Tag Archives: Wolf CRE
It’s tempting to consider open floor office design for your new headquarters, but is open floor office design good for business? Open floor offices advertise their collaborative environment and cheap rent, but is this true? Most likely not. You’ll come to find that the privacy of cubicles will be sought after, once the thrill of an open floor office wears off. Productivity will suffer, and so will your company work ethic.
Cubicles may not be as visually appealing, but they serve their purpose in keeping your business running smoothly. Open floor offices may have negative effects on your business that you’ve never thought of but should consider. If you’re currently renting open floor offices, a few of these points may feel a bit familiar. If
you haven’t hit “PAY” yet, read this before you are making your final decision.
Open Floor Office Design Problem #1 – HIGH PERFORMANCE EMPLOYEES NEED QUIET SPACES
It is no surprise that open floor spaces are loud. When there is chatter all around you, it’s hard to focus on your work at hand. There could be someone on a call, or a group of coworkers discussing their next business strategy, and maybe even a disagreement that’s within earshot. To you, this is just noise. You must reset your brain multiple times to zone back into your project in front of you.
Open Floor Office Design Problem #2 – JOB SATISFACTION OR NOT SO MUCH?
A study investigated the correlation between office type and employee job satisfaction. It revealed that those who worked alone in cellular offices and those who worked in a room shared with one other colleague experienced a positive work experience. However, as the number of co-workers increase in a room, job satisfaction decreased. Sure, you’ll save money on an open floor office, but you’ll pay for it in the long run with the costs associated with job satisfaction going down. It’s more cost effective to consider the impact an office type will have on employees rather than solely focusing on the short-term financial benefits.
Open Floor Office Design Problem #3 – LACK OF INTERACTION
Unfortunately, face-to-face interaction decreases in open floor offices, the opposite effect of what an open layout is going for. Communication through emailing and instant messaging increased and productivity declined. Because everyone is constantly surrounded by people, there was no longer the privacy that cubicles
provided. Online interactions increased as a result. Some may even go as far as to avoid more interaction with team members. Having so many people around you
can be overstimulating. You’ll see earbuds in and coworkers making the effort to avoid as much contact with others as possible.
Open Floor Office Design Problem #4 – VISUALLY DISTRACTING
When you’re in such close proximity to so many other team members, it’s visually distracting. In open floor offices, you’re surrounded by people that may not necessarily be in your department or even your company. Not only is their presence distracting, but their projects can also disrupt your work ethic. You could be bombarded with questions about what you do and how you do it, something you wouldn’t have to worry about if you were in a cubicle.
FOR MORE INFORMATION
Building life expectancy isn’t what it used to be. What to do with obsolete commercial buildings and how to prevent your portfolio from falling into the trap. Buyers, owners, investors and developers of real estate are facing questions regarding how properties are valued in the current market, especially where there are problems appraising a property’s highest and best use. More specifically, this question focuses on reversion value.
Commercial Building Life Expectancy – Multiple Cases
Recent Class B or lower valuation projects (as well as some lower level Class A properties) have presented serious, widespread questions from a valuation standpoint. The main question is simple: What should be done with “obsolete” buildings?
Historically, such a question became pertinent only after 50-100 years. Buildings were “built to last,” and most were designed to be updated over time. Part of the reason for that long horizon was that ample land was available for expansion. Another was that zoning was very prescriptive and clearly defined in many ways. Lastly, fixed real estate was a capital-intensive asset class.
In the past five years alone, that question, however, is now being asked about buildings that are only 20 to 30 years old. Many buildings that have been constructed in the last 30 years or so, like suburban office buildings and parks, retail centers and malls, some well located industrial parks and even sports stadiums, now face the wrecking ball because they are, effectively, obsolete. Some investors report that many U.S. submarkets, for a variety of uses, are “under-demolished.”
What is driving Decreased Commercial Building Life Expectancy?
The short answer is technology. The longer answer is human interaction with technology.
Historically, most companies had fairly simple operations and spatial needs, so real estate decisions were driven by location and/or resources, with physical building changes limited by cost and location. The current digital revolution, however, is changing that—literally at the speed of light. Locations are not as “fixed” as they were previously, and businesses’ physical space needs tend to change quickly due to technological shifts. Flexibility will be the key to long-term survival in all industries, including real estate.
Traditionally, real estate has been a fixed asset acquired at high prices compared to most assets. Such requirements mandated long lead times, high fixed costs, significant capital resources, segregation of uses, long-term contracts (i.e., leases and mortgages) and zoning. The industry faces the challenge of adapting fixed physical space needs, and all that goes along with it, to meet the new reality of demand for change at the snap of a finger, and how to underwrite office or other spaces that will likely shift to “creative space” when re-financed (at lower rents, not higher).
