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Sale and Leaseback of Commercial Real Estate

Sale and Leaseback of Commercial Real EstateLet’s explore the sale and leaseback of commercial real estate. Confer with the professionals at WCRE or ask us for a seasoned real estate or tax attorney but here’s one technique Abo has seen work well with business clients. Although real estate is generally thought of as an illiquid asset, some liquidity can be achieved by taking out a loan backed by the property. Alternatively, a sale and leaseback may be used effectively if a company’s balance sheet is burdened with excessive debt or just having difficulty in obtaining new capital. Typically, the transaction involves the company owned property being sold to a third party and then leased back to the company under a long-term lease.

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Sale and leaseback transactions may be on the rise but clients need to be aware that the IRS often focuses on transactions between closely-held corporations and their controlling shareholder to make sure that these transactions benefit the company as well as the shareholder. In one common type of sale and leaseback transaction, the company sells the land with a building on it to the shareholder and, in turn, the shareholder leases it back to the company. Some of the financial and tax benefits we’ve seen have included:

The rental deductions the company could take might be significantly larger than the former depreciation deductions if the property had been in service for many years.

After the sale and the leaseback transaction, the shareholder’s basis in the property will be its fair market value which is usually greater than the price paid for the property by the corporation. Thus, the shareholder’s depreciation deduction would be much greater than what was previously available to the corporation (also still need to consider the tax consequences of the sale to the corporation).

The sale and leaseback may enable the shareholder to generate passive rental income that could be offset
against passive losses of the shareholder.

The IRS would obviously be concerned that these transactions have economic substance and that they are
based on reasonable market conditions, and not just designed to generate larger tax deductions. Thus, for
a sale to be valid, the controlling shareholder should have taken an equity interest in the property and also
assumed the risk of loss. For the leaseback to be valid, four tests come to mind that really should be met:

1. The useful life of the property should exceed the term of the lease.

2. Repurchase of the property by the corporation at the end of the lease term should be at fair market value and not at a discount.

3. If the leaseback allows for renewal, the rate should be at a fair rental value (speak to WCRE, not necessarily the accountant).

4. The shareholder should have a reasonable expectation that he or she will generate a profit from the sale and leaseback transaction based on the value of the property when it is eventually sold and the rental obtained during the lease term.

I suspect one of the biggest risks for the seller-lessee is the loss of a valuable asset that could have substantially appreciated over its useful life. Also, the rental market could drop, leaving the seller locked into a rental rate in excess of fair value. On the other side of the table, the seller could move or default, leaving the buyer with unattractive real estate in a soft market.

Even if there are no other problems, the benefits of the deal could be substantially reduced if the IRS deems that it is merely a “financial lease.” In that case, the IRS will treat the seller-lessee as the true owner of the real estate, with all the appropriate tax assessed, and the buyer-lessor will be treated as a lender-mortgagee.

Since sale and leaseback transactions can be quite complicated and also have to pass IRS muster, as I stated earlier, whether you are a buyer, seller or investor, you are well advised to consult with WCRE and seasoned real estate/tax counsel about your financial and tax consequences and the manner of structuring and implementing them to withstand possible IRS challenge.

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.

 

Martin H. Abo, CPA/ABV/CVA/CFF
307 Fellowship Road, Suite 202
Mt. Laurel, NJ 08054
(856) 222-4723
marty@aboandcompany.com
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Is It Time to Refresh or Expand Your Space?

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

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

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

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

OPTION #1: Refresh Your Space

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

OPTION #2: Expand Your Space

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

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

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

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

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

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

About Argosy Management Group, LLC

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

For more information, contact: 

 

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New Proposed Regulations for Qualified Opportunity Zones

Qualified Opportunity ZoneThe second round of proposed regulations issued on April 17, 2019 provide additional guidance on some of the questions and issues that remained unclear after the initial round of proposed regulations that were issued in October 2018. The Opportunity Zone program was created by the Tax Cuts and Jobs Act (TCJA) to stimulate economic development and job growth in low income communities across the US, DC and the five US territories by providing tax breaks to investors in the qualified zone areas.

