Medical Practice Financing For Healthcare Professionals
On the heels of its move into retail banking, and with a mandate to find revenue growth outside of traditional investment banking and trading, Goldman Sachs (NYSE:GS) is quietly plotting to become a p
An old stock certificate from Poland with most of the coupons still attached.
In finance, the notion of traditional investments refers to putting money into well-known assets (such as bonds, cash, real estate, and equity shares) with the expectation of capital appreciation, dividends, and interest earnings. Traditional investments are to be contrasted with alternative investments.
Main article: Bond (finance)
Here the investor purchases debt issued by companies or governments which promises to pay an annual return until the debt is repaid. The value of the investment changes as the level of general interest rates fluctuates, causing the bond to become more or less valuable.
In cash investing, money is typically invested in short-term, low-risk investment vehicles like certificates of deposit, money market funds, and high yield bank accounts.[1]
Main article: Real estate investing
In real estate, money is used to purchase property for the purpose of holding, reselling or leasing for income and there is an element of capital risk.
Investment in residential real estate is the most common form of real estate investment measured by number of participants because it includes property purchased as a primary residence. In many cases the buyer does not have the full purchase price for a property and must borrow additional money from a bank, finance company or private lender.
Commercial real estate consists of apartments, office buildings, retail space, hotels, warehouses, and other commercial properties. Investors may purchase commercial property outright, with the help of a loan, or collectively through a real estate fund.
Investment in real estate investment trusts (REITs) is like investing in a pool of real estate that the company manages.
This involves purchasing a share in the equity of a company in the hope that the share price will increase. Purchasing a share in the company is the same as owning part of the company. Stock investing can come in the form of buying individual stocks, mutual funds, index funds and exchange traded funds (ETFs).[2]
Source: https://en.wikipedia.org/wiki/Traditional_investments
We realize what number of hardships you’ve got being subject
to the daily grind of running a small practice, it takes lots of hard work, devotion along with years of experience!
– http://www.nytimes.com/
– http://www.nytimes.com/
– http://www.cnn.com/
– reuters.com
– http://www.cnn.com/
– reuters.com
A real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and timberlands. Some REITs engage in financing real estate. The law providing for REITs was enacted by the U.S. Congress in 1960.[1] The law was intended to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.[2] REITs are strong income vehicles because, to avoid incurring liability for U.S. Federal income tax, REITs generally must pay out an amount equal to at least 90 percent of their taxable income in the form of dividends to shareholders.[3]
REITs can be publicly traded on major exchanges, public but non-listed, or private.[3] The two main types of REITs are equity REITs[4] and mortgage REITs (mREITs).[5] In November 2014, equity REITs were recognized as a distinct asset class[6] in the Global Industry Classification Standard by S&P Dow Jones Indices and MSCI. The key statistics to examine the financial position and operation of a REIT are net asset value (NAV), funds from operations (FFO), and adjusted funds from operations (AFFO).[citation needed]
REITs were created in the United States after President Dwight D. Eisenhower signed Public Law 86-779, sometimes called the Cigar Excise Tax Extension of 1960.[7][8] The law was enacted to give all investors the opportunity to invest in large-scale, diversified portfolios of income-producing real estate in the same way they typically invest in other asset classes – through the purchase and sale of liquid securities. The first REIT was American Realty Trust founded by Thomas J. Broyhill, cousin of Virginia U.S. Congressmen Joel Broyhill in 1961[9] who pushed for the creation under Eisenhower.
Since then, more than 30 countries around the world have established REIT regimes, with more countries in the works. The spread of the REIT approach to real estate investment around the world has also increased awareness and acceptance of investing in global real estate securities.[10]
A comprehensive index for the REIT and global listed property market is the FTSE EPRA/Nareit Global Real Estate Index Series,[11] which was created jointly in October 2001 by the index provider FTSE Group, Nareit and the European Public Real Estate Association (EPRA).
As of December 2017, the global index included 477 stock exchange listed real estate companies from 35 countries representing an equity market capitalization of about $2 trillion (with approximately 78% of that total from REITs).[12]
Around the time of their creation in 1960, the first REITs primarily consisted of mortgage companies. The industry experienced significant expansion in the late 1960s and early 1970s. The growth primarily resulted from the increased use of mREITs in land development and construction deals. The Tax Reform Act of 1976 authorized REITs to be established as corporations in addition to business trusts.
