Tag Archives: Wolf CRE
Energy Conservation Measures (ECM) or efficient building upgrades which include LED Lighting, Plumbing and Mechanical and HVAC upgrades, are proven to reduce energy and operating costs. Mechanical and HVAC upgrades could include Building Management Systems, Variable Frequency Drives on fans, pumps and motors, Free Cooling, installation of Condensing Boilers and Demand Based Domestic Water Boosters to name a few opportunities to reduce costs.
Investing in energy efficiency can yield a Return on Investment (ROI) of 30 to 40%, and an improvement in Net Operating Income (NOI) and significant Valuation Enhancement. By reducing energy and operating expenses NOI can be quickly improved giving the owner increased profits and/or a competitive advantage in the market.
NOI improvements from ECMs can be achieved in Hospitality, High and Low Rise, single and multi-tenant Office buildings, Manufacturing and Distribution Centers as well as High and Low rise multi-family buildings. Today the value of energy efficient upgrades are further increased because of favorable tax treatment – 100% expensing and generous Utility Company Cash Incentives.
Efficient building upgrades to a property 10 years of age or older to deliver:
• Energy Cost Reductions up to 40%
• Overall OpEx Reduction of 5 to 10%
• Value Enhancement of 5 to 15%
• Increased unlevered ROR by ½ to 2%
• Competitive Market Advantage
Energy efficient building upgrades are good for buyers and sellers!
A completed Energy Efficiency project in a 25 Story Office building located in center city Philadelphia reduced annual operating costs by $208,000. The Energy Efficient Measures (ECM) included LED lighting, free-cooling, premium efficiency motors for the condenser and hot water heating pumps with variable frequency drives and Retro-commissioning of the HVAC systems.
In the two tables below observe the actual energy efficiency upgrade costs and the energy cost savings generated by the above mentioned upgrades (Project Matrix) and in the NOI Improvement table the effect these real savings would have on NOI and the “Cap” rate against typical market Rents, OpEx Costs and a hypothetical property value of $33,600,000.
Energy efficient building upgrades offer VALUE ENHANCEMENT
An Owner of a $33,600,000 property making these improvements at a Cap rate of 8.57 would see the value of the
property increased to $36,008,000 due to the improved NOI. This is a 7.2% valuation enhancement or an ≈ $3,000,000 value growth with an ≈ $500,000 investment in CapEx!
Energy efficient building upgrades offer INVESTMENT ENHANCEMENT
A buyer of a $33,600,000 property would realize an increase in their unlevered Rate of Return of .60% in net dollars by installing similar Energy Efficient building upgrades.
Energy efficient building upgrades offer ADDITIONAL BENEFITS
Reduced Maintenance Costs – Another typical benefit of installing ECMs is the reduction in maintenance expense that comes from replacing aging equipment that is in need of repair or replacement. Quite often energy savings derived from certain high ROI ECMs can help offset the cost of equipment replacement.
“Green” Building Tenants Pay Higher Rent – That’s right, a CBRE Global Research and Consulting Review reported that the overall vacancy rate for green buildings was 4 percent lower than for non-green properties—11.7 percent, compared to 15.7 percent—and that LEED-certified buildings routinely commanded the highest rents.
• Higher productivity and better occupant health
• Promotion of a culture of sustainability among all building users
• Reduced environmental impacts
• Improved public image and marketing tools for both landlord and tenant
Rich Energy Solutions’ experience runs from small to large HVAC efficiency upgrades, wireless Building Management Systems and energy saving LED lighting system upgrades to displacing city steam and chilled water loops, in-house thermal and co-generation plants.
For qualified customers Rich Energy Solutions will conduct free, no obligation on-site building assessments to develop cost savings analyses and system design and provide turn-key installation of all energy conservation measures. The Rich Family has provided construction management, mechanical construction and energy saving solutions in 38 states for public and private businesses since 1918. www.richenergysolutions.com
To learn how Energy Efficiency can impact your NOI contact:
Rich Energy Solutions
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.
