Tag Archives: Jason Wolf


Philadelphia’s Proposed One Percent Tax on New Construction

One Percent Tax on New ConstructionIs Philadelphia’s proposed one percent tax on new construction a good compromise or a fools bargain? The Philadelphia City Council announced new legislation on April 11, 2018, that includes a new one percent tax on new construction that would raise revenue for the Housing Trust Fund, the city’s dedicated source for developing new affordable housing, preserving existing housing and preventing homelessness.

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WHAT IS THE TAX/IMPACT FEE?

Proposed Bill No. 180351 would impose a new Construction Impact Tax/Impact Fee on all projects that are eligible for the city’s 10-year tax abatement. The funds raised from the tax are intended to help the Housing Trust Fund provide funding for more affordable and workforce housing development, which would be available to both nonprofit and for profit developers.

HOW MUCH IS THE TAX?

The tax/impact fee is 1 percent of the stated cost of construction, including repairs, construction, additions and alterations of the building and is paid when the applying for a building permit. (Note that there is some discussion to change the time when payment would be due from the building permit application to the time a zoning permit is filed.) While a one percent tax on new construction may not sound like a lot, consider the tax on a $1 billion new technology center, a $300 million new multifamily high rise or a new $800 million stadium. In each instance, the tax for these projects would be $10 million, $3
million and $8 million, respectively.

ARE CERTAIN TYPES OF BUILDING EXEMPT?

As currently drafted, all buildings that are “for human occupancy” and that are eligible for the 10-year tax abatement would be subject to the tax/impact fee. These buildings would include not only residential structures, but commercial and industrial structures as well. Rather than single out one particular kind of developer (i.e., multifamily developers), the proposed tax would apply to any project that qualifies for a 10-year tax abatement in Philadelphia.

COALITION BUILDING

There appears to have been more compromise than usual between the trades, the Building Industry Association, City Council members, members of the development community and other civic-minded individuals as the merits and concerns over the 10-year tax abatement were debated, as was the Mixed Income Housing Bill, both being offered as potential solutions for addressing Philadelphia’s affordable and workforce housing needs.

NOVEL APPROACH

Drexel University’s Lindy Institute for Urban Innovation Senior Research Fellow Kevin Gillen told the Philadelphia Business Journal, “The impact fee being considered here is a truly unique hybrid. It is tied to the abatement rather than to inclusionary zoning. And it is the type of program that is traditionally used by low-cost, low-tax Sun Belt suburbs that have experienced decades of rapid population growth, but the bill’s sponsors want to apply it to a relatively high-cost, high-tax Northeastern city that until recently has experienced decades of depopulation.”

Impact on the Mixed-Income Housing Bill

If the new bill is passed, the Mixed-Income Housing Bill will become completely optional and will be amended to include numerous beneficial bonuses such as extra height (7 feet) and density (25 to 50 percent bonus) in RM-1, CMZ-1/2/2.5, amongst other potentially attractive zoning bonuses. These bonuses will continue to have a mixed-income housing requirement or payments in lieu of an additional 1 to 2 percent of construction costs depending on the amount of the
bonus.

EFFECTIVE DATE

As proposed, the effective date would be July 1, 2018, although some are already pushing for a later effective date of January 1, 2019. Duane Morris attorneys will continue to monitor and report on any development in this issue.

FOR MORE INFORMATION

If you have any questions about this Alert, please contact Brad A. Molotsky, any of the attorneys in the Real Estate Practice Group, attorneys in the Project Development/Infrastructure/P3 Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm’s full disclaimer.

FOR MORE INFORMATION CONTACT:


WCRE Opens Center City Philadelphia Office

New Exclusive Assignments and High Volume of Transactions Lead Growing Commercial Real Estate Firm to Expand into Philadelphia’s Central Business District

June 5, 2018 -Marlton, NJ – Wolf Commercial Real Estate (WCRE) is pleased to announce that it will be opening a new office at 1601 Market Street in Philadelphia. This will be the firm’s third office, in addition to its headquarters in Marlton, NJ and an office in King of Prussia that opened in 2014.

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“We’ve been serving numerous clients in and around Center City for a while now, so it makes sense to strengthen those relationships by opening an office here,” said Anthony Mannino, chief operating officer of WCRE. “This move will help create more opportunities for our professionals to network and collaborate with clients and partners, and to expand our commitment to community initiatives.”

Since its founding in 2012, WCRE has grown into a market leader in Southern New Jersey and southeastern Pennsylvania. The team has set a new standard in serving the needs of owners, tenants, and investors. The firm currently has more than 175 properties comprising 4.2 million square feet of office, retail, medical, industrial, flex and investment property in the region under exclusive watch.

Along with Mannino, WCRE’s Philadelphia team includes several well-known business leaders with deep roots in the city. Among them are Brian Propp, director of strategic relationships, Andrew Maristch, vice president corporate services & portfolios, Tony Banks, vice president, and Joseph Nassib, sales associate. Each brings a unique skill set, along with energy, passion, and the signature WCRE commitment to the community. Founding principal Jason Wolf, and Lee Fein, a senior vice president and industrial space specialist, will assist the Center City team from their respective bases in Southern NJ and King of Prussia.

Last year WCRE became affiliated with CORFAC International, a network of independently-owned, entrepreneurial commercial real estate firms with 78 offices worldwide. The move has helped elevate the firm and contributed to its latest expansion.

About WCRE

WCRE is a full-service commercial real estate brokerage and advisory firm specializing in office, retail, medical, industrial and investment properties in Southern New Jersey and the Philadelphia region. We provide a complete range of real estate services to commercial property owners, companies, banks, commercial loan servicers, and investors seeking the highest quality of service, proven expertise, and a total commitment to client-focused relationships. Through our intensive focus on our clients’ business goals, our commitment to the community, and our highly personal approach to client service, WCRE is creating a new culture and a higher standard. We go well beyond helping with property transactions and serve as a strategic partner invested in your long term growth and success.

