Month: November 2020

Finding a Good Solution for Austin's Homeless Population

Austin Must Solve its Homeless Problem

  • Austin has a terrible homelessness issue that is getting worse by the day. At least one local group is trying to get the City Council to address it.
  • Rampant homelessness is not good for anyone – not the people on the streets nor the nearby property owners.
  • But homelessness is not inevitable. It can be solved. Other cities have had success.
  • We must demand more of our Austin leaders to solve this issue.\

On Friday, November 20, the leaders of a local group called Save Austin Now filed suit against the City of Austin for rejecting its petition on homelessness. Earlier this summer, Save Austin Now submitted a petition to the City trying to reinstate the ban on camping in public. Under Austin law, a citizen initiative requires the citizen to submit a petition to the City with at least 20,000 signatures. If done, the City Council must approve issue or put it to a vote. In its petition, the Plaintiffs state that, instead of doing that, the City Clerk rejected the petition for not having enough signatures.

That lawsuit is just starting but I think the more interesting point is who makes up the leaders of Save Austin Now. The two leaders are a longtime local Republican and a Democratic activist. This may not surprise you too much, however. Because the runaway homelessness in Austin is a bi-partisan issue.

How the Problem Started

Austin – like any big city – has always had a homelessness problem. But it became exasperated when, in mid-2019, the Austin City Council repealed the local ordinance against camping on public grounds. As a result of this, people are free to set up camps on public grounds all around the City. We, therefore, get encampments under most overpasses, in the median along East Riverside, in public wooded areas, etc.

This has caused significant issues for Austin businesses. Allowing people to camp on public lands outside privately owned businesses discourages people from patronizing those businesses. Commercial real estate owners know this as well as anyone. East Riverside is a rapidly developing area in Austin. But permitting the encampments all along the median on Riverside has a chilling effect on all those new developments.

Austin Must Take Action

Since the summer of 2019, when the camping ban was rescinded, things have not gotten better – they just continue to get worse. While the City Council appears to make minor, unsustainable attempts at resolving the issue – like buying small motels to house a few people – the issue requires a more comprehensive plan.

I am not here to tell you what should be done. I am no expert in this area and do not know what the solution is. But there are experts out there. It can be done. We can help people significantly more than we are now.

For example –

  • San Antonio – The city has used a collaborative effort from traditional homeless providers, as well as the police, the business community, mental health officials, etc – to significantly decrease downtown homelessness.

  • San Diego – Through the City’s Community Action Plan on Homelessness – a comprehensive 10 year program – San Diego reduced homelessness by 12% in 2019.

  • Trieste – A city in northern Italy has radically reduced homelessness by focusing on mental health issues.

The point is, homelessness is not inevitable. It can be reduced. But to allow it to run rampant does not help anyone – not the people on the streets nor the nearby property owners.

And Austin’s city council has not done nearly enough to address these issues. We are not helping the people in need. And we are actively hurting businesses and property owners.

We need to demand more from our leaders – or vote them out.

Will You Forgive Me in 2020 Or 2021

Will You Forgive Me in 2020? Or 2021?

  • If you have not yet already done so, you may want to get your PPP loan forgiven in 2020.
  • The process is fairly simple. Contact your lender to learn more.
  • There are tax implications from forgiveness, so contact your tax lawyer or CPA to discuss.

Last week, we discussed some tasks that commercial property owners may want to get completed before the end of 2020. If you missed that article, please go here to catch up.

What we failed to mention, though, was what to do about your SBA Paycheck Protection Program (“PPP”) loans. Undoubtedly, many of your businesses received these loans in the first or second round earlier this summer. The next step, of course, is to apply for forgiveness of the loan. Borrowers can submit a forgiveness application at any time before the maturity date of the loan. However, if they do not submit it within 10 months after the last day of the borrower’s loan forgiveness covered period, loan payments are no longer deferred and the borrower must begin making payments on that loan.

So, if you have not applied for forgiveness yet, how do you do it? And should you do it before the end of the year? We will address those and other questions in this blog entry.

How to Apply for Forgiveness

The first step you should take when applying for forgiveness is to contact your lender. It may have particularly procedures or forms that it wants you to fill out to get the loan forgiven.

From the SBA’s perspective, the forgiveness process is fairly simple. There is a 2 page application that you have to fill out and submit to your lender. It does require you to show the amount you received and how that money was used – i.e., that the majority went to payroll. But if you can show that, then SBA should approve your application for forgiveness.

Should You Seek Forgiveness in 2020

Now that we know how to apply for forgiveness – should you do it in 2020? We are not a tax law firm, so I am not going to give you advice as to whether you should seek forgiveness in 2020 or 2021. I will just say you should consider the tax ramifications of forgiveness and discuss with your tax lawyer and/or CPA. It is my understanding that, once the government forgives your loan, that money becomes income to your company. So it is worth considering whether you want to seek forgiveness in 2020 or 2021.

Another Consideration

There is one more potential consideration for when you should seek forgiveness. Its very possible that there will be another stimulus plan passed by Congress in the next couple of months. One potential benefit of that stimulus could be a waiver of the forgiveness process – at least for loans under a certain amount. This has been talked about before.

Its not clear that Congress will pass this, but it is possible.

If you need any more information on PPP loans and their forgiveness, please call us at 512-614-0335.

What Should I do Before I Say Good Riddance to 2020

What Should I do Before I Say Good Riddance to 2020?

  • We are getting close to the end of the calendar year and that often incentivizes investors to close a sale or refinance before year-end.
  • There could be further incentive to do so this year because of the uncertainty of the changes a Biden administration will make.
  • One of those potential changes is a repeal of the 1031 exchange rules.