“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.
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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If 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.
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.
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 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 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.
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
Antonella Colella, Esq.
Snyderman Law Group
923 Haddonfield Road, Suite 300
Cherry Hill, NJ 08002
Your 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?
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
Let’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:
• 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.
An 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.
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.
Let’s look at how accelerated depreciation of commercial property can help your business. As a commercial property owner, how would you like to receive cash flow from tax savings of 7%-10% of your building cost within the first five years of ownership? That’s $70K-$100K for each $1M in building costs!
Accelerated Depreciation of Commercial Property – It’s YOUR Money!
Cost Segregation is an IRS-approved application by which commercial property owners can accelerate depreciation and reduce the amount of taxes owed. This savings generates cash flow that owners often use to reinvest in the business, purchase more property, apply to their principle payment or spend on themselves.
But we at STRYDE take it one step further with our “Engineered” Cost Segregation. Our engineers break down
your building into the smallest of components, e.g. carpeting, plumbing, & light fixtures, etc. to maximize your
depreciation. Engineered Cost Segregation is the answer.
Engineered Cost Segregation for Accelerated Depreciation of Commercial Property
The study accelerates the depreciation of your building/renovation components into faster depreciation categories such as 5-,7-and 15-year rather than conventional 27.5-and 39-year schedules. Five-and 7-year items might include decorative building elements and electrical for dedicated computer equipment. Fifteen-year items might include site utilities, landscaping and paving. This engineered cost segregation study results in a much higher depreciation expense and significantly reduced taxable income for the property owner. Best of all, the IRS ruling states cost segregation can be applied to all categories of buildings purchased or built since 1986, including renovations, and there is no need to amend your tax returns. This provides for the results to be easily applied to your tax return.
“I’m Already Doing That.”
It is true that a fair number of CPA’s may apply some of the benefits of Cost Segregation but an Engineered Cost
Segregation Study is the only way to truly maximize your benefits and get all of the depreciation and money your
entitled to. Our goal is to support your CPA or tax advisor with the most accurate cost segregation study results so you can realize maximum savings and increased cash flow. Our service utilizes a performance based method that is affordable for your commercial property application.
Do You Qualify for Accelerated Depreciation of Commercial Property
Even though 90% of all commercial properties do qualify for this benefit, there are a few rather broad minimum
requirements. They are: any building that was purchased or built within the last 20 years of $500,000 or more, OR,
has renovations within the last 20 years of $250,000 or more, AND, has paid federal taxes with in the last 3 years,
or plans to this year. There is also a “catch Up” method, in fact, 75% of our projects are older buildings.
FIND OUT WHY YOUR COMMERCIAL REAL ESTATE DEPRECIATION COULD BE WORTH 40% LESS IN 2019
For over 16 years, STRYDE has been delivering quality, affordable, engineer-based cost segregation studies to a wide range of individuals and businesses. Our team of experts can help easily apply the results to your current financials with your CPA or financial professional to assure successful results. In addition, our national coverage and expertise allows us to work with customers and properties across the United States.
Over the course of the 16 years we’ve been doing engineered Cost Segregation, we’ve had zero dismissed deductions and zero push-back, where the IRS says, “we’ll allow that deduction, but only this much ”
Our background allows us to provide not only the best possible results, but also strictly adheres to all IRS guidelines and provides our clients with all of the verifying documents and Audit defense.
HOW TO GET STARTED
Follow the IRS recommendation for application: Get an Engineered Cost Segregation Study. It’s easy:
- Call your local STRYDE affiliate for a no-cost preliminary property analysis to illustrate your potential savings.
- Engage STRYDE to begin your cost segregation study. The process is usually completed in four to six weeks, after which we provide the cost segregation study to you and your CPA.