Learn more about WCRE online at www.wolfcre.com, on Twitter & Instagram @WCRE1, and on Facebook at Wolf Commercial Real Estate, LLC. Visit our blog pages at www.southjerseyofficespace.com, www.southjerseyindustrialspace.com, www.southjerseymedicalspace.com, www.southjerseyretailspace.com, www.phillyofficespace.com, www.phillyindustrialspace.com, www.phillymedicalspace.com and www.phillyretailspace.com.

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Is the AIA Contract Set In Stone?

Is the AIA Contract Set In StoneIf you’re in the business of commercial real estate, you are bound to have come across the sometimes dreaded American Institute of Architects (AIA contract), the most commonly used contract for construction projects in the United States. We say that its sometimes dreaded because the form is lengthy and somewhat dense. There is also a misconception that because the contract is a pre-set form, it cannot be negotiated or amended. But as you know, everything can be negotiated.

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Below is a summary of some provisions in the AIA contract that you should pay particular attention to and if needed, should be negotiated in a way that helps your clients. While we are lawyers, the list below should not be taken as legal advice for you or your clients. Each deal and client is different and may require a different review of the contract. Should you need a legal review of a contract, please contact us.

PERIOD OF PERFORMANCE

Make sure that the commencement date and the substantial completion date of the project is a timeframe that makes sense and works for you. Not completing a project on time can lead to delay costs including liquidated damages and other ancillary costs of additional project construction.

PROGRESS PAYMENTS

Contractors want most of their payment at the beginning stages of the project while the other party always wants to hold money for substantial completion. You can negotiate the amounts and trigger dates for payment so that you can protect your client against delays in the project.

INDEMNIFICATION

Indemnification means that one contractual party agrees to assume responsibility for certain judgments resulting from third-party claims against the other party. This clause deserves special attention in every contract and should at the very least be made mutual so that each party gets its costs covered if it is sued because of something caused by the other party.

DELAYS

Delays are inevitable in many different kinds of projects. But the risk of dealing with the fallout from project delays can be managed through contract negotiation. You don’t want your client to bear the brunt of delay costs caused by the other party. Liquidated damages or other compensable damages can be negotiated here.

CONCLUSIONS:

Although the AIA contract is seen as a boilerplate static document, there are important provisions that should be on your radar and amended if necessary so that your client is protected. We suggest that any amendments be drafted by an attorney with experience in construction and ancillary industries.

For more information contact:

Marc Snyderman, Esq.
Snyderman Law Group
923 Haddonfield Road, Suite 300
Cherry Hill, NJ 08002
856.324.8267
E-mail: marc@snydermanlawgroup.com
Website: snydermanlawgroup.com

 

Antonella Colella, Esq.
Snyderman Law Group
923 Haddonfield Road, Suite 300
Cherry Hill, NJ 08002
856.324.8267
E-mail: antonella@snydermanlawgroup.com
Website: snydermanlawgroup.com

Why Commercial Property Investors are Overpaying on Income Taxes

Commercial Property Investors are Overpaying on Income Taxes

Commercial Property Investors are Overpaying on Income Taxes

Did you know that 9 out of 10 property investors are overpaying on income taxes? Year after year, the Federal Government has continued to incentivize those who invest in Commercial Property.
The IRS has established guidelines that, if ignored, cause commercial real estate investors to pay more in taxes
than they should.

What guidelines are being ignored by Commercial Property Investors? Those revolving around Accelerated
Depreciation; known in the taxation world as Property Cost Segregation.

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RAMIFICATIONS OF IMPROPER DEPRECIATION ALLOCATION
Most commercial property investors do not truly understand the substantial benefits of accelerated depreciation.
This is evidenced by our analysis of thousands of depreciation schedules over the years. We have found less
than 10% of investors are properly depreciating their properties. The most common misconception is, “I am
going to get this money anyway”. Is this a true or false statement?

Reasons Commercial Property Investors are Overpaying on Income Taxes

1. Capital Gains vs Ordinary Income Rates
Although the mechanics of these calculations are not always as simplistic as we will be making it for this
example, the short response is – increased depreciation leads to paying taxes at the capital gains rate as
opposed to the ordinary income rate. Since capital gains rates are likely much lower than the Investor’s income
tax rate, they would benefit from accelerated depreciation.

2. Time Value of Money
Simply put, your dollar is worth more today than it will be in the future. A tax dollar saved today therefore is
worth more than a tax dollar saved in the future. Why lock up a tax savings in your property for 27-39 years
when you can receive it today?

3. Catch-Up Depreciation
If you have not completed a Cost Segregation study on your property that you have held for a period of time,
did you know that you can capture your entire missed benefit immediately? The IRS allows you to complete a
481 adjustment thus enabling you to catch up all the missed accelerated depreciation into the current tax year.
This provision alone could save you hundreds of thousands immediately!

4. The Power of Cash in hand
You are a real estate “investor”. This means you understand the investing power of having funds in your hand
today. Cash today [in the form of tax savings] enables you to invest in additional properties. The benefits of this are exponential and allow continued growth of your investment portfolio. Correct allocation of real estate
depreciation is essential for Commercial Property Investors to effectively manage their tax situation. Are you
one of the 90% who are missing out on opportunities that 10% of your competitors are capturing?

Protecting Goodwill and Intellectual Property

Protecting Goodwill and Intellectual PropertyImagine building a company that took years to gain momentum, thousands of hours of labor, sleepless nights, hundreds of thousands of dollars in costs, and second mortgages on houses to obtain bank financing. Through your hard work and risk, the company is now financially successful and has established itself as a prominent provider/seller of [insert good or service here].

Unfortunately, your business did not a) adequately protect its intellectual property or b) conduct due diligence to ensure that the intellectual property it used was its own.

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Now, a competitor’s product/service has a distinctly similar name, a different competitor is using a markedly similar logo, and yet another competitor poached your employee who did not have a non-disclosure agreement/non-competition agreement and is now utilizing your company’s trade secrets against you. To top it all off, your company just received a cease-and-desist letter from a corporation on the other side of the country alleging that the company’s slogan infringes on their trademark.