We are a week out from the election and Joe Biden will be the next President of the United States. Don’t worry – this will not be a political blog entry. If you want to know more about what I think – as always – call me up and we can grab a beer, pull up a stool, and solve all the world’s problems.

Instead, in this blog I want to talk about some steps commercial property owners may want to take before the end of the year or before the Biden Presidency begins. I will, therefore, discuss refinances, taxes, etc – and whether its important to move on these issues quickly.

End of the Year

Its common in our practice to see companies work to get some deals closed prior to the end of a calendar year. Often this has a lot to do with taxes. This year, that may be further exacerbated because we are having a change in President. As a result, companies may want to make a sale or refinance before the end of the year for the following reasons:

  • Potential changes in the tax code – I’m not a tax lawyer and its not totally clear to me what general tax changes may happen. As a result, I will leave that to you and your tax person.

  • Eviction moratorium – As we have discussed previously, as of right now, the CDC has issued a moratorium on many non-payment of rent evictions.* And many municipalities also have a moratorium. Most of these are set to expire on December 31. But will they? Will they be extended?

  • Uncertainty over 1031 exchange – I discuss this further below, but Biden has previously stated that he may repeal the 1031 tax benefits for like-kind exchanges.

As a result of these, you may want to either sell or refi your commercial real estate before the end of 2020. Obviously we are on a tight schedule to do so now, but if you want to, we are available to help and work to get it closed before year end.

What is a 1031 exchange?

As mentioned above, there has been some talk of Biden potentially repealing the 1031 exchange tax benefit. Many of you know this, but for those that do not, under Section 1031 of the US Tax Code, a seller of real property can delay capital gains taxes if he or she reinvests the money from the sale in a “liked-kind” asset. The IRS has clarified this to mean that any real property is a liked-kind asset for any other type of real property. If an investor, therefore, rolls his or her sale proceeds into a purchase of any other real property, he or she can put off paying capital gains taxes. This is, obviously, a huge benefit to investors.

What Biden is Proposing

As stated above, there has been talk that the Biden administration could potentially repeal this section of the tax code. When describing his tax plan prior to the election, Biden never specifically mentioned Section 1031. But his representatives did say that they could potentially repeal some provisions that are beneficial to real estate investors – “including like-kind exchange issues.”

That, of course, does not mean that Biden will seek to repeal Section 1031. Its been talked about by previous administrations and never been done. And even if he wanted to repeal it, he would still have to get it through Congress. As a result, its definitely something to keep on your radar. And a reason that you may want to consider closing that sale before the end of 2020.

If you have any questions or would like to discuss further, please call us at 512-614-0335.

*Mostly. For further details on what the order requires, please call us at 512-614-0335.

We Want All of Your Companies

We Want All of Your Companies

  • People and companies are flocking to Texas – which is obviously great for our state.
  • They are doing so for our overall business friendly environment.
  • But if we do not have better local leadership, the good ride could end.

Texas got some more good news this week when CBRE announced it would officially move its headquarters to Dallas in 2021. According to Bob Sulentic, President and CEO of CBRE, “it just made sense.” But why does it make sense? And does it make sense for other companies? That’s what I am going to talk about in this blog entry – the rush of foreign[1] companies to move to Texas.

Companies Continue to Flock to Texas

The first question to ask is – are people coming to Texas? Are companies moving here? The answer is undoubtedly yes. Anecdotally, in addition to CBRE, Tesla recently announced they are building a large plant just outside of Austin that will employ at least 5000 people. And its not just large companies. Smaller companies like Buff City Soap and Dasan Zhone Solutions have both recently moved to Texas.

In 2019, Texas was the fifth fastest growing State by percentage increase in population. And as we all know, multiple Texas cities are regularly among the fastest growing in the country.

In 2019, Texas was also the #1 destination for companies that were leaving California. In addition, Governor Abbott’s office recently said there are 196 active relocation or expansion projects in the pipeline right now.

Its clear, therefore, that people and companies are coming to Texas. But why? And will it continue?

Why Companies are Moving to Texas

One of the most common reasons people and companies give for moving to Texas is probably the reason you already know – taxes. Texas does not have a state income tax. That can be very attractive to a lot of folks. But its more than that. There are plenty of things that make Texas welcoming.

  • Business friendly environment – Of course this includes low taxes. But its more than that. Texas – in general – has limited regulations on businesses and provides for a entrepreneurial friendly environment.

  • Diversity – Texas is the second most diverse state in the country.

  • Universities – Texas has strong universities to provide talent to companies, including the University of Texas-Austin and Rice.

  • Affordable Housing – While we tend to think of housing as expensive here, compared to housing on the coasts, it is quite reasonable.

  • Central location – Texas is pretty close to the middle of the country.

These benefits combine to help make Texas one of the most attractive locations for a company looking to move. And the result is what we talked about above – people and companies are flocking to Texas.

This is, obviously, very good for Texas. Companies bring jobs and money into the state. And its good for commercial real estate. Companies and people increase the demand for all types of commercial real estate. This is one of the reasons that two of the top 7 hottest cities for investing in commercial real estate (according to Forbes) are in Texas. As a commercial real estate investor, there is no question Texas is a great place to be.

What Could Stop the Party?

But just because things are good now does not mean they always will be. The good times can always come to an end. So what could stop them? I think the clearest example of a city hurting a good thing is right here in Austin. As a result, I am specifically looking at Austin’s mistakes and how they could ruin its future.

All of these issues and more could significantly hurt Austin’s (and Texas’s) future as a leading destination for companies and people.

Lets hope it improves before its too late.

[1] And by foreign, I mean not from Texas.