Some in Hyde Park face 6% tax hike

HYDE PARK — School tax rates for most town homeowners will increase by 2.2 percent this school year.

But the Hyde Park Central School District tax rates will increase 6 percent in the towns of Poughkeepsie, Clinton and Pleasant Valley, and 5.98 percent in Rhinebeck, due to a drop of $500,000 in the assessed value of Town of Hyde Park properties.

“The Town of Hyde Park experienced a greater reduction in the value of real properties relative to other towns,” said Steven Mittermaier, president of the Hyde Park school board. “The result is a a greater proportion of the tax burden is being shifted to the other towns.”

The school board recently voted to adopt the 2012-13 tax levy and set the tax rates in the portions of the five towns in the Hyde Park district. The $54,206,347 tax levy is the portion of the $83.51 million district budget that district property owners will fund.

The levy is increasing 2.6 percent over last school year. The budget slightly decreased spending by 0.29 percent.

In the Town of Hyde Park, the owner of a home assessed at $200,000 will pay $7,292 in school taxes — $158 more than last year. This is before any New York State School Tax Relief Program exemptions are factored in.

Mittermaier said he was disappointed to see the 6 percent tax rate increases in most of the district’s other towns.

“It’s frustrating to have worked so hard to control spending increases, only to see high tax increases caused by forces beyond our control,” Mittermaier said.

The forces beyond the school district’s control, he said, are the drop in the Town of Hyde Park’s assessed value and the state’s increase of the town’s equalization rate.

Hyde Park Supervisor Aileen Rohr said the drop in the assessed value was due primarily to legal actions taken last year by property owners to have their assessments lowered, as well as an increase in the number of property tax exemptions provided senior homeowners.

The increase in Hyde Park’s equalization rate from 52 percent to 56 percent this year reduced the town’s share of the district levy from 63.4 percent to 62.8 percent, said Wayne Kurlander, district assistant superintendent for business. As a result, the four other towns have to pick up more of the share of the levy.

Hyde Park is the only one of the five towns in the district that doesn’t have a 100 percent equalization reflecting properties assessed at the current market value. The last townwide revaluation of properties was done in Hyde Park in 1994.

“That it’s been 16 years since the Town of Hyde Park has gone through an assessment does make for a disparity in the rate changes,” said Hyde Park Superintendent of Schools Greer Fischer.

Bill Gannon, a homeowner in Clinton, said it is likely many Hyde Park homes are assessed below the current market value. Because they are not paying their fair share of taxes is why he and others face paying a 6 percent tax rate increase, he said.

“I feel bad what happened to my town and other towns, but it’s not the Hyde Park school board’s fault,” he said. “It’s caused by the Town of Hyde Park not being at 100 percent as the other towns are. ”

Iredell real estate transactions: Aug. 19-25

The following deeds were filed in the Iredell County Register of Deeds office from Aug. 19-25. For information regarding specific plots of land, visit


raquo; From KK Kahne to LK Doyle, 106 Milford Circle, Mooresville, $1,325,000, on Aug. 21.

raquo; From DL and MF Rau to JW and CN Parker, Lot 511 of The Point Subdivision, Mooresville, $950,000, on Aug. 24.

raquo; From TJ and JH VanTiem to ER Tetreault, Lot 1208 of The Point Subdivision, Mooresville, $925,000, on Aug. 20.

raquo; From WT and NH Adams to RJ and KJ Newman, a portion of 1402 Turnersburg Highway, Statesville, $676,000, on Aug. 21.

raquo; From TC and AE Cook to G. and MA Kostecki, 114 Tradition Lane, Mooresville, $675,000, on Aug. 20.


raquo; From DR Horton to B. and JC Abbott, Lot 65 of Oaks on Main Subdivision, Mooresville, $217,000, on Aug. 20.

raquo; From Legacy Village Mooresville to Martin Real Properties, 128 Steinbeck Way, Mooresville, $127,000, on Aug. 20.

raquo; From Wells Fargo to K. Saka, 1315 11th Street, Statesville, $14,500, on Aug. 20.