Possible Solutions to Decreased Commercial Building Life Expectancy
From a valuation standpoint, there are two traditional factors: zoning/legal issues and physical utility. To maintain real estate flexibility, underwriters, analysts, municipalities and all industries will have to consider:
1. Revised zoning codes that stress density/form over use. The economic lives of buildings are getting shorter and it may be necessary to re-configure space more quickly. This change, however, often runs afoul of local zoning ordinances, minimally, as it relates to uses. If structures in the future are more generic in form, site-specific codes may have to be revised to reflect multiple future uses. By “pre-coding” such code requirements, one of the major impediments to re-development (generically, all permitting costs) can be streamlined for material cost savings and faster re-use. Urban areas already have an advantage in this regard due to greater densities and uses. Suburban areas will need to adapt this concept, or face an even stronger “back to the city” trend than currently in the market. Otherwise, suburban office parks and similar “obsolete concepts” could risk vacancy. All jurisdictions, in order to retain and attract industry—their tax base—will have to re-write zoning laws to allow rapid flexibility.
2. In terms of physical utility, architects and engineers will have to design buildings that can be quickly adapted to alternate uses at a reasonable cost. Aesthetics will still be important. Those who are able to successfully design and build the most flexible buildings first will fare the best. Prime locations will also continue to have great importance. These locations, however, will not be limited strictly to traditional site selection parameters. The key will be how flexible the site and/or building improvements are perceived to be for needed changes due to technological shifts that dramatically alter market demand for that space.
The combination of these elements will require a shorter-term view, and investors and municipalities should incorporate some level of alternate use analysis, even from the original construction date. Underwriters would then have the benefit of downside underwriting (to consider future conversion costs)—on a current basis.
For many years, zoning and functional utility have simply been boxes to check during the valuation process. Moving forward, and given the rapid clip of technological change, it is now time to remove it from a box and think about a real exit strategy beyond the end of a lease or mortgage term.
Let’s examine who owns the fixtures at lease expiration. In order to facilitate a smooth transition between commercial tenants, it is important for landlords to understand their rights regarding items attached to their property. Generally, a lease will govern these rights. However, if the lease is silent on the issue, articles annexed to the property deemed “fixtures” must stay with the property, while articles deemed “trade fixtures” may be removed by a vacating tenant.
In New Jersey, a fixture is an object that “become[s] so related to particular real estate that an interest… arises under real estate law.” N.J.S.A. 12A:2A-309(1)(a). In contrast, an article may be considered to be a trade fixture if: (1) the article is annexed to the property for the purpose of aiding in the conduct of a trade or business exercised on the premises; and (2) the article is capable of removal from the premises without material injury thereto. Handler v. Horns, 2 N.J. 18, 24-25 (1949). As such, an important distinction between fixtures and trade fixtures is whether removal of the item will cause material injury to the premises. See e.g.
GMC v. City of Linden, 150 N.J. 522, 534 (1997). In applying this test, courts infer that if removal of an article would cause material injury to the premises, the parties must have intended for the article to remain beyond the lease term. Id.
A typical conflict involving this nuanced distinction may involve a vacating tenant removing an item from the leased premises under the assumption that it was (1) attached to the premises for the purpose of conducting a trade or business; and (2) capable of removal without material injury to the premises. A landlord may dispute one or more of these assumptions, arguing that the article was not used in the conduct of business (that it was in fact attached to improve the structure) or is not capable of removal without material injury to the premises.Over the years, vacating tenants have attempted to remove countless items from leased premises, including air conditioning systems, irrigation systems, bolted down light fixtures and even circuit breaker panels, by arguing these items were trade fixtures. See e.g. In re Jackson Tanker Corp., 69 B.R. 850 (Bankr. S.D.N.Y. 1987).
However, it isn’t difficult to imagine a hypothetical where the traditional landlord and tenant arguments are reversed – that is, where the tenant argues that the article must remain with the property and the landlord argues that the tenant is responsible for its removal. This unusual fact pattern may especially arise where the tenant’s business is specialized in nature, and where equipment is not easily removed from the premises.