These are but a few of the many scenarios that could occur when a company does not take proactive legal measures to protect its goodwill and intellectual property, and was likewise using intellectual property haphazardly and without ensuring that there was no other owner of that intellectual property or that appropriate licensing was obtained.

In an era of global business and competition, the names, logos, and slogans of products and services, trade secrets, and other intellectual property often start off with little commercial value, but upon establishing goodwill for the business and/or creating a popular product or service, the value of a trademark can exponentially increase. For instance, Forbes estimated the value of the trademark for Google® at over $40 billion dollars, or more than one-quarter of the company’s overall value (at the time o f the Forbes publication).

However, the value of trademarks and other intellectual property is not limited only to the technology industry. The same is true for real estate entities, developers, and affiliated businesses. Think of notable brands in real estate and development and it is trademarked – i.e. PREIT®, Vornado®, Toll Brothers®, Ryan Homes®, Chicago Title Insurance Company® – and the list goes on.

As such, this blog provides a basic overview of the three most common types of intellectual property encountered by small and medium-sized businesses.

Intellectual Property – TRADEMARKS

Most basically, a trademark is a brand name. A trademark or service mark includes any word, name, symbol, device, or any combination, used or intended to be used, to identify and distinguish the goods/services of one seller/provider from those of others, and to indicate the source of the goods/services. For instance, the words Facebook® and Microsoft® are both trademarked, as is Apple Computers’ partially bitten apple logo, and both McDonalds’s golden arches and its slogan “I’m loving’ it.”

Because trademarks serve as an indicator of the mark owner’s goodwill, federal trademark law was established to protect the unsuspecting public from confusing products/services and to prevent against attempts by unscrupulous competitors to deceive the public.

Federal trademark rights may be established by either being the first to use a mark in interstate commerce (a Section 1(a) filing), or a pr ospective mark may be reserved prior to use by filing an in tent-to-use application (a Section 1(b) filing). Although the law generally provides that the first user of the mark is entitled to legal protection, with or without a federal trademark registration, federal registration provides significant additional value as it allows for the ability to recover profits, damages, and costs against infringers, national notice of ownership of the mark, the presumption of the validity of the mark, access to federal courts, as well as incontestability status for the mark after five years of federal registration.

State registrations are also available, but do not offer the national, comprehensive protection of a federal trademark registration. In light of the significant benefits of federally registering trademarks (names, logos, and slogans), the ever-increasing value of intellectual property and goodwill to all businesses, the need to protect and distinguish a mark from that of a competitor, and to avoid claims of infringement, businesses must look closely at protecting their brand through trademark protection and likewise ensure their marks are not infringing on those of another business.

Intellectual Property – COPYRIGHTS

Similarly, copyrights protect literary, musical, artistic, and dramatic works such as novels, photographs, movies, songs, etc. Copyrights can also protect creative works outside of the entertainment industry, including articles, blog postings, course materials, advertising materials, designs, graphs, charts, etc.

Unlike a trademark which requires federal filing, a work is copyrighted as soon as it is created. However, benefits are gained by registering a work with the United States Copyright Office. Promptly filing the copyright notice allows the holder to file a copyright infringement lawsuit, provides prima facie evidence of the validity of the copyright, and also provides the holder with the ability to obtain certain damages and attorney’s fees upon prevailing in a copyright infringement lawsuit.

Conversely, while not all businesses produce copyrightable works, businesses must remain cognizant of utilizing the works of others without appropriate rights or licensing. The most common scenario for a business being sued for inadvertently infringing copyrights are entertainment/restaurant establishments showing professional sports games without an appropriate commercial license or playing music without an ASCAP license. However, businesses can also face infringement actions for using copyrighted images on their website, reproducing a chart, or other seemingly innocuous activities.

In short, creators benefit from copyright protection and should register the works they have created, and business (or anyone else) using copyrighted material should be aware of the licensing requirements prior to using such works in a commercial environment.

Intellectual Property – TRADE SECRETS

Trade secrets, confidential information, proprietary information, and the like, encompass a wide variety of information that a business intends to keep secret and which those outside of the business are not afforded access. Most famously, McDonalds’s Big Mac sauce and the recipe for Coca-Cola are such types of information. However, more mundane information that almost all businesses utilize may qualify as a trade secret or otherwise necessitate protection from general release to the public. This includes customer/client lists, vendor/supplier lists, processes, know-how, business plans, marketing plans, information on prospects, customer/vendor habits and preferences, financial/financing information, creations, inventions, intellectual property (even if unregistered), etc.

Trade secrets are protected at both the state and federal levels, and many states utilize the Uniform Trade Secrets Act as a basis for defining a trade secret and cause of action thereunder. While not all proprietary or confidential information constitutes a trade secret under statute, a substantial amount will. A trade secret is often defined as information with economic value that is not generally known to other persons or is easily ascertainable, and the owner of the information has taken reasonable efforts to maintain its secrecy.

Given the immense value of intellectual property, businesses must take appropriate efforts to safeguard their trade secrets, both ensuring internally that employees do not take such information with them to another employer or otherwise use the information for their own benefit, and externally, so that such information is not otherwise obtained by a competitor.

Conversely, in hiring an employee or engaging a contractor, a business must ensure that the potential employee/contractor is not disclosing protected trade secrets of a prior employer which could drag the business into a lawsuit for trade secret misappropriation.

As such, businesses should identify all of their trade secrets and employ appropriate electronic and physical safeguards to protect such information. Likewise, businesses should actively utilize confidentiality agreements with anyone privy to the business’s trade secrets to further protect against disclosure.

CONCLUSION

As intellectual property is a key asset to many businesses in the information economy, and is nevertheless important for protection of any business’s goodwill, it is essential to proactively protect intellectual property through means of trademark, copyright, or trade secrets protections, and to likewise remain cognizant of the intellectual property of others’ so as not to be subject to an infringement action.