raquo; From Legacy Village Mooresville to PAM Family LLC, 121 G. Irving Avenue, Mooresville, $80,000, on Aug. 20.

raquo; From MI Homes of Charlotte to DR and LL Acton, 125 Fellspoint Road, Mooresville, $360,500, on Aug. 20.

raquo; From EB Patterson to DM and CJ Wood, 510 E. Broad Street, Statesville, $102,000, on Aug. 20.

raquo; From Branch Banking and Trust Company to AM and SR Fulp, Lot 39 of Dogwood Estates Subdivision, Troutman, $162,000, on Aug. 20.

raquo; From JC and WL Rogers to SG Johns, 137 Ivy Creek Lane, Mooresville, $95,000, on Aug. 20.

raquo; From RN and KP Rogerson to TE Warlick, Jr., Lot 37 Poplar Grove, Mooresville, $360,000, on Aug. 20.

raquo; From B. Jarding and K. Lauerman-Jarding to TD and SK Stairwalt, Lot 174 Curtis Pond, Mooresville, $194,000, on Aug. 20.

raquo; From MS Somoskey and JA Mortimer-Somoskey to NE Crisan and JR Mount, Lot 131 Queens Cove, Mooresville, $96,000, on Aug. 20.

raquo; From The Bank of New York Mellon to Axelrod, 843 E. Center Ave., Mooresville, $46,000, on Aug. 20.

raquo; From JD and RB Kelley to AD and JD Matchen, 176 Edgington Street, Mooresville, $170,000, on Aug. 21.

raquo; From Deutsche Bank National Trust Company to J. and T. Deroos, 477 Stonemarker Road, Mooresville, $550,500, on Aug. 21.

raquo; From EA Gromis to Krohn Real Estate, Lot 104 of Talbert Pointe Business Park, Mooresville, $327,000, on Aug. 21.

raquo; From JH and RE Adams to RJ and KJ Newman, 1424 Dunlap Gate Road, Statesville, $1,000, on Aug. 22.

raquo; From RJ and KJ Newman to JH and RE Adams, 1402 Turnersburg Highway, Statesville, $10,000, on Aug. 22.

raquo; From Lennar Carolinas to J. Brittain, Lot 67 of Wellesley East Subdivision, Mooresville, $203,000, on Aug. 22.

raquo; From J. and G. Ianco to MJ and LA Ahuna, Lot 168 of Linwood Farms Subdivision, Mooresville, $350,000, on Aug. 22.

raquo; From Greg Biffle Inc. to NGK Ceramics USA, 0.8 acres in the Coddle Creek Township, Mooresville, $52,000, on Aug. 23.

raquo; From DD and TG Blakenship to M. and CA Springer, Lot 19 of Canterbury Subdivision, Mooresville, $117,000, on Aug. 23.

raquo; From A. and M. Esposito to WJ and TT Gander, Lot 18 of Cornelius Estates, Mooresville, $230,000, on Aug. 23.

raquo; From C. Forberg to CC and SS Aley, Lot 69 of North Shore II Subdivision, Mooresville, $379,000, on Aug. 24.

raquo; From SC and CC Cogar to MJ and KA OBrien, Lot 21 Beacon Pointe Subdivision, Mooresville, $430,000, on Aug. 24.

raquo; From B. and RF Johnson to TL and BA and LA Mitchell, 194 Ringneck Tail, Mooresville, $445,000, on Aug. 24.

raquo; From TR and TH Watts to 164 American Way, LLC, 154 Orbit Road, Statesville, $160,000, on Aug. 24.

Tracking Change

September 20, 2012

Tracking Change

Commercial Property Asset Management Software Comes of Age

By Dees Stribling

At the end of Raiders of the Lost Ark, the Ark of the Covenant becomes lost again in an FDR-era federal government warehouse. Had the government had a better automated asset management system (not that computers existed then), the relic might not have disappeared quite so readily, since at its heart asset management involves the close tracking of physical or intangible assets as time passes to determine the best courses of action to maximize their use, maximize returns and minimize the costs associated with them.

