What do we do?

Today I had lunch with a long-time CFO client and now friend of mine.  He made the comment that he likes our advisory model but has a tough time defining what exactly we do.  This was helpful and made me think about why we exist.  Our roots started because we felt there was a need in the marketplace for a third party that just represents the end-users of space.  This includes corporations, government entities and non-profits.  Why is this important?

The majority of the industry is driven by the institutional owner that awards third-party service companies with their leasing, management, maintenance, construction and investment services.  This fuels the revenue stream for these third-party service firms but causes conflicts when the end-user is up against the other side of the company who may be trying to represent them.  We experienced this first hand many times in our career and it is not best for the end-user.  

This passion to provide advisory, transaction and single-sided representation drives everything we do for our clients.  This is why our clients like our approach.  Large or small, we are there for them on planning, leasing, selling, building, managing or providing project management oversight.  Call today if you would like to discuss how we may be able to help your organization.  

Tenant Representation Service

We use the term often but what does "tenant representation" really mean?  We believe tenants need to have representation when they look for a new location or renew or expand their current lease.  Knowledge is power for all of us and an informed decision makes for a better decision.  We can organize the process, research the market, define key lease items to decrease your risk and help negotiate the lease.  We can also assist to help you manage your time and money so your tenant improvement budget is spent wisely and your space is ready to go the day people show up to occupy the new space.  Let us know if you would like to sit down to discuss how we may be able to assist you!

Youthlink Executive Night Out for Homeless Youth

Jeff LaFavre is sleeping out in September to raise funds for youth homelessness on behalf of Youthlink.  This is the third year Jeff has participated.  Youthlink reaches 16-24 year old homeless youth and young adults to help them achieve productive futures.  Helping them beyond this point becomes much more difficult.  The issue is real and we can make a difference to address it if we all work together.  I am working to raise at least $3,000 this year and would appreciate your help at the attached link.  Thank you for playing a role in this effort.  

https://www.givemn.org/project/night-of-hope-jeff-lafavre58ed436a3d115

Congratulations Youthlink & PPL

We are so excited for our clients and friend Youthlink as they broke ground on their new downtown facility last week. This facility will be instrumental in providing services to homeless youth in Minneapolis. It has 46 residential units as well. This 17-million-dollar project is a great partnership between Youthlink, Project for Pride for Living (PPL), and local government. IAG Commercial congratulates Youthlink and PPL on this exciting project! Thank you for all you do for our community.

 

-IAG Team

Executive Night Out

The snow on the ground this morning has us thinking about homeless and at risk youth. This is a cause near to our hearts which is why we partner with Youthlink. For this reason, every year our founder and president, Jeff LaFavre, camps out in Minneapolis to raise money for this cause. As a result of this fundraising, Youthlink is able to provide support services to vulnerable youth. Please partner with Jeff and IAG Commercial and contribute to this great cause. 

www.youthlinkmn.org/night-of-hope-sleep-out/

The changes in office space

This is a good summary of what is happening nationally in regard to the use of office space.  Less space, more amenities.  http://www.ccim.com/cire-magazine/articles/2017/03/Shrinking-Footprint/  Many amenities are new to the market.  I think we will see more provision for "bicycle rooms" where people can easily store and work on their bicycles.  I recently toured a new apartment property in the CBD where they had a vending machine with bicycle parts, big screen T.V. , couch and a tool box full of bicycle tools.  They said this had become one of the most popular social rooms in the project.  This would work in high density office/apartment areas in the suburbs as well, in my humble opinion!

TIF vs. Tax Abatement

What’s the Difference Between a TIF and a Tax Abatement? A compare and contrast of the two subsidies.

 

Now that you have been introduced to both TIF and Tax Abatements, let’s take it a step further by comparing these two public subsidies. First, tax increment financing (TIF) is the ability to capture and use the most of the increased local property tax revenues from new development within a defined geographic area for a defined period of time without approval of the other taxing jurisdictions. On the other hand, Tax Abatement is the ability of one or more taxing jurisdictions to capture and use all or a portion of their share of local property tax revenues within a defined geographic area. It is in a sense a rebate rather than an exemption from paying taxes. A city approves a TIF while in a tax abatement, cities, counties, school districts, and townships can approve. If a developer is wanting to redo substandard or obsolete buildings then they could use a Redevelopment TIF, Renewal and Renovation TIF or an Abatement. If the developer is looking at purely affordable housing, then they could use a Housing TIF or Abatement. Both an Economic Development TIF and Abatement are tied to job and tax base creation.

