A Ph.D. Land Economist Looks at Capital Recovery Fees

The following article is by Dr. Tom McPeak, Ph.D., regarding the economics of capital recovery fees.

I believe capital recovery fees balance needs of the buyer, the developer, and the community in a Pareto-efficient way by more efficiently restructuring the economics of the real estate transaction.”

— Dr. Tom McPeak, Ph.D.

AUSTIN, TEXAS, UNITED STATES, December 31, 2018 /EINPresswire.com/ — As a Land Economist, I have always been fascinated by the allocation of land resources. One emerging area in this field is the use of capital recovery fees to allocate development costs and fund infrastructure.

A capital recovery fee is created when a real estate developer files a legal instrument in the deed records, which imposes an obligation on future sellers to pay a percentage of the sales price (e.g. one percent of the sales price), for a given period of time, [usually] ninety-nine years, which equates to an estimated 10 sales).

From the perspective of the real estate developer a capital recovery fee represents an alternative to putting 100% of development costs onto the shoulders of first-time buyers, which allows the developer to gain a competitive advantage from a reduced sales price. In addition, by selling the future income stream to investors looking for long-term income that correlates well with inflation, developers can generate liquidity for their development project, much like the issuance of public improvement district bonds, tax increment financing bonds, and similar financial instruments.

Since a capital recovery fee instrument is filed in the deed records it will appear on the title commitment delivered to a buyer prior to being legally obligated to close. As such, capital recovery fees will only be paid by parties who willingly assume the obligation, and who presumably negotiate their price and terms accordingly.

From the buyer’s perspective, the willingness to pay a capital recovery fee in the future in return for a lower initial price will result in lower acquisition costs and carrying costs, and possible reallocation of the savings (i.e. does the buyer pay down high interest credit card debt with the savings). In addition, a buyer may consider intangible issues such as the portion of the transfer fee that goes to non-profits, and whether the buyer can qualify for the lower priced home (with a capital recovery fee) but would be unable to qualify for the higher priced home (without a capital recovery fee). All of these variables go into the decision-making process, and both buyer and seller make an economic decision based upon their respective perceptions of the market value of the trade. If these perceptions match, a bargain is struck and the transaction is Pareto-efficient.

The assumption is that since each seller paid less, they can and will lower the sales price. This assumption is well-founded because economic theory suggests that buyers armed with the facts will not pay the same for a home with a capital recovery fee as they will pay for the same home without a capital recovery fee. It would be illogical to argue otherwise.

The community benefits because a portion of the income from capital recovery fees is virtually always allocated to a non-profit operating within the community. This provides long-term sustainable revenue for clean air, clean water, youth programs and other benefits to the community while reducing reliance on government funding. This builds stronger property values, which in turn protects and enhances the fee stream.

From a public policy perspective, since the future fee stream depends on long-term sustainable value, it is in the developer’s economic interest to take a long-term view of the project. In lieu of accepting a lump sum up front and then having no further economic interest in the project developers imposing a capital recovery fee have a vested interest in ensuring that property values remains as high as possible for as long as possible. This mutuality of interest benefits home buyers, taxing authorities, and the community in general.

When the parties to a transaction come away satisfied with the bargain they have made, it is referred to as a Pareto-efficient transaction. An economic system that is Pareto-efficient is an important metric for evaluating economic efficiencies and public policies. For the reasons discussed above, I believe that capital recovery fees balance the needs of the buyer, the developer, and the community in a Pareto-efficient way by more efficiently restructuring the economics of the real estate transaction.

About Dr. Tom McPeak, Ph.D.: In 2000 I began teaching at one of the nation’s top business schools, the Terry College of Business at the University of Georgia. I received my Ph.D. in Resource Development (Land Economics) from Michigan State University.

Source: Dr. Tom McPeak, Ph.D.