Tracking real estate assets is a good deal more complicated than tracking items in a warehouse. Yet collecting data from commercial real estate assets is essential, since it helps management make the best decision about holding, selling, making improvements or other revenue-enhancing decisions that ultimately affect a company’s bottom line or the returns it can offer investors. Bringing together the various streams of data from a portfolio of assets to offer a coherent picture is exactly what certain kinds of asset management software have evolved to do, and the evolution continues to improve the systems’ capability and scalability.

“I feel that a great asset management system is one that adds value to each step of the real estate life cycle–from acquisition to disposition. Increasing operational efficiency through mobile workflows and approvals is a growing area of interest in the lead-to-lease process,” observed Rob Teel, vice president of global solutions for Yardi Systems Inc. “Secondly, the concept of centralized content management, from marketing collateral to legal documents, is driving integration to Microsoft’s SharePoint platform. Finally, only with a strong business intelligence platform can you analyze the health of a portfolio and identify acquisition and disposition opportunities that will increase market value.”

Noted Wise Cho, CFO of Archibus, “Good CRE asset management software allows users throughout an organization to easily collaborate on strategic and operational decisions, to effectively manage returns on assets for an organization. This requires an integrated platform for management of real estate, facilities and infrastructure to effectively and efficiently support an organization’s overall objectives.”
Since each commercial real estate owner is going to have different needs for its asset management system, Cho also recommends “executives first review business results as demonstrated by client success stories and best practice adoption and future technology direction as evidenced by a significant user community. Deployment successes are key to evaluating such systems.”

Asset management software should include a number of capabilities, Cho noted, such as geospatial applications that give property managers the ability to review and analyze performance, as well as offer reports to tenants that display available spaces, rent rates and so forth. Such software should also track asset use in a way that optimizes a portfolio for current and future needs. “We recommend that asset management software include integrated capabilities to manage asset use and requirements at both the strategic and operational levels,” he said.

Among other functions, any asset management software worth its salt is going to handle performance measurement, investment accounting and reporting to investors. Real properties are so complex financially that these tasks must be automated, even for relatively small portfolios. The overarching goal is to provide information to managers so they can make better decisions about the portfolio.

Performance measurement is a critical component of what asset software systems do, and software is becoming increasingly granular in measuring performance. Not too many years ago, it was enough to track energy expenses in their most basic form: how much a building needed to spend over the course of a day or a month or a year for HVAC, electric and other systems. Now sophisticated software–as much property management as asset management–can pinpoint which light fixtures are being inefficient, the better to manage the cost associated with a portfolio. That might sound like purely a property management function, but going forward, the value of a portfolio will partly be determined by its energy efficiency or other green characteristics.

As for investment accounting, asset management software allows managers to easily oversee complicated commercial real estate structures. It does not take too many layers of ownership or other hierarchies across a portfolio for things to become mind-bogglingly complex. Good asset management software sorts out the complexities and presents them in an understandable form, including investment or ownership structures and cash flow between those structures, among outside investors or across national boundaries–which might involve multiple currencies and the vagaries of exchange rates.

Moreover, good asset management software has another important function: the presentation of that information. Good software makes it relatively easy to visualize a particular set of important data, typically through easily accessible dashboards. The use of dashboards ought to, at a glance, make it easy to understand the status of, for example, individual assets as measured by various metrics.

Good asset management software also helps provide transparency to investors and stakeholders when it generates the aforementioned coherent information. The importance of this function cannot be underestimated in a world of global investors leery of infusing capital into commercial real estate structures that seem opaque. Software that helps a company generate useful, easy-to-understand, professional-looking materials for investors will pay for itself in short order.

Capitol starts demolition of new illegal structures in Apas

THE Cebu provincial government started tearing down newly built illegal structures in the province-owned lots in Apas, Cebu City.

Three structures were demolished by the Cebu Provincial Real Properties Protection Task Force.

Ten more will soon be cleared, said Ramil Ayuman, Apas barangay captain.

He said there wasn’t any resistance or commotion, only queries.

“A certain Fernandez approached me and said that Wilson Peria, president of the association is asking for the court order,” said Ayuman.

Ayuman explained that it’s not a court orderered action but a “summary demolition” as stated in a Capitol memorandum dated August 31 that directed against new structures built on province-owned lots.