For example, Landlord rents out space to Tenant, who plans on operating a restaurant. The lease does not specifically address what does and does not constitute a trade fixture. Tenant plans on installing a walk-in freezer and other specialized, complex systems. After several years of operating, Tenant declines to renew the
lease, closes, and vacates the premises. Tenant removes the furniture, appliances not fixed to the premises and other items it deems to be trade fixtures and leaves the walk-in freezer infrastructure. Tenant refuses to remove the walk-in freezer, arguing its removal will cause substantial damage to the premises. Unable to re-let the premises to a restaurant tenant, Landlord is left with a walk-in freezer occupying a substantial portion of the premises. It is important that during the lease negotiation, landlords think carefully about the business their prospective tenant is in, the kinds of equipment the tenant will install and what will happen to that equipment upon termination of the lease. This same thought process applies when landlords receive requests for alterations. In the above hypothetical, Landlord could have avoided being left with a walk-in freezer and a less than desirable space if it addressed the issue during negotiation of the lease. A discussion with prospective tenants concerning the specific kinds equipment the tenant will install is always a good idea, followed by specifications and drawings for approval. Landlords are wise to reduce these conversations to writing, and specifically address each party’s expectations regarding the disposition of specific equipment when the lease inevitably comes to an end. As always, an ounce of prevention is worth a pound of cure.
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.
William F. Hanna, Esquire
Hyland Levin LLP
Hyland Levin LLP
6000 Sagemore Drive, Suite 6301
Marlton, NJ 08053-3900
How Do You Move The Compressor Off Your Roof When You Relocate Your Office? You Need Rigging Services. Here’s a little-known secret that movers won’t tell you: rigging services are critical to many moves, and not many companies are certified to do it. So what is rigging, and why would you need it? Here’s a quick tutorial.
Q. What on earth are rigging services?
A. Rigging services are necessary when you are moving an exceptionally large, heavy, or sensitive piece of equipment — production equipment, hospital equipment, or safes and bank vaults are just some of the unique items that should only be moved by a rigging specialist. Vetted rigging specialists also have the expertise necessary to move equipment where the logistical access points are limited — from industrial machinery on a
production line to the compressor on the roof of a building. Rigging services are also necessary if you need to
crate and skid large items for transport or export, or if you’re moving industrial machinery or equipment that
needs leveling, aligning, and anchoring. Very specialized equipment (crane lifts, engineered and critical lifts,
gantry lifts to 300 tons, forklifts to 100,000 lbs, hydraulic jack-and-slide systems, unified structural jacking systems, cantilever insertion tools, etc) and very experienced move specialists are needed to conduct a rigging job safely and efficiently.
Q. So aren’t rigging services just heavy lifters with cool equipment?
A. NO! Turn-key rigging contractors provide the riggers, machinery, heavy-hauling movers, millwrights, electricians, and crafts persons to dis-assemble, transport, re-assemble and erect machinery and equipment properly. An experienced hauler with a proven match-marking system will provide the most efficient reinstallation and problem-free startup to keep your business running smoothly.
Q. What if I have just one tricky item to move, and not a whole plant?
A. An experienced provider of rigging services focuses on the size of the item, not the size of the project. Just make sure the contractor you hire is a CERTIFIED AND INSURED rigging specialist, not just movers who think they can do rigging projects.
Q . So what kind of certifications should a company have if they are providing rigging services?
A. Any logistics management company quoting on rigging services should provide OSHA qualified or CCCOCertified riggers and signal persons. You want to take every precaution so that your job site is operating safely at all times.
Q. What’s the difference between trans-loading, heavy hauling, and freight forwarding?
A. Trans-loading is the process of transferring a shipment from one mode of transportation to another. It is most commonly employed when one mode cannot be used for the entire trip. Heavy hauling is moving oversized loads too large for road travel without an escort and special permit. Freight forwarding is getting goods from the manufacturer or producer to the final point of distribution. All three processes require handling of goods, which leaves your items at much higher risk of damage. That is why you need a rigging specialist that can provide these specialized types of transport services with integrity.
Q. What if my move is complex, and I can’t reinstall my compressor, boiler, or other heavy equipment at the new site right away?
A. A rigging service provider should be able to offer you secure, heated, and crane-served warehousing for short-term machinery and equipment storage, or containerization for long-term storage. They will deliver your equipment as your project requires.
Q. What if my relocation involves moving an entire industrial warehouse or manufacturing plant, and I need to keep manufacturing lines up and running during the transition?
A. A vetted service provider should be able to choreograph all of the various relo priorities in a single logistics plan. They can phase one manufacturing line out at the old location, and get it up and running at the new location as you transition through the move. Keeping multiple manufacturing lines productive throughout a
transition is complex, but certainly attainable with detailed planning.
The bottom line is rigging services are a critical part of any move, and you need an experienced, certified provider to tackle this part of your transition. Rigging is just too much for you to shoulder on your own.
