Sports-Arena Sale
Has a Serious Snafu

Louis B. Fisher III, who is leading the group that's scheduled to auction off the Miami Arena on behalf of the city of Miami in about three weeks, has encountered an unexpected hurdle in marketing the former home of the Miami Heat basketball team: Many real-estate developers and investors believe the arena has already been sold.

New York investor Jacob "Hank" Sopher, who has been buying up land in Miami and using the parcels as parking lots until he's ready to develop the sites or sell them, hammered out an agreement a few months ago with the city of Miami to purchase the arena for $25 million. But under the agreement, city officials are slated to hold an auction for the property in an attempt to get a higher price. Mr. Sopher then has the option to top a higher price.

Officials plan to use the proceeds from the arena sale to help fund a new baseball stadium for the Florida Marlins. The arena, a 347,000-square-foot structure, sits on nearly five acres near downtown Miami. The city will allow the arena to be demolished and the site to be redeveloped to accommodate as many as 300 residential units per acre, as well as office and retail space.

But some people who ordinarily might be considered likely bidders for the property -- or brokers representing such parties -- weren't aware of the auction, says Mr. Fisher, chief executive of Fisher Auction Co. in Pompano Beach, Fla. He says executives from two development companies and real-estate brokers at a major brokerage firm all thought the arena had been sold. "There's a misconception among many people that the deal is done," he says.

Fisher Auction, which is auctioning the property with Sperry Van Ness, an Irvine, Calif., real-estate brokerage firm, is selling information packages for the property for $280 a pop. So far, only seven have sold.

With less than three weeks to go before the auction, "I would feel better if we had at least 10 to 12" packages sold, says Mr. Fisher.

New Ruling

The U.S. Treasury Department and the Internal Revenue Service yesterday issued a ruling that's good news for 1031 tenant-in-common investors.

In 1031 exchanges, real-estate owners defer capital-gains taxes on the sale of property by purchasing a similar property of equal or greater value. A variation of the program, known as tenant-in-common transactions, allows sellers to make an exchange by buying just an interest in a property.

The ruling states that investors in multiple-owner Delaware statutory trusts, which were being set up to invest in real estate, are eligible to defer capital-gains taxes. Until now, officials from the Treasury Department had indicated that 1031 investors who own real estate through Delaware statutory trusts may be ineligible to defer taxes because those investors are considered owners of an interest in a partnership, rather than an interest in real estate.

By allowing tenant-in-common investors to own property in statutory trusts, "lenders will only have to deal with a single entity," says Rob Hannah, chief executive of TSG Real Estate LLC, a Chicago-based firm that puts together 1031 tenant-in-common deals. Now, closing costs for these deals will be around $200, rather than $5,000 and up, and "will require a lot less paperwork," he says.

Building Blocks: London's West End once again tops the list of the world's 50 most-expensive office locations, a spot it has held since the end of 2000, according to a survey by real-estate services firm CB Richard Ellis Global Inc. The cost of occupying office space -- which includes rent and building expenses, such as property insurance and taxes, and maintenance and security costs -- hit $177.39 a square foot, up 19% from just six months earlier. The only U.S. cities to rank in the top 50 were midtown Manhattan, where the occupancy cost hit $52.04 a square foot, a slight drop from six months earlier; Washington, at $46.78 a square foot, a 2% drop; Boston at $42.76, a 3% drop; and downtown Manhattan, at $38.19, a decline of 1%. New Delhi and Hong Kong experienced occupancy cost increases of more than 10%, to $40.62 and $48.39 a square foot, respectively.... Affordable Residential Communities Inc., a Denver-based real-estate investment trust, has hired Sheldon Good & Co. Auction LLC to auction 12 mobile-home parks located mostly in the Southeast and Midwest. One of the properties, a 126-unit mobile-home park in Sarasota, Fla., will require a minimum bid of $2.8 million. The rest will be sold to the highest bidder regardless of price.

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