A copy was given to barangay captains of Busay and Apas, the Office of the Building Official, Kenneth Enriquez, and Cebu Provincial Police Director Patrocinio Comemdador, Jr.

These new structures include a riprap and a fence, Ayuman said.

The “illegal structures” in Provincial Lot 1179 were documented and reported by Capitol security guard Romelito Bajenting.

Oher new structures were put up by parties without permission from Capitol authorities on September 4 and 5.

“There’s malice in their building of these structures,” said Ayuman.

The task force is coordinating with barangay officials of Busay and Apas.

Ayuman urged people to report new structures built within the provincial lot to Provincial Treasurer Roy Salubre.

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Investor Acquires AT&T Central SD Bldg for $6.2M

A private investor purchased the industrial facility at 4772 Alvarado Canyon Rd. in San Diego, CA from Dano Alvarado LLC for $6,225,000, or about $283 per square foot. ATT is the current tenant, and will occupy the facility until the first quarter of 2018.

The 22,000-square-foot service center was constructed in 1975. It is in Mission Gorge submarket and was fully occupied at the time of sale.

Paul Bonanno of Net Leased Real Properties, Inc. represented the seller, while Randy Getz of CBRE represented the buyer.

Please see the CoStar COMPS #2549669 for more information on this transaction.

Property developer to get back P359.6B tax overpayment after SC ruling

MANILA, Philippines–The Supreme Court ordered the Bureau of Internal Revenue to refund real property developer Fort Bonifacio Development Corp. (FBDC) a P359.65 million overpayment of output value-added tax (VAT) for the first quarter of fiscal year 1997 in connection with the sale and lease of lots in Taguig.

In a 17-page decision dated September 4, the high court, through Associate Justice Mariano del Castillo reversed the 2006 decision of the Court of Appeals agreeing with the Court of Tax Appeals in denying the company’s claim for tax refund.

The high court, voting 9-5, said FBDC is entitled to recover the amount it erroneously paid as output VAT since transitional input tax credit of P5.69 billion is more than enough to cover its out VAT liability for the said period.

It further pointed out that prior payment of taxes is not required to avail of the transitional input tax credit. Instead, what is required is for the taxpayer to file with the BIR a beginning inventory.
The transitional input tax credit is not a tax refund per se but a tax credit, which is defined as an amount subtracted directly from one’s total tax liability, it added.
Contrary to the view of the CTA and the CA, there is nothing [in Sec. 105 of the National Internal Revenue Code] to indicate that prior payment of taxes is necessary for the availment of the 8% transitional input tax credit, the decision read.

The high court further pointed out that to require prior payment of taxes in this case is tantamount to both committing judicial legislation and rendering invalid Sec. 105 of the NIRC, which states that the transitional input tax credit shall be 8% of the value of the [beginning] inventory of the actual [VAT] paid on such goods, materials, and supplies, whichever is higher.

On Feb.8, 1995, FBDC bought from the national government a portion of the Fort Bonifacio reservation, now known as the Bonifacio Global City (BGC) in the city of Taguig.

When Republic Act 7716 (e-VAT law) took effect in 1996, it extended the coverage of VAT to real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business.

In September 1996, FBDC submitted to the BIR an inventory of all its real properties, the book value of which aggregated P71.23-billion. Based on this value, petitioner claimed that it was entitled to a transitional input tax credit of P5.7-billion, pursuant to Section 105 of the National Internal Revenue Code.

Then, it proceeded with the sale of lots in October that same year.

For the first quarter of 1997, it generated P3.68-billion from its sales and lease of lots, on which the output VAT payable was P368.54 million. Petitioner paid the output VAT by making cash payments to the BIR totaling P359.65 million, and crediting its unutilized input tax credit on purchases of goods and services of P8.88 million.

Realizing that its transitional input tax credit was not applied in computing its output VAT for the first quarter of 1997, FBDC on Nov. 17, 1998, filed with the BIR a claim for refund in the amount P359.65 million erroneously paid as output VAT for that period.

