Posts Tagged ‘Small Business Administration’

Better Building Initiative Will Green Commercial Buildings

Tuesday, February 15th, 2011

President Barack Obama recently visited Penn State University to introduce his Better Buildings Initiative, an incentive program intended to stimulate energy-efficient retrofits to existing commercial buildings.  The initiative is also designed to create jobs in the construction and manufacturing industries.

Despite the long-term economic benefits of energy efficiency, many building owners often run into difficulty raising capital to make improvements.  To resolve this problem – with the aim of increasing commercial building efficiency by 20 percent by 2020 – the Obama initiative proposes loan guarantees and corporate tax credits for commercial building owners who retrofit their portfolios.  Additionally, it will reward local and state governments for taking leadership in requiring enhanced building performance.  Business and political leaders and industry groups agree that the initiative will create green jobs in the design, construction, and manufacturing industries.

Although several items on the president’s ambitious list require legislative action, federal agencies can take preliminary steps using existing authority, said Lane Burt, director of technical policy at the U.S. Green Building Council (USGBC). A pilot program guaranteeing loans for building owners could “run through existing programs at the Department of Energy,” he said.  Although tax credits for green upgrades will need Congressional approval, existing tax incentives like the Commercial Building Tax Deduction (CBTD) could be used almost immediately.  “The deduction was designed for energy-efficient new construction,” said Burt, so it can be difficult to claim the deduction for retrofits.  Burt said the Internal Revenue Service will clarify its guidance on using the CBTD for improvements, potentially helping more building owners deduct as much as $1.80/ft2 from their gross income on tax forms.

The White House highlights five points that comprise the building efficiency plan.  It didn’t say how much the program will cost, but at least four of the programs are likely to require new or expanded outlays, including: turning tax deductions for commercial building retrofits into tax breaks, a move the administration said “could result in a ten-fold increase in commercial retrofit take up”; boosting access to Small Business Administration loans; introducing Race to Green, modeled after the Race to the Top education program that would reward states and municipalities that encourage retrofits; and expanding job-training programs in energy auditing and building operations.

“That’s money that could be spent growing those businesses and hiring new workers,” Obama said.  The president argued that the U.S. needs to “out-educate” and “out-innovate” the rest of the world.  “In America, innovation isn’t just how we change our lives; it’s how we make a living,” he said.

Two groups that applauded news of the initiative are The National Multi Housing Council (NMHC) and the National Apartment Association (NAA). The organizations released the following statement about the Better Buildings Initiative. “We commend the Obama Administration for its focus on energy efficiency in commercial properties, including apartments, and for taking an incentive-based approach to achieving meaningful reductions in our building energy usage.  Energy consumption and energy policy are priority issues for the apartment sector.  The plan announced today includes several items long advocated by NMHC/NAA, most notably reforming the existing building efficiency tax incentives.  Many apartment firms have voluntarily established energy efficiency and green building programs throughout their portfolios, but many more have been stymied by the lack of sufficient tax incentives and financing for building retrofits.”

Robert Knakal on the Bulls vs. the Bears – Who Do You Trust?

Monday, October 18th, 2010

Robert Knakal discusses whether the bulls or bears are right about the economy. Who’s right about the state of the economy and commercial real estate – the bulls or the bears?  Robert Knakal, chairman of New York-based Massey Knakal Realty Services, weighs both sides to help us cut through the mixed messages.

In a recent interview for the Alter NOW Podcasts, Knakal noted that the bulls like to cite the best back-to-back GDP growth since 2003 – 5.9 percent in the 4th quarter of 2009 and 3.2 percent in the 1st quarter of 2010.  Bears, on the other hand, believe that weak consumer spending will cause the GDP to grow at an anemic two to three percent for the rest of the year.  Knakal views this is an interesting dynamic because of the growing number of economists who back the bears’ position – numbers that are well below the trend coming out of a recessionary period.

Knakal, a graduate of the Wharton School of Business, also writes StreetWise, a nationally syndicated real estate industry blog, is concerned that many loans made by community and regional banks are five-year loans, which will mature in 2011 and 2012.  These loans raise the loudest alarms, because many are still performing thanks to very advantageous interest rates – possibly in the form of interest-only loans or with interest reserves that are carrying the property.  When these loans – which now could have an interest rate as low as two percent – mature, it will be renewed at a 5 ½ or six percent interest rate that will require a de-leveraging process.  Some $10 billion banks are carrying half of all their commercial real estate exposure in Small Business Administration (SBA) loans.

Despite the bears’ lack of confidence in the commercial real estate markets, capital is available to credit-worthy users chasing high-credit projects.  The amount of available private equity is currently estimated at approximately $173 billion.  Public REITs raised more in common stock offerings in 2009 than they did in the previous nine years.  Non-public REITs are expected to raise $10 billion this year.  Sovereign wealth funds are said to have access to an astonishing $3.5 trillion.  What Knakal cautions us to recognize is that these often represent the same pools of equity and to draw the distinction between capital that has been promised and that which is actually available.

 
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One11 West Illinois Street Is Development Magazine’s Latest Cover

Wednesday, May 6th, 2009

One11 West Illinois Street is on the cover of  the Spring issue of Development magazine, published by the National Association of Industrial & Office Properties.111w_illinois_1

The Development article highlights the building’s unique positioning as Class-A-to-own office space that lets businesses own their space in a building with the quality of a premium-priced skyscraper – but at 40 percent of the cost of leasing.  The versatile building accommodates multiple uses — hotel, retail, restaurant, and office space.

Aimed at entrepreneurial business, One11 comes at a time when credit is being extended to small- to medium-sized business through the Small Business Administration and other agencies.  (To hear Key Bank executive Charles Krawitz discuss capital available to entrepreneurial firms, visit our TAG podcasts here.

Prominent architect Martin Wolf, FAIA, senior principal with Solomon Cordwell Buenz & Associates, faced several design challenges, specifically two adjoining buildings that occupy part of the site.  Wolf resolved this challenge by designing One11 around the buildings and creating a dramatic prow-like edge that resembles the bow of a ship.  The design achieves a contemporary, geometric presence that has won high praise from Blair Kamin, the Chicago Tribune’s Pulitzer Prize-winning architecture critic.

One11 West Illinois Street’s lead user – the Erikson Institute – had taken 75,000 SF on three floors prior to the ground-breaking so the graduate school for child-development professionals could have an upscale vertical campus.  A key factor in Erikson’s decision to purchase was the tax-exempt financing and the real estate tax exemption.  This economic incentive gave Erikson the ability to purchase almost double the space they had previously occupied.

To read the entire article, please visit NAIOP