The Right Equation for Responsible Development: Spotlight on Courtyard by Marriott

Courtyard by Marriott in Portland

Courtyard by Marriott in Portland

In the second of a 7-part series exclusive to the Maine Real Estate Insider, we’ll provide an up-close look at the most notable commercial development projects of the past year that are helping to fuel Maine’s economy in terms of investment and job creation.  MEREDA is proud to recognize responsible development based upon criteria including environmental sustainability, economic impact, energy efficiency, social impact and job creation.  Please join with us in celebrating Courtyard by Marriott in Portland.  A conversation with developer, J.B. Brown & Sons.

MEREDA:  Describe the building and project.

J.B. Brown & Sons:  The project consists of a 132 room Courtyard by Marriott, 7,000 sf Tiqa restaurant, 14 residential condominium units, and 34 on-site parking spaces.  We also constructed a pedestrian way connecting York and Commercial Streets.

MEREDA:  What was the impetus for this project? 

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MEREDA Welcomes New Vice Presidents

PORTLAND, Maine (July 17, 2015) – The Maine Real Estate & Development Association (MEREDA) is pleased to announce the appointments of Bruce Jones, Creative Office Pavilion and Brian Curley, PDT Architects to Vice Presidents for 2015 -2016.

Bruce Jones color cropBruce Jones, Business Development Manager at Creative Office Pavilion since 2004, works with business owners and managers to provide creative furnishing solutions that support their business objectives.   He has been an active member of MEREDA since 2010 serving on the Conference Committee. Bruce joined the MEREDA board in 2012 and that same year, was selected to receive MEREDA’s President’s Award.

Bruce has worked in the commercial furniture industry for over 20 years serving in various sales, training and management roles. He also serves in a leadership role with the Rotary Club of Portland, volunteers at the Long Creek Youth Development Center and is active with the Portland Society for Architecture.

Brian Curley 2015Brian M. Curley, AIA, LEED AP, principal of PDT Architects, is the team leader for corporate, housing, financial services, and interiors clients, with special expertise in historic reuse and energy retrofits. He joined the MEREDA Board of Directors in 2011, and is a member of the Legislative Committee as well as co-chair of the Conference Committee. He has delivered several talks on construction from the architect’s perspective for MEREDA’s breakfast seminar series, and received its President’s Award in 2014.

The recipient of several Statewide Historic Preservation Awards, Brian practiced at several Portland firms before joining PDT Architects in 1996 and becoming a principal in 2003.

“Bruce and Brian both exemplify leadership roles and can-do attitudes that are particularly welcomed in a volunteer organization such as ours.   We are thrilled to work with them now as Vice Presidents,” said Shelly R. Clark, MEREDA’s Vice President of Operations.

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Protect your Commercial Real Estate Investment

By Justin Lamontagne of NAI | The Dunham Group

My father always said, “If it’s worthwhile doing, it’s worthwhile doing right”. As a teenager, it was one of those absolutely grating sayings that usually accompanied some menial assignment or chore like moving a pile of rocks from one side of the yard to another or raking leaves in someone else’s yard. As a kid, I would roll my eyes. As a working adult, I now appreciate it (and look forward to tormenting my kids with it). I recently thought of those words while discussing a piece of the commercial real estate puzzle that is too often overlooked and not done “right”: commercial property insurance.

I traded some emails on the topic with my friend, Josh Fifield, a commercial insurance agent at Clark Insurance. Too many of my clients and other property owners simply look at insurance as another item to check off the list, without considering the true value it can have. Furthermore, there are significant cost-savings that can be had up front with proper coverage and planning. Along those lines, Josh suggests that, “including your insurance agent in the early planning discussions is extremely helpful regarding your investment whether it be new construction, development or renovation/rehabilitation. It also applies when adding to or subtracting from your property portfolio.”

Josh emphasized the importance of …

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The Maine Real Estate & Development Association Announces 2015-16 Officers and Welcomes New Board Member

2015 - 2016 Officers v2

Top Row: Michael O’Reilly, Paul Peck, Brian Curley Bottom Row: Bruce Jones, Bill Shanahan, Shelly R. Clark

PORTLAND, Maine (July 14, 2015) – The Maine Real Estate & Development Association (MEREDA) is pleased to announce its 2015-16 slated officers, which include Paul Peck of Drummond & Drummond, Brian Curley of PDT Architects, and Bruce Jones of Creative Office Pavilion, all serving as Vice Presidents, and Bill Shanahan of Northern New England Housing Investment Fund as Treasurer. Michael O’Reilly of Bangor Savings Bank will continue as President, in the second year of his two-year term, and Shelly R. Clark has been promoted from Assistant Secretary to Secretary of the Board. Shelly also serves MEREDA full-time as the organization’s Vice President of Operations.

