Economic Update

Commercial Real Estate & Environmental Sustainability

CBRE, the global commercial real estate company, recently released its North American City Sustainability Study. Of the 60 markets CBRE Econometric Advisors studied, 10 North America cities were ranked as the “best positioned to withstand the impact on property values from both transition and physical climate risks.” On that list is Washington, D.C., so let’s dive a little deeper.

Transition Risk

CBRE defines transition risk as “the cost of retrofitting to meet emission reduction goals and/or policies as a percentage of business value.”

Physical Climate Risk

Again, a definition: “Physical climate risk identifies property values at risk from climate-related disasters.”

Common Characteristics

All top ten cities have increased their use of renewable energy and have pledged to be carbon neutral or achieve net zero greenhouse gas (GHG) emissions by 2050. Washington, D.C. has set its target date at 2045.

Washington, D.C.

Of the cities studied, Washington is one of the leaders in the percentage of Leadership in Energy and Environmental Design-certified (LEED) buildings (44%), and its buildings are only moderate risk of damage from extreme temperatures, flooding, and strong winds.

Why Sustainability Matters to Investors

We are advocates of balanced portfolios that, when appropriate, include real estate other than one’s residence. In addition to all the factors we consider when helping you choose a property that suits your goals / portfolio, CBRE suggests that investors take at least two additional factors into consideration before investing in commercial real estate:

• Green Leases include terms related to temperature settings and building-hours, for example, that are designed to reduce utility consumption and save money. These leases can also enhance a landlord’s brand image, and some practices can earn credits toward LEED for Commercial Interiors (LEED-CI) certification.
• Investors should expect increasingly stringent regulations along with additional compliance and reporting obligations. Penalties for failing to comply differ depending on location.

Sustainability and Property Value

A study by Cushman & Wakefield found that “Over a three-year period ending in December 2021, LEED-certified assets held a 21.4% higher average market sales price per square foot over non-LEED-certified assets.” This analysis controlled for the age of the asset, asset class and central business district / suburban location.

We can help you evaluate a list of factors to determine whether (and what type of) commercial real estate suits your goals, risk tolerance and portfolio. Environmental sustainability is on now that list.

Lifestyle

Simple Ways to Reduce Your Carbon Footprint

Double glazing windows and solar panels are great ways to save energy, but there are simpler—and cheaper—ways to reduce your carbon footprint.

All of us have heard “Turn off the lights when you leave a room!” either coming from a parent’s or our own mouth. Many of us have made it a practice to take the stairs rather than an elevator when we can. Yet energy-saving opportunities are all around us. Here are just three:

Food: Buy in bulk, reuse leftovers and compost when possible.

Clothing: We’ve written about building a sustainable wardrobe. Try washing clothes in cold water and only running the washer for full loads.

Transportation: Drive less. Try carpooling or taking public transportation one day a week.

Hello Schwab!

The TD Ameritrade to Schwab conversion is complete. As of September 5, all Schwab account holders should have full online access. Those of you who had accounts with TD Ameritrade can set up access to your accounts here. If you have any questions about your account, please don’t hesitate to contact our office.

Important Change to Roth Catch-Up Requirements

In June and July of this year, we wrote three articles about some of the provisions of the 358-page SECURE 2.0 Act of 2022 (Setting Every Community Up for Retirement Enhancement). Section 603 (just one of 92 provisions in the Act):

• Permitted participants in 401(k) and similar retirement plan to contribute funds above the employee deferral limit (i.e., catch-up contributions) if they were 50 years old or older.
• Eliminated the tax-break for participants who earned more than $145,000 per year by allowing catch-up contributions only to after-tax Roth accounts as of January 1, 2024.

On August 25, 2023, the IRS issued guidance related to this section that extends the deadline for making catch-up contributions on a pre-tax basis to December 31, 2025 for plan participants—regardless of income.

The IRS simultaneously announced that it “intends to issue further guidance,” so, as is the case in all matters involving the IRS, please check in with us for how the latest regulations might affect you

How We Help

Business Succession in Blended Families

Last week we touched on some of the challenges that blended families encounter as they use estate planning to protect and pass wealth to the people they choose. Today, we look at just a few of the issues that blended families encounter in family business succession planning.

Choosing a successor among children is always a balancing act that involves numerous issues related to business equity: control, liquidity, and timing.

• Should the child who is active in the business share ownership with siblings who are not?
• How do parents allocate assets fairly when the most valuable one in their portfolio is a business?
• When one child receives (or buys) a parent’s business interest, is it fair that other children must wait until the parent’s death to receive “their share.”

These are tough questions when all the children are biologically related to the same parents. In blended families, the complexity increases exponentially. Did children grow up together or meet as teenagers? Do they get along? Are children loyal to one parent? Do children feel that parents are partial to their biological children?

There are a host of additional issue to work through, and we’re here to help. No two families are the same, yet two observations are universal: 1) The sooner you begin to plan for the succession of your business, the more time you give yourself to consider all options and address potential challenges; and 2) No succession plan is perfect, so flexibility is key.

Advisory Services offered through Obsidian Personal Planning Solutions, LLC. Securities are offered through Triad Advisors, member ​FINRA/SIPC.​ Obsidian Personal Planning Solutions, LLC, and Obsidian Personal Planning Solutions, Inc, are not affiliated with Triad Advisors.