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TAX INCENTIVES OFFERED BY THE PROGRAM:

• Tax Deferral
• Step-up in basis
• Permanent Exclusion

TAX DEFERRAL:

Most capital gains can be deferred with tax savings to the taxpayer until 12/31/2026 or until the investment in the Qualified Opportunity Fund (QOF) is sold, whichever is earlier, if the original capital gains are invested in a QOF within 180 days of the sale of the asset.
• Gain from sale or exchange of assets between related parties as provided in the proposed regulations does not qualify.
• Investment in QOF must be an equity interest and cannot be a loan or another debt instrument.
• The deferred gain retains its attributes

STEP-UP IN BASIS:

The basis in the capital gains invested in the QOF is increased by:
• 10% if the taxpayer holds the QOF investment for at least 5 years, or
• 15% if the taxpayer holds the QOF investment for at least 7 years

Thus, the taxpayer can defer and effectively exclude up to 15% of the original capital gains from taxation.

PERMANENT EXCLUSION:

The capital gain on the sale or exchange of the investment in the QOF can be permanently excluded from taxation if the QOF investment is held for at least 10 years.

Example:

• John has a capital gain of $ 100,000 from sale of Apple stock as on 7/1/18.
• He invests $ 100,000 in QOF on 11/1/18 (within 180 days of 7/1/18):
• Does not pay any tax on the entire gain in 2018
• Holds the QOF investment until 11/30/23 (past 5 years) and sells the QOF investment at a gain of $ 20,000:
• Gets a step-up in basis of 10% or $ 10,000 on the original gain and pays tax only on the remainder of the original gain of $ 90,000. The $ 20,000 gain on the sale of QOF investment is also subject to tax in 2023.
• Holds the QOF investment until 11/30/25 (past 7 years) and sells the QOF investment at a gain of $ 35,000:
• Gets a step-up in basis of 15% or $ 15,000 on the original gain and pays tax only on the remainder of the original gain of $ 85,000. The $ 35,000 gain on the sale of QOF investment is also subject to tax in 2025.
• Holds the QOF investment until 11/30/28 (past 10 years) and sells the QOF investment at a gain of $ 65,000:
• The $ 65,000 gain on the sale of QOF investment is permanently excluded from taxation. Must pay tax on the
deferred gain of $ 85,000 in 2026.

There are several key topics and rules that need to be followed in order to take advantage of this tax benefit. For more information, contact Jeffrey Cohen, Partner, Tax Services Leader, at jcohen@grassicpas.com or Shashi Singal, Tax Senior Manager, at SSingal@grassicpas.com. For more information on Grassi and additional services, please contact Chris Fifis, Director of Business Development at 201-808-9746.

 

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Second Annual WCRE Celebrity Charity Golf Tournament Raises $35,000

Second Annual WCRE Celebrity Charity Golf Tournament Raises $35,000In its second year, built on the remarkable success of WCRE’s community commitment and annual celebrity charity hockey event, The WCRE Foundation has successfully raised approximately $35,000 to be shared equally by 6 charitable causes within the Philadelphia and Southern New Jersey region. Over the past three years, The WCRE Foundation has now raised close to $235,000.

The Second Annual WCRE Celebrity Charity Golf Tournament which was held at Ramblewood Country Club in Mount Laurel this past Friday afternoon, is the brainchild of Philadelphia Flyer legend and WCRE director of strategic relationships Brian Propp and WCRE’s vice president and principal, Chris Henderson. WCRE welcomed 120 area business leaders and many guests to an afternoon of great golf, fun, competition and contests.

All proceeds from the event will be shared among the CARES Institute at Rowan University, the Jewish Federation of Southern New Jersey, the Alzheimer’s Association Delaware Valley Chapter, the American Cancer Society, Susan G Komen-Philadelphia and Samaritan Healthcare and Hospice. Each of these organizations benefits from WCRE’s long-standing practice of donating a portion of its proceeds from every transaction to an area charity. Learn more about this program at http://wolfcre.com/community-commitment/.

“This event was another successful gathering for The WCRE Foundation and our community partners. Special thanks to the entire WCRE team, our incredible sponsors, donors, golfers, friends and Ramblewood Country Club who all helped make our 2019 Celebrity Charity Golf Tournament a victory for 6 incredible non-profits in our community,” said Jason M. Wolf, founding principal of WCRE. “It is a credit to our friends, neighbors, and business associates that we are able to come together to improve the lives of others.”

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 on Twitter & Instagram @WCRE1, and on Facebook at Wolf Commercial Real Estate, LLC.

Visit our blog pages at www.southjerseyofficespace.com, www.southjerseyindustrialspace.com, www.southjerseymedicalspace.com, www.southjerseyretailspace.com, www.phillyofficespace.com, www.phillyindustrialspace.com, www.phillymedicalspace.com and www.phillyretailspace.com.