The Tax Reform Act of 1986 also impacted REITs. The legislation included new rules designed to prevent taxpayers from using partnerships to shelter their earnings from other sources. Three years later, REITs witnessed significant losses in the stock market.
Retail REIT Taubman Centers Inc. launched the modern era of REITs in 1992 with its creation of the UPREIT. In an UPREIT, the parties of an existing partnership and a REIT become partners in a new “operating partnership.” The REIT typically is the general partner and the majority owner of the operating partnership units, and the partners who contributed properties have the right to exchange their operating partnership units for REIT shares or cash.The industry struggled beginning in 2007 as the global financial crisis kicked in. In response to the global credit crisis, listed REITs responded by deleveraging (paying off debt) and re-equitizing (selling stock to get cash) their balance sheets. Listed REITs and REOCs raised $37.5 billion in 91 secondary equity offerings, nine IPOs and 37 unsecured debt offerings as investors continued to act favorably to companies strengthening their balance sheets following the credit crisis.
For the five-year period ending Dec. 31, 2017, all stock exchange listed REITs posted total returns of 60.29%, with compound annual total returns of 9.90%. Stock exchange listed equity REITs had total returns of 59.85% during that same period, with compound annual total returns of 9.83%. The S&P 500 had total returns of 108.14% during that same period, with compound annual total returns of 15.79%. Economic climates characterized by rising interest rates have a detrimental effect on REIT shares. The dividends paid by REITs look less attractive when compared to bonds that have increasing coupon rates. Also, when investors shy away from REITs, it makes it difficult for management to raise additional funds to acquire more property.[13]
The first REIT in Kenya was approved by the Capital Markets Authority in October 2015. The REIT is issued by Stanlib Kenya under the name Fahari I-Reit scheme. The REIT scheme will provide unit holders stable cash inflows from the income generating real estate properties. The unrestricted IPO will be listed on the main investment market segment of the Nairobi Securities Exchange.[14]
REITs have been in existence in Ghana since 1994. The Home Finance Company, now HFC Bank, established the first REIT in Ghana in August 1994. HFC Bank has been at the forefront of mortgage financing in Ghana since 1993. It has used various collective investment schemes as well as corporate bonds to finance its mortgage lending activities. Collective Investment Schemes, of which REITs are a part, are regulated by the Securities and Exchange Commission of Ghana.
In 2007, the Securities and Exchange Commission (SEC) issued the first set of guidelines for the registration and issuance of requirements for the operation of REITs in Nigeria as detailed in the Investment and Securities Act (ISA). The first REIT, the N50 billion Union Homes Hybrid Real Estate Investment Trust, was launched in September 2008. In November 2015 there were three listed REITS on the Nigerian Stock Exchange:[15] Skye Shelter Fund, Union Home and UPDC. A Haldane McCall REIT did not list after failing to reach the minimum 50% subscription in a January 2015 initial public offer amid poor market prospects.[16]
By October 2015 there were 33 South African REITS and three non-South African REITs listed on the Johannesburg Stock Exchange, according to the SA REIT Association,[17] which said market capitalization was more than R455 billion.
