Tag: Hank Kelley

1031 Exchanges Help Defer Certain Tax Liabilities

Posted on 09/11/23

Brokerage, property management, development management, consulting

For all of your commercial real estate questions, ask a professional at Kelley Commercial Partners

A 1031 exchange, also known as a tax-deferred exchange, gets its name from the Internal Revenue Code 1031. Essentially, this rule in the tax code allows investors to defer certain tax liabilities they would otherwise incur after making a profit from a real estate investment. This can be an incredibly effective tool for investors who find themselves in a situation in which they would like to sell a real estate holding, but do not want to incur the tax burdens such a transaction would create.

In order to take advantage of the 1031 exchange rule, you must replace the property you are selling (the relinquished property) by purchasing another property (the replacement property) with one of equal or greater value and similar in kind and use. For example, if you are relinquishing a rental property for $100,000, you must replace it with another rental property with one valued at $100,000 or more. (You may also have the option to buy several rental properties, so long as the sum total of their value is $100,000 or more). So, unfortunately, you cannot relinquish a rental property and replace it with a vacation home because those two properties would not be alike in kind and use.

In addition to these restrictions, there is a set time frame in which all of these transactions must occur. Once the relinquished property has closed, investors have 45 days to identify the replacement property and 180 days to close that transaction.

Finding buyers for the properties you wish to relinquish, while at the same time attempting to identify equitable exchange properties can be challenging, especially considering the time restrictions. Proper attention must be paid to the details of how 1031 exchanges work and how using them might affect your long-term plans. This is why it is so important to find an experienced CRE professional you can trust to help you with the due diligence commercial real estate transactions require.

If you have any questions regarding a tax-deferred exchange or any other commercial real estate issue, Kelley Commercial Partners brokers and associates are here to provide the answers and support you need to make successful decisions.

The Downtown Connection

Posted on 03/21/22

Aerial Downtown Little rock Arkansas USA

As published in Arkansas Business, March 14, 2021
by Hank Kelley

At Kelley Commercial Partners, we focus a lot on downtown properties because it’s been home to our company for so long. When we tour the market with out-of-town clients, we proudly tell the stories of our landmarks and the amenities that define us.

James and Deborah Fallows, the authors of “Our Towns: A 100,000-Mile Journey Into the Heart of America,” helped shape my view of Little Rock and central Arkansas. The couple traveled the country for five years focusing on thriving flyover communities and outlining attributes common to each of these progressive cities. After they published their book, they visited Little Rock to discuss their findings. They believe communities that have positioned themselves to thrive possess these traits:

People work together on practical local possibilities, rather than allowing disagreements about national politics to keep them apart.
Citizens can name local patriots.
The phrase “public-private partnership” refers to something real.
People know their civic story.
They have downtowns.
They are near a research university.
They have and care about a community college.
They have distinctive, innovative K-12 schools.
They embrace diversity.
They have big plans. Municipal governments are where real improvements can be done.
They have brewpubs and/or distilleries where the product is made and served in a setting that encourages people getting together.

This is a good list of priorities worthy of focus, commitment and action to help Little Rock become its best. But of those priorities, the Fallowses believe a downtown is the best single marker of the condition of the town. Downtown Little Rock has changed for the better since we first moved into the Simmons Tower 38 years ago, thanks to the combined efforts of city leaders and the private sector championing progress. Today, downtown is home to the arts, history, retail, housing and entertainment. From historic Robinson Center to the $142 million Arkansas Museum of Fine Arts, from boutiques to farmers markets, from historic homes to high-rise condos, there’s something for everyone. The past decade has added marinas to both sides of the Arkansas River, along with hundreds of apartments and homes for those who want to live in an urban environment.

Speaking of North Little Rock, Argenta plays a huge role in our downtown. Dickey-Stephens Park, Simmons Bank Arena and the restaurants that line Main Street provide countless entertainment opportunities. With two cities across one river, we punch well above our weight in concerts, performing arts and local dining options. While the Arkansas River may seem to be a dividing line, the cycling, walking and running along the Arkansas River Trail connect us.