Is It Time to Refresh or Expand Your Space?

Refresh or Expand Your SpaceYour business is growing and you like your current location, so you’ve decided to renew your lease and either refresh or expand your space. GREAT!

Ready to expand your space? Did you call the movers yet?

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That’s right. Movers. And contractors. And space planners. And IT specialists. And a host of other vendors that you haven’t even thought of yet. When you’re staying in the same location, the reality is that the To Do list can seem almost as overwhelming as if you were pulling up stakes and starting all over in a new venue. Because you ARE starting in a new venue. The address may be the same, but how you utilize the space to maximize productivity is a rare opportunity you need to take full advantage of. You have two options: refresh or expand. To capitalize on either one of these options, you need a detailed staging and logistical plan to minimize downtime and keep your employees as close to 100% productivity while you update or expand.

So where do you start? You hire a professional logistics management team to shoulder the responsibility of planning and executing the project. No matter how big or small your space, here’s what an experienced logistics management team brings to the table for each option…

OPTION #1: Refresh Your Space

Also called an office restacking, you need to look at this type of project as an employee retention tool. No doubt your business has markedly changed over the last 10 years, so your office environment needs to evolve to best support that shift in culture. Restacking changes and improves the look and feel of the work environment, and by redefining the space to include collaboration rooms/workspaces, you can change the corporate culture in the  link of an eye to catch up with the times. A refresh re-energizes your employees, and shows you value their presence. New paint, carpeting, furniture, lighting, bathrooms, and more will make employees happier when they are at work, and warmly welcome new clients into your space when they visit. It’s a win-win.

OPTION #2: Expand Your Space

Here the biggest opportunity is to redefine the space. Are you adding new employees? Consolidating employees
from another location? Expanding the space for client interaction? A space planner will help you understand how much new space you really need (square footage/head count), and how much you should allot to common areas, workstation areas, private office areas, client showrooms, product production space, etc. An experienced logistics management team knows exactly what questions to ask to make sure you have the most comprehensive staging and logistics plan possible, so no detail is overlooked and no opportunity is missed:

(1) Where are you going to temporarily move active files and personal contents during your office refresh or expansion?

(2) Does the furniture have to be removed (new carpet installation) or just lifted in place (carpet tile installation)?

(3) Should you upgrade the furniture, or re-use what you have?

(4) How can you maintain productivity when computers or data centers need to be disconnected, moved, and reconnected?

The bottom line is refreshing and/or expanding your office requires careful thought and planning to keep your business thriving. The right logistics management team will help you hit the ground running as you launch your business into its next growth stage!

About Argosy Management Group, LLC

Argosy Management Group (AMG) is a leader in office relocation and logistics project/move management. AMG services companies throughout the U.S. and worldwide. AMG delivers a wide range of comprehensive services:  move management and transition planning, space planning and furniture needs, office and industrial relocation and liquidation, storage solutions and asset management, furniture disassembly and installation, IT/ data center relocation, and rigging.

For more information, contact: Shawn O’Neil at 609-744-4112 or Paul Sipera at 609-760-8312, or visit
www.argosymg.com

Installment Sale of Commercial Real Estate Properties

Installment Sale of Commercial Real EstateLet’s explore using an installment sale to evenly distribute tax liabilities stemming from a commercial real estate transaction. Do you own a property that has appreciated considerably and that you want to sell? Are you concerned about incurring a large capital gains tax liability or worse – ordinary income recapture? One option is to structure the sale as an installment sale. Here the buyer pays the cost of the property plus interest in regular installments, perhaps for 5 years, enabling the seller to reflect the gain for tax purposes over the entire payment period. Alas, the installment sales method can’t be used for the following:

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• Sale of inventory. The regular sale of inventory of personal property doesn’t qualify as an installment sale even if you receive a payment after the year of sale.

• Dealer sales. Sales of personal property by a person who regularly sells or otherwise disposes of the same type of personal property on the installment plan aren’t installment sales. This rule also applies to real property held for sale to customers in the ordinary course of a trade or business.

• Stock or securities. You can’t use the installment method to report gain from the sale of stock or securities traded on an established securities market. You must report the entire gain on the sale in the year in which the trade date falls.

Items to note about installment sale transactions:

• Installment obligation. The buyer’s obligation to make future payments to you can be in the form of a deed
of trust, note, land contract, mortgage, or other evidence of the buyer’s debt to you.

• If a sale qualifies as an installment sale, the gain must be reported under the installment method unless you
elect out of using the installment method.

• Sale at a loss. If your sale results in a loss, you can’t use the installment method. If the loss is on an installment sale of business or investment property, you can deduct it only in the tax year of sale.

• Unstated interest. If your sale calls for payments in a later year and the sales contract provides for little or no interest, you may have to figure unstated interest, even if you have a loss.

Sellers who decide on this strategy are cautioned, however, that an installment sale carries more risk than an outright sale of the property. Here are some areas of concern this CPA believes the seller must review in depth with his/her seasoned attorney (and if you need one you can call us at Abo and Company or my buds at WCRE): Carefully assess the creditworthiness of the buyer and possibly obtain personal guarantees if the purchaser is a business; Evaluate the future income producing capability of the property to make sure it provides sufficient
cashflow to enable the buyer to make the payments; Use an interest rate competitive with current market rates so as not to squash the deal; and Obtain a significant enough down payment, perhaps at least 20%, to have a cushion if buyer default occurs, and to cover the expenses if foreclosure becomes necessary. Business property transactions are often complex, and the services of knowledgeable professionals can be vital in developing strategies that make it possible to bring a contemplated transaction to a successful conclusion.

FOR MORE INFORMATION:

Martin H. Abo, CPA/ABV/CVA/CFF is a principle of Abo and Company, LLC and its affiliate, Abo Cipolla Financial Forensics, LLC, Certified Public Accountants – Litigation and Forensic Accountants. With offices in Mount Laurel, NJ and Morrisville, PA, tips like the above can also be accessed by going to the firm’s website at www.aboandcompany.com.