Main article: Australian real estate investment trust
The REIT concept was launched in Australia in 1971. General Property Trust was the first Australian real estate investment trust (LPT) on the Australian stock exchanges (now the Australian Securities Exchange). REITs which are listed on an exchange were known as Listed Property Trusts (LPTs) until March 2008, distinguishing them from private REITs which are known in Australia as Unlisted Property Trusts. They have since been renamed Australian Real Estate Investment Trusts (A-REITs) in line with international practice.[18]
REITs have shown numerous benefits over direct investment including lower tax rates and increased liquidity. There are now more than 70 A-REITs listed on the ASX, with market capitalization in excess of A$100bn.[18]
Australia is also receiving growing recognition as having the world’s largest REITs market outside the United States. More than 12 percent of global listed property trusts can be found on the ASX.[19]
REITs have been in existence in Hong Kong since 2005, when The Link REIT was launched by the Hong Kong Housing Authority on behalf of the Government. Since 2005, there have been 7 REIT listings as at July 2007, most of which, including Sunlight REIT have not enjoyed success because of low yield. Except for The Link and Regal Real Estate Investment Trust, share prices of all but one are significantly below initial public offering (IPO) price. Hong Kong issuers’ use of financial engineering (interest rate swaps) to improve initial yields has also been cited as having reduced investors’ interest[20]
As of July 2012 there are nine REITs listed with a total market capitalization of approximately €15 billion which amounts to almost 2% of the total global REIT market capitalization. Two out of the nine listed REITs are also included in the EPRA index, an index published by the European Public Real Estate Association (EPRA). The current top five REITs in Hong Kong are The Link REIT with a total market capitalization of €8 billion, Hui Xian REIT with a total market capitalization of €2.3 billion, Champion REIT with a total market capitalization of €1.8 billion, Fortune REIT with a total market capitalization of €1 billion and Regal Real Estate with a total market capitalization of €700 million.[21]
Main article: Business Trust in India
As of August 2014, India approved creation of real estate investment trusts in the country.[22] Indian REITs (country specific/generic version I-REITs) will help individual investors enjoy the benefits of owning an interest in the securitised real estate market. The greatest benefit will be that of fast and easy liquidation of investments in the real estate market unlike the traditional way of disposing of real estate. The government and Securities and Exchange Board of India through various notifications is in the process of making it easier to invest in real estate in India directly and indirectly through foreign direct investment, through listed real estate companies and mutual funds. In the budget of 2014, finance minister Arun Jaitley has introduced a law for setting up of REITs.[23]
China
China is one of countries that motivated and interested to approve creation of real estate investment trusts.
Japan is one of a handful of countries in Asia with REIT legislation (other countries/markets include Hong Kong, Singapore, Malaysia, Taiwan and Korea), which permitted their establishment in December 2001. J-REIT securities are traded on the Tokyo Stock Exchange, and most service providers of the J-REITs are Japanese real estate companies, Japanese conglomerates and foreign investment banks.[citation needed]
Since the burst of the real estate bubble in 1990, property prices in Japan have seen steady drops through 2004, with some signs of price stabilization and possibly price increase in 2005 and 2006. Some see J-REITs as a way to increase investment in the real estate market, although notable increases in asset values have not yet been realized.[citation needed]
A J-REIT (a listed real estate investment trust) is strictly regulated under the Law concerning Investment Trusts and Investment Companies (LITIC) and established as an investment company under the LITIC.
In addition to REITs, Japanese law also provides for a parallel system of special purpose companies which can be used for the securitization of particular properties on the private placement basis
The Bursa Malaysia (www.bursamalaysia.com) has 18 REIT listed with five Islamic REITS (shariah compliant – according to Islamic investment compliance).
The Securities and Exchange Commission of Pakistan is in the process of implementing a REIT regulatory framework that will allow full foreign ownership, free movement of capital and unrestricted repatriation of profits. It will curb speculation in Pakistani real estate markets and gives access to small investors who want to diversify into real estate. The Securities and Exchange Commission of Pakistan is proposing a regulatory framework similar to that of Singapore and Hong Kong.[citation needed]
The Securities and Exchange Commission of Pakistan expected that about six REITs would be licensed within the first year, mainly large asset management companies. Pakistan has seen an outflow of investments by foreign real estate development companies, mostly based in Malaysia and Dubai.[24]
SECP has issued licenses to four parties namely, Arif Habib REIT Management Company, AKD REIT Management Company, Eden Developers REIT Management Company and SB Global REIT Management Company.
REITs in the Philippines have been available to the public after the Real Estate Investment Trust Act of 2009 (RA 9856) passed into law on December 17, 2009. Its Implementing Rules and Regulations were approved by the Securities and Exchange Commission in May 2010. However, it failed to attract investors due to its restrictive tax policies and high friction cost.[25]
Commonly referred to as S-REITs, there are 31 REITs listed on the Singapore Exchange, with the latest REIT, Cromwell European REIT, listed on 30 November 2017. The first one to be set up being CapitaMall Trust[26] in July 2002. They represent a range of property sectors including retail, office, industrial, hospitality and residential. S-REITs hold a variety of properties in countries including Japan, China, Indonesia and Hong Kong, in addition to local properties.[27][28] In recent years, foreign assets listing on the Singapore Exchange has grown to overtake those traditional listing with local assets.
