- The Washington Times - Friday, December 20, 2002

High taxes in Germany, and the possibility of more increases, could lead to more real estate investment here in the United States.

German Chancellor Gerhard Schroeder this week announced plans to introduce a 15 percent capital-gains tax, and under special rules real estate gains would be taxed more than any other investment.

The capital-gains announcement comes on the heels of numerous tax increases instituted by Mr. Schroeder, and news that the government might increase taxes on social security contributions by businesses. The chancellor has said raising taxes is necessary in order to invigorate the German economy, which has seen little to no growth this year.

"This will be even more of a motivation to put more money outside Germany and in the U.S.," said James Fetgatter, chief executive of the Association of Foreign Investors in Real Estate.

Under the proposed capital-gains tax, income from securities and real estate sales would be taxed at 15 percent. But under law, only half of the income from securities can be taxed, making the real tax rate on securities about 7.5 percent.

Germany currently taxes about half of the income from people in the highest tax bracket. In the United States, the highest rate of taxation of income is about 39 percent, and is expected to decline gradually over the next 10 years. Furthermore, overseas investments in the United States are taxed in the United States and cannot then be taxed in the home country. And, foreign investors are taxed based on their income in the United States not their total combined income meaning that they could possibly be taxed at a lower rate, Mr. Fetgatter said.

German investment in U.S. real estate is also expected to increase because of a law passed over the summer allowing certain German funds to place more money in assets overseas.

In the Washington area, German investors have not purchased any big office buildings recently. But discussions are said to be lively. Jamestown, a German real estate fund, was believed to be involved in negotiations to buy One and Two Independence Square in Southeast, before it was eventually purchased by Wells Real Estate Investment Trust for $345 million, the biggest real estate transaction this year.

Movement on the Pike

The Arlington County Board this week approved several amendments to the county's general land-use and transportation plans, paving the way for further changes that could lead to the revitalization of Columbia Pike.

The board went against the recommendation of the county Planning Commission, which on Dec. 10 said it preferred to have more time to gather information on what the changes would mean to the county.

Key items approved by the county board include:

•Amendments to allow for the construction of several two-lane streets through neighborhoods along Columbia Pike, in order to relieve congestion in proposed commercial areas.

•Switching the general land-use designations of some low-density residential areas to allow for commercial development.

•Establishment of a fund to provide financial assistance to developers working on projects that will help "initiate and anchor" the Columbia Pike revitalization.

In other news

•MCI has decided to lease its two buildings in Pentagon City to the Transportation Security Administration. The agency will pay $37.25 per square foot and occupy about 150,000 square feet by March. Eventually, the TSA will occupy both buildings, totaling just under 500,000 square feet.

Property Lines runs Fridays. Tim Lemke can be reached at tlemke@washingtontimes.com or 202/636-4836.

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