Due to the inaction of the BIR, petitioner elevated the matter to the Court of Tax Appeals, which on October 2000 denied the claim for refund.

The CA affirmed the CTA ruling upon the FBDC’s filing of a petition for review prompting the company to elevate the case to the Supreme Court.

Concurring with the decision were Associate Justices Presbitero Velasco, Jr., Teresita Leonardo-De Castro, Diosdado Peralta, Lucas Bersamin, Roberto Abad, Martin Villarama, Jr., Jose Perez and Jose Mendoza.

Associate Justice Antonio Carpio dissented and was joined by Chief Justice Maria Lourdes Sereno and Associate Justices Arturo Brion, Bienvenido Reyes and Estela Perlas-Bernabe.

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Religious and charitable institutions

THE Philippines grants both constitutional and statutory benefits to religious and charitable organizations.

Section 28(3) of Article VI of the Philippine Constitution grants religious and charitable institutions exemption from real property tax on all lands, buildings, and improvements, actually, directly, and exclusively used for religious, charitable, or educational purposes. Conversely, real properties of religious and charitable institutions not actually, directly, and exclusively used for religious, charitable, or educational purposes shall be subject to the real property tax (Systems Plus Computer College vs. Caloocan City, GR 146382, Aug. 7, 2003).

On the other hand, Section 30 of the Tax Code states that non-stock corporations or associations organized and operated exclusively for religious or charitable purposes shall be exempted from income tax provided that no part of its net income or asset shall belong to or inure to the benefit of any member, organizer, officer, or any person.

However, income derived from any of their properties, or from any of their activities conducted for profit regardless of the disposition made of such income, shall be subject to Philippine income tax.

Moreover, gifts or donations made in favor of a charitable or religious corporation, institution, or organization shall be exempt from the donor’s tax pursuant to Section 101(A)(3) of the Tax Code. The exemption is subject to the condition that not more than 30 percent of the gifts shall be used for administration purposes (BIR Ruling No. DA-212-02 dated Nov. 21, 2002).

All imported equipment that will enter the Philippines for purposes of religious and charitable activities must generally still be declared (Section 101, Tariff and Customs Code).

However, the following goods imported into the Philippines shall be considered “conditionally free importations” and are therefore exempted from import duties after complying with the formalities prescribed by the regulations as promulgated by the Commissioner of Customs:

Philosophical, historical, economic, scientific, technical and vocational books specially imported for the bona fide use and by order of any society or institution, incorporated or established solely for charitable purposes.

Bibles, missals, prayer books, and other religious books of similar nature and extracts therefrom, hymnal and hymns for religious purposes, specially prepared books, music and other instrumental aids for the deaf, mute or blind, and textbooks prescribed for use in any school in the Philippines: Provided, that complete books published in parts in periodical form shall not be classified therein (Section 105(s) of the Tariff and Customs Code).

Articles donated to public or private institutions established solely for educational, scientific, cultural, charitable, health, relief, philanthropic or religious purposes, for free distribution among, or exclusive use of, the needy (Section 105(u) of the Tariff and Customs Code).

The importation of automatic data processing machines including laptop units, and other computer equipment are also free of customs duties pursuant to Chapter 84.71 of the Tariff and Customs Code.

* **

You may contact the author at

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Commercial real estate industry contributes over $63 billion to Canadian economy

TORONTO, Sept. 19, 2012 — /CNW/ – The commercial real estate sector (CRE
Sector) makes a substantial contribution to the Canadian economy,
generating $63.3 billion in economic activity in 2011, according to a
groundbreaking new research report from the Real Property Association
of Canada (REALpac) and the NAIOP Research Foundation. To put this
value into perspective, the economic activity of the Canadian CRE
Sector is more than twice as large as the entire economy of the
province of Newfoundland Labrador. The CRE sector adds to the
Canadian economy in various ways by:

  • Supporting 340,000 jobs, many of which are high-paying professional
    jobs, which is roughly equivalent to the total employment in the entire
    Canadian agriculture industry;
  • Generating $18.1 billion in personal income, related to labour income
    and other sources of income, which is more than twice the labour income
    of the Canadian agriculture, forestry, and fishing industries combined;
  • Generating $12.5 billion in corporate profits earned by many small and
    medium companies, as well as some of the largest pension funds and
    insurance companies in Canada;
  • Contributing $7.2 billion in personal and corporate income tax revenues
    for the federal and provincial governments; and ultimately
  • Accounting for $32.4 billion in total net contribution to Canadas GDP,
    which is more than the total GDP of New Brunswick.

