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Monthly Archives: October 2018


Wire Fraud in Commercial Real Estate

Wire Fraud in Commercial Real EstateLet’s examine Wire Fraud in Commercial Real Estate and how you can avoid it. No industry is exempt from cyber crime, and the commercial real estate industry has become a common target. As hackers devise plans to obtain sensitive information about commercial real estate transactions, real estate professionals need to take particular interest in cyber security to protect their clients and themselves from wire fraud.

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Wire Fraud in Commercial Real Estate: WHAT IS IT?

In instances of wire fraud in commercial real estate, a common ploy involves hackers breaking into a real estate agent’s email account to obtain details about upcoming transactions. Once the hackers have all the information they need, they send an email to the buyer, pretending to be the agent or a representative of the title company.

In an email to the buyer, the hackers state that there has been a change in the closing instructions and that the buyer needs to follow new wire instructions listed in the email. If a buyer falls victim to the scam and wires money to the fraudulent account, they’re unlikely to see the money again.

Wire Fraud in Commercial Real Estate: RED FLAGS

A potential indicator of wire fraud in commercial real estate is an email that makes any reference to a Society for Worldwide Interbank Financial Telecommunication (SWIFT) wire transfer, which is sent via the SWIFT international payment network and indicates an overseas destination for the funds. However, since the emails tend to include detailed information pertaining to the transaction—due to the perpetrator having access to the agent’s email account—many people make the mistake of assuming the email is from a legitimate source. The email addresses often appear to be legitimate, either because the hacker has managed to create a fake email account using the name of the real estate company or because they’ve hacked the agent’s actual email account.

Wire Fraud in Commercial Real Estate: HOW TO AVOID IT

Wire fraud is one of many types of online fraud targeting commercial real estate professionals and their clients. To prevent cyber crime from occurring, every party involved in a real estate transaction needs to implement and follow a series of security measures that include the following:

• Never send wire transfer information, or any type of sensitive information, via email. This includes all types of financial information, not just wire instructions.

• If you’re a real estate professional, inform clients about your email and communication practices, and explain that you will never expect them to send sensitive information via email.

• If wiring funds, first contact the recipient using a verified phone number to confirm that the wiring information is accurate. The phone number should be obtained by a reliable source—email is not one of them.

• If email is the only method available for sending information about a transaction, make sure it is encrypted.

• Delete old emails regularly, as they may reveal information that hackers can use.

• Change usernames and passwords on a regular basis, and make sure that they’re difficult to guess.

• Make sure anti-virus technology is up to date, and that firewalls are installed and working.

• Never open suspicious emails. If the email has already been opened, never click on any links in the email, open any attachments or reply to the email. IF YOU’VE BEEN HACKED

Take the following steps if you suspect that your email, or any type of account, has been hacked:

• Immediately change all usernames and passwords associated with any account that may have been compromised.

• Contact anyone who may have been exposed to the attack so they too can change their usernames and passwords. Remind them to avoid complying with any requests for financial information that come from an unverified source.

• Report fraudulent activity to the FBI via the Internet Crime Complaint Center at www.ic3.gov/default.aspx. Also contact the state or local realtor association, which will alert others to the suspicious activity.  Contact Hardenbergh Insurance Group today for more information on avoiding real estate fraud and other types of cyber crime.

For More Information about how you can prevent Wire Fraud in Commercial Real Estate, please contact:

Brian Blaston, Partner
Hardenbergh Insurance Group
phone: 856.489.9100 x 139
fax: 856.673.5955
www.hig.net

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Accounting Implications for Leasing Equipment

Accounting Implications for Leasing EquipmentFor companies with tight cash flow, leasing  equipment (computer and other office) is often more desirable than installment purchasing. It requires a smaller up-front payment and the payments over the term of the lease are smaller because the lessor can take the equipment back at the end of the lease or sell it to the lessee. If entering into a lease arrangement, it is important to: (1) determine the interest rate the lessor is using and compare it with the rate on an installment purchase of the equipment; (2) obtain the exact price to be paid for purchasing the equipment at the end of the lease term, and (3) review any conditions pursuant to which the lessor can impose added fees at the termination of the lease if the equipment is not purchased. The lessor often obscures the information, so that many clients who decide to lease costly business equipment often seek the assistance of their CPAs as well as their lawyer’s in reviewing the leasing arrangement before they finalize a deal.