Qualified Opportunity Zones and The Potential to Drive Community Development

Qualified Opportunity ZoneAn investment in a Qualified Opportunity Fund that is in turn invested within a Qualified Opportunity Zone is entitled to certain tax deferral of capital gains, certain basis step-up and, if held long enough, the ability to not have to pay tax on the appreciation of investment within the fund beyond the initial deferred gain.

On December 22, 2017, as part of Congress’ House Resolution 1, the concept of a Qualified Opportunity Zone (QOZ) was added to the toolbox of potential community development tools. In this Alert, we explain what a QOZ is and offer strategies to help real estate developers take advantage of the benefits of QOZs. In short, an investment in a Qualified Opportunity Fund that is in turn invested within a QOZ is entitled to certain tax deferral of capital gains, certain basis step-up (which will lower tax on sale/disposition) and, if held long enough (10 years or more), the ability to not have to pay tax on the appreciation of investment within the fund beyond the initial deferred gain. As explained below, QOZs are in low-income areas; thereby, investment in these areas is incented by the creation of the ability to defer gain within them.

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What is a Qualified Opportunity Zone?

A QOZ is a census tract that is located in a low-income community (LIC), i.e., an area designated as such due to it having a 20 percent poverty rate. The qualification process to designate QOZs will end on March 21, 2018:

• QOZs must be located within a LIC as shown on the census map.
• The governor of each state must nominate their desired LICs to the U.S. Treasury Department by

March 21, 2018. Each state may only nominate up to 25 percent of the eligible LICs within a given state, noting that up to five percent of the 25 percent may be non-LIC tracts that are contiguous to other applicable LICs.

What is the Benefit of a Qualified Investment in a Qualified Opportunity Zone?

If designated as a QOZ, the bill allows investors to defer short- and long-term capital gains realized on the sale of property if the capital gain portion of the sale or disposition is reinvested within 180 days in a Qualified Opportunity Fund (QO Fund).

Benefits of Investing Within a Qualified Opportunity Zone Fund

• Owners of low tax basis properties can sell these properties and defer the capital gains to the extent the gains are invested in a QOZ; and
• QOZs are likely to attract investor capital that is looking to defer capital gains, thereby making
the QOZs potentially more valuable than non-QOZ properties.

Recognition of Gain

• Gain is required to be recognized on the earlier of a disposal of the QO Fund investment or December 31, 2026.
• Gain is reduced over time in the following manner:
• The basis of the QOZ investment increases by 10 percent of the deferred gain if the investment is held for five years from the date of reinvestment; and
• The basis of the QOZ investment increases by 15 percent (i.e., an additional five percent) of the deferred gain if the investment is held for seven years from the date of reinvestment. In other words, the gain on which capital gains is paid is reduced to 85 percent of the original gain.
• Appreciation on investments within the QO Fund that are held for at least 10 years are excluded from gross income (i.e., if held for 10 years, the appreciation is not taxed).

What is a Qualified Opportunity Fund?

A QO Fund is an investment vehicle that is organized as a corporation or partnership for the purpose of investing in a QOZ property that holds at least 90 percent of its assets in QOZ property. Note, there are presently no limitations on the amount of the investment, and there are no overall limits on the total investment that the collective funds can make. Moreover, the QO Fund, if it so desires, could invest in Low Income Housing Tax Credit deals, historic tax credit deals and New Markets Tax Credit deals if it so desired within the QOZ.

Qualified Opportunity Zones Viewed as an Economic Tool

The permitted creation of a QO Fund that can: 1) receive appreciated property within 180 days of a sale or disposition; 2) appropriately shelter it with an applicable investment within a QOZ; and 3) enable up to 15 percent of the gain to be deferred until sale of the investment or December 31, 2026, enables a 15 percent increase in the basis of the asset that is subject to gain recognition, which results in a very powerful means to reduce applicable tax.

Moreover, if one does not sell or dispose of the property within the QO Fund in the QOZ for 10 years or more, the appreciation of such property (beyond the initial deferred gain, which is taxable), will be not be subject to tax. This potential to appropriately avoid capital gains on a future sale should encourage funds to be invested in QO Funds that will in turn invest in QOZs. These QOZs, as noted above, will be in LICs that might not otherwise have seen such an investment, which should thereby act as an economic driver within these more difficult investment areas.

Owners of properties within LICs should be considering whether to reach out to the applicable governing authorities within their state to have their properties tendered by their governor for inclusion within the QOZ designation. If a property is not proposed as a QOZ by March 21, 2018, the opportunity to be designated as a QO Z is likely to be lost forever (absent a future reopener, which is unc ertain).

Attorneys in the Real Estate Practice Group and the Corporate Practice Group at Duane Morris will continue to monitor and provide updates on any related developments once applicable regulations from the Treasury Department are issued.

If you have any questions about this alert, please contact Brad A. Molotsky, Arthur J. Momjian, any of the attorneys in the Real Estate Practice Group, attorneys in the Corporate Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm’s full disclaimer.

WCRE 2018 FIRST QUARTER REPORT

SOUTHERN NEW JERSEY & PHILLY CRE MARKETS SEE MODERATE GAINS AMID TAX REFORM OPTIMISM AND FINANCIAL MARKET SHAKINESS

April 10, 2018 – Marlton, NJ – Commercial real estate brokerage WCRE reported in its latest quarterly analysis that the Southern New Jersey market is in largely good shape, with moderate gains in leasing activity and strong fundamentals. The firm believes the market may be poised to take off as benefits of the new tax law begin to reverberate in personal and corporate checkbooks.

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“Our market appears to have picked up steam, with a healthy pace of business growth and continuing new investment,” said Jason Wolf, founder and managing principal of WCRE. “Despite corrections ending a long winning streak in the financial markets, the benefits of the new tax law should shore up commercial real estate, especially industrial and office demand.”