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Contact: Dr. Tom McPeak, Ph.D., (770) 631-2881. tmcpeak@gmail.com

John Martinson
Freehold Capital Partners
+1 713-252-7561
email us here


Source: EIN Presswire

Adding Value to Real Estate through Asset Segregation

Freehold Capital Partners is helping real estate developers and property owners implement an asset segregation strategy that utilizes capital recovery fees

AUSTIN, TEXAS, UNITED STATES, December 31, 2018 /EINPresswire.com/ — In the eighties a form of corporate activism emerged where a publicly traded company would be an acquisition target under the theory that its various divisions could be spun out into separate publicly-traded entities which collectively would add up to a higher cumulative share price. This same theory of asset segregation applies to real estate.

Real property interests have been called a “bundle of rights” or “bundle of sticks”. Rights associated with certain sticks can be “possessory” (the right to occupy the land) or non-possessory (the right to control use of the land, such as with a deed restriction or covenant). Common “sticks” include surface rights (the right to the surface of the land and all improvements on that surface), subsurface rights (mineral rights, oil rights, etc.), air rights, water rights and incorporeal rights such as “covenants, conditions and restrictions”. Sticks can be pulled from the bundle and owned separately, which can create simultaneously existing, legally recognized interests.

Segregating the various sticks can increase value. One example is breaking out the leasehold from the fee simple. Consider an office building appraised at $100 million and owned by Mr. REIT. Mr. REIT creates a leasehold interest for 99 years. The building now must pay rent to the leasehold owner. Since the leasehold now has virtually zero credit risk, it will command a market premium. Mr. REIT sells the leasehold for $30 million and the building for $80 million. Mr. REIT has increased overall value from $100 million to $110 million. A purchaser of the building enjoys greater tax advantages (because the leasehold payment can be written off in its entirety each year, and need not be amortized or capitalized) and lower acquisition costs.

Another form of asset segregation can be seen in capital recovery fees. Real estate developers create capital recovery fees by filing a legal instrument (called a Declaration of Covenant), which imposes an obligation to pay a one percent fee at the time of each sale, generally for 99 years. This non-possessory real property interest can be segregated out and sold separately from the surface rights. In practical terms, this means that the developer can lower the sales price, and gain a competitive advantage yet still increase profits over time, because of the power of price appreciation. Each property buyer benefits from the lower purchase price (which means the buyer can qualify for a larger home or enjoy reduced payments).
Asset segregation represents an effective method of restructuring real estate transactions in a way that creates value and reduces economic inefficiencies.

About Freehold Capital Partners: For over a decade Freehold Capital Partners has helped real estate developer and property owners implement an asset segregation strategy that utilizes capital recovery fees. Freehold’s portfolio now covers hundreds of thousands of planned and existing real estate parcels in 34 states, including office buildings, retail centers, industrial space, apartment complexes, and hundreds of thousands of residential homes.
Source: Freehold Capital Partners http://www.freeholdcapitalpartners.com

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Megan Lee media@freeholdcapitalpartners.com (T:212.755.0070)

John Martinson
Freehold Capital Partners
+1 7132527561
email us here


Source: EIN Presswire

Offshore Energy UK Limited Announces Launch of New Website

New Design to Improve Visitor Experience and Engagement

LONDON, UNITED KINGDOM, December 30, 2018 /EINPresswire.com/ — Offshore Energy UK Limited, a leading provider of project management, engineering and lifting management to the oil & gas, subsea telecommunications and renewables industries announced today the launch of its newly designed website (http://www.oel-uk.com).

“We are pleased to debut the newly designed company website, which is part of a strategy to improve our digital presence. We hope our customers, clients, partners, media and visitors enjoy learning more about the breadth of the services Offshore Energy can provide, and that the new website helps showcase the company’s commitment to excellence.” says Richard Turnbull, Offshore Energy’s MD.

The revamped website features streamlined messaging, simplified design, improved functionality and enriched content areas to create the best possible experience for visitors. The site has been designed using the latest technology, so the site is compatible with today’s browsers and mobile devices in a fully responsive and mobile-friendly layout.