Download Printable Article PDF>>>

How about the actual accounting side of leasing equipment?

Have a lot of debt on your balance sheet? Concerned that you may not be able to obtain bank loans to provide sufficient capital to finance your business operations? Well, one factor that might make a difference is whether you obtain the use of computers, office equipment, vehicles or even machinery under a capital or operating lease. When you use a capital lease, the accounting treatment is the same as if you purchased the equipment. Thus, the cost, equal to the present value of the lease payments, is reflected as an asset on your balance sheet, while an equal amount, the lease obligation, is reflected as a liability. The effect is to increase your debt to equity ratio, a critical measure used by lenders to determine whether additional loans should be made. Conversely, if you have an operating lease, the accounting treatment is as if you were merely renting use of the equipment. Consequently, neither the cost of the equipment nor the rental obligation appears on the balance sheet, and rent expense is reflected in the income statement as you make the rental payments.

What distinguishes a capital lease from an operating lease? In an operating lease when leasing equipment?

1. There can’t be any transfer of ownership of the property to your business.

2. The lease may not contain a bargain purchase option permitting your firm to obtain the property at below market value at the end of the lease term.

3. The term of the lease should be for less than 75% of the estimated useful life of the leased property.

4. The present value of all lease payments should be less than 90% of the fair market value of the leased property.

If these requirements can’t be satisfied, the lease should be treated for accounting purposes as a capital lease since the transaction is viewed as being an installment purchase. It’s clear that the terms of the underlying lease contract directly affect the accounting, and indirectly, the firm’s borrowing capacity.

Here is another area where the advice and skill of your CPA and your lawyer, can make a difference in your business prospects. Leasing real estate? Well, add WCRE to the team.

For More Information About Leasing Equipment

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.

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Office Space Near Philadelphia Independence Hall in Great Demand

Could there be signs the Philadelphia Independence Hall office market is heating up?

Throughout 2015 and 2017 Independence Hall was an outlier with noticeably higher vacancies than other submarkets in and around Philadelphia’s central business district (CBD) such as Market Street West and University City. These higher vacancies were caused by move outs by both government and private sector tenants including the U.S. Navy, the GSA and Dow Chemical.

Independence Hall’s concentration of older office buildings and its distance from key center city regional rail stations are potential drawbacks from many office tenants’ perspective. However, a slew of office renovations, restaurant/bar openings and high-end residential construction throughout the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – are now coalescing in what was once a relatively sleepy submarket.

This report on U.S. and Philadelphia commercial properties, being made available through Philadelphia commercial real estate broker Wolf Commercial Real Estate – a Philadelphia commercial real estate brokerage firm, is part of the Market Insights series from the CoStar Group research organization. These periodic reports provide a snapshot of recent real estate trends. CoStar monitors commercial real estate across 390 metro areas and analyzes the economic trends that move these markets.

Since 2014, Keystone Property Group has re-energized the ground floor of 100 Independence by bringing Independence Beer Garden — which includes outdoor seating and a gaming area — and modernist café La Colombe. One block away, MRP Realty’s newly-renovated Bourse — previously home to the nation’s first commodity exchange — is reopening this fall with an impressive array of new dining and drinking options on the ground floor. Coworking operator Make Offices also recently leased 35,000 square feet on the fifth floor of one of these key national and Philadelphia commercial real estate properties.

More than 850 new, high-end apartment units have either completed or broken ground in the Independence Hall submarket over the past five years. Parkway Corporation recently completed its Civic Design review for a proposed 278-unit apartment tower at 709 Chestnut in this key segment of the national and Philadelphia commercial real estate market. Toll Brothers is also planning an 85-unit condo development on the 700 block of Sansom Street.

These improvements to Independence Hall’s ambience and amenity offerings are beginning to bear fruit for office owners. A handful of large leases including Macquaire Investment Management, Five Below and a few coworking operators have been signed in recent years. These leases, combined with conversions of older office space into apartments, have helped bring Independence Hall’s office space availability rate — the percentage of space being marketed for lease — back in line with other Center City submarkets in 2018.

Given Independence Hall’s complete lack of new office construction, the submarket’s availability rate has nowhere to go but further down if tenants’ interest in these U.S. and Philadelphia commercial real estate listings continues to rebound. It will be interesting to see just how much more tenant interest Independence Hall can garner in the years ahead.