 

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Why Smart Buildings Matter to Commercial Real Estate Owners

smart buildings energy consumptionLet’s look at why smart buildings matter to commercial real estate owners. Energy cost savings are top of mind for every commercial building owner, operator, and facility manager, but it’s time to be proactive. On average, a U.S. office building spends nearly 29% of its operating expenses on utilities, and much of this expenditure goes toward HVAC operation.

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Researchers at Massachusetts Institute of Technology (MIT) estimate commercial buildings account for 20% of all the energy used in the U.S. and conclude that as much as 30% of that energy is wasted. Wasted energy will only increase over time without intervention. Imagine a solution that prevents waste and saves 15-30% on energy expenses? That’s possible to achieve with smart buildings.

Smart buildings are any facility that have complete automated controls and systems in place that are integrated together to form an intelligent data collection application, usually via a building automation system (BAS).
BAS offers reduced operation and energy consumption, improved building efficiency, preventative maintenance, comfort for workers and building occupants, and better use of resources.

At Pennoni, we offer our Utilities Watch (UW) solution, a combination of best-in-class energy analytics/fault detection software and engineering expertise that optimizes buildings, reduces costs, and minimizes environmental impact.

Through UW, our software continually analyzes data from diverse systems: BAS, energy, water, and other resource metering systems to identify opportunities for cost reduction. The fault detection and diagnostics application within the software drills down into patterns to identify issues, deviations, and opportunities for operational improvements and cost reduction.

Utilities Watch Key Benefits

Reduce costs

  • Optimize buildings and reduce energy consumption
  • Increase control and visibility of energy budget
  • Decrease maintenance and capital costs through proactive and predictive maintenance
  • Increase lifespan and reliability of HVAC systems

Validation and M&V

  • Performance goals
  • ECM’s, LEED

Commissioning

  • MBCx – automated ongoing commissioning

Risk Management

  • Disaster recovery (information supports better identification of issues)

Improve sustainability strategies, goals, and metrics

  • Full integration to EnergyStar Portfolio Manager
  • Earn additional LEED points for existing buildings

Improve portfolio management

  • Benchmark buildings and compare performance
  • Performance accountability

Deploying smart buildings software is only half of the equation. Our energy analysts and engineers write custom algorithms to automate analyses that traditionally required constant manual effort. From there, our team of engineers interprets the data to make it meaningful and actionable with custom dashboards and notifications that ensure the facility manager has full visibility and can readily prioritize activities, ensuring much greater efficiency.

For more on smart buildings and Utilities Watch, contact Tony Lepre at (609) 214-5520 or TLepre@Pennoni.com.

tony lepre

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Like-Kind Exchanges (1031 Exchanges) and Tax Law Changes

Like-Kind Exchanges (1031 Exchanges) and Tax Law ChangesThe 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.

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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.

 

 

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Bankruptcy Provisions in Commercial Leases

Bankruptcy Provisions in Commercial LeasesLet’s examine what you need to know about bankruptcy provisions in commercial leases. Each property is unique and every relationship has its own contours that will drive the path of commercial lease negotiations. While a lease cannot account for or predict every potential scenario in the course of a commercial landlord-tenant relationship, landlords can put themselves in a better position to weather a tenant bankruptcy by understanding the bankruptcy landscape, including which provisions will be enforced and which provisions will be ignored by bankruptcy courts.

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Most landlords know that commercial bankruptcy cases generally take one of two forms: chapter 7 or chapter 11. In both types of cases, the automatic stay applies. In both types of cases, the commercial lease can be assumed, assigned or rejected within a finite period of time. A chapter 7 case is a liquidating case, while chapter 11 cases are typically reorganizations.

A tenant filing bankruptcy under chapter 7 will cease doing business. There, the court appoints a chapter 7 trustee to gather and liquidate assets and to distribute the proceeds to creditors. While the debtor tenant in a chapter 7 case is unlikely to continue the lease, the trustee may sell/assign a valuable lease to a third party. Negotiations in a chapter 7 case take place with the chapter 7 trustee, rather than with the debtor tenant.

On the other hand, a tenant filing a chapter 11 bankruptcy generally continues operations as a “debtor-in-possession.” The chapter 11 case typically culminates in a plan of reorganization, through which the debtor will outline its plans to fund payments to creditors, restructure debt and continue operations as the entity emerges from bankruptcy. Often, chapter 11 debtors seek to shed debt by rejecting above-market leases or leveraging the right to assume and reject leases by extracting rent concessions from landlords as a condition to lease assumption. Absent unusual circumstances, the court will not appoint a trustee, thus negotiations take place with the debtor tenant.