The ‘Contacts’ page provides information on how people can get in touch with the company at any of its regional offices in the United Kingdom, Canada, Angola, South Africa or the Mediterranean.

About Offshore Energy UK Limited

Offshore Energy offers integrated project management and solution-based engineering services to the oil & Gas, subsea telecommunications and renewable energy industries worldwide. We plan, design and deliver projects in challenging environments, creating the most effective and efficient solutions for our clients.

Our personnel are highly competent and have significant industry experience. Engineering is at the heart of everything we do, and our engineering team is key. This engineering focus adds value to projects by exercising the rigour necessary to mitigate and manage risks, which facilitates innovative and creative thinking needed to deliver complex, demanding and often ground-breaking projects.

Our engineers can be involved throughout the life cycle of your project, from initial FEED through kick off, design, onshore planning, offshore installation and project completion.

For more information, please visit www.oel-uk.com

Or please contact Offshore Energy’s Business Manager, Andrew Nussbaum on +44 (0)203 478 3968, or by emailing info@oel-uk.com

Andrew Nussbaum
Mr
+44 20 3478 3968
email us here


Source: EIN Presswire

Intermountain Foundation Holiday Events Raise More Than $3.9 Million

Foundation sustains Intermountain Healthcare’s not-for-profit mission

SALT LAKE CITY, UTAH, USA, December 28, 2018 /EINPresswire.com/ — Thousands of donors responded with generosity at Intermountain Foundation holiday fundraisers, raising more than $3.9 million for causes statewide ranging from mental health and suicide prevention, to cardiovascular services, cancer services, and medical care for children. Some highlights:

• More than 100,000 holiday revelers flocked to the 48th annual Festival of Trees, which raised nearly $2.8 million for pediatric patients in need at Intermountain Primary Children’s Hospital.

• Nearly $1 million was raised at this year’s Jubilee of Trees in St. George, Utah, where more than 14,000 donors pitched in to advance cardiovascular services at Intermountain Dixie Regional Medical Center.

• Hosted by the Intermountain Foundation at Intermountain Bear River Hospital in Tremonton, Utah, the 9th annual Jubilee of Trees raised $108,000 for local mental health and suicide prevention programs.

• More than 1,000 attendees enjoyed the Jaynie Nye Memorial Holiday Concert featuring Lexi Walker, Vocal Point, and the American Heritage Lyceum Philharmonic, raising funds for Cancer Services at Intermountain McKay-Dee Hospital in Ogden, Utah.

About Intermountain Foundation

Through the generosity of donors, Intermountain Foundation sustains Intermountain Healthcare’s not-for-profit system comprised of 23 hospitals, 170 clinics, and other health services. Helping People Live the Healthiest Lives Possible®, Intermountain is widely recognized as a leader in transforming healthcare through high quality and sustainable costs. For more information, visit intermountainfoundation.org.

Daron Cowley
Intermountain Healthcare
801-442-2834
email us here


Source: EIN Presswire

Spreading Infrastructure Costs Reduces Homeownership Burden

Streets, water lines, engineering fees, impact fees, permits– these are all part of multi-million dollar costs necessary to develop the modern subdivision.

AUSTIN, TEXAS, UNITED STATES, December 28, 2018 /EINPresswire.com/ — Streets, fresh and wastewater lines, lift stations, engineering fees, impact fees, permits– these are all part of the multi-million dollar costs necessary to develop the modern subdivision.

Traditionally, a developer divides development costs by the number of lots, and the result is passed on to the first buyer. Modernly, some developers elect to impose a 1% Capital Recovery Fee, and, in consequence, lower the sales price.

For buyers who prefer to pay 100% of development costs up front, and to finance those costs and then pass them along to the next buyer, numerous alternatives exist. For those that do not want to pay for infrastructure up front or through yearly assessments, capital recovery fees provide a reasonable alternative.