- Your personal CPA will apply the results to your tax return and you will realize your tax savings dollars. This is your money!
- The NEW Tax Law provides a unique opportunity that you must act on during 2018 in order to fully capitalize on this change.
New Assignments Bring Additional 113,000 Square Feet Under Firm’s Control
March 1, 2018 – Marlton, NJ – Wolf Commercial Real Estate (WCRE) is pleased to announce that it has been appointed exclusive agent for 13 new projects in the Southern New Jersey and Philadelphia region.
WCRE continues to raise the bar with an aggressive marketing and branding strategy and has increased its South Jersey and Philly presence. WCRE will assume marketing, leasing and sale responsibilities for an additional 13 properties totaling approximately 113,000 SF.
The team at WCRE now oversees over 175 properties throughout the PA/NJ market encompassing over 4.2M square feet of office, retail, industrial, healthcare and investment real estate.
“We see endless possibility in the properties our clients have entrusted to WCRE, and we are excited to connect new prospects with these assets.” said WCRE managing principal Jason Wolf.
The New Projects awarded to WCRE during the first two months of 2018 are as follows:
- 1140 White Horse Road, Voorhees, NJ (25,000 SF Retail Building)
- 1030 Auburn Road, Woolwich, NJ (4.2 Acres)
- 601 Route 130 North, West Collingswood, NJ (2,113 SF Commercial Building on .35 Acres)
- 605 Route 130 North, West Collingswood, NJ (1,200 SF Commercial Building on .27 Acres)
- 513 Centennial Drive, Voorhees, NJ (6,700 SF Office Building on 1.31 Acres)
- 1504 Blackwood Clementon Road, Blackwood, NJ (3,000 SF Office Building on .34 acres)
- 297 Easton Road, Horsham, PA (.62 Acres)
- 146 East Evesham Road, Cherry Hill, NJ (.92 Acres)
- 133-136 Route 73, Voorhees, NJ (25,000 SF Medical Office on 2.85 acres)
- 816 North Black Horse Pike, Gloucester Township, NJ (1.39 Acres)
- 162 West Cohawkin Road, East Greenwich, NJ (25,000 SF Retail Property on 2.5 Acres)
- 55-59 High Street, Mount Holly, NJ (13,000 SF Office Building on .12 acres)
- 735 Bethlehem Pike, Montgomeryville, PA (3,234 SF Retail Building on .39 acres)
- 700 W Browning Road, Collingswood, NJ (8,250 SF Retail Building)
A marketing brochure for each of these properties is available upon request.
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.moorestownofficespace.com, www.moorestownmedicalspace.com, www.phillyofficespace.com, www.phillyindustrialspace.com, www.phillymedicalspace.com and www.phillyretailspace.com.
Let’s look at New Jersey Marijuana Reform and Commercial Real Estate. Governor Phil Murphy campaigned on a pledge to fully legalize marijuana in New Jersey. On January 23, 2018 he signed an Executive Order directing a complete review of New Jersey’s existing medical marijuana program within 60 days, which sets the stage for legalizing recreational marijuana. Presently, only medical marijuana is legal under a New Jersey law enacted in January 2010. Likely marijuana reform presents unique real estate investment opportunities and will probably increase the demand for commercial and industrial real estate. However, there are significant risks that must be carefully considered before making any investment decisions, including criminal and civil liability (including property seizure) if federal laws are enforced, and a limited number of potential lenders and buyers.
Opportunities Associated with New Jersey Marijuana Reform
New Jersey Marijuana Reform presents a unique opportunity to be capitalized upon by risk tolerant investors willing to invest in real estate and benefit from the cannabis trend. Vacancy rates may decline based on the experience in other states following marijuana legalization and expansion, where cannabis suitable commercial real estate became hot commodities.
