective in saving both time and money. However, if the other party is difficult or if a good arbitrator is not selected, arbitrations can be just as expensive and lengthy as ordinary litigation, but without the right to appeal. Similarly, mediation – brokered settlement discussions – can break a communications logjam and get matters settled, but the timing needs to be right for the approach to really be effective. Parties need sufficient information to understand the positive and negative parts of their case before they can be in the right frame of mind to settle.

Of course, sometimes an agreement to settle cannot be achieved, in which case a cost-sensitive yet aggressive handling of the matter is a must for an aggrieved party. Most importantly, parties need to understand that litigation (or threat thereof) is ultimately a business tool and, like any tool, it may get the job done or it may be the wrong one entirely. A good litigation attorney will use the right resolution tool – be it arbitration, meditation, or litigation – paying careful attention to the risks and rewards of each method, the timing of the action, and how much the parties are informed and interested in settling.

A partner and chair of the litigation practice team at Crosbie Gliner Schiffman Southard & Swanson LLP (CGS3) – a San Diego-based commercial real estate law firm – Gregory Markow has devoted his entire career to resolving real estate and business disputes. He has represented real estate investors, owners and property management companies looking to minimize risks that lead to litigation, defending them when disputes cannot be avoided. For information on how CGS3 can help you avoid litigation when deals go south, contact Gregory Markow at 858-367-7697 or [email protected].

Sources:

Crosbie Gliner Schiffman Southard & Swanson LLP (CGS3), Gregory Markow, Partner

The buzzword going around the commercial real estate industry is “creative office space,” a new type of workplace that incorporates user experience, community and amenities that enhance user well-being. This trend is not likely to burn out quickly with the nation’s millennial workers, aged between 18 and 34, now driving the demands of the workforce and workplace landscape.

One of the changes in commercial real estate is that we used to force people to adapt to the buildings we had. Now, we are adapting buildings to individuals’ workflows…Employee happiness is becoming a big factor in design. ‘People first’ is the new catch phrase. Diane Davidson, Chief Operations Officer, Sperry Van Ness International

Creative office is taking the hint from co-working centers and executive suites and executing shareable business centers in repositioned, thought to be previously obsolete, industrial buildings or office parks in suburban and midtown locations. According to a report published last year by NGKF,

Between 14% and 22% of suburban-office inventory in five office-tenancy submarkets – Santa Clara, in the San Francisco Bay Area; Denver; the O’Hare area of Chicago; Reston and Herndon, outside of Washington, D.C.; and Parsippany, New Jersey – is in some stage of obsolescence, suggesting that between 600 million and 1 billion square feet of office space are unnecessary for the modern company and worker. That’s about 7.5 percent of the country’s entire office inventory. Newmark Grubb Knight Frank

Developers, designers and investors are gaining inspiration from lifestyle concepts that allow for flexible, open floor plan, plug-and-play spaces. These types of spaces are attractive to many next-stage companies after incubation. A leading company that champions the creation of workplaces that reflect its brand and local culture is Google. A perfect example is the Google location in Madison, Wisconsin, that was designed to welcome new recruits with workspaces that encourage collaboration and alternative spaces, allowing employees to choose where and how they work best.

Besides the shifting demographics, evolving technology is a large driving force behind creative office space. Due to today’s rising independent workforce, now 30 million strong, workers are deciding where their work gets done, whether it be in their local Starbucks with free Wi-Fi or in a thoughtfully-designed office space that allows for connection with colleagues and contribution to company culture.

Full-time independent contractors and free-lancers accounted for a 12% increase in the nation’s workforce over the past 5 years, compared to a 7% increase in overall U.S. employment. Audra Capas, President, 5StarPR LLC

While commercial real estate is adapting to the trend, there remains an increased pressure to enact cost saving initiatives to increase net operating income and creative office space doesn’t come cheap. The challenge is to rethink the workplace and deliver space that exceeds the c-suite’s expectations and provides a satisfying experience for the next generation of workers.

Instead of letting lease expirations drive change, examine how workplace design can yield long-term value. Contact Meissner Jacquét Commercial Real Estate Services to learn how to reposition your commercial real estate asset.

Sources:

NAIOP, Development, Volume XLVI No. 4, Winter 2015/2016

The Atlantic, The Plight of the Suburban Office Park

You might be wondering, did I read that headline correctly? You did if your commercial retail or restaurant property is in need of an upgrade, or currently undergoing a renovation.