In addition to fairly apportioning costs across future owners, a portion of every Capital Recovery Fee is earmarked for non-profits operating within the community. This helps to build strong communities, and provides a private solution to a public issue. In fact, as of 2018 an estimated $15 million in transfer fee payments has been reportedly paid out to non-profits, and the number is predicted to rise dramatically. Many home buyers may prefer a home with a Capital Recovery Fee, not only because of the lower price of entry into the home itself, and the lower monthly payment, but because they appreciate the fact that they are supporting their community.

John Martinson
Freehold Capital Partners
+1 713-252-7561
email us here


Source: EIN Presswire

Capital Recovery Fees are a Normal Part of Real Estate Closings

Real estate closings for an estimated eleven million properties nationwide involve some type of “transfer fee”.

“As an Instrument filed in public records, a Capital Recovery Fee covenant should appear on a properly prepared title commitment, just like other covenants, restrictions and similar encumbrances.” ”

— Covenant Clearinghouse

AUSTIN, TEXAS, UNITED STATES, December 28, 2018 /EINPresswire.com/ — Real estate closings for an estimated eleven million properties nationwide involve some type of “transfer fee”. See https://en.wikipedia.org/wiki/Private_transfer_fee at fn 6.

There are three types of transfer fees: (1) government fees (generally referred to as “flip taxes”); (2) transfer fees payable to a homeowner’s association (generally referred to as “HOA Fees”) and (3) capital recovery fees (sometimes called private transfer fees), first popularized by Freehold Capital Partners http://www.freeholdcapitalpartners.com over a decade ago, and used by real estate developers to pay for public benefits such as parks, streets and utilities.

According to Covenant Clearinghouse, http://www.covenantclearinghouse.com, the servicing agent for an estimated 350,000 planned and existing homes, retail projects, and office buildings nationwide that are subject to Capital Recovery Fees originated by Freehold Capital Partners, “[a]s an Instrument filed in the public records, a [Capital Recovery Fee covenant] should appear on a properly prepared title commitment, just like other covenants, restrictions and similar encumbrances.” See http://www.covenantclearinghouse.com/faq at 3.

As a routine part of every real estate closing the closing agent (usually a title company) obtains a title commitment that lists every lien and similar encumbrance on the real estate parcel being sold. These encumbrances include mortgages, easements, judgments, tax liens and similar encumbrances, including Capital Recovery Fees and similar assessments. As such, sums due under these various instruments are collected at closing. In the case of a Capital recovery Fee, the title company collects the fee from the seller and remits the fee to the servicing agent. (See http://www.covenantclearinghouse.com)

Collection of fees and payoffs due in connection with a transfer of title is a routine part of every real estate closing, and a decade of closings shows that a Capital Recovery Fee is no exception.

More information:
1. Capital recovery fees relieve burden on cities; reduce homeownership costs (Feb. 17, 2017).
https://www.prnewswire.com/news-releases/capital-recovery-fees-relieve-burden-on-cities-reduce-homeownership-costs-300409752.html
2. Private Transfer Fee Covenants Give Buyers a Choice About How To Pay for Rising Infrastructure Costs. http://markets.financialcontent.com/stocks/news/read?GUID=12166293
2. Wikipedia: https://en.wikipedia.org/wiki/Private_transfer_fee
3. Covenant Clearinghouse. http://www.covenantclearinghouse.com

Source: Freehold Capital Partners http://www.freeholdcapitalpartners.com

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Megan Lee media@freeholdcapitalpartners.com (T:212.755.0070)

John R Martinson
Freehold Capital Partners
+1 7132527561
email us here


Source: EIN Presswire

Capital Recovery Fees make home ownership more affordable

Traditionally, initial buyers bear 100% of the costs of roads, sewers, parks, etc when they will use such capital improvements only a fraction of useful life.