S-REITs are regulated as Collective Investment Schemes under the Monetary Authority of Singapore’s Code on Collective Investment Schemes,[29] or alternatively as Business Trusts.[30]
Some of the regulations that S-REITs have to adhere to includes:[31]
S-REITs benefit from tax advantaged status where the tax is payable only at the investor level and not at the REITs level. In addition to REITs, there are ten Business Trusts (“BTs”) (similar to REITs but may hold assets that are not conventional and are not subjected to stringent rules as compared to SREITs), and six Stapled Instruments (composed of a stapled Business Trust Unit and a REIT unit), which are listed on the Singapore Exchange. The total market capitalisation of the listed Trust on Singapore Exchange approximate SGD 100 billion (as at 30 Nov 17).
The Securities and Exchange Commission created regulations to establish REITs as an investment vehicle in late 2012, opening the doors for the first REITs to be listed in 2013.[32]
The REIT legislation was introduced by Dubai International Financial Centre (DIFC) to promote the development of REIT’s in the UAE by passing The Investment Trust Law No.5 that went into effect on August 6, 2006.[citation needed] This restricts all ‘true’ REIT structures to be domiciled within the DIFC. The first REIT license to be issued will be backed by Dubai Islamic Bank with a REIT named ‘Emirates REIT’ headed up by the dot com entrepreneur, Sylvain Vieujot.[citation needed]
The issue is that DIFC domiciled REITs cannot acquire non-Freezone assets within the Emirate of Dubai. The only federally approved Freezone within the UAE is the DIFC itself so therefore any properties outside this zone are purchasable by local Gulf (GCC) passport holders only. However, through a collaboration with local authorities, Emirates REIT has been able to establish a platform enabling it to purchase properties anywhere in Dubai given a minimum of 51% of local ownership of its shares. This allows the company to diversify its portfolio with an efficient revenue generating mix of properties in the prime locations of Dubai. Emirates REIT is the first REIT established within the United Arab Emirates. It is also the first REIT listed on NASDAQ Dubai and one of the five Shari’a compliant REIT in the world with a focus on Income-producing assets.
Emirates REIT has a portfolio of over USD 575.3 million consisting of a total of seven properties primarily focus on commercial and office space as of Dec 2014. It has had substantial growth over the last four years. Further information can be found at www.reit.ae
Commonly referred to as Real Estate Investment Fund, the regulations were launched in July 2006 by the Saudi Capital Market Authority, The regulation did not allow the funds to be traded in the stock market and force all funds to be structured by a licensed Investment companies by CMA with a presence of a real estate developer and some other key persons.[33]
Over the past few years[when?] new REIT regimes have been introduced[by whom?] in Europe to meet the growing demand from investors for tax-efficient real-estate investment vehicles; existing REIT regimes in Europe have also been improved.[34][not in citation given] In Europe, the top-performing REIT and the largest publicly-traded real-estate company is Unibail-Rodamco SE.[35][36]
Bernheim Comofi (now AG Real Estate) introduced Belgian REITs in 1995 with the constitution of Befimmo. Others REITs in Belgium include Cofinimmo and Ascensio.[37]
REITs were introduced in Bulgaria in 2004 with the Special Purpose Investment Companies Act. They are pass-through entities for corporate income tax purposes (i.e., they are not subject to corporate income-tax), but are subject to numerous restrictions.[38]
Finnish REITs were established in 2010, when the Finnish parliament passed “the tax exemption law” (Laki eräiden asuntojen vuokraustoimintaa harjoittavien osakeyhtiöiden verohuojennuksesta, 299/2009).[39] Together with the “Law on Real Estate Funds” (Kiinteistörahastolaki, 1173/1997)[40] it enables the existence of tax-efficient residential REITs.
Qualifications
As of 2018[update] Orava Residential REIT is the only REIT in Finland.[41]
The French acronyms for REIT are SIIC or “SCPI” (which are two different kinds of real-estate trust). In France, Unibail-Rodamco is the largest SIIC.[42] Gecina is the second-largest publicly traded property company in France, with the third-highest asset value among European REITs.[43][44]
Germany planned to introduce German REITs (short, G-REITs) in order to create a new type of real estate investment vehicle. The Government feared that failing to introduce REITs in Germany would result in a significant loss of investment capital to other countries.[citation needed] Nonetheless there still is political resistance to these plans, especially from the Social Democratic Party).