For example, in four states with legalized recreational cannabis (i.e. California, Colorado, Oregon and Washington), industrial real estate prices surged. In some Denver neighborhoods, the average asking lease price for warehouse space reportedly jumped by more than 50 percent from 2010 to 2015. Industrial space has been in high demand due to both marijuana growers and manufacturers seeking industrial warehouses to cultivate and process their product. Commercial real estate prices have also experienced double digit annual increases in some markets.
Risks Associated with New Jersey Marijuana Reform
The federal government does not recognize a legitimate medical use of cannabis and can impose criminal or civil liability under the Controlled Substances Act. Marijuana is currently classified as a Schedule I drug, which puts it
under the same category as heroin, cocaine, peyote, meth and fentanyl. It is currently illegal under federal law
to lease or rent real estate for the purpose of manufacturing or distributing any controlled substance. However,
the Department of Justice can direct the enforcement of these laws differently between administrations, as the
Obama Administration issued guidance discouraging the enforcement of federal marijuana laws in states where it had been legalized. United States Attorney General Jeff Sessions has long been strongly opposed to the legalization of marijuana and there is a fear of federal enforcement among owners, developers and lenders as long as the federal and state positions remain at odds. It is tough to make long term real estate investments without clarity predicated on the assumption that the federal government will not enforce its own laws.
Banks traditionally answer to federal regulators and risk losing their licenses by dealing with marijuana businesses. Federal banking laws also prevent banks from lending to or accepting deposits from illegal businesses. The federal government is also allowed to seize property. Thus, obtaining financing from traditional sources and collecting rents is difficult. Borrowing costs will therefore likely be higher than a typical real estate transaction, and tenants may be limited to properties that are owned free and clear of traditional financing.
Therefore, many companies that get into the marijuana business try to buy and control their own real estate. If the state approves expansion, it will probably issue licenses allowing business to legally sell recreational marijuana in designated places, and businesses must find a local jurisdiction that will allow them to operate.
Towns will need to change their zoning ordinances to allow for such uses.
What Does This Means for Commercial Real Estate Investors?
Higher risks will likely translate into higher rents for commercial and industrial landlords based on anecdotal evidence seen in California, Colorado, Oregon, Washington and other states that have permissible marijuana laws. Developers, landlords and investors with a suitable risk tolerance should closely follow the state’s progress in introducing and passing legislation to accomplish Governor Murphy’s goals and evaluate potential opportunities and risks. They should also monitor subsequent municipal efforts to accommodate such uses by amending their zoning ordinances, and work to identify potential opportunities in suitable locations.
The contents of this article are for informational purposes only and none of these materials offered are, nor should be construed as, investment advice, legal advice or a legal opinion based on any specific facts or circumstances.
What is a commercial relocation concierge, and do they really add value to your project? Let’s get one thing out of the way right up front: a commercial relocation concierge is not some made-up millennial job description. A commercial relocation concierge is an expert that you partner with when you are considering moving or expanding your office. They are the ones who crunch the numbers, draw up the timeline, coordinate all the subcontractors, and develop the move plan. They’ll be the one qualified to answer the question, “What’s the most cost effective way to transition to a new space?”.
A top-notch commercial relocation concierge has the connections for everything — space planners, IT/data center relocation, phone and furniture procurement, contractors, rigging services, and so much more. They know the right vendor for every job, and the right price that should be charged. Any client that thinks they can vet the vendors and negotiate a better price as their own general contractor might better think twice. Just the risk management liability alone is enough to make you scramble to find a relocation concierge ASAP.
And here’s the best part: including a Relocation Concierge on a project benefits the landlord by protecting the integrity of the real estate, and benefits the tenant by protecting their security deposit. It’s a win-win for everyone!
So what responsibilities can a commercial relocation concierge take off your plate?
