U2 Bono? Caught in #Tax Scheme

Leaked papers revealing investments in tax havens by the world's wealthy suggest U2 frontman Bono used a company based in low-tax Malta to buy part of a shopping mall in Lithuania.

The Guardian newspaper said Monday that the "Paradise Papers" document trove, obtained by it and other news organizations, reveals that the singer was an investor in Maltese company Nude Estates, which bought the Ausra shopping center in 2007.

Bono's spokeswoman told the paper that the rocker, whose real name is Paul Hewson, was a "passive minority investor in Nude Estates Malta Ltd., a company that was legally registered in Malta until it was voluntarily wound up in 2015."

The Irish band, well known for its poverty-fighting efforts, has faced past criticism over its tax arrangements.

U2 was heavily criticized in 2006 for moving its corporate base from Ireland to the Netherlands, where royalties on music incur virtually no tax.

In 2011, protesters inflated a giant balloon reading "U Pay Tax 2?" during U2's set at the Glastonbury Festival.

Forget Paradise Put Up A Parking Lot (and make Money!)

Betty Jones dabbles in real estate, and her portfolio includes a handful of rental properties in San Francisco, New York and Washington, D.C. Some are spacious apartments with lovely views, but the rentals that give her the greatest return on investment are small, dark and have no view — unless you count the parallel white lines that separate them.

They are three parking spaces below a residential building in Washington’s Dupont Circle. As is increasingly the case these days, the building’s spaces are sold “unbundled,” or separate, from the apartment units, which are far greater in number.

Ms. Jones, a trial consultant in Houston, last year paid around $37,000 each for the spaces, which combined, net about $700 a month after property taxes and a garage fee. “It’s a lot less hassle than an apartment,” she said.

No worries about slovenly tenants, leaky toilets or broken appliances. And if a tenant decides not to renew a lease, she said, she just has her son, who lives nearby, tack up a sign in the building’s laundry room and the space is rented out in less than three days.

“I don’t have to hire a Realtor to show it, I don’t have to meet the tenant — boom, it’s done,” she said. “It only takes one winter of looking for a parking space in the snow for people to realize they never want to do it again.”

-Forget Paradise Put Up A Parking Lot-

Buying individual parking spaces is a little known but extremely appealing real estate play for small investors like Ms. Jones. The obvious selling points are comparatively low prices, steady income, next to no maintenance, and wear and tear limited to the odd oil stain on the cement. Moreover, a growing number of parking apps is making it easier to rent out these spaces on a yearly, monthly, daily and even hourly basis.

“It’s a great investment idea for individuals or small groups, for sure,” said Keith Bawolek, chief executive of Vermillion Realty Advisors in Chicago, Ill., which specializes in acquiring multimillion-dollar garages and parking facilities for institutional investors. “There are opportunities in every market. You just have to be diligent and understand the right entry point for you as an investor.”

Marc Wisotsky and his partner, Jackie Lew, bought two spaces in 2005 in a parking garage near their home in Park Slope, Brooklyn, for around $45,000 each. They used one and rented out the other for $600 a month, pocketing $310 after taxes and the garage fee.

It was a tidy, reliable income, Mr. Wisotsky said, but the real payoff came when he and Ms. Lew sold their extra space last year for $285,000. “We could have gotten more — the prices just keep going up and up,” he said. “There are never as many parking spaces as residential units being built.”

Charles Cridland, a founder of YourParkingSpace, which he describes as the Airbnb of parking in the United Kingdom, at a parking space that his parents own and rent out in East Putney, London. Credit David Azia for The New York Times

According to Parkopedia’s 2017 Global Parking Index, the most expensive cities in the United States to park are New York, Boston, San Francisco, Washington, D.C., Seattle and Chicago. Abroad, it’s London, Zurich, Amsterdam, Sydney, Hong Kong and Tokyo. Top average rates are about $600 a month in New York and London, $47 a day in Sydney and $33 for two hours in New York.

Of course, the barrier to entry in some of these markets is substantial. In Hong Kong, prices for spaces can go as high as $644,000, which can make any derived rental income seem piddling. But if you’re strategic and pay attention to population density and traffic flows, you can find affordable, income-producing parking investments on the fringes of major markets, as well as in smaller cities and suburban areas, said Charles Cridland, a founder of YourParkingSpace, which he described as the Airbnb for parking in the United Kingdom.

Parking investors do face an uncertain future, though. If more people start driving electric cars, spaces without charging stations will be less desirable. Ride hailing apps and self-driving car services could also dampen demand.

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Realtors, Builders Oppose Tax Bill

The long-awaited House Republican tax legislation is touching off a lobbying frenzy as industries fight to preserve pet deductions. But the nation’s real-estate agents already are veterans of the battle.