A law concerning G-REITs was enacted 1 June 2007, effective retroactively to 1 January 2007:[45]
The German public real-estate sector accounts for 0.21% of the total global REIT market capitalization. Three out of the four G-REITS are represented in the EPRA index, an index managed by the European Public Real Estate Association (EPRA).[46]
The 2013 Finance Act contained provisions for creating REIT structures in Ireland.[47]
See also: English land law and Corporation Tax Act 2010
The legislation laying out the rules for REITs in the United Kingdom was enacted in the Finance Act 2006 (now see the Corporation Tax Act 2010 sections 518 to 609) and came into effect in January 2007 when nine UK property-companies converted to REIT status, including five FTSE 100 members at that time: British Land, Hammerson, Land Securities, Liberty International and Slough Estates (now known as “SEGRO”). The other four companies were Brixton (now known as “SEGRO”), Great Portland Estates, Primary Health Properties and Workspace Group.[48]
British REITs have to distribute 90% of their income to investors. They must be a close-ended investment trust and be UK-resident and publicly listed on a stock exchange recognised by the Financial Services Authority.[citation needed] The EPRA in Brussels each year publishes a breakdown of the UK REIT structure requirements.[49]
To support the introduction of REITs in the UK, several commercial property and financial-services companies formed the REITs and Quoted Property Group. Other key bodies involved include the London Stock Exchange the British Property Federation and Reita. The Reita campaign was launched on 16 August 2006 by the REITs and Quoted Property Group in order to provide a source of information on REITs, quoted property and related investment-funds. Reita aims to raise awareness and understanding of REITs and of investment in quoted property companies. It does this primarily through its portal www.reita.org, providing knowledge, education and tools for financial advisers and investors.[50]
Doug Naismith, managing director of European Personal Investments for Fidelity International, said[when?]: “As existing markets expand and REIT-like structures are introduced in more countries, we expect to see the overall market grow by some ten percent per annum over the next five years, taking the market to $1 trillion by 2010.”[51]
The Finance Act 2012 brought five main changes to the REIT regime in the UK:
Boyd Carson of Sapphire Capital Partners LLP commented that “the most important of these advantages is the ability for REITs to be listed on the AIM and the abolition of the 2% entry charge to the regime is also a significant step forward.”[53]
SOCIMI (Sociedad cotizada de Capital Inmobiliario)
See also: List of REITs in Canada
Canadian REITs were established in 1993. They are required to be configured as trusts and are not taxed if they distribute their net taxable income to shareholders. REITs have been excluded from the income trust tax legislation passed in the 2007 budget by the Conservative government. Many Canadian REITs have limited liability.[54] On December 16, 2010, the Department of Finance proposed amendments to the rules defining “Qualifying REITs” for Canadian tax purposes. As a result, “Qualifying REITs” are exempt from the new entity-level, “specified investment flow-through” (SIFT) tax that all publicly traded income trusts and partnerships are paying as of January 1, 2011.[55]
Mexico has passed legislation to allow for the equivalent of REITs, known as FIBRAs[56] (Fideicomiso de Infraestructura y Bienes Raíces),[57] to be traded in the Mexican Stock Exchange. Like REITs legislation in other countries, companies must qualify as a FIBRA by complying with the following rules:[58]
The first Mexican REIT was launched in 2011 and is called FIBRA UNO.[59] According to the Wall Street Journal, Mexican REITs debuted in March 2011 “after government regulatory changes made the structure possible. Fibras offered investors an easy way to own Mexican real estate and pick up an attractive dividend at the same time. Like U.S. REITs, Fibras avoid paying corporate taxes as long as they distribute at least 95% of their income to shareholders as dividends.”[57]
History[edit]
From 2008 to 2011, REITs faced challenges from both a slowing United States economy and the late-2000s financial crisis, which depressed share values by 40 to 70 percent in some cases.