 

For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

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Landlords Could Seize Opportunity If Papa John’s Shuts Stores

It’s not often that commercial real estate landlords want to lose tenants, but that may be the case with the criticized pizza chain Papa John’s as it faces the prospect of closing 250 restaurants across the country.

Landlords throughout the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – are concerned the chain’s highly publicized missteps by its former chief executive, who received swift criticism after using a racial slur on a recent conference call, could dissuade shoppers and they may hope the chain shuts stores, an industry spokesperson said recently.

“There’s a need for that size of space in the market and there’s not that much of it,” the spokesperson explained. “They (landlords) may be able to get higher rents from other tenants.”

This report on U.S. and Philadelphia commercial properties from the CoStar Group research organization is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

Papa John’s, the country’s third-largest pizza chain, has suffered public blows this past year from, among others, owners of national and Philadelphia commercial real estate properties. Founder and former Chairman and Chief Executive John Schnatter — who still owns about 30 percent of the company — this summer used a racial slur to describe African Americans on a conference call. Last fall, he blamed NFL leadership for allowing players to kneel during the National Anthem and complained the controversy was hurting the chain’s sales. At the time, Papa John’s was an NFL sponsor. It has since been replaced by Pizza Hut.

In a recent earnings call, Papa John’s Chief Executive Steve Ritchie said the chain was struggling and may be forced to close some locations.

“We’re going to evaluate all the options as they’re presented to us, if there is some sort of increase in closures that exist here because of the declines in the sales,” he said.

A Papa John’s spokeswoman declined to comment.

If the chain does close stores, a new commercial real estate report providing insight into the national and Philadelphia commercial real estate market offers clues as to which businesses might replace them. The report said non-retail and non-restaurant space in shopping centers increased to 23.1 percent this year from 19.2 percent in 2012. Forty-four percent of shoppers say they prefer to visit shopping centers that have a wide variety of non-retail tenants.

“The growing focus on experience has led to a rising share in non-retail tenants, including food and beverage, salons, movie theaters, fitness centers and medical clinics,” the report said.

Most Papa John’s stores are in shopping and strip centers, and industry observers believe two popular concepts — Mediterranean or taco restaurants — could backfill the space in these U.S. and Philadelphia commercial real estate listings and drive traffic.

Rival pizza chain Domino’s, the country’s second-largest pizza chain, in particular is taking advantage of Papa John’s woes, said Henry Renaud, president of retail brokerage Renaud Consulting. In contrast to Papa John’s, Domino’s Chief Executive Richard Allison said this summer that the chain was preparing to build about 2,500 restaurants in the next decade or so and two supply chain centers in the next two years to keep pace with growth.

For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

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WCRE 2018 THIRD QUARTER REPORT

SUMMER SLOWDOWN SLIGHTLY COOLS SOUTHERN NEW JERSEY & PHILLY COMMERCIAL REAL ESTATE MARKETS

Activity and Prospecting Both Take a Dip

October 11, 2018 – Marlton, NJ – Commercial real estate brokerage WCRE reported in its latest quarterly analysis that the Southern New Jersey market took an expected pause in the third quarter of 2018. Leasing and sales dropped off somewhat from their earlier pace, but the market still shows overall solid fundamentals, continued new investments from outside of the region, and economic inflows to support local expansion.

“A lot of the positive trends we’ve been tracking for several quarters are still in place, so there are reasons to stay bullish,” said Jason Wolf, founder and managing principal of WCRE. “But activity did cool off noticeably, at least in part due to summer.”

There were approximately 274,931 square feet of new leases and renewals executed in the three counties surveyed (Burlington, Camden and Gloucester), which was down about 10.5 percent compared to the previous quarter. The sales market stayed active, with about 1.43 million square feet on the market or under agreement. This metric was essentially unchanged.

New leasing activity accounted for approximately 32 percent of all deals. Overall, gross leasing absorption for the quarter was in the range of approximately 194,282 square feet.

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Other office market highlights from the report:

  • Overall vacancy in the market is now approximately 11.3 percent, which is nearly one point higher than the previous quarter.
  • Average rents for Class A & B product continue to show strong support in the range of $10.00-$15.00/sf NNN or $20.00-$25.00/sf gross for the deals completed during the quarter. These averages have stayed near this range for most of 2018.
  • Vacancy in Camden County increased to 12.3 percent for the quarter.
  • Burlington County vacancy was up more than a full point to 10.4 percent, after falling during the first half of the year.