After House Speaker Paul Ryan (R., Wis.) warned last year that he may not be able to fully save tax incentives they view as crucial to their industry, members of the National Association of Realtors started developing an action plan, the group’s officials said.

Among their goals: preserving deductions for mortgage interest and property taxes, both of which GOP lawmakers have targeted as a way to pay for lowering certain tax rates.

The Realtors recently deployed personalized digital advertisements in every district of House Ways and Means Committee members asking constituents to remind the lawmakers not to “let tax reform become a tax increase for middle class homeowners.”

The sacred cows of the tax code—including breaks for home mortgage interest and state and local taxes—are being challenged. WSJ's Richard Rubin explains.... with real cows. Photo/Illustration: Heather Seidel/The Wall Street Journal

The association will expand that effort to Senate Finance Committee members’ states by the end of the week, the group’s officials said. The 15-second online clips show images of families laughing and playing in front of tidy suburban houses.

Realtors are among the most influential advocacy groups because they are bipartisan, mostly single-minded and work for a valuable nationwide voting bloc: homeowners.

Ohio Sen. Sherrod Brown, a Democrat on the Finance Committee, said the Realtors’ lobbying effort is notable on Capitol Hill “because it’s mostly not [from] Washington, and come from all parts of the country.”

“The Realtors are small-business people, there are a lot of people in both parties, for a business group they are pretty diverse,” Mr. Brown said. “They have a lot of individual personal relationships with a lot of members of Congress.”

The National Association of Realtors has spent about $32 million on lobbying so far this year and is routinely a top-three federal lobbying spender, according to the nonpartisan Center for Responsive Politics.

Not only does the association have 25 registered lobbyists, according to federal lobbying records, but it has a membership of more than one million, many of whom respond to the association’s calls to action.

Tax Bill "No Sale" To #Home Builders

An influential home builders group will oppose the House Republicans’ forthcoming tax bill, in a blow to the party’s attempt to forge unity among business sectors.

The National Association of Home Builders, which had expressed openness to changes in the mortgage interest deduction, decided it couldn’t back the GOP bill. The association’s leaders made the decision after top Republicans this weekend said they wouldn’t accept an idea home builders and lawmakers had been working on: repealing the deductions for mortgage interest and property taxes and replacing them with a new tax credit.

Instead, the bill will retain an itemized deduction for property taxes, the House Ways and Means Committee said late Saturday. That is a concession to lawmakers from high-tax states such as New York and New Jersey.

“It’s a bad bill for the housing sector,” Jerry Howard, CEO of the builders group, said in an interview on Saturday. “We will not be for it.”

House Republicans plan to release their tax bill on Wednesday. The tax legislation is the centerpiece of the GOP’s economic and political agenda, and many details have been closely guarded as lawmakers try to build a coalition to push it through the House before Thanksgiving.

The plan nearly doubles the standard deduction, ends personal exemptions and likely repeals the deductions for state and local income and sales taxes. The combination would remove much of the incentive for the mortgage-interest deduction outside the highest-cost areas and could potentially hurt home prices.   

#Millennials Spooked by #Home Buying

Historically, Americans have bought a home by their early 30s, but today’s millennials are playing a waiting game because they’re saddled with so much student loan debt and can’t afford to save.

For first-time buyers, a majority of whom are millennials, the median down payment was 5% in 2017, down from 6% a year earlier, based on data from the National Association of Realtors. Comparatively, the median down payment among all home buyers was 10%.

Millennials who don’t already own homes are delaying purchasing one for a median of seven years, according to another recent joint study on millennial student debt from the National Association of Realtors and education financing nonprofit American Student Assistance.

Overall, 83% of non-home owners said they believe that student loan debt has delayed them from buying a home — and that figure is higher among older millennials (those born between 1980 and 1989) and people who have more than $70,000 in student loan debt. The report was based on the results of a survey of 2,203 student loan borrowers.

Groucho's Home Sells for $3.8M

Room service? Send up a larger room...one of Groucho's most memorable lines, but apparently he didn't really need larger rooms.

The onetime Hollywood, Los Angeles, home of Groucho Marx has sold for $3.81 million to a buyer from Texas, according to property records.

That’s some impressive price appreciation from the time the television, radio and film star last lived there in the 1940s. Marx sold the property in 1949 for a mere $35,000,

The most recent seller, a company called The Crest Group LLC, put the home up for sale just seven months after buying it for $3.45 million, property records show. The company originally wanted close to $4 million for the house but ended up closing for slightly less two weeks ago, selling to a husband and wife from Houston, Texas.

The 3,700-square-foot home, built around 1935 and which recently underwent a Regency-style renovation, has four bedrooms and five bathrooms. The main house sits on around one-quarter of an acre, which encompass a swimming pool with waterfall and hot tub and brick-paved terrace, according to the listing with Juliet Zacarias of Sotheby’s International Realty. Ms. Zacarias did not immediately return request for comment.

