Monthly Archives: April 2019
The Tax Cuts and Jobs Act (TCJA) made tax law changes that affected virtually every business and individual in this past tax year 2018 and the years ahead. One tax provision that taxpayers should be aware of is that a like-kind exchange, otherwise known as a 1031 exchange after the code section to which it applies, is now generally limited to exchanges of real property.
Here’s what you need to know:
Beginning after December 31, 2017, section 1031 like-kind exchange treatment applies only to exchanges of real property held for use in a trade or business or for investment, other than real property held primarily for sale. Before the law change, section 1031 also applied to certain exchanges of personal or intangible property, such as machinery, equipment, vehicles, artwork, collectibles, patents, and other intellectual property. Effective January 1, 2018 these types of assets do not qualify for nonrecognition of gain or loss as like-kind exchanges.
Generally, if you exchange business or investment real property solely for business or investment real property of a like kind, section 1031 provides that no gain or loss is recognized. If, as part of the exchange, you also receive other (not like-kind) property or money, gain is recognized to the extent of the other property and money received, but a loss isn’t recognized.
Properties are of like kind if they are of the same nature or character, even if they differ in grade or quality. Generally, real properties are like-kind properties, regardless of whether they are improved or unimproved. For example, an apartment building would generally be of like-kind to unimproved land. However, real property in the United States and real property outside the United States aren’t like-kind properties.
We often will recommend deferred exchanges. A deferred exchange occurs when the property received in the exchange is received after the transfer of the property given up. For a deferred exchange to qualify as like kind, you must comply with the timing requirements for identification and receipt of replacement property. The replacement property for the exchange must be identified within 45 days after the property being given up is transferred. The replacement property must be received within 180 days, or by the due date of the tax return including extensions, whichever is earlier. Real estate property includes land and generally anything built on or attached to it. Again, an exchange of real property held primarily for sale still does not qualify as a like-kind exchange.
A like-kind exchange is reported on Form 8824 which taxpayers must file with their tax return for the year the taxpayer transfers property as part of a like-kind exchange. This form certainly assists us tax professionals in helping our client figure the amount of gain deferred as a result of the like-kind exchange, as well as the basis of the like-kind property received if cash or property that isn’t of like kind is involved in the exchange. Take a look at the form as we think it flows almost logically!
If you make a deferred exchange using a qualified intermediary, the transfer of the property given up and receipt of like-kind property is treated as a like-kind exchange. If you fail to meet the timing requirements, your transaction won’t qualify as a deferred exchange and any gain may be taxable in the year you transferred the property.
Clear as mud, eh? Now you know why we at Abo and Company insist clients retain and rely on credible and seasoned real estate professionals, qualified intermediaries in tandem with real estate attorneys well versed in this arena.
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.
The open office presents some etiquette concerns. Let’s examine Policies, Protocol and Politeness as it relates to the open office environment. Cost considerations and space utilization can direct an organization’s decision to move from private to mostly open space. However, achieving strategic goals and supporting a firm’s mission, brand message and culture often play a more significant role. By improving collaboration and communication, flattening hierarchies and eliminating siloes, open environments can catalyze the innovation businesses seek.
Removing barriers and creating a more efficient footprint brings additional benefits. Open office environments can enhance workplace flexibility and provide the agility to meet evolving business needs. Infusing a workplace with natural daylight helps achieve sustainability and wellness initiatives.
Transforming a workplace to a more open setting creates an opportunity to drive other organizational changes.
A successful approach to the shift is pragmatic, holistic and begins well in advance of occupancy. It continues through the actual transition and includes regular updates and checkins. Developing and introducing appropriate guidelines, expectations and etiquette to the workforce will help streamline your firm’s adjustment to its new environment, minimizing downtime and lowering stress levels. This paper provides advice on the process for developing workplace protocols and presents an example of guidelines for a hypothetical company that addresses some typical hot button issues.