With 33% of the local total commercial real estate inventory (12.7 million SF), downtown is the largest submarket in the metropolitan area and offers the greatest value. In fact, businesses, offices and residents have never had a more exciting and diverse menu of amenities downtown — benefits that can’t be replicated in suburban areas. Downtown boasts the lowest average cost per square foot in the area and can satisfy the needs of users large or small. And the Interstate 30 rehabilitation will provide the best regional access to downtown for occupants and visitors.

Whether it’s a national grocery store, restaurant chain, fashion retailer, office user or manufacturer, all our prospective commercial real estate clients want to know what’s happening downtown, which is why we must think of downtown when making key decisions about infrastructure, business expansions, education initiatives and other items on the Fallowses’ list.

These prospects know that American downtowns serve as benchmarks as to where a community is headed. We need visitors to clearly see new developments happening on both sides of the Arkansas River, making this place a great place to live, work and play.

So I challenge you to reread the Fallowses’ observations. Where does Little Rock stack up? Where are we going? What do you want to see next? If you want to listen to the music I hear, call me. Let’s meet and walk to lunch! In downtown of course.

Kelley Commercial Partners Adds New Shareholder Partner

Posted on 02/04/22

Kelley Commercial Partners is pleased to announce the appointment of our newest shareholder partner, Kaley Tucker. She will be joining existing partners Hank Kelley, Daryl Peeples, Maggie Hogan, Nick Kelley, Brooke Miller, Jessi Miller, Kevin Pledger, Gary Smith, Eric Varner, and Cheryl White.

“I knew Kaley was coming to the firm with a solid education and strong work ethic, but she has exceeded every expectation. Her professionalism makes her a joy to work with for team members, clients, and customers. I am excited to see what the future holds for Kaley at Kelley Commercial Partners and honored to be her partner,” said Daryl Peeples, president.

Tucker began her career at the firm nearly 7 years ago, just weeks after graduating from Ouachita Baptist University. She started as an assistant property manager and was promoted to a manager role in 2019. Tucker manages some of Little Rock’s largest Class A properties, including Simmons Tower, and several high-rise Property Owner’s Associations. She coordinates overall management, leasing activities, construction management, and financial oversight for more than 1.3 million square feet of property across central Arkansas.

“I had never considered a career in real estate and was certain I was headed down the CPA path after graduation, but I have grown to love what I do and the people I get to work with every day,” said Tucker.

In October 2021, Tucker completed her RPA® (Real Property Administrator) designation through BOMI. Only property managers with a minimum of three years of experience are eligible for the program. Tucker completed the coursework in less than two years and says she gained a more in-depth knowledge of every aspect of managing a commercial property successfully.

Tucker attributes her success in the company to the close-knit team. “I truly could not do what I do each day without my associates, Alex [Graham] and Abby [Turner], and the mentorship I have in Eric [Varner], Maggie [Hogan], Hank [Kelley] and Daryl [Peeples] as well as the support from my husband, Curt. Any property manager will tell you that not every day is sunshine and rainbows. There are some really hard days, but those are the days that I learn the most,” said Tucker.

Tucker is a member of BOMA GLR and is involved in her church, Immanuel Baptist Church. She and her husband have a feisty little red-headed toddler named Tessa.

Predictions about commercial real estate in Little Rock circa 2050

Posted on 11/04/21

In this month’s issue of the Arkansas Times, Hank Kelley shared his thoughts about what the commercial real estate industry will look like in 2050.

Hank Kelley, CEO

Connectivity

There is demand now — and will be in the future — for unique living and workspaces in multiple-story buildings so your space can be close to other residents and professionals, and to other recreational and educational uses. The way we “go to work” now will change over the next 30 years, and the need to have the same level of hard-wall separate office areas within a building will change. More emphasis will be placed on a building’s connectivity for virtual connections than exists today. Even today, mobile professionals regularly chart their destinations based on the connection to credible Wi-Fi. In 30 years, the need for high-quality connections will be a constant and core requirement.