The traditional-style house with a steep sloping roof and dormer windows has an attached garage and is surrounded by a privacy hedge, photos of the home show. The master suite has two bathrooms, a walk-in closet and an office with its own balcony.

The first floor has a living room with a fireplace, a dining room and wet bar, and an open kitchen attached to a media room with double glass doors out to the backyard.   

#Homes, #RealEstate Selling Like #Weed

Home ownership close to a business with a name like Herban Underground, High Rollers or Dr Releaf could yield a bonus upon a resale. And neither Potco nor WellGreens refer to a bulk products warehouse or a pharmacy chain store. All these are real names of Colorado marijuana shops.

But serious headlines from a variety of sources state this mystifying side effect of legalized cannabis:

“Will Legal Marijuana Give Home Prices a New High?” — Realtor.com.

“The Marijuana Business is Really the Real Estate Business” — FloridaMarijuana.net.

“A Real Estate Boom, Powered by Pot” — The New York Times.

Before cannabis legalization spread across the land, this real estate phenomenon would have been laughable. Indeed, one leading Florida Realtor howled at the very thought when asked for comment about the possibility of such a positive pot impact here.

The growing trend may not be on anyone’s radar here — or statewide, the Florida Realtors organization suspects — but could that change as Florida’s fledgling medical marijuana market sprouts dispensaries?

To date, there’s but one dispensary operational today in the Sarasota-Manatee area, a Trulieve outlet on Tamiami Trail in Bradenton. Its grand opening last month attracted a standing-room-only crowd.

The cannabis clout is on a roll in both the residential and commercial real estate markets in other states. Several scholarly studies support pot’s real estate impact. But that depends on several factors.

Twenty-nine states have legalized some form of marijuana use, either medical, recreational or both. In the November election, California, Massachusetts, Maine and Nevada joined Alaska, Colorado, Oregon and Washington with laws allowing the recreational use of cannabis. Sunshine State voters approved medical pot in November via Amendment 2. The ballot initiative included a July deadline for implementation.

Realtor.com reports the four states with at least a year of experience with recreational marijuana sales showed a marked increase in home prices — well above the national median price. Coincidentally, the price charts for those four states show almost identical upward trends. As Realtor.com states, “Recreational marijuana is likely to have a big impact on home buyers, owners and sellers.”

Even Washington, D.C., which only legalized medical marijuana like Florida, sports a similar upswing in home prices.

One of the academic studies, primarily from two University of Mississippi economics professors, estimates that Colorado’s legalization of recreational cannabis and local governments’ approval of retail outlets within their jurisdictions increased housing values by an average of 6 percent. (Florida, like Colorado, allows local governments to ban cannabis.) The sharp price rise “is likely due” to pot shops “inducing strong housing demand,” the researchers’ report states.

The highly detailed study found recreational marijuana laws “obviously attract more migrants — whether it be marijuana users, entrepreneurs or job-seekers — to relocate, which drives up housing demand.” And, as existing residents become more willing to remain in place, the housing supply drops as demand rises, thus the increase in property values.

The rather lengthy equations the researchers devised to reach their conclusions would make Einstein proud and speaks to their scientific approach. A natural logarithm, indicator variable, vector, demographics, and fixed effects are all part of the multiple equations. Good luck following the explanation of the interplay between all these factors.

A second study, from the University of Wisconsin School of Business and economics researchers from two additional universities, focused on property values in Denver and found that homes near retail cannabis outlets — within just 0.1 miles — gained 8.4 percent more in value than houses just steps further away, from 0.1 to 0.25 miles. That big increase amounted to almost $27,000 for an average house.

A Realtor.com analysis published last year compared median home prices in Colorado from the first six months after the debut of pot shops in January 2014 with the first half of 2016. The increase? From $248,000 to $298,000, a 20.4 percent jump, far higher than the 15.2 percent registered across the nation. The Rocky Mountain state’s booming population accounts for some of that.

Realtor.com qualifies the numbers: “There’s no direct evidence tying the legalization of the drug to the population boom, but real estate agents say more of their clients are relocating to the state because of it.”

Furthermore, “Home prices tend to be higher in the roughly 60 Colorado cities and towns where cannabis is legal than the more than 200 where it’s not.” In hard numbers, the median sales price in the second quarter of 2016 came in at $302,500 for pot jurisdictions versus $267,200 in banned areas. The annual appreciation rate has been higher in cannabis locales, too, 12 percent versus 9 percent since 2014.

On the flip side, Colorado neighborhoods harboring grow houses lose value. The pungent odor the plant emits turns off home seekers.

The Realtor.com data team did not analyze Washington state because some cities allowed sales but later issued moratoriums on sales licenses. Colorado offered the most consistent data.