There were approximately 272,550 square feet of new leases and renewals executed in the three counties surveyed (Burlington, Camden and Gloucester), which was a gain of 23 percent over the previous quarter. Leasing picked up, and the sales market stayed active, with about 1.63 million square feet on the market or under agreement and an additional 320,691 square feet trading hands. The sales figure is a 36 percent increase over the previous quarter.

New leasing activity accounted for approximately 77.2% percent of all deals. Overall, net absorption for the quarter was in the range of approximately 105,250 square feet. Both of these figures represent large increases over the fourth quarter.

Other office market highlights from the report:

  • Overall vacancy in the market is now approximately 11.2 percent, which is more than a full point higher than the previous quarter. This may be attributed to large blocks of space returning to the market.
  • Average rents for Class A & B product continue to show strong support in the range of $10.00-$14.50/sf NNN or $20.00-$24.50/sf gross for the deals completed during the quarter. These averages have stayed within this range for most of this year.
  • Vacancy in Camden County improved steadily last year, but jumped nearly a point to 12.5 percent for the quarter.
    Burlington County vacancy was at 9.9 percent, which was also higher than the fourth quarter.

WCRE has expanded into southeastern Pennsylvania, and the firm’s quarterly reports now include a section on transactions, rates, and news from Philadelphia and the suburbs.

Highlights from the first quarter in Pennsylvania include:

  • Philadelphia’s office market saw a decrease in vacancy in the Central Business District during 2017 and Q1 2018, as demand for office space continues to be strong. Still, we see increasing employment and new construction, both of which bode well for continued strength.
  • Comcast’s second office tower, the Comcast Innovation and Technology Center, is a 59-story (1,121 feet), LEED Platinum certified skyscraper developed by Liberty Property Trust. The development, positioned in the heart of the CBD, will also include a Four Seasons Hotel. The project is estimated to cost $1.2 billion, is expected to be the tallest building in the United States outside of New York and Chicago, and will be the largest private development project in the history of Pennsylvania. Net of the hotel, the property is planned for 1,336,682 SF of office space. Comcast has signed a 20-year lease for 98% of the building, with the remainder available for lease. However, Comcast may fill the remaining space themselves.
  • The project is estimated to cost $1.2 billion, is expected to be the tallest building in the United States outside of New York and Chicago and will be the largest private development project in the history of Pennsylvania. Net of the hotel, the property is planned for 1,336,682 SF of office space. Comcast has signed a 20-year lease for 98% of the building, with the remaining available for lease. However, like with the Comcast Center original headquarters, they potentially may fill the remaining space themselves.
  • At 2400 Market Street, the new Aramark Headquarters is utilizing the former Philadelphia Market Design Center and will comprise the entirety of floors 5-9 on a long-term lease. Thus, the expansion (new inventory) is effectively 100% pre-leased. Estimated delivery is early 2018.
  • The Philadelphia Planning Commission has approved zoning changes to an area west of 30th Street Station, where Brandywine Realty Trust and Drexel University plan their Schuylkill Yards redevelopment project, a 14-acre district of labs, offices, residences and shopping. There is not a definitive timeline for the project. According to Brandywine, the master plan will comprise a total buildout of 2.8 million square feet of office, 1.6 million SF of residential, 247,000 SF hotel, 1 million SF of lab, and 132,000 SF of retail space. This reflects the bulk of proposed inventory in the Center City submarket.
  • Developer Oliver Tyrone Pulver Corp. is proposing a 38-story office tower on a long-empty lot east of City Hall at 1301 Market Street. It will comprise 841,750 SF upon completion if developed once a lead tenant is secured. The tower would tentatively open in 2020.
  • Demand for multi-family product is demonstrating significant growth, with nearly 2,800 units recently completed, 1,250 units under construction, and 3,200 units proposed in the PA suburbs. Within the Center City market, there are 2,200 units under construction with an additional 6,300 units proposed. Market participants are questioning whether these units will continue to be absorbed. Many high-end apartment complexes are facing concessions and compression in rental rates.
  • Quarter-over-quarter, industrial vacancy in Southeastern Pennsylvania was flat at 6.8%. The market’s largest yearly occupancy gains were recorded in Bucks County, where positive absorption totaled 709,530 square feet, and Delaware County, where 233,633 square feet was absorbed. The year’s largest moves were Almo and Amazon occupying 300,000 and 104,000 square feet of warehouse space along Cabot Boulevard in Bucks County in the second quarter.
  • Philadelphia County recorded 169,134 square feet in negative yearly absorption. The increased demand for warehouse and distribution space from e-commerce firms has focused on larger scale properties and newer buildings, both of which are in low supply. E-commerce and logistics warehouses may require anywhere between a few hundred thousand square feet to over 1 million square feet, but the tightness of Philadelphia’s industrial market means that many companies are starting to look outside the city to fulfill their space needs.

WCRE also reports on the Southern New Jersey and Philadelphia retail market.

The first quarter saw a continuation of the unfortunate trend of legacy brands such as Toys R Us and Sears closing stores and/or filing for bankruptcy protection. However, there was good development news in the region, with several healthcare, entertainment, and retail projects receiving approval. Other highlights from the retail section of the report include:

  • Retail vacancy in Camden County stood at 8.4 percent, with average rents in the range of $13.75/sf NNN.
  • Retail vacancy in Burlington County stood at 10.4 percent, with average rents in the range of $14.24/sf NNN.
  • Retail vacancy in Gloucester County stood at 7.0 percent, with average rents in the range of $14.83/sf NNN.

The full report is available upon request.

About WCRE

WCRE is a full-service commercial real estate brokerage and advisory firm specializing in office, retail, medical, industrial and investment properties in Southern New Jersey and the Philadelphia region. We provide a complete range of real estate services to commercial property owners, companies, banks, commercial loan servicers, and investors seeking the highest quality of service, proven expertise, and a total commitment to client-focused relationships. Through our intensive focus on our clients’ business goals, our commitment to the community, and our highly personal approach to client service, WCRE is creating a new culture and a higher standard. We go well beyond helping with property transactions and serve as a strategic partner invested in your long term growth and success.

