Beat the Clock 2012: The Rush To Close Deals at Year End …

It’s not surprising to see a surge of activity in December as investors rush to close property sales transactions by the end of the year. But this year was something special, with property sales across the nation much higher than usual after the Presidential Election and continuing right to year end. In fact, we were closing deals right up through the last weekend in December. These last two transactions for 2012 were a student housing property leased to Sacred Heart University in Fairfield, CT, and a 94-unit apartment property in Chicopee, MA.

The reason for the rush to close? The short answer is the anticipated increase in the capital gains tax. More broadly, a confluence of factors — uncertainty over the “fiscal cliff,” questions about the possible cessation of the Bush-era tax cuts, the prospect of higher capital gains and new health-related taxes — all fueled a national trend to make business decisions and get deals done as quickly as possible before 2012 turned in 2013.

Granted, sellers often aren’t solely focused on avoiding tax rate increases, but this can play a strong contributing factor in a sales timeline.

This rush across all asset categories took off after the uncertainty of the Election was resolved in November and investors gained better clarity on what policies would shape the U.S. economy for the next four year, and it gathered steam right up and through December 31. This actually caused a bit of crush with attorneys, title agents, appraisers, environmental consultants and many of the other necessary players in a deal. In fact, we heard reports of 20 to 30 business day turnarounds on appraisal requests, which is double the normal turnaround time of 10 to 15 days. However, we were well-prepared for this contingency and everything went smoothly without a hitch.

We see this end of year rush as another sign that the commercial real estate market will steadily improve this year. We are seeing much more buyer activity now as investors have gained more certainty where the economy is going. They now feel they know what to expect going forward, and there is a greater willingness to make deals across all asset classes.

With our four offices in New York, Connecticut and Massachusetts, our investment sales teams are well positioned to support multifamily and commercial investors from New York to Boston in this strengthening market. If you’re a property owner or an investor in the mid-market segment and want to discuss your investment goals and how we can help you achieve them, please give us a call. We work best when we are your trusted partner.