Craig Young 2015MEREDA would also like to welcome a new member to its Board of Directors. Craig Young, CCIM of Scarborough, Partner and Senior Broker at CBRE | The Boulos Company has been elected to MEREDA’s Board of Directors and will serve on its Conference Committee.

Craig is a fierce advocate for his clients and takes the time to intimately understand their internal goals and processes, which enables him to provide a higher level of service. During his impressive tenure at CBRE | The Boulos Company, he has completed several complicated development transactions, dozens of high value investment deals and experienced all sides of the transaction as buyer, seller, landlord and tenant representative.

A Maine native, Craig feels strongly about giving back to his community. He is currently a board member of Big Brothers Big Sisters of Southern Maine, and is a past President of the Portland Community Chamber and Sweetser’s Kids at Heart program. MEREDA is looking forward to Craig’s contribution as a new member of its Board of Directors.

For further information, please contact MEREDA’s Vice President of Operations, Shelly R. Clark at 207-874-0801 or visit www.mereda.org.

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Kick Your Taxes Down the Road with a Like-Kind Exchange

By Andrew Smith, Baker Newman Noyes, Tax Principal

The “like-kind exchange” rules housed in Internal Revenue Code Section 1031 allow taxpayers to defer gain on the sale of a business or investment property if they reinvest in a similar property within a specified time. Many transactions qualify, and regardless of complexity or size, qualifying exchanges have the same effect: deferral of taxable gain or loss, and deferral of related taxes.

The popularity of §1031 transactions dropped in 2008 when the economy and property values dropped, because…

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The Maine Real Estate & Development Association (MEREDA) Recognizes Retiring Board Members

Jaimie Schwartz 2015Jaimie Schwartz of Bernstein Shur served as a contributing member of the MEREDA Board for the past 13 years. MEREDA recognized Schwartz in 2011 with its Robert B. Patterson, Jr. Founders’ Award, which honors members of MEREDA who have distinguished themselves by making significant contributions to the industry and the organization over many years. In addition to serving on the Board of Directors, Schwartz has also been a valuable participant on MEREDA’s Conference Committee. Schwartz consistently identified relevant topics for MEREDA events and the organization has greatly valued his creativity.

Drew Sigfridson 2014Drew Sigfridson of CBRE | The Boulos Company retired from MEREDA’s Board of Directors after 12 years of service. Sigfridson consistently went above and beyond in his service to MEREDA. He was recognized with MEREDA’s Volunteer of the Year Award in both 2006 and 2014. Sigfridson served the organization as President from 2012 to 2014, during which time he spearheaded a number of initiatives, including the MEREDA Index, the Mainebiz Real Estate Insider and the Bowl-A-Thon scholarship fundraiser. He also contributed significantly on various MEREDA legislative initiatives.

“As one of MEREDA’s only two staff members, I can personally tell you how much the organization relies on the support of its volunteer Board. We are deeply thankful to Drew and Jaimie for their many years of service to the organization and our industry,” commented Shelly R. Clark, Vice President of Operations for MEREDA.

For further information, please contact MEREDA’s Vice President of Operations, Shelly R. Clark at 207-874-0801 or visit www.mereda.org.

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The Role of the Real Estate Appraiser

By Mark L. Plourde, MAI, Maine Valuation Company

What is the role of the real estate Appraiser in a purchase and sale transaction? Why isn’t the contract price used as the measure of market value?

Well, for starters, one proposed transaction does not constitute a “market” in terms of value. Just because one buyer and one seller have reached a “meeting of the minds” to forge an agreement based upon self-interest, it does not mean their actions reflect what most others would do in the greater marketplace. The various elements of any proposed transaction price need to be examined in relation to the definition of Market Value itself to ensure that the contract price is actually reflective of the market, and not based on atypical conditions. When conducting due diligence, Appraisers often find transaction related information that is not accurate. Unfortunately, such misinformation has only gotten worse with the explosion of on-line “secondary” internet resources. The knowledge and motivations of participants in a transaction can vary quite widely as well. So do you think the actions of just a few should speak for most/all market participants? Separating the facts from fallacy does take time and effort. It is the real estate Appraiser’s responsibility to uncover the facts to be found, and to conduct appropriate due diligence and analyses of comparable market data when forming an opinion of market value.

