This Issue -- Thursday, May 3, 2007 |
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Commercial Real Estate Deal - Investing in the Healthcare Business |
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by Andy and David Farbman |
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What makes medical buildings good investments? They are viable assets for several reasons: low vacancy rates, a booming health care industry, and changing demographic trends - a growing senior population, increases in the number of people with chronic illnesses, and longer life spans thanks to new advances in medical technology. |
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| Recent market trends have led to an increase in the inventory of medical office buildings available for ownership by organizations other than hospitals. Medical providers are becoming more focused on investing capital in their businesses, rather than in “bricks and mortar,” so that they can provide more advanced medical technology and cost-effective service to their patients. And the average tenant in a medical office building stays longer than the typical office tenant because they spend a lot of money improving their space. So when looking for investment options this year, it might be wise to check the pulse of the healthcare industry. It could provide just the right medicine. All the best, Andy and David Farbman |
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Automotive - New Visteon Plant Coming to Highland Park |
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Visteon Corporation is bringing new life to the former Chrysler Corporation headquarters in Highland Park. The company is building a new manufacturing facility on the site to produce interior auto components for assembly plants in Michigan and other states. The new facility will create 75 new jobs. “This is another positive move for Highland Park’s revitalization efforts. Visteon’s investment in the community will help the city regain some of its urban vitality and economic stability,” said Michael Kalil of NAI Farbman. “Commercial, industrial and residential development is on the upswing in Highland Park. An amazing $300 million has been invested in the city over the past 10 years.” According to The Detroit News, Visteon is investing $35 million to build the plant. The company will receive a state tax credit worth $1.73 million and local tax abatements of $4.5 million over seven years. The state expects the project to create more than 175 indirect jobs and generate $151 million in personal income for Michigan workers over seven years. |
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Economic Outlook - Investors Reawaken to the Reality of Risks |
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It may have been a case of “the quiet before the storm,” but now investors are beginning to snap out of their hypnotic, tranquil state and are getting back to the harsh reality of credit defaults and a volatile financial market. The PNC Financial Services Group’s National Economic Outlook indicates the steady global economic growth over the past several years and the stable financial market are changing. The final week of February and the beginning of March saw a sudden and sharp decline in U.S. and global stock prices, as well as an implosion in the sub-prime mortgage market in response to a rise in delinquencies and foreclosures. “I don’t think anyone is sounding the panic alarm just yet, however. Instead, the drop in stock prices is being looked at as a normal correction in the market. Although there are a lot of warning signs popping up - housing foreclosures, an auto industry slump and job layoffs - the U.S. economy remains basically sound,” said Andy Gutman of NAI Farbman. |
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Tourism - Promoting Michigan to the U.S. |
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“Build it and they will come.” A coalition of Michigan businesses believes that’s exactly what will happen if the state creates a major national advertising campaign to attract out-of-town tourists. The Tourism Improving Michigan’s Economy coalition is seeking $30 million a year in state funding to promote Michigan tourism to the entire country. “It’s true that with our current economy, we can’t rely on Michigan residents alone to support our tourism industry. When we attract out-of-towners to the state, they can see firsthand what Michigan offers and may even decide to relocate here and set up business. That in turn creates all sorts of job opportunities and further development potential in our state,” said David Farbman of NAI Farbman. “Allocating additional funds for tourism and business attraction promotion can provide a big boost to our economy.” The coalition consists of various Michigan industries including lodging, retail, restaurant, boating, campground and more. The push for a national tourism ad campaign comes as the Michigan Travel Commission begins to implement the state’s first ever tourism strategic plan created by a 75-member tourism industry planning council, Michigan State University and Travel Michigan. |
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Midwest Real Estate - Mix & Match Developments |
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There’s a growing trend in the Midwest real estate industry: mixed use developments. This “mix & match” approach is designed to revitalize central business districts and offers many advantages. Everything is within walking distance, making it convenient for residents to work, shop and eat in the community where they live. Developers are eagerly looking for new markets in the Midwest where they can mix and match. Recently, Heartland Real Estate Business highlighted some major mixed-use projects under construction:
“These developments will include residential units, retail and office space, restaurants, parking structures, banks, post offices, health clubs and much more. It is truly a ‘city within a city’,” said Andy Farbman of NAI Farbman. “The demographics of the area play a huge role in where mixed-use developments will be most successful. Access to major highways is also important in order for the project to serve surrounding communities. Here in Michigan, mixed-use projects are planned and being developed in some of our most vibrant communities. These sought after locales are very attractive to businesses.” |
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Transportation - A Mass Transit Plan for Detroit |
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A mass transit plan for Detroit continues to be a major topic of discussion in the city. The Detroit Department of Transportation recently held a series of meetings to get public input on the plan, including ideas about the different modes of transportation available and the four corridors that would be used leading to downtown Detroit. As Crain’s Detroit Business reports, the mass transit plan is being developed by the Detroit Transit Options for Growth Study Technical Committee, a group of representatives from 21 governments and organizations including Detroit Mayor Kwame Kilpatrick; the cities of Dearborn, Hamtramck and Highland Park; and the Southeast Michigan Council of Governments. A recommended plan is expected by the end of this year. “An effective rapid transit system can have a major impact on businesses, the creation of jobs and economic development along the routes in Detroit. In fact, a lot of cities across the country are starting to look at light rail transit projects and how they can benefit,” said Michael Kalil of NAI Farbman. Supporters of a public transportation system are hoping to tap into state and federal governments and local businesses for funding. |
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Taxes - Replacing Michigan’s Single Business Tax |
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Michigan lawmakers are continuing to try to come up with a replacement for the state’s Single Business Tax (SBT). The SBT, adopted in 1975, is a value-added tax that replaced the corporate income tax and six other business taxes. It raises about $1.9 billion per year, but is scheduled to be phased out at the end of this year. “Many businesses feel the SBT is complicated and puts them at a competitive disadvantage with other states,” said Andy Gutman of NAI Farbman. “But when deciding on a replacement, it’s important to remember the huge impact it will have on Michigan’s business landscape and decisions about expanding or setting up shop in the state.” The newest alternate being discussed is a 6 percent service tax. According to Crain’s Detroit Business, the service tax would raise about $4.5 billion annually before tax credits and deductions. Crain’s reports another potential alternative on the table is Governor Granholm’s Michigan Business Tax, which would use sales, income and assets as a base, and include personal property tax credits for some businesses. The Michigan Chamber of Commerce favors a proposal that would tax businesses on business income and gross receipts, and provide a personal property tax credit for all businesses. |
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NAI Farbman publishes this e-newsletter to convey general information about real estate and not for the purpose of providing advice. The information you obtain from this e-newsletter is not, nor is it intended to be, real estate advice. You should consult an attorney for individual legal advice regarding your own situation. This e-newsletter and its contents do not create a professional relationship between NAI Farbman and any subscriber to this e-newsletter. Electronic mail ("E-mail") sent to NAI Farbman, or any of its brokers, agents, partners or employees will not create an professional relationship and will not be treated as confidential. Please do not send confidential information unless and until a formal relationship has been established. The links to other publicly available web sites are provided as a convenience. We make no claims, promises or guarantees about accuracy, completeness or adequacy of the information at those sites. For coverage comments or news tips, e-mail us or call (248) 353-0500. NAI Farbman |
With the healthcare industry growing every day, the best prescription
for a case of “investor blues” may be medical offices. Investments
in medical office buildings are becoming very popular. According to