SIMPLE PROCESS FOR DEVELOPING WORKPLACE PROTOCOLS
Before the move
• Gain leadership support and sponsorship. An effective shift begins at the top. Active and visible leaders play a critical role in times of change. It is important to involve them early in the process as they provide the authority and influence necessary for a successful workplace change. An employee’s direct manager also plays a significant role in providing specific information and reinforcing change principles.
• Introduce the open office concept. Using multiple forms of media and approaches, educate employees on the changes taking place and the business reasons for the change. Maintain a positive, informative tone while highlighting ways it will benefit them as well as the organization.
• Initiate a transition from the old environment to the new. Provide the support and tools necessary to assist employees in the change. For example, shredding and scanning materials ease the move to digital records. Consider offering incentives or sponsoring a company-wide contest for purging physical files.
• Involve employees in creating guidelines. Including employees in the process will further engage them, solidify “buy-in” and sidestep a perception that change is “being done to them.” An appropriate level of engagement can give employees a voice, without setting unrealistic expectations of influence.
Assemble a small group of employees who represent different areas of the business that will be moving to the
Using the sample guidelines we have provided, brainstorm a list of no more than 5 to 8 issues relative to adopting an open workplace that the group feels should be addressed. Within that list, include these three areas of concern: audible distractions, privacy and uninvited interruptions.
Employee representatives can then solicit input from co-workers on the specific issues, such as common sources of noise in the office, and the collective team can create a short “rule” or guideline that addresses each issue. Some issues may require more than one guideline.
• Consult with Human Resources to assure compliance. Your Human Resources representative should be
involved to ensure that any guidelines you create align with existing policies. • Confirm that the appropriate infrastructure is in place. Security and shared spaces reservation systems should be functional; individual and team workspaces should be fully equipped and accessible. Storage and supplies should be available. All elements of technology, including hardware, power and connectivity, must be available, serviceable and reliable. Be sure to provide proper training to employees and managers on how to use new spaces and technologies.
DURING THE MOVE
• Deliver guidelines. Use the release of guidelines as an opportunity to reiterate your message and celebrate the mission. Depending on the number of employees involved in the change, you can incorporate the guidelines with other training meetings related to the move. If that is not practical, the guidelines can be posted on the corporate intranet and/or presented via “lunch & learn,” webinar, town hall or other method appropriate to your organization’s size and culture. Guidelines should also be a component of onboarding materials for new hires.
• Make the change a positive experience. Celebrating the move process with events and consistent visuals and messaging acts to reinforce a positive experience. Consider providing a welcome letter from leadership and a small office-related gift to each employee on move day.
• Distribute all essential materials and guides. In addition to the sample guidelines presented, develop a printed series of handouts such as office plans, technology instructions and codes, and any other needed guides that employees can refer to.
• On move day, have staff on-hand to resolve problems and answer questions.
• Lead by example. Managing a successful change starts in the C-suite. Encourage all levels of the organization to follow the suggested guidelines on a daily basis. Users will be more inclined to accept their new workstyle upon seeing senior leaders adopting the new workplace norms.
AFTER THE MOVE
• Monitor and adjust. Assess the successes and shortcomings of the change process. There is no substitute for regular face-to face conversations and walking around to see if policies are working and being adhered to.
Build in means for users to submit feedback on how they feel the guidelines are working after about 90 days. Based on insights learned, policies can be tweaked as needed.
A well-executed plan will aid in acceptance of a new environment. Moreover, knowing their input was considered and future feedback welcomed will engage and encourage employees to embrace their new space.
CLICK HERE TO SEE THE SAMPLE GUIDELINES FOR OPEN OFFICE POLICIES, PROTOCOL AND POLITENESS INCLUDED WITH THIS ARTICLE
For More Information, Contact
A couple of the more than 2,200 numbers buried deep in this month’s Census Bureau report on retail sales in the national and Philadelphia commercial real estate markets may add to mounting concerns for U.S. shopping mall investors about the growing threat from e-commerce.
The report shows that for the first time, non-store retail sales (including e-commerce sales) in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – totaled more than those for the department stores that anchor most traditional Class B and Class C malls.