It should come as no surprise that the real estate appraising is a highly regulated profession – and it should be. After all, important financial decisions rest upon such appraised opinions of value being accurate and unbiased. The Uniform Standards of Professional Appraisal Practice (USPAP) is the primary guide to professional practice in this industry. USPAP defines an Appraiser as “one who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective”[1] Thus, it is the expectation of the marketplace that the role of the Appraiser will reflect competence and independence when rendering his or her services, and such actions are codified by regulatory laws, rules, and ethical standards.

In addition, of all the participants in a real estate transaction, whose compensation is not based directly or indirectly on some form of contingent fee basis?  The Appraiser – that’s who.  Anyone is capable of convincing themselves as to what the property’s market value may be when there is some financial reward to be gained from that opinion. The payment of a fee for an appraisal service however is not contingent upon the concluded market value opinion, or whether the deal closes or not. This is a significant difference between Appraisers providing Appraisal Services and others in a typical transaction. So when faced with multiple opinions of value from multiple sources, perhaps you might want to ask yourself who stands to gain the most financially?

In conclusion, estimating the market value of a property may appear to be fairly easy on the surface. However, providing a qualified and accurate appraisal of market value is quite involved. Limitations can also result from the availability of sufficient confirmed primary market data coupled with “commodity approach” demands of ever faster turn-around time and lower appraisal fees. Whatever the limitations are however, the role of the real estate Appraiser is to properly define the appraisal problem to be solved, develop an appropriate scope of work, and then provide such appraisal services in a competent, independent, and unbiased manner in compliance with professional standards.

Mark L. Plourde, MAI is the Managing Partner of Maine Valuation Company and a MEREDA member since 1997.  Maine Valuation Company provides unbiased professional opinions of value on commercial real estate along with appraisal review services throughout Maine.  www.mainevaluation.com

 

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The Lead Poisoning Control Act: What it Means for Maine Landlords

Jonathan P. Hunter, Attorney, Rudman Winchell

Over eighty percent of all homes built prior to 1978 contain lead-based paint.  The Lead Poisoning Control Act, 22 M.R.S. §§ 1314-1329, originally enacted in 1973, attempts to address the health hazards posed by lead paint and other lead-based products.  In doing so, however, the Act presents several challenges for Maine landlords.

Pursuant to the Act, the Department of Health and Human Services (DHHS) may inspect any dwelling unit when there are reasonable grounds to suspect that there are lead-based substances on the exposed surfaces of the unit, at the request of the owner or occupant with whom children reside, or upon a report of lead poisoning.

If DHHS concludes that a dwelling contains an environmental lead hazard, which includes any condition that may cause exposure to lead from lead paint that is in poor condition, DHHS must give notice of the hazard to the owner and occupants.  DHHS will also order that the lead-based substances be removed, replaced, or securely and permanently covered within thirty days in accordance with rules adopted by the Department of Environmental Protection.

The good news for both landlords and tenants is that most lead abatement projects take less than two weeks.  In the meantime, however, the owner cannot knowingly rent the unit to new tenants.

 The landlord’s responsibilities are more onerous if a lead hazard is discovered in a unit already being rented to a family with children.  Until the hazard is addressed, the owner must move the tenants to a substitute unit after giving reasonable notice.  The owner is responsible for the tenants’ reasonable moving expenses and any use and occupancy expenses exceeding the rent for the vacated unit.  The tenants may not be evicted on the basis of the lead hazard.

There are some notable qualifications to the landlord’s responsibility to provide substitute housing during the lead abatement process.  First, the substitute unit provided by the landlord need not be one that the tenant prefers—it need only be lead-safe and similar in location and accommodation to the vacated unit.  Second, DHHS has the discretion to waive the requirement of moving a tenant to a substitute unit if it determines that adequate measures can be taken to limit exposure to the lead hazard until it is fully abated.

Any landlord with properties built before the 1980s is likely to have to address a lead paint issue at some point in the future.  In the event that a lead hazard is discovered, landlords should protect themselves by seeking the advice of an attorney.  The Act is complex and the penalties for noncompliance can be severe.  By promptly and properly complying with the required abatement procedures, landlords can keep their tenants safe while minimizing the strain on their business.

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An Increase in the MEREDA Index Provides Encouragement for the Real Estate Development Community

Index Logo 110 Spring 2015The MEREDA Index is the leading way our industry tracks changes in Maine’s real estate markets. It’s a composite of nine measures reflecting activity in both new development and existing properties, in commercial and residential markets, as well as construction employment.

The Index is quarterly beginning in the first quarter of 2006, which serves as the baseline—an index of 100. This report, which was originally presented on May 12, 2015 at our Annual Spring Conference, covers activity through the first quarter of 2015.