• Relocation plan & objectives
• Goals & budgeting
• Space evaluation & planning
• Asset inventory/furniture analysis
• Furniture Liquidation & Procurement
• Transportation & Logistics
• Contents move plan and asset liquidation
• IT/Data center migration
• Phone system/cabling
• Facility Decommissioning
So what is the takeaway from all of this? Simply that companies that focus all their time and effort on the “hard costs” of relocation or expansion will be blindsided by the much more important “soft costs” of a transition. There are the obvious hard costs associated with any move — packing, moving, etc. But then there are the less tangible soft costs you need to consider — lost productivity, efficiencies of timing/scheduling, IT testing, risk management, etc. A commercial relocation concierge minimizes your company’s exposure to lost revenue by reducing the distraction to your core business and curtailing down time. You’re an expert at what you do, so why not let a commercial relocation concierge handle all the logistic details for you!
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 services.
Let’s look at air quality management for commercial buildings. The health of your property’s occupants can be jeopardized by poor air quality, and it is your responsibility to provide a healthy indoor environment, whether it is protecting against airborne infections like H1N1 or pollutants from equipment. From mechanical problems like a faulty exhaust fan to the measure of air volume exchanges, there are many factors that are easily overlooked. An Indoor Air Quality Management Plan is a good way to ensure that residents’ health is not endangered by the air in the building.
The plan you design must address the specific needs of each space, and should never be limited to HVAC maintenance. The task should be assigned to one person who is charged with identifying problem locations and staff whose activities might affect the quality of the air.
Air Quality Management Practices
(1) STUDY THE EXCHANGE RATE
The air volume exchange rate is a factor that property managers must consider. The American Society of Heating, Refrigerating and Air Conditioning Engineers (ASHRAE) recommends a minimum exchange of ten cubic feet per minute per person in an indoor environment. This rate can be tested by a certified engineer. If your rate is too high, you will be alerted to problems like a faulty variable air volume box.
(2) TAKE STEPS TO IMPROVE YOUR AIR QUALITY MANAGEMENT PLAN
Ensure that you will easily be able to update your plan for any legislative or other changes that affect air quality. Follow these guidelines for creating a plan that is appropriate to your situation:
• Consult the Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA) for advice on the maintenance of air quality if you renovate or add on to your property.
• Schedule routine maintenance of motors, fan belts and filters with certified mechanics. Revisit everything every 90 days.
• Specify filter selection and maintenance. If the property has mixed uses, each occupant should have a separate filter schedule:
• Specify which Minimum Efficiency Rating Value (MERV) is necessary in the filter. The higher the number, the higher the filtration rate.
• In sensitive environments, use a high efficiency particulate air (HEPA) filter.
Design procedures for reacting to complaints by occupants, including those regarding humidity or odors. Air quality professionals may be able to analyze air samples to identify appropriate solutions, which might include dehumidifiers or air scrubbers.
• Verify that all cleaning products comply with Environmental Protection Agency (EPA) standards.
(3) WORK WITH OCCUPANTS
Inform your occupants your air quality plan, and ask for their help in maintaining good air quality. There are steps occupants can take to improve air quality, including the following:
• Refraining from smoking within 25 feet of the building
• Using entryway cleaning systems, such as grills and mats, to reduce the amount of dirt, dust and pollen that enters the building
• In sensitive environments, using ultra-violet lights to kill bacteria circulating in the air
For more air quality management and loss prevention tips, contact Hardenbergh Insurance Group. Our insurance specialists are available to help you solve your property and casualty issues.
Brian Blaston, Partner
Hardenbergh Insurance Group
phone: 856.489.9100 x 139
Let’s take a quick look at some 2018 tax law changes affecting commercial real estate tax deduction restrictions. Below please find some insight into recent tax changes affecting commercial real estate tax deductions.
Here are some items that come to mind:
(1) The Tax Cuts and Jobs Act enables investment real estate owners to still defer capital gains taxes using section 1031 like-kind exchanges. There were no new restrictions on 1031 exchanges of real property made in the law. However, the new law repeals 1031 exchanges for all other types of property that are not real property. This means like-kind exchanges of personal property will no longer be allowed after 2017 for collectibles, franchise rights, heavy equipment and machinery, collectibles, rental vehicles, trucks, etc. The rules apply to real property not generally held for resale (such as lots held by a developer).
