Mining a Market Mining a Market SegmentSegment

Patrick G. O’Healy, SIOR, CREPatrick G. O’Healy, SIOR, CREO’Healy Commercial Real Estate ServicesO’Healy Commercial Real Estate Services

Los Angeles, CALos Angeles, CA562-492-9234562-492-9234

pohealy@ohealycommercial.compohealy@ohealycommercial.com

SIOR Brokers SIOR Brokers Always Always

Innovating!Innovating!

A Rich Target MarketA Rich Target Market

Property Owner CharacteristicsProperty Owner Characteristics Age:Age: 70+70+ Owned property 20 years or longerOwned property 20 years or longer Likely fully depreciated Likely fully depreciated Possibly management intensivePossibly management intensive

A Rich Target MarketA Rich Target Market

Relatives Co-OwnersRelatives Co-Owners Divergent objectivesDivergent objectives Older partners risk adverseOlder partners risk adverse Younger partners seeking:Younger partners seeking:

Greater returnGreater return Willing to accept more riskWilling to accept more risk More leverageMore leverage Expanded asset baseExpanded asset base

Depreciation LawsDepreciation Laws

All real estate 1981 to 3-16-84 , 15 yrs All real estate 1981 to 3-16-84 , 15 yrs 3-16-84 to 5-8-85 , 18 yrs 3-16-84 to 5-8-85 , 18 yrs 5-8-85 to 12-31-86 , 19 yrs.  5-8-85 to 12-31-86 , 19 yrs.  Residential real estate (MACRS) 1-1-87 Residential real estate (MACRS) 1-1-87

to current , 27.5 yrs. to current , 27.5 yrs. Non residential real estate (MACRS) 1-Non residential real estate (MACRS) 1-

1-87 to 5-12-93 , 31.5 yrs ,  5-13-93 to 1-87 to 5-12-93 , 31.5 yrs ,  5-13-93 to current 39 yrs. current 39 yrs.

Depreciation CalculationDepreciation CalculationBy Purchase DateBy Purchase Date

All real estate purchased prior to 1986 All real estate purchased prior to 1986 is fully depreciatedis fully depreciated

Residential real estate (MACRS) Residential real estate (MACRS) purchased after 1987 has depreciation purchased after 1987 has depreciation leftleft

Non residential real estate (MACRS) Non residential real estate (MACRS) purchased after 1987 has depreciation purchased after 1987 has depreciation leftleft

The ApproachThe Approach Sell the AssetSell the Asset Divide the proceedsDivide the proceeds Older partnersOlder partners

Un-leveraged investmentUn-leveraged investment Charitable alternativesCharitable alternatives Seeking maximum wealth transferSeeking maximum wealth transfer Seeking predictable after tax incomeSeeking predictable after tax income

The ApproachThe Approach

Younger PartnersYounger Partners New leveraged investmentNew leveraged investment New depreciation scheduleNew depreciation schedule Likely doubling of net after tax incomeLikely doubling of net after tax income

• Shelter makes net after tax cash flow go upShelter makes net after tax cash flow go up

The PlanThe Plan

Property owner target listProperty owner target list Develop alternative structuresDevelop alternative structures Develop hypothetical outcomesDevelop hypothetical outcomes Tailor packages to seller specificsTailor packages to seller specifics

Leverage for younger partnersLeverage for younger partners Safety and charitable alternatives for older partnersSafety and charitable alternatives for older partners

Develop upleg alternatives for prospectsDevelop upleg alternatives for prospects Linkage with charitable entityLinkage with charitable entity

Preparation for targets and knowledge of possibilitiesPreparation for targets and knowledge of possibilities

Differentiation From Differentiation From CompetitionCompetition

Targeting specific segmentsTargeting specific segments Developed planDeveloped plan Understanding the target marketUnderstanding the target market Satisfying market needsSatisfying market needs Showing new alternativesShowing new alternatives

Two Pathways to SuccessTwo Pathways to Success

Linkage with the charityLinkage with the charity Sale of the asset for the ownerSale of the asset for the owner Sale of the donated asset for the charitySale of the donated asset for the charity Referrals to other donorsReferrals to other donors

Sale to younger partnersSale to younger partners Immediate transactionImmediate transaction New relationships developedNew relationships developed Ongoing transactions and referralsOngoing transactions and referrals