While a tenant bankruptcy filing shifts the balance of power to the tenant, defensively drafted leases may allow the landlord to retain some control and negotiating advantage after the filing of a bankruptcy.

7 Bankruptcy Provisions in Commercial Leases

(1) Tenant bankruptcy triggering lease termination
Bankruptcy provisions in commercial leases that would terminate a lease or modify other rights of a bankrupt party upon the filing of a bankruptcy petition are known as ipso facto clauses and are unenforceable under the Bankruptcy Code. Bottom line: Don’t waste your leverage trying to incorporate or keep an ipso facto provision in the lease.

(2) Waiver of the automatic stay.
The filing of a bankruptcy petition automatically triggers a stay of all activities to collect a debt, including efforts to obtain possession of property. To avoid the delay associated with the  imposition of the stay, consider including a provision requiring the tenant to waive the protection of the automatic stay or a waiver of the right to contest a motion by the landlord for relief from the stay. The remedy, if enforced by a court, allows a landlord to obtain relief much sooner than it would otherwise be entitled, particularly because courts are reluctant to grant stay relief in the early days of a bankruptcy case. Bottom line: Whether this provision is worth fighting for depends on your jurisdiction. Not all courts will enforce a pre-petition waiver of the stay, and even if they will, the waiver will generally not be “self-executing”. The blessing of the court is needed. Therefore, to avoid the imposition of sanctions that accompany a violation of the stay (or the voiding of stay-violating activities), landlords with waivers in a lease should consult with counsel on filing the appropriate motion with the bankruptcy court before pursuing eviction or collection activities.

(3) Adequate Assurance Definition.
Under the Bankruptcy Code, in order for a bankrupt tenant to assume a lease, it must provide the landlord adequate assurance that it will meet its future lease obligations. The Bankruptcy Code does not define “adequate assurance”, but the parties can define the concept in the lease to narrow the issues in bankruptcy court litigation. Adequate assurance provisions often require the tenant provide assurances as to (i) the source of future rent, including that any assignee is similarly situated, financially, to the tenant at the time the lease was signed, (ii) the stability of the percentage rent, if applicable; and (iii) non-disruption to the tenant mix in the center or complex. Bottom line: A lease containing specific understandings of ambiguous bankruptcy concepts will carry greater weight with a court interpreting a tenant’s post-petition obligations to its landlord.

(4) Shopping Center Provisions.
While bankruptcy courts do not favor limitations or conditions on the assignability of a lease, shopping center leases receive special treatment and, as a result, shopping center landlords have greater leverage in post-petition assignment negotiations. Therefore, if a property can reasonably be considered a shopping center, including a provision indicating that the property is a shopping center may afford a landlord with additional leverage and protections. Any shopping center lease should require that any assignee of the lease in a bankruptcy adhere to exclusive use (or other use restrictions), co-tenancy and tenant mix requirements. Bottom line: Ensure that any
shopping center lease contains provisions that protect the future viability and maintain the integrity of the shopping center if a tenant lease is assumed and assigned in bankruptcy.

(5) Security.
Cash may be king, but, generally, security deposits become property of the debtor’s estate once a bankruptcy petition is filed, limiting the setoff rights of a landlord and requiring motion practice in the bankruptcy court. A letter of credit, coupled with a lease provision allowing the landlord to draw upon it after default and without notice to the tenant, generally falls outside of “property of the estate” and therefore provides more ready access to cash to a landlord whose tenant has filed for bankruptcy. Bottom line: Securing the tenant’s obligations under the lease by collateral that falls outside the umbrella of “property of the estate” puts the landlord in a better position to recover costs when dealing with a tenant in bankruptcy.

(6) Guarantors.
A corporate parent or affiliate guaranty provides additional security for the tenant’s lease. Frequently, however, that guarantor often files bankruptcy at the same time as the tenant, and the landlord’s claim against the guarantor becomes one of many unsecured claims that will receive cents-on-the-dollar recovery. Personal guaranties from tenant equity holders may provide more protection because of the “skin in the game” and a reluctance of many individuals to file personal bankruptcy. Bottom line: The newer the business or the more limited financial history of your tenant, the more compelling a case for obtaining personal guaranties.