Learn more about WCRE online at www.wolfcre.com, on Twitter & Instagram @WCRE1, and on Facebook at Wolf Commercial Real Estate, LLC. Visit our blog pages at www.southjerseyofficespace.com, www.southjerseyindustrialspace.com, www.southjerseymedicalspace.com, www.southjerseyretailspace.com, www.phillyofficespace.com, www.phillyindustrialspace.com, www.phillymedicalspace.com and www.phillyretailspace.com.

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Why You Need a Phase I ESA and a Preliminary Assessment Report in New Jersey

I’m buying a commercial or industrial property in New Jersey, and I’ve been told I need an ASTM Phase I Environmental Site Assessment (Phase I ESA). However, I’ve also been told I need a NJDEP Preliminary Assessment Report (PAR) as well? Do I really need both? Won’t the Phase I ESA provide me adequate innocent purchaser protection?

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SHORT ANSWER: NO. HERE’S WHY:

Chances are, you’re conducting a Phase I ESA to satisfy one of the requirements to qualify for the innocent landowner, contiguous property owner, or bona fide prospective purchaser limitations on CERCLA liability (Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §9601)), and the Environmental Protection Agency (EPA) All Appropriate Inquiry (AAI) Rule, Subsection 312.10 of 40 Code of Federal Regulations 312 (40 CFR §312). However, CERCLA is a federal law, and provides landowner liability protections under that particular law. What a Phase I ESA does not necessarily do, however, and as is made clear in the Phase I standard itself (ASTM E 1527-13, section 1.1.4), is address requirements of state or local laws; users of a Phase I ESA are cautioned that federal, state, and local laws may impose environmental assessment obligations that are beyond the scope of [the Phase I standard itself].

Like many other states, New Jersey has enacted its own innocent purchaser defense that requires a property owner to demonstrate that, at the time they acquired the property, they did not know and had no reason to know that any hazardous substance had been discharged at the property, by performing an “all appropriate inquiry” prior to purchase of the property. As stated in the New Jersey Spill Compensation and Control Act (Spill Act), any person who owns real property acquired on or after September 14, 1993 on which there has been a discharge prior to the person’s acquisition of that property and who knew or should have known that a hazardous substance had been discharged at the real property, shall be strictly liable, jointly and severally,
without regard to fault, for all cleanup and removal costs no matter by whom incurred [N.J.S.A. 58:10-23.11g(c)(3)].

However, contrary to most states, New Jersey has not adopted the federal All Appropriate Inquiries rule (which can be satisfied by performing a Phase I ESA) but instead has its own unique definition for satisfying “all appropriate inquiry.” Under N.J.S.A. 58:10-23.11g(d)(2), an “all appropriate inquiry” is defined as the performance of a preliminary assessment, and site investigation, if the preliminary assessment indicated that a site investigation is necessary.

As was again made very clear during a January 14, 2016 court ruling, a party buying property in New Jersey after 1993 must obtain a PAR in accordance with NJDEP rules in order to have a chance of obtaining innocent purchaser protection in the state of New Jersey. The decision was affirmed regarding environmental contamination at the Accutherm mercury thermometer manufacturing property in Salem County, that later became a Kiddie Kollege daycare. DEP v. Navillus Group, App. Div. Dkt. No. A-4726-13T3. In this case, despite advice of counsel, the defendants merely relied on various environmental reports, instead of performing a PAR; thus, no innocent purchaser protection was afforded them under the Spill Act, and they were liable for the contamination identified at their property.

IN SUMMARY:

If you’re performing real estate due diligence in New Jersey and want to qualify for both federal and state innocent purchaser liability protections, you need to perform both an ASTM Phase I ESA, as well as a NJDEP PAR.
Here at Whitman, in addition to standalone Phase I and Preliminary Assessment reports, we also provide our clients a single, combined PA/Phase I report that concurrently satisfies both federal and state innocent purchaser protections.

If you have any questions regarding real estate due diligence in New Jersey, or would like a quote for any of Whitman’s wide selection of the due diligence services, please contact Chemmie Sokolic, Whitman’s Director of Due Diligence Services, at 732-390-5858 or csokolic@whitmanco.com.

FOR MORE INFORMATION CONTACT:

Chemmie Sokolic, Director
Whitman
7 Pleasant Hill Road
Cranbury, NJ 08512
(732) 390-5858 (phone)
(973) 931-2474 (cell)
(732) 390-9496 (fax)

How to Get the Most Out of Your Office Space

Let’s look at How to Get the Most Out of Your Office Space. There’s nothing worse than working in a cluttered cramped space from 9 to 5. The space you share with your team matters. The culture of your business depends on the comfort of your employees. However, before you evaluate how much square footage you need, look into the design of your floor plan. Make a list of what is most important in your office space in order drive the most business and keep employee morale high. Is your company heavy on meetings? Do you have a need for a fun and extensive lunch area, or do most people leave the office for lunch? Do you entertain in the office space? Do you need specific areas for storage of marketing goods or other products? You may be holding onto a layout you no longer need, when you can be maximizing the space for more important things. There are many ways to make the most of the space you’re in now, therefore take the time to properly evaluate your office space using the steps below.

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How to Get the Most Out of Your Office Space

LET NATURAL LIGHT IN to Get the Most Out of Your Office Space

Natural light not only affects mood, but also the aesthetics of a space. Light can make rooms feel larger and better the mood of your employees. This comes down to color contrast. If you’re in a room that is dark, it will feel like you’re in a tight constricted space. Consider opening the blinds to let light in. If you have light colored walls and furniture, the light will bounce off and give the feeling that you’re in a larger space than you really are. If
you’re feeling adventurous, install a skylight in the office. You’ll be surprised how much light a skylight lets in. To avoid glare, add a filter so light is spread evenly throughout the office.