In November the IRS issued Revenue Procedure 2015-56, which aims at providing qualified tax payers who are engaged in operating a retail establishment or a restaurant a safe harbor accounting method for those costs incurred that are related to remodeling and refreshing their qualified buildings.

The new procedure allows retailers and restaurateurs, as well as landlords, to deduct 75% of the expenses from remodels. Taxpayers interested in using this procedure must file for an automatic change in accounting method, Form 3115, Application for Change in Accounting Method.

Who qualifies for a commercial property upgrade under the new procedure?

To qualify for the deduction of expenses through Revenue Procedure 2015-56, a remodel-refresh commercial project must maintain the following guidelines:

• Maintain a contemporary and attractive appearance;
• More efficiently locate retail or restaurant functions and products;
• Conform to current retail or restaurant building standards and practices;
• Be intended to standardize to consumer experience;
• Offer the most relevant and popular goods within the industry; or address changes in demography by changing products or service offerings and their protestations.

Which costs associated with the commercial property upgrade are eligible for deduction?

The costs associated with the remodel, refresh, repair, or maintenance of the qualified commercial property that are eligible for a safe harbor include:

• Painting, polishing, or finishing interior walls;
• Adding, replacing, repairing, maintaining, or relocating permanent floor, ceiling, or wall coverings, including millwork, kitchen fixtures or signage;
• Relocating departments, eating areas, check-out areas, kitchen areas, beverage areas, management space, storage space, or similar areas, within the existing footprint;
• Increasing or decreasing the square footage of departments, eating areas, check-out areas, kitchen areas, beverage areas, management space, storage space, or similar areas within the existing footprint;
• Moving, constructing, or altering walls or adding, relocating, or removing a room or rooms within the existing footprint;
• Adding, relocating, removing, replacing, or re-lamping lighting fixtures, or adding reflectors, mirrors, or other similar devices to existing lighting fixtures;
• Repairing, maintaining, retrofitting, relocating, adding, or replacing building systems within the existing footprint;
• Replacing façade materials around windows and entrances, or making non-structural changes to exterior facades;
• Relocating, replacing, or adding windows or doors within the existing footprint;
• Repairing, maintaining, or replacing the roof or portion of the roof within the existing footprint;
• Repair and maintenance to the qualified building that directly benefits or is incurred by reason of a remodel-refresh project;
• Removal and demolition of structural components, such as insulation or drywall that directly benefit or are incurred by reason of the remodel-refresh;
• Obtaining permits or similar authorizations that directly benefit or are incurred by reason of a remodel-refresh project;
• Architectural, engineering, and similar services that directly benefit or are incurred by reason of a remodel-refresh project.

Which costs are excluded?

Those costs that are not eligible for a safe harbor include:

• Personal or intangible property;
• Land, including non-depreciable or depreciable improvements such as sidewalks, landscaping;
• The initial acquisition, production, or lease of a qualified building, including purchase price, construction/transaction costs, and costs of work performed prior to the date building is initially placed in service;
• The initial build-out, or a portion thereof, for a new lessee;
• Activities to rebrand a qualified building performed within two taxable years following the closing date of (a) an acquisition or initial lease or (b) the acquisition by the qualified taxpayer of a controlling interest in or lease of the qualified building;
• Activities performed to ameliorate a material condition or defect that existed prior to the acquisition or lease of the qualified building or that arose during the production/development;
• Material additions, including enlarging, expanding, or extending the square footage or the building systems in conjunction with the square footage;
• Restoration caused by damage for which the taxpayer is required to take a basis adjustment as a result of a casualty loss, or relating to a casualty event;
• Adapting more than 20% of the total square footage of a qualified building to new or different use or uses, as part of a remodel-refresh project;
• Remodel-refresh costs incurred during a temporary closing – which means closing the qualified building during normal business hours for more than 21 consecutive calendar days;
• The cost of any property for which the taxpayer has claimed an expense deduction under §179.

If it is time to remodel or refresh your commercial retail space, or if you have a project currently underway, then consider taking advantage of this new safe harbor to deduct up to 75% of the costs that might otherwise be capitalized and depreciated. Prior planning will assist you in identifying the costs that can benefit from the new procedure, so be sure to consult your commercial real estate attorney for guidance.

As it turns out, maybe the IRS isn’t such a Scrooge!

Sources:
Crosbie Gliner Schiffman Southard & Swanson LLP (CGS3), Phil Jelsma – Partner

IRS Rev. Proc. 2015-56