This Co-Star report involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
Non-store retail sales in February, the most recent month reported, totaled $59.77 billion involving U.S. and Philadelphia commercial real estate listings. E-commerce sales account for about 88 percent of that volume.
The total for general merchandise national and Philadelphia commercial real estate properties housing retailers, the category that includes department stores, totaled $59.74 billion. Ten years ago, general merchandise store sales outpaced non-store sales by 47 percent.
The figures contribute more gust to the intensifying headwinds for shopping mall investors in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – whether they are property owners, lenders or real estate investment trust and commercial mortgage investors.
“Class B and C malls in particular are driving weaker loan performance as they generally have less favorable locations, weaker anchor profiles and are particularly vulnerable to competition, both from other malls and internet sales,” Fitch analysts said in a recent report. “Losses of foot traffic and sales have led to additional store closures with increasing mall vacancies affecting property-level cash flow, thus putting pressure on loan performance.”
Overall, there have been more than 5,800 store closings reported this year among national and Philadelphia commercial real estate listings. That elevated level of closings could lead to a widening gap in performance between property owners with more Class A malls than those with more Class B and Class C malls, Morgan Stanley & Co. analysts reported this week in their outlook for upcoming REIT first quarter earnings results.
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 (firstname.lastname@example.org) 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.
MODEST GAINS CONTINUE IN SOUTHERN NEW JERSEY & PHILLY CRE MARKETS
Another Solid Quarterly Performance Despite Ongoing Political Uncertainty
Commercial real estate brokerage WCRE reported in its analysis of the first quarter of 2019 that the Southern New Jersey and Southeastern Pennsylvania markets continued to show overall solid fundamentals, buoyed by new investments from outside the region and economic inflows to support local expansions. Leasing, net absorption, and prospecting activity all were up in the first quarter, while sales dipped slightly.
“We’ve been in this cycle for several years at this point, with steady growth supported by strong fundamentals,” said Jason Wolf, founder and managing principal of WCRE. “The financial markets and political climate have been somewhat less predictable, but commercial real estate has performed very reliably, and we believe will continue to do so.”
There were approximately 373,362 square feet of new leases and renewals executed in the three counties surveyed (Burlington, Camden and Gloucester), which was an increase of 10 percent over the previous quarter. The sales market stayed active, too, with about 1.59 million square feet on the market or under agreement. Sales were active, with $24.7 million totaling approximately 186,000 square feet.
New leasing activity accounted for approximately 50 percent of all deals for the three counties surveyed. Overall, gross leasing absorption for the first quarter was in the range 411,000 square feet, an increase of 30 percent over the fourth quarter.
Other office market highlights from the report:
- Overall vacancy in the market is now approximately 11.60 percent, which is 65 basis points higher 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 stayed near this range throughout 2018 and have remained there into 2019.
- Vacancy in Camden County dropped to 11.1 percent for the quarter, which is an improvement of 40 basis points compared to the fourth quarter.
- Burlington County’s vacancy jumped to 12.1 percent after two straight quarters at 10.4 percent. Burlington was impacted by several large blocks of space returning to the market.
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 moved to 9 percent, up from 7.8 percent at the end of the year. The market’s vacancy rate is at a 17-year low and below that of other major market. Despite this cooling off, demand for office space remains strong, and vacancy in Philadelphia is still below other major cities.
- Net office space absorption in Philadelphia was 1.1 square feet for the quarter.
- The industrial sector in Philadelphia remains very strong, though there may be signs of slowing down a bit. The first quarter saw a further decrease in vacancy rates, to 5.1 percent, but net absorption was off, at 4.7 million square feet.
- Philadelphia retail is treading water to avoid a major spike in vacancy. The vacancy rate ticked down two tenths of a point, to 4.3 percent, while net absorption was positive at 161,406 square feet after two straight quarters in negative territory.
WCRE also reports on the Southern New Jersey retail market. Highlights from the retail section of the report include:
- Retail vacancy in Camden County dropped to 5.8 percent, with average rents in the range of $16.25/sf NNN.