BECOME LESS RELIANT ON PAPER to Get the Most Out of Your Office Space

Not only is printing documents killing trees, it’s not as necessary as it was in the past. With the technology that we have today, you can share documents easily without having to print on a single piece of paper. This will also allow you to minimize the space needed for a printing station and using the space for something else. You will also save on ink, paper, and electricity costs by switching everything to digital.

UTILIZE COMMON AREAS to Get the Most Out of Your Office Space

You may not have as small a space as you think! Do you have dedicated areas specifically for meetings like conference rooms or a dining area? Those spaces can be used as extra work space.

It’s refreshing to have a change of scenery when you’re working. This is great, especially if your employees have their own laptops. Spread out and utilize the space you already have, but may not be using 80% of the time. Your employees will feel happier and their productivity will go up as a result.

CREATIVELY STORE to Get the Most Out of Your Office Space

You would be surprised on how many “dead spaces you actually have within your office layout. Underneath most desks and cubicles there exists an empty space where you can add either low bookcases or filing to hide items that require long term storage. By examining this storage option you will eliminate the need for storage in other areas, and gain back some of that wasted square footage. Cubicles and office desks now even have options for built in coat closets which allow employees to store their coats within their own space and allow you to eliminate the need for a central coat closet. Gaining the closet space back can allow you to rethink how that area can be designed.

MAKE SMART CHOICES ON FURNITURE to Get the Most Out of Your Office Space

Select furniture pieces that are easy to store and tuck away neatly when furnishing areas that are used less than 25% of the time. Plan your space with the overall design in mind. Whichever is your preference in color and style try and stay consistent throughout so that your message is as consistent as your sales process. Filing cabinets tend to take up a lot of space. Save your files digitally in a cloud instead of having physical pieces of paper, folders, binders, paper clips, etc, whenever allowable. You and your employees will be much more comfortable with the fresh open space!

FOR MORE INFORMATION CONTACT:

Josh Smargiassi
Principal
Boomerang, Inc.
6950 Sherman Lane
Pennsauken, NJ 08110
P 856.582.0100
F 856.582.0104
www.boomerangofficefurniture.com

WCRE Honored with 2017 CoStar Power Broker Award

Local Firm Selected by Commercial Real Estate’s Largest Research Organization as One of the Top Leasing Firms in the Market

power broker awardWolf Commercial Real Estate (WCRE) has been selected by CoStar Group, Inc. (NASDAQ: CSGP), the leading provider of commercial real estate information, analytics and online marketplaces, to receive a CoStar Power Broker Award. This annual award recognizes the “best of the best” in commercial real estate brokerage by highlighting the firms and individual brokers who closed the highest transaction volumes in commercial property sales or leases in 2017 within their respective markets.

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With the largest independently researched database of commercial real estate property information available online, CoStar can easily identify the top firms and brokers in each market throughout the U.S. and Canada. All awards are based on transaction data maintained in CoStar’s commercial real estate database.
WCRE qualified as one of the top commercial brokerage firms in the Philadelphia region based on total leasing transactions closed during the year. WCRE is also proud to announce that Andrew Maristch was recognized by CoStar as one of the top Leasing Brokers in the Philadelphia region. In order to be selected for this honor, WCRE’s overall transaction volumes were evaluated by CoStar against other commercial real estate brokerage firms active in its region, and subsequently ranked among the top firms in the market.

“We are thrilled to have earned this recognition from CoStar for a fifth consecutive year. I am grateful to our entire team and to all our clients and associates. Congratulations to all the winners,” said Jason Wolf, managing principal of WCRE.

“With such an active year in commercial real estate, CoStar is proud to honor the individual brokers and firms who perform at the industry’s highest level,” said CoStar Group founder and CEO Andrew C. Florance. “These industry leaders deserve to be recognized for their expertise, hard work and superior deal-making abilities. We extend our congratulations to this year’s winners on their exceptional sales and leasing success.”

The complete list of 2017 CoStar Power Broker Awards winners can be found at CoStarPowerBrokers.com.

About CoStar Group

CoStar Group, Inc. (NASDAQ: CSGP) is the leading provider of commercial real estate information, analytics and online marketplaces. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. Our suite of online services enables clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. LoopNet is the most heavily trafficked commercial real estate marketplace online with more than 10 million registered members.

Apartments.com, ApartmentFinder.com, ApartmentHomeLiving.com, and Westside Rentals form the premier online apartment resource for renters seeking great apartment homes and provide property managers and owners a proven platform for marketing their properties. Through an exclusive partnership with Move, a subsidiary of News Corporation, Apartments.com is the exclusive provider of apartment community listings across Move’s family of websites, which include realtor.com®, doorsteps.com and move.com.  CoStar Group’s websites attracted an average of nearly 24 million unique monthly visitors in aggregate in 2016. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe and Canada with a staff of over 3,000 worldwide, including the industry’s largest professional research organization. For more information, visit www.costargroup.com

About WCRE

WCRE is a full-service commercial real estate brokerage and advisory firm specializing in office, retail, medical, industrial and investment properties in Southern New Jersey and the Philadelphia region. We provide a complete range of real estate services to commercial property owners, companies, banks, commercial loan servicers, and investors seeking the highest quality of service, proven expertise, and a total commitment to client-focused relationships. Through our intensive focus on our clients’ business goals, our commitment to the community, and our highly personal approach to client service, WCRE is creating a new culture and a higher standard. We go well beyond helping with property transactions and serve as a strategic partner invested in your long term growth and success.

Learn more about WCRE online at www.wolfcre.com, on Twitter & Instagram @WCRE1, and on Facebook at Wolf Commercial Real Estate, LLC. Visit our blog pages at www.southjerseyofficespace.com, www.southjerseyindustrialspace.com, www.southjerseymedicalspace.com, www.southjerseyretailspace.com, www.phillyofficespace.com, www.phillyindustrialspace.com, www.phillymedicalspace.com and www.phillyretailspace.com.