Legislation[edit]
Under U.S. Federal income tax law, an REIT is “any corporation, trust or association that acts as an investment agent specializing in real estate and real estate mortgages” under Internal Revenue Code section 856.[60] The rules for federal income taxation of REITs are found primarily in Part II (sections 856 through 859) of Subchapter M of Chapter 1 of the Internal Revenue Code. Because a REIT is entitled to deduct dividends paid to its owners (commonly referred to as shareholders), a REIT may avoid incurring all or part of its liabilities for U.S. federal income tax. To qualify as a REIT, an organization makes an “election” to do so by filing a Form 1120-REIT with the Internal Revenue Service, and by meeting certain other requirements. The purpose of this designation is to reduce or eliminate corporate tax, thus avoiding double taxation of owner income. In return, REITs are required to distribute at least 90% of their taxable income into the hands of investors. A REIT is a company that owns, and in most cases, operates income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and even timberlands. Some REITs also engage in financing real estate. The REIT structure was designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.[2]
Structure[edit]
See also: List of public REITs in the United States
In the United States, a REIT is a company that owns, and in most cases operates, income-producing real estate. Some REITs finance real estate. To be a REIT, a company must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends.[61]
To qualify as a REIT under U.S. tax rules, a company must:
Because of their access to corporate-level debt and equity that typical real estate owners cannot access, REITs have a favorable capital structure. They are able to use this capital to finance tenant improvement costs and leasing commissions that less capitalized owners cannot afford.[citation needed]
REITs were introduced in Brazil in 1993 by the law 8668/93 and initially ruled by the instruction 205/94 and, nowadays, by instruction 472/08 from CVM (Comissão de Valores Mobiliários – which is the Brazilian equivalent of SEC). Locally they are described as “FII”s or “Fundos de Investimento Imobiliário”. FII’s dividends have been free of taxes for personal investors (not companies) since 2006, but only for the funds which have at least 50 investors and that are publicly traded in the stock market. FIIs, referred to as “REIT” to correspond with the similar investment vehicle in the US, have been used either to own and operate independent property investments, associated with a single property or part property, or to own several real properties (multiple properties) funded through the capital markets.[citation needed]
Source: https://en.wikipedia.org/wiki/Real_estate_investment_trust
Leaseback, short for “sale-and-leaseback,” is a financial transaction in which one sells an asset and leases it back for the long term; therefore, one continues to be able to use the asset but no longer owns it. The transaction is generally done for fixed assets, notably real estate, as well as for durable and capital goods such as airplanes and trains. The concept can also be applied by national governments to territorial assets; prior to the Falklands War, the government of the United Kingdom proposed a leaseback arrangement whereby the Falklands Islands would be transferred to Argentina, with a 99-year leaseback period,[1] and a similar arrangement, also for 99 years, had been in place prior to the handover of Hong Kong to mainland China. Leaseback arrangements are usually employed because they confer financing, accounting or taxation benefits.
After purchasing an asset, the owner enters a long-term agreement by which the property is leased back to the seller at an agreed rate. One reason for a leaseback is to transfer ownership to a holding company while keeping proper track of the ongoing worth and profitability of the asset. Another reason is for the seller to raise money by offloading a valuable asset to a buyer who is presumably interested in making a long-term secured investment. Leaseback arrangements are common in the REIT industry.
According to Robert Peston, one-time Business Editor for the BBC, one option being considered for dealing with the subprime mortgage crisis is a sale-and-leaseback of toxic assets. Peston says “a sale-and-leaseback between the banks and the state has two supreme advantages: there’s no need to value the poisonous assets; and losses on those stinky assets would be absorbed by the banks in manageable chunks over about 10 years.”[2]
Leaseback arrangements are popular in France, the United States, United Kingdom, and throughout Australia and Asia, including, more recently, in India.
France[edit]
Leaseback of residential property has been popular in France for more than 30 years, and there are significant tax advantages. Under the scheme, the purchaser may use the property usually between 1 and 8 weeks per year (with a maximum of 6 months per year). The French government encourages the development of leaseback schemes in touristic areas to alleviate shortages in rental accommodation. The government rebates the local VAT (which is 19.6%), when the property is purchased off plan.
The scheme works by purchasing a freehold property. You become the legal owner. The property is then leased back to the developer or a management company. Under the leaseback scheme the government also refunds to you the VAT normally charged on a new build properties (currently 19.6%).