- Retail vacancy in Burlington County increased to 7.9 percent, with average rents in the range of $13.10/sf NNN.
- Retail vacancy in Gloucester County stood at 8.1 percent, with average rents in the range of $13.75/sf NNN.
The full report 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.phillyofficespace.com, www.phillyindustrialspace.com, www.phillymedicalspace.com and www.phillyretailspace.com.
In a time when layoffs and foreclosures are widespread, your firm may be forced to manage vacant real estate. The insurance risks and liabilities associated with owning vacant property can be extensive, and to ensure you are adequately protected, it is important to know these risks. In addition to purchasing comprehensive insurance coverage, there are numerous preventive strategies for maintaining vacant properties to reduce risk and liability.
Potential Risks of Vacant Real Estate
There are a host of risks and concerns associated with owning vacant real estate. Vacant buildings are an obvious target for theft, trespassing and vandalism. For example, the rising cost of copper has given rise to an increase in the theft of copper pipes from vacant properties. In addition to any loss or property damage that may occur, keep in mind that the owner of a property can be held liable for criminal activities or accidents that take place on the premises.
In addition, vacant properties are susceptible to undetected damages, such as fire, water damage, electrical explosions, wind or hail damage, and mold. A study by the U.S. Fire Administration shows that approximately 30,000 fires occur every year in vacant buildings, costing $900 million annually in direct property damage. Many of these incidents occur in vacant buildings due to small, undetected maintenance issues; someone in an occupied building would have recognized and handled the problem before it caused a larger loss.
In certain facilities, there may also be environmental hazards that the owner needs to consider. Facilities that are used to store chemicals or other pollutants should ensure that such materials are removed or securely stored— the owner may be held liable for any hazardous materials that contaminate groundwater or other nearby natural resources. Also, underground fuel tanks present serious challenges and thus should be frequently and carefully inspected by professionals.
Other Ways to Mitigate Risk with Vacant Real Estate
In addition to extending coverage, there are some simple steps that owners of vacant property can take to limit their risk and liability.
Prevent vandalism: Notify local authorities of vacated properties so they can watch for criminal behavior.
Maintain an “occupied” appearance: mow the lawn, have mail forwarded or picked up regularly and install light timers and/or a security system.
Limit liability: Make sure the property is free from significant hazards (e.g., broken railings or steps, broken windows) that could cause injuries to anyone on the property—this could include police officers, maintenance workers, firefighters or even trespassers.
Avoid damage: Performing regular maintenance on the property can decrease the odds of sustaining damage. Make sure the heating system and chimney are cleaned and inspected regularly. Have the plumbing system winterized to prevent frozen pipes. Periodically inspect roof, insulation, attic, basement, gutters and other areas of the property for any necessary repairs, mold, damage or other problems. Consider installing smoke detectors that are tied to a centrally monitored fire alarm system so the fire department will be notified in the case of an alarm. Remove all access material and combustibles from in and around the building.
Insuring Vacant Residential Properties
Most insurance companies include a clause that the homeowner’s insurance will expire if a home is left vacant for more than 30 or 60 days. This leaves the property owner financially vulnerable for all previously noted risk. However, many insurance companies do offer vacant property insurance, also known as vacant building insurance or vacant dwelling insurance.
Insuring Vacant Commercial Buildings
Vacant commercial buildings are more difficult to insure because they present greater risks, including increased chance of theft, malicious damage and burst pipes. It is important to disclose all relevant facts when seeking insurance, including the reason for the property’s vacancy and a schedule of any work to be done on the property. Because of the increased risks and liability associated with a vacant property, these types of insurance tend to be costly—ranging from one and a half to five times the cost of a property insurance policy. It is important to look beyond the price and consider the suitability and comprehensiveness of the coverage being purchased.
For more information about vacant property insurance and other strategies to help protect your assets and mitigate loss from vacant real estate, contact us today at (856) 489-9100.
Commercial Lines – Manager
Hardenbergh Insurance Group
phone: 856.489.9100 x 139
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