15-Year Perspective: Resale Value of Borelli’s Commercial Condos Rises Up to 18% Annually

15-Year Perspective: Resale Value of Borelli’s Commercial Condos Rises Up to 18% Annually

Commercial condominiums are one of the hottest trends in real estate today. In a commercial condominium transaction, rather than leasing space, a business buys one or more units. That business then enjoys all the benefits of property ownership, such as:

• Tax deductions, including IRC Section 179 write-offs of up to $112,000 and accelerated depreciation through the cost segregation accounting method
• Loan interest deductions
• The ability to lock-in occupancy costs
• Equity buildup plus potential long-term appreciation

The smaller size of commercial condominium transactions—for example, purchasing a single unit of perhaps 1,000 to 3,000 square feet rather than an entire building—is what has driven the hot sales trend. This puts commercial condos within the reach of almost any business or professional firm.

In addition to creating a “forced savings” plan for the owner of a small business, one of the big attractions of commercial condos is undoubtedly the prospect of owning an asset that will appreciate over time, and can be used for retirement or to pass on to family members. As a leader in the commercial condominium business—both as a developer and as a reseller—Borelli Investment Company has gained a unique 15-year perspective on how commercial condominium values have increased over the years. And in short, the answer is—very well.

Better Than Expected Return on Investment

Many commercial condo buyers are initially attracted by the equity buildup and tax benefits. Instead of “throwing away” thousands of dollars on rent, payments increase the equity in a condo property, and enable the business to write off the payments against taxes. When creating a “lease vs. buy” analysis for the prospective buyer, Borelli Investment Company has been very conservative when it comes to appreciation.

Run your own numbers using our on-line lease vs. buy calculator. Use Borelli Investment Company’s exclusive Lease vs. Buy Calculator to do a personal analysis of how much money you can save when buying an office condominium compared to leasing space. Plug in actual numbers. Get the answer in seconds.

“We have typically used a figure of two percent appreciation annually,” said Ralph Borelli. “This was based on a general historical model for Silicon Valley commercial real estate. Recently, we decided to conduct a more specific study of our own.”

Over the years, Borelli Investment Company has developed a number of commercial condominium properties—both conversions of existing properties and construction of new buildings. More than 150 units have been sold at the three complex listed below, and at Borelli’s newest project—Junction Office Center (first sale, December 2005). Many units have changed hands at least once since the original sale. Based on an in-depth analysis of current resales at our previously developed commercial condos, Borelli calculated the following rates of appreciation (see table for detail):

• De La Cruz Commercial Condominiums—first sale, January 1992: 9% annually
• Ringwood Business Center—first sale, June 2004: 18% annually
• AirTech Office Condominiums—first sale, December 2004: 15% annually

“Those are remarkable figures,” Borelli noted. “With a wealth of history on De La Cruz, an owner who bought in 1992 would have enjoyed nine percent annual appreciation, 4 1/2 times what we have been using in our analysis for buyers. And the recent hot market for commercial condos seems to have resulted in even higher value increases at our newer complexes.”

Of course, past returns do not guarantee future results, and Borelli Investment Company encourages all prospective buyers to talk with their advisors. Borelli currently has new office condominium units available at just two complexes: AirTech Office Condominiums (only two units remaining) and Junction Office Center (nearly 70 sold or occupied).

It All Adds Up

To further assist potential buyers, Borelli Investment Company has created a powerful, online Lease vs. Buy Calculator. This exclusive tool enables buyers to enter a variety of actual estimated figures for their current leased space, projected price per square foot, potential down payment, loan sizes and rates, tax rates, and more for a specific unit or units. Then, the Calculator draws upon its detailed data to provide “real” calculations in minutes—based upon the various scenarios—so buyers will know precisely where they stand.

“On virtually every projection, buying comes out ahead of leasing on an after-tax basis,” stated Borelli. “With these figures at their fingertips, buyers can make better decisions.”

For more information about Borelli’s Junction Office Condominiums, contact Larry Bengiveno larry@borelli.com or Monte Pasquinelli about Airtech Office Condos monte@borelli.com. Or call (408) 453-4700.