Prepared by Altus Group Economic Consulting, The Contribution of the
Commercial Real Estate Sector to the Canadian Economy shows that
capital investment in the CRE Sector totalled some $21.6 billion in
2011, accounting for about half of the total spending in Canada on
non-residential construction. Some $14.9 billion was spent on new
buildings; the rest ($6.7 billion) accounted for capital improvements,
renovations and the upgrading of existing buildings.

The on-going operations of CRE Sector buildings also generated $3.5
billion in building management fees and almost the same amount for
commercial brokerage fees from sales of commercial properties in 2011.

The CRE Sector also generates an array of other benefits to the national
economy such as the promotion of economic development and accommodation
of employment growth. In addition, properties owned by the CRE Sector
provide substantial revenue to municipalities and school boards across
Canada through realty taxes.

The CRE Sector plays an important role in Canadas economy and the
quality of life for all Canadians. Development and construction of
commercial real estate buildings, and subsequently their daily
operations, creates directly thousands of jobs and adds tremendous
value to the Canadian GDP. Beyond the strict numbers of economic
activity, spinoff benefits, jobs created, income earned and taxes
generated, the CRE Sector is also responsible for imparting a
tremendous benefit to communities across Canada by providing
high-quality workspaces for millions of Canadians and places for
Canadians to live, eat, shop and play.

To download The Contribution of the Commercial Real Estate Sector to
the Canadian Economy, please go to

About the Real Property Association of Canada
REALpac is Canadas premier industry association for investment real
property leaders. Our mission is to collectively influence public
policy, to educate government and the public, and to ensure stable and
beneficial real estate capital and property markets in Canada.

REALpac members currently own in excess of $180 Billion CAD in real
estate assets located in the major centres across Canada. Members
include real estate investment trusts, publicly traded and large
private companies, banks, brokerages, crown corporations, investment
dealers, life companies, lenders, and pension funds. For more
information, please visit us at

About NAIOP and the NAIOP Research Foundation
NAIOP represents commercial real estate developers, owners and investors
of office, industrial, retail and mixed-use properties. It provides
strong advocacy, education and business opportunities, and connects its
members through a powerful North American network. For more
information, visit

The NAIOP Research Foundation was established in 2000 as a 501(c)(3)
organization to support the work of individuals and organizations
engaged in real estate development, investment and operations. The
Foundations core purpose is to provide these individuals and
organizations with the highest level of research information on how
real properties, especially office, industrial and mixed-use
properties, impact and benefit communities throughout North America.
The initial funding for the Research Foundation was underwritten by
NAIOP and its Founding Governors with an endowment fund established to
fund future research. For more information, visit

About Altus Group Limited
Altus leads the global real estate industry in offering professional
real estate advisory services, data solutions and intelligence about an
organizations assets, generating a wealth of knowledge and insight.
With a staff of over 1,700, Altus has a network of over 60 offices in
14 countries worldwide, including Canada, the United Kingdom,
Australia, Asia and the United States. We operate five interrelated
Business Units, bringing years of experience and a broad range of
expertise together into one comprehensive platform: Research, Valuation
and Advisory; Cost Consulting and Project Management; Realty Tax
Consulting, Geomatics and ARGUS Software. Altus#x2B9; clients include banks,
financial institutions, governments, pension funds, asset and fund
managers, developers and landlords and companies engaged in the oil and
gas industry. Visit us at

About Altus Group Economic Consulting
Altus Group Economic Consulting was formed in February 2007 when Clayton
Research Associates Limited (est. in 1972) joined in Altus Group. Altus
Group Economic Consulting is a group of urban and real estate
economists and provides strategic advice and information to both
private and public sector clients across Canada. The division
specializes in real estate market analysis, land use planning issues,
property investment and financing, and building products and technology
analysis. Altus Group Economic Consulting has gained a reputation for
astute and independent advice and analysis, based on extensive in-house
expertise, a unique information base, leading edge analytical
techniques and extensive contacts throughout Canada.