The owner is then guaranteed a rental income throughout the period of the lease. The net return to the owner varies between developments but is typically between 4% to 6%. This compares very favourably with a typical 20 year fixed rate mortgage of around 3.75%, and variable rate mortgages which are lower. It can be seen how the rental income can be used in respect of the mortgage payments. Loans of between 75% and 85% are available depending upon circumstances. The rental yield is also index linked annually to construction costs, which means the rental income currently increases by approximately 2.5%.
As in the UK there are tax allowances in respect of mortgage payments which can be offset against income. The lease typically lasts for between 9 and 11 years, after which the management company has the option to either renew, or the property can be sold, or rented out and held privately by the owner.
The purchaser/owner can also enjoy periods of usage free of charge through the year, depending upon the terms of the lease. These terms normally allows for between 4 and 6 weeks free usage each year. The management company is responsible for the maintenance of the property including the maintenance of furnishings which are often included in the purchase price. The developer is also responsible for insuring the building and its contents. It also pays for some of the property taxes and all the utility costs.
United Kingdom[edit]
In the United Kingdom, a form of leaseback known as sale and rent back was the subject of a 2014 Supreme Court case that found many such arrangements had been perpetrated fraudulently.[3]
United States[edit]
A “sale/leaseback” or “sale and leaseback” is a transaction in which the owner of a property sells an asset, typically real estate,[4] and then leases it back from the buyer. In this way the transaction functions as a loan, with payments taking the form of rent. Due to the lack of financing available in today’s market, many American businesses are increasingly turning to sale-and-leasebacks to provide quick capital.[5] For example, developers of master-planned communities will often sell the model home to a buyer before the community is sold out, leasing it back from the buyer for a period of up to two years.[6] In some arrangements, the current lessee will give the option to buy the asset back at the end of the lease. Typically, if the original owner were to buy back the asset, it would take place at the end of the tax year, in case any party were to be audited by the IRS.[7]
Other countries[edit]
The leaseback concept has spread to other European countries, including Spain and Switzerland. Typical property available are studios, apartments, and villas. They are situated near ski areas, beach resorts, or golf courses.
A sale-and-leaseback is typically a commercial real estate transaction in which one party, often a corporation, sells its corporate real estate assets to another party, such as an institutional investor, or a real estate investment trust (REIT), and then leases the property back at a rental rate and lease term that is acceptable to the new investor/landlord. The lease term and rental rate are based on the new investor/landlord’s financing costs, the lessee’s credit rating, and a market rate of return, based on the initial cash investment by the new investor/landlord.
The reasons and advantages for a seller/lessee are varied, but the most common are:
The advantages for an investor/landlord are:
Leaseback is also commonly used in general aviation, with buyers using the scheme to let flight schools and other FBOs use their aircraft.
Leaseback is very often used in commercial aviation to essentially take back the cash invested in assets. Airlines, for example, sell aircraft and engines to lessors, banks or other financial institutions who, in turn, lease the assets back to them. Tax deductions can also be realized by the airline since the asset is no longer owned but leased. Due to the high price of aircraft and engines, especially new, the cash from such a leaseback is used by airlines to improve their financial performance.
The leaseback concept has also spread to industry, mostly for industrial equipment. A company sells some of its equipment to a lessor, such as a bank or another financial institution, which leases the equipment back to the company. Thus the company is no longer the owner of the equipment but keeps the use of it. This commercial transaction allows two companies to have at their immediate disposal the cash to make investments in new business opportunities.
HFF, Inc. is a provider of capital markets and brokerage services to owners of commercial real estate.
In 1974, John Fowler and Peter Goedecke founded Fowler, Goedeneke & Company. In 1982, Holliday Fenoglio & Co was founded by Harold E. (Hal) Holliday and John Fenoglio.[2]
In 1994, Amresco acquired Holliday Fenoglio Dockerty & Gibson.[3]
In 1998, Amresco acquired Fowler, Goedecke, Ellis & O’Connor Inc. and merged the two companies to form Holliday Fenoglio Fowler L.P.[4]
In 1999, the company was sold to Lend Lease Group for $228 million.[5][6]
In 2007, the company became a public company via an initial public offering that raised $257 million.[7][8][9]
In 2012, founders Holliday and Fenoglio went to work for CBRE Group.[10]
Source: https://en.wikipedia.org/wiki/HFF_(commercial_real_estate)