(7) Forecasting Trouble.
Bankruptcy provisions in commercial leases that require the submission periodic financial statements, balance sheets and cash flow statements from a tenant and any guarantors will allow a landlord to monitor the performance of its tenant. Leases containing financial covenants provide a mechanism for a landlord to call a default if financial performance declines. Having a heads-up to financial distress can allow the landlord to exercise remedies quickly and potentially in advance of any bankruptcy filing. The automatic stay does not apply to leases terminated pre-petition, so moving quickly to terminate in a distressed situation may give the landlord a valuable edge in regaining possession of the property outside of the bankruptcy court. Bottom line: The more you know about your tenant’s finances, the better you can react to a deteriorating situation, whether by exercising remedies or bolstering the security for the tenant’s obligations under the lease.

The contents of this article are for informational purposes only and none of these materials is offered, nor should be construed, as legal advice or a legal opinion based on any specific facts or circumstances.

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Open Office Etiquette

Open Office PoliciesThe 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.

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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
new space.

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

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WCRE FIRST QUARTER 2019 REPORT

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.

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“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.

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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Best Practices for Proper Asphalt Parking Lot Maintenance

Best Practices for Proper Asphalt Parking Lot MaintenanceLet’s look at the best practices for proper asphalt parking lot maintenance. The four most precious assets associated with a commercial building; the roof, the HVAC system, the elevator (if there is one), and the parking lot. The parking lot is the first impression of your company to your employees; as well as, your client base. A decision as to do business with a company or not…often comes right in the parking lot. The expected useful life of a parking lot (that was properly constructed) should be 15-20 years providing proper maintenance has been applied.

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Proper Asphalt Parking Lot Maintenance Includes:

• Seal coating every two years
• Crack sealing as soon as they appear, and before they widen/worsen.
• New striping for safe navigation by pedestrians and motorists.
• Proper signage
• Pothole repairs as soon as they appear.
• Inlet repair at the first sign of failure
• Water should never be standing in a parking lot- find/remediate the root cause. Pavement failure is often the result of standing water and the subsequent freeze-thaw cycles. Small untreated cracks eventually turn into potholes which cause the pavement to fail. Once this or alligatoring occurs, there is no course of action other than costly reconstruction.

Best Practices for Proper Asphalt Parking Lot Maintenance fall into 3 Categories

1. Must do: Consisting of concerns revolving around property and personal liabilities. Some potential hazards include raised sidewalk, broken curb, potholes, large cracks, alligatored areas, and failing inlets.

2. Should do: Consisting of preventative maintenance measures that will provide life cycle cost savings by “getting ahead” of tomorrows problems today. These include crack sealing, seal coating and small repairs.

3. Could do: When the budget permits, reconstructing the area earlier is better than later. Costly base repairs can often be avoided if milling and paving are performed early.

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Preventing the Most Common Cause of Property Loss

the Most Common Cause of Property LossWhether you count your career in months, years or decades…it doesn’t take much time to see this pattern: the overwhelming majority of the property losses you face are liquid based events. Your “Location, Location, Location” will be interrupted by “Water, Water, Water” because it is the most common cause of property loss. The risk is present year round, whether it’s a flood that’s weather driven, or it rains inside your space due to a plumbing break or roof leak. Due to its threat level to life safety, fire receives our attention to protocols by way of building design, code compliance, annual inspections, drills, materials selection and more. However, the rate of incidence of fire is extremely low compared with the frequency, and high cost of property damage and business interruption caused by water. With this in mind, it’s a great return on your investment of time, to initiate or review your team’s plan for response.

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Preventing the Most Common Cause of Property Loss

HOW READY IS YOUR STAFF TO CONTAIN A WATER LOSS? (the most common cause of property loss)

6 Quick Questions before the next emergency

• Is my staff aware of the Safety hazards of a water event, and how to safely navigate them?
• Is a diverse cross-section of my staff knowledgeable and trained in how to shut off the water?
• Are key 24/7 contacts for subs such as plumbers, electricians, alarm and remediation contractors at your fingertips and in hard copy? Is the information published and posted in a logical, accessible manner?
• Do I have an app with a closed group, or group text pre-loaded for my crisis team and I to communicate during an emergency?
• Is my staff trained in how to divert water in a multi-floor water release, and how to conduct an assessment of the extent of damages?
• Do we have basic tools on hand such as shop vacs for extraction, plastic sheeting to cover and protect contents, and clear bags to remove (but not dispose of) water impacted items?