SOURCE Real Property Association of Canada

Estate tax avoidance, consequences–III

RIGHTLY or wrongly, people have this notion that establishing a holding company is the best way to avoid estate taxes especially where real properties are concerned. The idea is to incorporate the real properties by exchanging them for shares of stock in a holding company, such that titles to the real properties are transferred to the holding company.

TEXT-Fitch affirms Interproperties’ IDRs at ‘BB-‘

Sept 21 – Fitch Ratings has affirmed the ratings of Interproperties Holding
(Interproperties) as follows:

–Foreign currency Issuer Default Rating (IDR) at BB-;
–Local currency IDR at BB-;

Interproperties Finance Trust (IFT):
–Foreign currency IDR at BB-;
–Local currency IDR at BB-;
–USD185 million senior secured notes at BB-.

IFT, the issuer of the notes, is a trust constituted under the laws of the
Cayman Islands solely to issue the secured notes. The notes are structured as if
they were senior secured obligations of Interproperties.

The Rating Outlook is Stable

Interproperties ratings reflect its solid business position in Perus shopping
center industry with participation in eight shopping centers, stable and
predictable cash flow generation, and the low working capital requirements
nature of the industry. Incorporated in the ratings is the companys stable
revenue stream derived from its lease portfolio and the credit profile of its
main tenants. The lease revenues are predominately fixed in nature and also
provide for the pass-through of ongoing maintenance and operating expenses for
the companys properties, which lowers business risk. Factors that constrain the
rating are limited asset and tenant diversification, high leverage, execution
risk related to its capex plan.

Integration to Major Peruvian Retail Operator Incorporated:

The companys operations complement a diversified retail platform as
Interproperties is integrated as a central component of the business strategy of
the retail holding company Intercorp Retail Peru, which is oriented to expand
its operations in the supermarket, pharmacy, department stores, and home
improvement retail formats. The expected business growth in Intercorp Retail
Perus operations ensures high occupancy levels for the Interproperties assets
and is the main driver behind Interproperties important capex plan. As of June
30, 2012, approximately 70% of the companys total GLA was occupied by tenants
that belong to the same economic group.

Positive Business Environment:

Interproperties is expected to continue to benefit from the strong industry
fundamentals as a result of a positive macroeconomic environment coupled with a
limited supply of leasable shopping areas. Perus favorable economic environment
has led to increases in disposable income, which in turn has boosted retail
sales growth at a higher rate than Perus inflation rate and GDP growth.
Furthermore, there is a limited supply of gross leasable area in the shopping
centers, and, therefore, an inadequate supply of space to meet the demands of
the main retailers. The ratings reflect the view that the company will continue
to benefit from the countrys positive business environment. The Peruvian
economy is forecasted to post growth rates of 5.8% and 6.2% during 2012 and
2013, respectively, after growing by 6.9% and 8.8% in 2011 and 2010,

Operating Metrics Trending Positive, Limited Diversification:
The companys operational performance reflects its portfolio quality, evidenced
by the high level of occupancy, positive trending in tenant sales, and rent per
square meter. Interproperties achieved a 98% occupancy rate during the second
quarter of 2012. This compares with 97% during 2Q2011. The companys tenant
consolidated sales totaled USD196 million during the first half of 2012
(1H2012), representing increases of 42% over 1H2011, while same sales store
(SSS) during 1H2012 increased by 16% versus 1H2011. In addition, the company had
a 26% increase in the level of rent per square meter (m2) to during 1H2012. The
companys revenues for the last 12 month (LTM) ended in June 2012 was
approximately USD25.1 million, adjusted by the effect of the change in fair
value of assets (USD6.9 million).