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:

  • The vacancy rate in Philadelphia’s office market inched up to 8.1 percent in the third quarter. It stood at 7.9 percent in Q2 2018. Demand for office space continues to be strong, and the office vacancy rate is a full point below the national average.
  • Net office space absorption in Philadelphia was down compared to Q2, but still positive, at 443,032 square feet for the quarter.
  • The industrial sector is as strong as ever in Philadelphia. The third quarter saw a further decrease in vacancy rates, to 5.4 percent, net absorption in the range of 6.1 million square feet, and average rents at $5.36 per square foot. All of these figures were improvements over the previous quarter.
  • Philadelphia retail was largely flat in Q3. The vacancy rate ticked up a tenth of a point, to 4.4 percent, while net absorption was negative after three consecutive quarters of very positive absorption. Net absorption was -273,875 square feet. This number was impacted by large stores such as Sears and Bon-Ton shuttering locations.

WCRE also reports on the Southern New Jersey retail market. The third quarter saw consumer confidence inch upward in September after dramatic improvement in August. It is in the range of 18-year highs. The job market is remarkably strong, supporting consumer spending and reverberating through other indicators.

Other highlights from the retail section of the report include:

  • Retail vacancy in Camden County stood at 7.4 percent, with average rents in the range of $15.38/sf NNN.
  • Retail vacancy in Burlington County stood at 8.2 percent, with average rents in the range of $13.84/sf NNN.
  • Retail vacancy in Gloucester County stood at 7.6 percent, with average rents in the range of $14.77/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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Commercial Real Estate Mortgage Debt Surges to New Record

Mortgage debt underlying offices, apartments, and other non-farm commercial real estate rose the most in any quarter on record to a new high of $3.27 trillion in the second quarter of 2018 as all major investor groups increased their holdings amid strong economic growth.

The $52.3 billion growth in debt on office, multifamily, retail, industrial and hotel properties in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – outpaced the previous record growth from the first quarter by 1.6 percent. This led to the record total debt as of June 30, according to the Mortgage Bankers Association.

This report on U.S. and Philadelphia commercial properties from the CoStar Group research organization is being offered through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

“The four major investor groups all increased their holdings, and multifamily mortgage debt outstanding topped $1.3 trillion for the first time,” Jamie Woodwell, the association’s vice president of commercial real estate research, said in releasing the data.

Overall demand for national and Philadelphia commercial real estate properties is rising, fueled by job growth and early benefits of the new tax law passed in December, as U.S. economic growth rose 4.2 percent in the second quarter, the strongest since 2014. The four major investor groups are bank and thrift; federal agency and government sponsored enterprises; life insurance companies; commercial mortgage-backed securities and other asset-backed securities issuers.

Woodwell added that “strong property fundamentals and values, coupled with still-low mortgage rates and strong loan performance” all support the growth of commercial real estate lending.

Commercial banks hold the largest share of the retail, office, industrial, hospitality and multifamily mortgages in the national and Philadelphia commercial real estate market — $1.3 trillion, or 40 percent of the total. In the second quarter, banks and thrifts had the largest increase in dollar terms in their holdings of commercial mortgage debt – an increase of $23.9 billion, or 1.9 percent.

Life insurance companies hold $486 billion, or 15 percent of the total. Life insurance companies increased their holdings of U.S. and Philadelphia commercial real estate listings by $10.6 billion, or 2.2 percent.

Commercial mortgage-backed securities and other asset-backed securities issuers hold $452 billion, or 14 percent of the total throughout the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space. They increased their holdings by $5.7 billion, or 1.3 percent.

While the major groups were upping their holdings, state and local government retirement funds decreased their holdings about 72 percent, according to the Mortgage Bankers.

Separate data released last week from the Federal Reserve shows that real estate investment trusts also shrunk their share of commercial mortgage debt outstanding by about $3.2 billion, or roughly 1.9 percent.

Multifamily mortgage debt made up a huge chunk of the increase with outstanding amounts rising to $1.3 trillion, an increase of $20 billion from the first quarter of 2018, representing a 1.6 percent increase.

For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

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