Please note that this report marks a change in methodology to smooth out some of the sharp spikes in certain Index components. As part of this adjustment, some prior quarters have been reconfigured.

The Composite Index

Driven by significant improvements in the commercial sector, particularly in large property sales, the composite index is up to 110—the highest level ever. This is 25% above early 2014.  Most of the dramatic growth occurred in early-2015, and the trend below is reflective of that growth being annualized:

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015
  88    95 108 110 110

As discussed below, this growth is largely the result of dramatic gains in the commercial sector. The residential and construction components of the index are still below the early 2006 base level.

The Residential Market

Residential real estate has been showing strength in sales of existing houses and mortgage originations over the past year. New housing construction (as measured by permits) was very weak in first quarter 2015, reversing an upward trend through 2014. However, this may have been influenced by the harsh winter. The median home price is up only slightly (2%) over year-ago on a seasonally adjusted basis. The total Residential Index stands at a 77, just 5% above the 73 of a year ago. The second quarter Index may reveal more.

The Commercial Market

All components of the commercial index contributed to a record Index level of 143, compared to a 102 a year ago. The volume of commercial transactions was up 24%, and price per square foot was up 18%.  Lease rates per square foot have grown more slowly, at 5% over the past year.

The largest growth of any index component, however, has been in commercial square footage sold.   A number of large commercial property sales from late 2013 through early 2015 have pushed this component to five times the level of first quarter 2006. The sale of four large office buildings properties in particular—One and Two Portland Square, and 100 Middle Street—played an immense role in this component.

A full copy of the Spring 2015 MEREDA Index can be found at mereda.org/currentindex.php.

Technical Notes

All data is either quarterly or monthly, converted to quarterly and then either seasonally adjusted or trended using moving averages and then compared to the value of each variable in the first quarter of 2006 (2006Q1 = 100).

Data sources for the index include: the Maine Association of Realtors, the Boulos Company, Bureau of Labor Statistics, Mortgage Bankers Association, U.S. Census, and Moody’s Analytics.

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Longtime Board Members Retire from Real Estate Organization

The Maine Real Estate & Development Association Recognizes Board Members for their Many Years of Dedication and Service

PORTLAND, Maine (June 4, 2015) –The Maine Real Estate & Development Association (MEREDA) relies on the generous support of its volunteer officers and Board of Directors to fulfill its mission of promoting an environment for responsible development and ownership of real estate throughout Maine. Many have distinguished themselves by making significant contributions to the real estate industry and to MEREDA over many years. Two of MEREDA’s longtime Board members will be retiring from the organization and were recently recognized at MEREDA’s Board Meeting on May 27. 

James C. Otis of Scarborough, is one of MEREDA’s biggest fans and wholeheartedly believes in the organization’s mission and reason for being. He is also one of MEREDA’s original founding members and has been supporting MEREDA since its inception 30 years ago. He currently serves as MEREDA’s Assistant Treasurer, and has been a very dedicated and active Board Member through the years. Jim received MEREDA’s President’s Award in 2009 and the Robert B. Patterson, Jr. Founders’ Award in 2006 for his commitment to the organization and the real estate industry. Jim founded Otis | Atwell, a CPA firm providing accounting and tax services to businesses throughout the Northern New England area with a special emphasis on matters of affordable housing, in 1974.

Thomas N. Lea of Cumberland Foreside, has served on the MEREDA Board for the past 25 years, as President from 2010 to 2012 and as an active participant on its Legislative Affairs and Conference Committees. He was the 2014 recipient of MEREDA’s Robert B. Patterson, Jr. Founders’ Award for his instrumental role in the organization. He recently retired from People’s United Bank, after a long career as a residential and commercial real estate lender for over 43 years.

“We are grateful to Jim and Tom for their dedication and service to MEREDA over the years,” stated Michael O’Reilly, MEREDA Board President and Senior Vice President, Southern Maine Commercial Banking Team Lead at Bangor Savings Bank, “The organization would not be the strong voice in our industry that it is today without the efforts of these two members.”

(From LEFT to RIGHT): MEREDA Board President, Michael O’Reilly of Bangor Savings Bank,  with longtime Board members, James C. Otis of Otis | Atwell, Thomas N. Lea, formerly with People’s  United Bank and Shelly R. Clark, Vice President of Operations for MEREDA.

(From LEFT to RIGHT): MEREDA Board President, Michael O’Reilly of Bangor Savings Bank,
with longtime Board members, James C. Otis of Otis | Atwell, Thomas N. Lea, formerly with People’s
United Bank and Shelly R. Clark, Vice President of Operations for MEREDA.

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