The ratings factor Interproperties geographic, income, and tenant
diversification. The company has operations in eight malls. The companys three
largest malls are Real Plaza Huancayo, Real Plaza Primavera, and Real Plaza
Arequipa that represent approximately 19%, 18%, and 16%, respectively, (or 53%
combined) of the companys total revenue. In addition, the companys tenant
composition is concentrated as its 10 most important tenants represent
approximately 45% and 72% of the companys total annual rent revenue and total
GLA, respectively. This concentration is counterbalanced by the credit quality
of these tenants.

Capex Plan to Increase GLA 80% by 2014:
Interproperties is currently implementing an aggressive capex plan with several
greenfield and expansion projects, which are expected to be funded with the
companys liquidity, cash flow generation (EBITDA), and equity increases During
the LTM ended June 2012, the company added approximately 25,641 square meters to
its gross leasable area (GLA) for a total GLA of 191,140 square meters. The
companys capex plan for 2012 and 2013 is expected to reach levels of
approximately USD100 million and USD115 million, respectively, increasing the
companys total GLA to 249,615 square meters and 346,585 square meters by the
end of 2013 and 2014, respectively.

The company has adjusted its original plan (September 2011) by giving priority
to complete expansion projects in several of its shopping centers during 2011-12
period, while the Salaverry project, which was initially scheduled to be
completed by the end 2013 with an original GLA target of 66,000 square meters,
has been rescheduled and is now expected to be opened in 2014 and will add
73,642 square meters. The companys implementation of its capex plan should
increase cash flow generation. During LTM June 2012, the companys EBITDA was
USD19 million, Fitchs base case considers Interproperties EBITDA (annual
basis) will be around USD30 million by the end of 2013.

Leverage Expected to Remain High during 2012-13 Period:

Interproperties had USD199 million of debt at the end of June, resulting in a
total debt-to-EBITDA ratio of 10.4x. Business deleverage is expected to start
taking place as projects are completed, resulting in a decline in the companys
forecasted gross financial leverage to around 9x and 7x by the end of 2012 and
2013, respectively. FCF is expected to be negative during 2012-13 period –
driven by the capex plan. Equity infusions should support the financial needs of
the company during 2012-13 period. Interproperties is in compliance with the
covenants related to the secured notes as well as bank loans.

Adequate Liquidity and Good Collateral Support:

The secured notes (USD185 million) are the main component of the companys total
debt of USD199 million by the end of June 2012, considers only interest payments
during the first three years. The notes structure provides financial
flexibility to the company to complete the capex plan and increase its cash flow
generation. Interest payments related to the secured notes are estimated around
USD16 million per year during 2012-14 period. In 2015, the company will start to
face a total amount related to the secured notes in debt service of principal
and interests of USD25.4 million, which should be covered by the expected EBITDA
levels at that point in time.

Positively incorporated, the notes are secured by encumbered assets that are
composed by real properties with a commercial value of approximately USD267
million (net of secured loans) by the end of June 2012, which results in a
current LTV ratio of 69% for the secured notes.

Rating Drivers:

Key rating drivers include the development of the Peruvian macroeconomic
environment in which the company operates. The Stable Outlook reflects Fitchs
expectation that Interproperties will complete its capex plan as scheduled and
reach EBITDA levels by the end of 2013 that would be sufficient to cover
principal and interest payments. The Stable Outlook also incorporates the view
that the companys adjusted gross leverage will be around 7x by the end of 2013.

Positive Rating Actions: Interproperties ratings could be positively affected
by significant improvement in its cash flow generation, credit metrics, and
collateral support due to capex plan completion ahead of original schedule. An
upgrade is not likely to occur until the company completes its capex plan,
reverses its free cash flow trends and lowers leverage; which is not expected to
occur during the next 12-month period ended in June 2013.

Negative Rating Actions: Delays in the companys capex plans for 2012 and 2013
would likely result in a negative rating action. A rating downgrade could be
triggered by a decline in the Peruvian macroeconomic environment in which the
company operates, and/or delays in the execution of the capex plan, resulting in
a deterioration of the companys credit profile and collateral support.

Additional information is available at The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
–Corporate Rating Methodology (Aug. 12, 2011);
–National Ratings Criteria (Jan. 19, 2011).

Applicable Criteria and Related Research:
Corporate Rating Methodology
National Ratings Criteria