The commercial side

On the commercial side, warehouses, factories and self-storage businesses in states with legalized marijuana have been converted to pot growing and processing enterprises, the New York Times found. And suburban strip malls have become homes to pot shops.

The industrial real estate market is booming as marijuana operations continue to sprout up. The upshot translates into premium prices for building leases and purchases. The smart money is on property ownership since landlords have been known to gouge marijuana tenants. One sign of all this: There’s a Denver-based real estate and business brokerage company called Avalon Realty Advisors that specializes in cannabis counsel.

Denver marijuana growers inhabited 4.2 million square feet of metro industrial space by the end of 2016, an increase of 14 percent over the previous 18-month mark of 3.7 million square feet, CBRE Research found. Roughly two-thirds of the space comes from warehouses. The average sales price of cannabis-occupied industrial properties jumped 17.6 percent from 2014 to the end of 2016, CBRE reported. Plus, in 2016 sale prices of those properties achieved a 20 percent average premium over all industrial properties.

Denver’s city council, though, capped the number of dispensaries and grow houses in April 2016 since the Mile High municipality became overrun with pot operations. Marijuana dispensaries far outnumber Starbucks outlets in the state — by five times. The number of individual marijuana dispensaries within Denver’s city limits stood at 235 by the end of 2016.

As the Colorado market cools from saturation, states with recent marijuana legalization are now entering the quickly changing landscape in commercial real estate, particularly California and Massachusetts. The states with newfound cannabis laws are looking to Denver’s industrial market to gauge the potential impact on their own market fundamentals, CBRE wrote in a June 2017 analysis.

Arcview Market Research, a division of the Oakland-based marijuana company Arcview Group, forecasts California’s legal marijuana industry will be worth $5.8 billion by 2021. Nationally, Archview predicts revenues from the industry will soar from $6.7 billion in 2016 to more than $21 billion by 2021.

The pot industry could go up in smoke should U.S. Attorney General Jeff Sessions implements new federal policies to crack down on legalized recreational cannabis. The impact on medical marijuana is not clear.

The question of whether Florida’s real estate market could see fresh dollar signs is pretty iffy, especially on the commercial side. Currently, there are strict limits on cultivation operations. To get a grow license, an applicant’s nursery must be at least 30 years old and should also possess at least 400,000 plants in cultivation. Plus, applicants should be able to prove they have a financially viable business plan backed by $2 million for start-up costs and show licensing officials they have the ability to finance their operation for at least two years without going bankrupt.

Unless the rules change, it appears only dispensary locations could influence real estate in the Sunshine State — on the residential side. Limitations on potential retail medical marijuana sites, and bans by cities, look likely to snuff out the potential realized in other states.

Oh Lord (& Taylor) #WeWork Buys HQ

The iconic Lord & Taylor flagship building on Fifth Avenue will soon be WeWork's new headquarters. The seven-year-old startup is buying the building, which was officially named a city landmark in 2007, for $850 million in a deal that Lord & Taylor's parent company, Hudson's Bay, hopes will help reduce its debt.

The deal is the latest example of the heightened pressures that have slammed the retail industry in recent years. And while retail giants once did well in grandiose shopping spaces, that real estate has now proven to garner more value in serving the needs of millennial workers.

Lord & Taylor has operated out of its Fifth Ave store since 1914. When it opened, "it drew 75,000 visitors, who were treated to music from a pipe organ on the seventh floor and could chose to dine in one of three restaurants on the top floor," per the New York Times. But after Christmas next year, the retailer will only control the bottom floors, and the rest of the 12-story building will be converted into office space.

Other retailers across the U.S., such as Macy's and Sears, have also been rethinking their building space as consumers increasingly choose to shop online or at specialty stores.

Meanwhile, WeWork has become one of the world's wealthiest startups with a valuation of more than $20 billion. As of Monday, Lord & Taylor's valuation is less than a tenth of that at $1.7 billion.

WeWork's joint venture real estate partner, Rh?ne Group, will also invest $500 million in Hudson's Bay, which will give the parent company more than $1 billion to help pay off its debt.

Alexa: Buy Me a House

A building company is now selling homes on Amazon that anyone can purchase online–but they are not your average humble abode.

The tiny houses, sold by MODS International, are fashioned out of shipping containers and are each 320 square feet, according to Apartment Therapy. Despite their shortcomings, the homes seem rather luxurious inside.

Each residence comes fully furnished and includes a bedroom, shower, toilet, sink, kitchenette, and living area, according to the Amazon posting. The home is also fully insulated with AC and heat, and can be hooked up for plumbing, water and electric.

Unfortunately there is no free 2-day shipping deal as the home is not an Amazon Prime item, however the listing goes for a reasonable price of just $36,000.

Have a great and prosperous day ahead