You can’t put all of the costs on home buyers and still sell at an affordable price.”

— Inman News, Builders, Realtors square off on transfer fees. May 16, 2007.

AUSTIN, TEXAS, UNITED STATES, December 28, 2018 /EINPresswire.com/ — A modern subdivision requires significant expenditures for long-term capital improvements, such as streets, water lines, parkland, etc.

Traditionally, initial buyers are asked to shoulder 100% of the costs, despite the fact that initial buyers will use the capital improvements for a fraction of the useful life. The initial buyer must finance these capital improvements costs, and then pass the costs along to the next buyer. This is an inefficient process that leads to high home ownership costs. Consider a simplified example of a modern subdivision with infrastructure- costs of $10,000 per Lot:

The price of the home includes the $10,000
Buyer 1 incurs closing costs on the $10,000 (est. $500).
Buyer 1 must qualify for a mortgage that includes the $10,500 (Buyer 1 can afford less house).
The $10,500 accrues mortgage interest, rising to estimated $14,500 in 7 years.
Buyer 2 repeats the process, but starts out having to absorb $14,500 (which means Buyer 1 must sell for a higher price).

Modernly, capital recovery fees such as those originated by Freehold Capital Partners http://www.freeholdcapitalpartners.com help reduce the initial sales price by spreading infrastructure costs over all participants. As the California Building Industry Association pointed out:

“You can’t put all of the costs on home buyers and still sell at an affordable price.” Source: Inman News, Builders, Realtors square off on transfer fees. May 16, 2007.

Continuing the above example ($10,000 in capital costs), by using a Capital Recovery Fee:

Buyer 1 pays $10,000 less for the home. (Buyer 1 can afford more home or enjoy lower payments).
Buyer 1 pays a 1% Capital Recovery Fee (typically $2,000 – $3,000) when Buyer 1 sells.
Buyer 2 pays $14,500 less. (Buyer 2 can afford more home or enjoy lower payments).
Buyer 2 pays a 1% Capital Recovery Fee when Buyer 2 sells.
The above continues for subsequent buyers, generally for 7-10 sales spread over 99 years.

In this manner infrastructure costs are spread over those who will use the infrastructure and the debt is repaid in large part from appreciation in property prices. Capital Recovery Fees offer a choice in how to finance infrastructure costs.

For more information on capital recovery fees, visit https://en.wikipedia.org/wiki/Private_transfer_fee

Source: Freehold Capital Partners http://www.freeholdcapitalpartners.com

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Megan Lee media@freeholdcapitalpartners.com (T:212.755.0070)

John Martinson
Freehold Capital Partners
+1 713-252-7561
email us here


Source: EIN Presswire

Freehold Capital Partners Reports that Charitable Funding from Capital Recovery Fees Expected to Rise Significantly

Charitable contributions are generated from Freehold’s portfolio of hundreds of thousands of planned and existing real estate projects across the United States

This generational legacy is something that our hundreds of agents and thousands of developers can look on with the satisfaction, knowing we will leave the world a better place than we found it.”

— Joe Alderman, CEO of Freehold Capital Partners

AUSTIN, TEXAS, UNITED STATES, December 28, 2018 /EINPresswire.com/ — Real estate developers use Capital Recovery Fees to apportion development costs for public improvements (such as streets, utilities, parkland, etc.).

The largest originator of Capital Recovery Fees in the United States is Freehold Capital Partners http://www.freeholdcapitalpartners.com. Beginning with its very first instrument filed over a decade ago, Freehold’s deed restriction has mandated that five percent of the gross Capital Recovery Fee go to non-profits working for the betterment of the community.

Charitable funding from Freehold’s portfolio of hundreds of thousands of planned and existing real estate projects across the United States is expected to generate billions of dollars in funding for clean air, clean water, open space, affordable housing, domestic violence shelters, child hospital services, fire departments and other public services.

