The Measure ULA Net-Proceeds Trap
Measure ULA is often referred to as the “mansion tax,” which has created some confusion among commercial property owners. It also applies to qualifying commercial real estate transactions within the City of Los Angeles, including shopping centers.
For transactions closing after June 30, 2026, the current rates are:
4% on transactions over $5.4 million and below $10.9 million
5.5% on transactions of $10.9 million or more
What matters most is how the tax is calculated. Once a transaction crosses the applicable threshold, the percentage applies to the full transaction value, not simply the amount above it. For a property trading close to one of those numbers, that can change the sale math quickly.
A higher price can produce a lower net
Consider a property that could realistically trade near the first ULA threshold. A sale at $5.4 million would not trigger the 4% ULA tax. Move the price just above that threshold, and the tax applies to the entire transaction.
Suddenly, the extra sale proceeds may not be enough to offset the additional tax. This is one reason I do not recommend looking at pricing in isolation. If a property is close to a threshold, we need to know what each realistic sale price actually means to the seller after closing costs.
Sometimes the highest offer is still clearly the best offer. Sometimes it is not.
The number I want owners looking at
Before setting a price or accepting an offer, I want to see the net sheet. That means taking the expected sale price and accounting for Measure ULA, brokerage commissions, closing costs, loan payoff, and other transaction-specific expenses.
Only then can you compare offers on an equal basis.
A $6 million offer sounds better than a $5.4 million offer. But what matters to the owner is the difference between the two numbers after everything comes out.
The sale price tells you what the buyer is paying. The net sheet tells you what you are keeping.
ULA should influence the strategy, not dictate it
I have seen owners look at Measure ULA and immediately conclude that they should not sell. I would not make the decision based on the tax alone.
There are several other questions that matter. What is the property worth in today's market? How strong is buyer demand? Where are cap rates? What does the rent roll look like? Are major leases approaching expiration? Does the property require additional capital? Would refinancing make sense? Does the owner want to continue managing the asset?
An owner may decide that holding is the better move. Another may have an opportunity to sell at a price that still makes sense after ULA.
The important thing is to know the numbers before making that decision.
If you may sell, start the analysis early
You do not need to be ready to list a property to start evaluating your options.
If a sale is possible within the next year, I would begin with a current valuation and run several realistic net-proceeds scenarios. For properties near a ULA threshold, I would specifically compare what happens on both sides of that threshold.
Owners considering a 1031 exchange should also begin those conversations well before a transaction is underway. Waiting until a buyer is already in place can unnecessarily limit your options.
The goal is to go into the market knowing what price makes sense, what you expect to net, and what outcome you are trying to achieve.
For LA shopping center owners, Measure ULA has made that preparation much more important. A strong sale is not simply the transaction with the biggest number attached to it. It is the transaction that leaves the owner with the best overall outcome.
Considering selling your shopping center? Click here to contact us. Our team is happy to help you evaluate your property, current buyer demand, and potential net proceeds before you go to market.