External Affairs

[Dr. Victor Calanog, Ph.D., CRE]

This is definitely a pertinent topic that has implications reaching far beyond real estate issues. Most of the seminars and talks I’ve attended so far – with practitioners from law and accounting firms serving as speakers – often echo a similar theme: “We are all still trying to figure it out.”

On my end, we’ve written a white paper about the direct impact of lower corporate taxes on the lower desirability of Low Income Housing Tax Credits (LIHTC).  This already had a chilling effect on LIHTC deals in the beginning of 2017, before the tax plan was rolled out. Subsequent deals that were issued starting around July 2017 were priced with an implicit assumption that the corporate tax rate was going to be 25% – not too far off from the actual number!

We are estimating that the new tax plan will reduce new LIHTC construction by up to 40% over the next five years.

[Ms. Terri Johnson, CRE]

At Capstan we are seeing a significant impact of tax reform on owners and investors in the real estate space.  We have been blogging on this extensively. Those firms who can take advantage of the 100% bonus depreciation on shorter lived assets 5 year, 7 year and 15 year, on new construction, renovations AND now acquisitions are seeing dramatic increases in accelerated depreciation with the impact of huge tax savings. There are many items that need further guidance and clarification.

As mentioned LIHTC deals could be negatively impacted as well as groups such as auto dealerships.  We are also keeping a close eye on the impact to 1031 exchanges.

Most professional who practice in this area are still trying to understand the long term impact. Definitely a top 10 issue in real estate for 2018 and beyond.

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