SAFETY FIRST

• Make certain the area is safe for entry, free of electrical hazards. A licensed electrician is required to manage the following:
• Water impacted basements housing electrical and HVAC
• Equipment and appliances not rated for submersion
• Any wiring, outlets, and panels that have come in contact with water
• Coordinate with a licensed mechanical contractor to inspect and verify HVAC equipment if affected by water damage.
• Contact Alarm & Elevator contractors as needed.
• Determine Category of Water Source (Clean or Contaminated).
• If Flood or Sewage water, PPE and environmental testing are recommended.

ADDRESS THE SOURCE

Address the source and stop water from flowing into the building. Multiple people in various departments should be trained in how to shut off the water. Photomapping and signage to demonstrate the location and instructions for shut off valves is key.

INSPECTION & INITIAL CLEANUP

• A Thorough Assessment is the Foundation of a Successful Recovery. Missed areas and issues create costly secondary damage down the road.
• Direct and/or capture water in a manner that is efficient and prevents further infiltration and damage. For example, when water pouring from floor to floor, direct water into one stream through one deliberate opening in the ceiling tiles, instead of many points.
• Walk the building to determine extent of damage. Use the “360 degrees” approach. Work from the source room/area, up & down, side-to-side, follow gravity as water seeks its lowest point.
• Inspection Tools Include: High powered flashlight, Hygrometer (Temp & Humidity Monitor), Moisture Meter, Thermal Imaging camera, painter’s tape for waterlines & mark out and floor plans.
• Document via photos & video.
• Move sensitive equipment, cover & protect contents.
• Extract standing water, set drying equipment.
• Manipulate contents in a manner to promote proper drying. For example, move lateral cabinets away from walls, roll back carpet and carpet pad.
• Remove saturated contents, do NOT dispose, document, allow insurance adjuster to determine if salvageable. Save potential faulty parts and subcontractor logs in the event subrogration (legal means of seeking other another party’s resources for financial recovery) measures apply.

COMMUNICATION

• Review your Organizations Chain of Command & Procedures for Internal Reporting.
• Make sure your “phone/text tree” and alert systems are ready to activate your response, and to provide notifications to management, staff and occupants.
Tip: A few basic notification templates developed in advance will go a long way towards saving time and stress during a crisis.

For more information about the most common cause of property loss, Contact:

Christine Messina

 

Christine Messina, Vice President
AllRisk Property Damage Experts
TeamAllRisk.com
877.247.5252 24 Hrs
609.634.9960 cell
christine@allriskinc.com
Connect with us!
https://www.linkedin.com/in/christine-messina-b836073

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WCRE APPOINTED EXCLUSIVE AGENT TO MARKET 3 FORMER BB&T BANK LOCATIONS IN THE GREATER PHILADELPHIA AREA

WCRE | CORFAC International is pleased to announce that it has been appointed by Branch Banking and Trust Company (NYSE: BBT) as the exclusive sales agent to market 3 separate BB&T bank locations in the Greater Philadelphia Area.

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The 3 locations include two locations in Pottstown, PA and one location in Bensalem, Pennsylvania.

1830 E High Street in Pottstown is a 5,742 square foot building with 3 drive-thru lanes and great visibility along the highly traveled East High Street.

The 1111 Ridge Road location in Pottstown is 2,997 square feet with 3 drive-thru lanes and ample parking spaces.

The property at 2460 Bristol Road in Bensalem is a 3,889 square foot location equipped with 3 drive-thru lanes and just off the Pennsylvania.

All 3 of the opportunities represent great options for an investor or potential owner user/occupant. The locations present highly visible sites for retail or professional uses, as they are surrounded by various other retail attractions and professional offices.

We are very excited about the opportunity to continue building our relationship with BB&T. We are looking forward to replicating our past success of unloading BB&T assets with these three great properties” said Mitch Russell, associate of WCRE.

We are proud of our partnership with BB&T and look forward to continuing our successful relationship with a top-tier financial institution in the region,” said Jason Wolf, managing principal of WCRE.

A marketing brochure is available upon request and additional information can be found at the links below:

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

About BB&T

Branch Banking and Trust (B&BT) is a bank holding company currently based out of Winston Salem, North Carolina. BB&T has displayed aggressive growth across the country through acquisitions and mergers culminating in the recent merger with SunTrust. With the completion of this merger, the bank will be renaming itself and relocating its headquarters to Charlotte, NC. With over 2,000 branches across 15 states, BB&T offers commercial and consumer banking along with asset management, mortgage and insurance services to its clients. Additional information can be found at https://www.bbt.com/about-us/default.page.

 

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