(2) The capital gain tax rates stayed the same so a real estate owner selling an investment property can potentially owe up to four different taxes: (1) Deprecation recapture at 25% (2) federal capital gain taxed at either 20% or 15% depending on taxable income (3) 3.8% net investment income tax (“NIIT”) when applicable and (4) the applicable state and local tax rate.
(3) The tax law creates a new tax deduction of 20% for pass-through businesses. This gets tricky but here goes. For tax years 2018-2025, an individual generally may deduct 20% of qualified business income from a partnership, S corporation, or sole proprietorship. The 20% deduction is not allowed in computing Adjusted Gross Income (AGI), but is allowed as a deduction reducing taxable income.
Restrictions on Tax Deductions
(1) Mostly, the deduction cannot exceed 50% of your share of the W-2 wages paid by the business. The limitation
can be computed as 25% of your share of the W-2 wages paid by the business, plus 2.5% of the unadjusted basis
(the original purchase price) of property used in the production of income.
(2) The W-2 limitations do not apply if you earn less than $157,500 (if single; $315,000 if married filing jointly).
(3) Certain personal service businesses are not eligible for the deduction, unless their taxable income is less than
$157,500 for singles and $315,000 if married. A “specified service trade or business” means any trade or business involving the performance of services in the fields of health, law, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners, or which involves the performance of services that consist of investing and investment management trading, or dealing in securities, partnership interests, or commodities. (It appears President Trump liked real estate people but did not like professionals like lawyers, doctors, accountants and other consultants).
(4) The exception to the W-2 limit and the general disallowance of the deduction to personal service businesses is phased out over a range of $50,000 of income for single taxpayers and $100,000 for married taxpayers filing
jointly. By the time income for a single taxpayer reaches $207,500 or $415,000 for a married-filing-jointly
taxpayer, the W-2 limitation will apply in full (i.e. personal service professionals get no deduction).
(5) The new tax law increased the maximum amount a taxpayer may expense under Section. 179 to $1,000,000 and increased the phaseout threshold to $2,500,000. Interestingly, the new law also expanded the definition of Section. 179 properties to include certain depreciable tangible personal property used predominantly to furnish lodging. It also expanded the definition of qualified real property eligible for Section 179 expensing to include the following improvements to nonresidential real property: roofs; heating, ventilation, and air-conditioning property; fire protection and alarm systems; and security systems
(6) State and local taxes paid regarding carrying on a trade or business, or in an activity related to the production of income, continue to remain deductible. A rental property owner can deduct property taxes associated with a business asset, such as any rental properties. Don’t confuse such with the itemized deduction for your personal residence or vacation home which is now limited.
(7) While the prior law generally allows a deduction for business interest expenses, the new tax act limits that deduction to the business interest income plus 30% of adjusted taxable income. However, taxpayers (other than tax shelters) with average annual gross receipts for the prior three years of $25 million or less are exempt from this limitation. Real estate businesses can elect out of the business interest deduction limitation, but at the cost of longer depreciation recovery periods—30 years for residential real property and 40 years for nonresidential real property. If a real estate business does not elect out of the interest deduction limitation, then residential and nonresidential real property depreciation recovery periods are maintained at 27.5 years and 39 years, respectively.
Phew-there you have taste of what we’re going or at least as we see general changes directly or even indirectly
affecting real estate peeps. As you can see, the new law will bring a lot of changes (both good and bad) to individual and business taxpayers. On the plus side, this means more planning opportunities for many although looking for answers can be problematic as we all try to navigate through uncertain territory. These comments only touch the surface of one of the biggest tax overhauls in the nation’s history. Stay tuned and do stay close to your tax attorney and accountant.….