According to Freehold’s majority shareholder, Joe Alderman, “this generational legacy is something that every member of the Freehold team, from our hundreds of agents to the thousands of developers who have utilized our Capital Recovery Fee to spread infrastructure costs, can look on with the satisfaction that comes from knowing that we have not only built something bigger than ourselves, but we will leave the world a better place than we found it.”

For more information on Capital Recovery Fees, visit https://en.wikipedia.org/wiki/Private_transfer_fee

Source: Freehold Capital Partners http://www.freeholdcapitalpartners.com

###
Megan Lee media@freeholdcapitalpartners.com (T:212.755.0070)

John R Martinson
Freehold Capital Partners
+1 713-252-7561
email us here


Source: EIN Presswire

After more than a decade of use, capital recovery fees show no negative impact on closings

Capital Recovery Fees, in widespread use over a decade, caused concerns of potential negative impact on closings. These concerns have failed to materialize.

AUSTIN, TEXAS, UNITED STATES, December 28, 2018 /EINPresswire.com/ — When Capital Recovery Fees began to see widespread use over a decade ago, some market participants expressed concerns regarding the potential negative impact on closings. Fortunately, these concerns have failed to materialize.

The largest originator of Capital Recovery Fees, Freehold Capital Partners, reports that over the past decade real estate closings nationwide involving private transfer fees have largely been “routine”. Freehold attributes this to the public disclosure that occurs from filing the assessment instrument in the deed records, together with additional public notices filed at periodic intervals.

Covenant Clearinghouse, http://www.covenantclearinghouse.com (the servicing agent for an estimated 350,000 planned and existing real estate projects nationwide that are subject to a Capital Recovery Fee) notes that “[a]s an Instrument filed in the public records, a [Capital Recovery Fee covenant] should appear on a properly prepared title commitment, just like other covenants, restrictions and similar encumbrances.” See http://www.covenantclearinghouse.com/faq at 3.

A decade of real estate closings across the United States has shown that Capital Recovery Fees are just a routine part of the real estate closing process.

About Freehold Capital Partners: Beginning over a decade ago, Freehold Capital Partners originated a portfolio of Capital Recovery Fees that covers hundreds of thousands of planned and existing real estate parcels in 34 states, including office buildings, retail centers, industrial space, apartment complexes, and hundreds of thousands of residential homes.

Source: Freehold Capital Partners http://www.freeholdcapitalpartners.com

###
Megan Lee media@freeholdcapitalpartners.com (T:212.755.0070)

John Martinson
Freehold Capital Partners
+1 7132527561
email us here


Source: EIN Presswire

LifeStart Named One of Nation's Best and Brightest in Wellness for Third Year in a Row

We are honored to be recognized for our strong commitment to Wellness for the third year in a row!”

— Mike Flanagan CEO LifeStart

CHICAGO, IL, USA, December 27, 2018 /EINPresswire.com/ — The Nation’s Best and Brightest in Wellness® is an annual competition to identify and honor organizations that have proven their commitment to the wellness of their employee population. Organizations are assessed on categories such as communication, work-life balance, employee education, diversity, recognition, retention, and more. The competition honors the companies with the most influential and innovative wellness solutions in the nation.

LifeStart was selected this month as a winner of the Best and Brightest competition for the third year in a row. The winning companies this year were evaluated on a multi-point assessment instrument designed to measure wellness program effectiveness. They include outcomes, analysis and tracking, participation &incentives, benefits and programs, leadership, employee input, culture and environment.

LifeStart designs, develops, and manages onsite fitness centers across the nation. With over 80 centers under management, the company stands at the forefront of wellness innovation. The company delivers best-in-class engagement for our member population while helping building owners and property managers to fully amenitize their workplaces. LifeStart’s network of health professionals includes nurses, dietitians, health coaches and exercise physiologists.

Mike Flanagan
LifeStart
+1 312-627-1300
email us here
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Source: EIN Presswire