 

If looking at a redevelopment project, TIF can be used to redo substandard/obsolete buildings, 15% of each parcel must be improved, 70% of the district area must consist of improved parcels, more than 50% of the buildings must be substandard and reasonable distribution of conditions. An abatement has no coverage or inspection requirements in a redevelopment scenarios. What about renewal and renovation projects? For these types of projects, a TIF can be used when redoing substandard/obsolete buildings. It has the same coverage requirements as a redevelopment TIF, 20% of the buildings must be substandard and 30% obsolete, and have reasonable distribution of conditions. With Abatements there are no  coverage or inspection requirements.

 

For housing, a TIF is more liberal on the rules for pooling, the income test is the main qualification, and it can include market rate housing to help contribute TIF to affordable housing. If using Abatement, there are no income requirements. For economic development projects, a TIF has job creation goals attached to the project, a majority of new space must be manufacturing, warehouse, distribution, telemarketing, and/or research and development, small city retail, border city retail, tourism, or bedrock. With Abatement there are no use requirements. In a TIF, the TIF district must be in a project area, which sets boundaries for TIF expenditures. The project area may contain multiple TIF districts, and the FIF district defines parcels for capture of value. With Abatements, parcels with taxes being abated must be identified. Project areas for TIF district are established by the City, EDA, or HRA. Some increment can be spent outside the TIF district, but in the project area pooling. For terms in an Economic Development project a TIF is 9 years while an Abatement is 15 years if all three political subdivisions are participating. A Renewal and Renovation TIF project is 16 years.  A Redevelopment project for a TIF is 26 years and a Housing TIF term is 26 years. In an Abatement, participation by one or two political subdivisions is 20 years and if the resolution is silent as to the term of the Abatement, then it is an 8 years term.

 

Concerning the approval process, a TIF requires notification to the County and School District, but does not require approval from other jurisdictions while an Abatement requires a public hearing by each participating political subdivision. In a TIF the City hold a public hearing and adopts a resolution with findings while in an Abatement, each political subdivision adopts a resolution with a statement of public benefit and term of abatement. A TIF captures only the increase in value while an Abatement may capture existing values. TIF requires annual reports that are filed with the Office of the State Auditor by August 1 while an Abatement has not reporting requirements other than what the political subdivision requires and the Department of Employment and Economic Development. Both a TIF and Abatement require business subsidy reports. 

 

There is no maximum on the annual increment generated or number of TIF districts, while an Abatement requires that the maximum cannot exceed the greater of $200,000 or 10% of the net tax capacity. In a pay-as-you-go note both a TIF and Abatement  requires that the developer assumes the risk and is paid back over time with interest. In a General Obligation Tax Increment Bond, the issuer assumes the risk and at least 20% of the debt must be supported with tax increment. While, when using a Tax Abatement the issuer assumes the risk and the Abatement must support 100% of the principal. In TIF Revenue Bonds, the investor in bonds takes the risk. TIF must be used on activities including acquisition, demolition, site improvements, public utilities, streets and sidewalks, and administration, general government use is prohibited as well as recreational use. While an Abatement has very few restrictions on use and one cannot abate taxes on a parcel located in a TIF district. Tax Abatements are special levies and outside levy limits, the amount of abatement must be added to the total levy for the current year, and the proposed levy and certified levy must include the current levy abatement amounts, while a TIF has geographic restrictions and pooling. Other factors affecting future funds are local tax rates, state law changes in class rates, interest rate of borrowing, timing of the project, and inflation/deflation of the market value. If you are considering the use of public subsidies for your next project please contact Brian Beeman, Senior Advisor, IAG Commercial. Bbeeman@iagcommercial.com

Medical users are thinking like retailers

With the pressure web shopping is placing on retail we are predicting the trend for medical users to occupy many of the current retail vacancies will continue.  Many medical users are starting to think like retailers and market themselves directly to the end-user.  We anticipate this trend will continue with the changes in healthcare and the consumers wanting more say in how they spend their high out of pocket deductibles.