The exterior of buildings will hopefully be a source of energy generation through advances in solar panel technology, but not at the expense of views within the spaces. More filtering will improve indoor air quality. Rooftop decks and balconies with sunscreen canopies will be the norm as people continue to want to be outdoors but become even more concerned about sun exposure.

Mixed-Use

I believe we will continue to see an evolution of larger office buildings to include a mixture in their uses. The cost of converting their use, though, will have to be feasible before developers will invest in the remodeling needed for conversion. The conversion of office buildings to residential and or hospitality (hotel) requires extensive plumbing and mechanical alterations, and those changes will only happen when adequate demand for those uses justifies the conversion cost. In the short run, we will see workspaces within the buildings compressed to more flexible work environments and, in some cases, with even more open floor spaces for cubicle and tabletop workspaces. Landlords will become more flexible on tenant expansion and contraction needs to retain their tenants and use the surplus space they have to attract growing businesses.

The office buildings and existing residential condo buildings in Little Rock’s Central Business District represent the highest density of population per mile in our city and region, and companies will continue to be attracted by the excellent accessibility to both I-30 and I-40. People who live in midrise and high-rise buildings in the Central Business District enjoy walkable amenities now — the Central Arkansas Library, the Robinson Center, the Arkansas Museum of Fine Arts — and we believe the demand for walkable amenities will grow over time.

“’Hoteling’ of office space and rotation of in-office and out-of-office workdays will become more of a norm.”

As regards trends toward remote working, we don’t believe the majority of companies will choose a completely remote workforce because of the challenges in maintaining the culture needed to compete. “Hoteling” of office space and rotation of in-office and out-of-office workdays will become more of a norm. We continue to believe there is value in the separation of workspace and living space. The networking component of “going to work” is now and will continue to be a valuable need for workers and companies.

Energy Efficiency

We will see great advances in products and technology to conserve and generate energy, water and land at both the individual user level, but also at the utility provider level. We are hopeful those advances will reduce operating costs and help preserve our natural resources. The office building industry has been active in conservation efforts through the LEED certification process. Maintaining buildings to operate at peak efficiency will become a requirement to own and operate a building, and utility providers will charge non-compliant building owners penalties for excessive consumption.

We expect that fewer people will own their own cars, meaning we will see less of a need for parking spaces.

Finally, inflation will increase interest rates on the debt and the cost of services to maintain existing buildings. Some building owners are not prepared for their debt and operating expenses to increase, as they have been trying to maintain current rent levels with tenants. This means less income is available to pay debt and reinvest in building upgrades needed to maintain an efficient and attractive building. The squeeze of increasing costs will challenge some building owners and cause a change in ownership if those owners don’t have adequate reserves. Tenants will seek out buildings with owners who have the financial resources and desire to reinvest in their properties.

Hank Kelley is CEO and Executive Broker at Kelley Commercial Partners, and has been working in brokerage and property management in Little Rock for 36 years.

Maggie Hogan: Nominee for Arkansas Business CFO of the Year 2021

Posted on 10/21/21

At a luncheon to be held on November 3 at the DoubleTree Hotel, Arkansas Business will honor chief financial officers from small private companies, large private companies, nonprofit organizations, public sector organizations, education, banking, and hospitals.

For the past 13 years, Arkansas Business has recognized the men and women navigating these challenging and often behind-the-scenes positions. Kelley Commercial Partners’ Chief Financial Officer, Maggie Hogan, is among the finalists for CFO of the Year in the small private company category. Other finalists in this category include Scott Dendler of Assembled Products Corp. of Rogers, Stuart McLendon of Dyne Hospitality Group of Little Rock, and Scott Rosenberg of Travel Nurse Across America of North Little Rock. Lifetime achievement awards will be presented to Vickie Judy of America’s Car-Mart, Inc. of Rogers and Johnny McCaleb of Simmons First of Pine Bluff.

We salute all the CFOs being honored as well as those yet to be recognized for the essential work and support they provide to their companies. We are especially proud of Maggie Hogan for her leadership and dedication to our firm.