2004 began with significant investment activity in Lafayette. Lafayette Terrace LLC purchased the 47,456 square foot Lafayette Terrace from Equity Office Properties, and Cornerstone Financial sold Lafayette Corporate Terraces, a 3 building office project consisting of 78,000 square feet, to TA Associates. Meanwhile, several buildings in the Walnut Creek Shadelands, a difficult leasing market over the last 24 months, also changed hands.
Owner/user purchasers looking to either occupy buildings entirely or to occupy a portion and lease the remainder are in abundance throughout the East Bay and Tri Valley, and buildings under 15,000 square feet are especially desirable. For many would-be tenants, the combination of affordable interest rates, the freedom and pride of ownership, and the potential for capital appreciation make purchasing a building a more attractive option than leasing space. In this product-scarce climate it appears that size and type of buildings is more important than location, and that availability is paramount.
| 2440 Stanwell Drive: Concord | 11,250 square foot office/flex building |
| 321 Hartz Avenue: Danville | 10,866 square foot retail/office building |
| 1081 Market Place: San Ramon | 10,284 square foot medical office building |
| 1501 Bollinger Canyon Road: San Ramon | 8,830 square foot medical office building |
| 520 Lennon Lane: Walnut Creek | 6,820 square foot office condominium |
From a purely investment standpoint the 1st half of 2004 was relatively quiet while we expect activity in the 2nd half to increase significantly. Currently there are a number of Class A and Institutional quality office properties on the market with Hines Interests/CalSTRS marketing Stoneridge Corporate Plaza (600,000SF) as part of a 10 million square foot national portfolio. CalSTRS is also marketing Emerald Point (195,000SF) which is 100% leased to SBC and Franklin Templeton while Summit Commercial is marketing Koll Dublin Corporate Center (415,000SF). There are currently two major office projects under contract to be sold to investors along the North I-680 corridor and both are located within the Shadelands Business Park. One is Walnut Creek Executive Park, a twelve-building project consisting of approximately 420,000 rentable square feet and the other is Centre Pointe, a six-building project of approximately 198,000 rentable square feet. All large Institutional quality properties are garnering significant interest from investors. 1111 Civic Drive, an approximately 79,000 square foot Class B office building in downtown Walnut Creek, quietly sold to a private equity investor when the owner accepted an unsolicited proposal. Similarily Hacienda Business Park's, Hacienda Lakes project, a 200,000SF multi-building property was sold by Clarion/Oregon STRS to a local investor.
| Retail Center: San Lorenzo (in escrow) | 51,000 square foot retail center |
| 24 Hour Nautilus: Papillion, NE | 35,000 square foot retail building |
| 1401 Enea Circle: Concord (in escrow) | 32,000 square foot office/flex building |
| Desco Plaza II: Lafayette (in escrow) | 25,112 square foot office building |
| California Place: Walnut Creek (in escrow) | 20,000 square foot retail strip center |
How it Works
A private annuity trust is a trust in which the property owner transfers ownership of the property to a trust before completing a sale to a buyer. The trust pays the owner for the property, not in cash, but with a special payment contract called a private annuity that stipulates that the trust will make payments to the owner for the rest of his or her life - essentially in installments. The trust often names the property owner's children as beneficiaries, but the trustee may be any adult, including an adult child, who is not claimed as a dependent. Even the annuity holder's accountant, attorney, financial adviser, family friend or relative outside of the immediate family can be a trustee, according to the National Association of Financial and Estate Planning. What's more, you can have one trustee or two co-trustees.
Once ownership of a property is transferred to the trust the trust can sell it, and use the proceeds to make investments. Meanwhile, the trust is required to make fixed payments to the investor for the rest of his or her life.
Some Advantages
In a normal sale, the seller would immediately pay capital-gains tax on the full value of the property. Since the private annuity contract calls for payments to be made over the seller's life, the seller is taxed on payments only when they are received, instead of all upfront. When set up properly, the annuity will help you transfer your property to your children (or other beneficiaries) while avoiding estate and gift taxes and generating continuous income to you.
IRS payment schedules are designed so that if you live to your life expectancy you will receive full value and interest from your property. If you do not live to your life expectancy, the beneficiary comes out ahead because payments end at your death. If you outlive your life expectancy, you will receive more than the value of the property plus interest. For more information contact mzylstra@ccarey.com
We cover: Contra Costa * Alameda * Pleasanton * Dublin * San Ramon * Danville * Walnut Creek * Concord * Pleasant Hill * Livermore * Lamorinda * Martinez * Tri-valley * I680 * I580