ABOUT ARGOSY MANAGEMENT GROUP, LLC
Argosy Management Group (AMG) is a leader in office relocation and logistics project/move management. AMG services companies throughout the U.S. and worldwide. AMG delivers a wide range of comprehensive services: move management and transition planning, space planning and furniture needs, office and industrial relocation and liquidation, storage solutions and asset management, furniture disassembly and installation, IT/data center relocation, and rigging.
For more information, contact: Shawn O’Neil at 609-744-4112 or visit www.argosymg.com
Energy Conservation Measures (ECM) or efficient building upgrades which include LED Lighting, Plumbing and Mechanical and HVAC upgrades, are proven to reduce energy and operating costs. Mechanical and HVAC upgrades could include Building Management Systems, Variable Frequency Drives on fans, pumps and motors, Free Cooling, installation of Condensing Boilers and Demand Based Domestic Water Boosters to name a few opportunities to reduce costs.
Investing in energy efficiency can yield a Return on Investment (ROI) of 30 to 40%, and an improvement in Net Operating Income (NOI) and significant Valuation Enhancement. By reducing energy and operating expenses NOI can be quickly improved giving the owner increased profits and/or a competitive advantage in the market.
NOI improvements from ECMs can be achieved in Hospitality, High and Low Rise, single and multi-tenant Office buildings, Manufacturing and Distribution Centers as well as High and Low rise multi-family buildings. Today the value of energy efficient upgrades are further increased because of favorable tax treatment – 100% expensing and generous Utility Company Cash Incentives.
Efficient building upgrades to a property 10 years of age or older to deliver:
• Energy Cost Reductions up to 40%
• Overall OpEx Reduction of 5 to 10%
• Value Enhancement of 5 to 15%
• Increased unlevered ROR by ½ to 2%
• Competitive Market Advantage
Energy efficient building upgrades are good for buyers and sellers!
A completed Energy Efficiency project in a 25 Story Office building located in center city Philadelphia reduced annual operating costs by $208,000. The Energy Efficient Measures (ECM) included LED lighting, free-cooling, premium efficiency motors for the condenser and hot water heating pumps with variable frequency drives and Retro-commissioning of the HVAC systems.
In the two tables below observe the actual energy efficiency upgrade costs and the energy cost savings generated by the above mentioned upgrades (Project Matrix) and in the NOI Improvement table the effect these real savings would have on NOI and the “Cap” rate against typical market Rents, OpEx Costs and a hypothetical property value of $33,600,000.
Energy efficient building upgrades offer VALUE ENHANCEMENT
An Owner of a $33,600,000 property making these improvements at a Cap rate of 8.57 would see the value of the
property increased to $36,008,000 due to the improved NOI. This is a 7.2% valuation enhancement or an ≈ $3,000,000 value growth with an ≈ $500,000 investment in CapEx!
Energy efficient building upgrades offer INVESTMENT ENHANCEMENT
A buyer of a $33,600,000 property would realize an increase in their unlevered Rate of Return of .60% in net dollars by installing similar Energy Efficient building upgrades.
Energy efficient building upgrades offer ADDITIONAL BENEFITS
Reduced Maintenance Costs – Another typical benefit of installing ECMs is the reduction in maintenance expense that comes from replacing aging equipment that is in need of repair or replacement. Quite often energy savings derived from certain high ROI ECMs can help offset the cost of equipment replacement.
“Green” Building Tenants Pay Higher Rent – That’s right, a CBRE Global Research and Consulting Review reported that the overall vacancy rate for green buildings was 4 percent lower than for non-green properties—11.7 percent, compared to 15.7 percent—and that LEED-certified buildings routinely commanded the highest rents.
• Higher productivity and better occupant health
• Promotion of a culture of sustainability among all building users
• Reduced environmental impacts
• Improved public image and marketing tools for both landlord and tenant
Rich Energy Solutions’ experience runs from small to large HVAC efficiency upgrades, wireless Building Management Systems and energy saving LED lighting system upgrades to displacing city steam and chilled water loops, in-house thermal and co-generation plants.
For qualified customers Rich Energy Solutions will conduct free, no obligation on-site building assessments to develop cost savings analyses and system design and provide turn-key installation of all energy conservation measures. The Rich Family has provided construction management, mechanical construction and energy saving solutions in 38 states for public and private businesses since 1918. www.richenergysolutions.com
To learn how Energy Efficiency can impact your NOI contact:
Rich Energy Solutions
New Exclusive Assignments and High Volume of Transactions Lead Growing Commercial Real Estate Firm to Expand into Philadelphia’s Central Business District
June 5, 2018 -Marlton, NJ – Wolf Commercial Real Estate (WCRE) is pleased to announce that it will be opening a new office at 1601 Market Street in Philadelphia. This will be the firm’s third office, in addition to its headquarters in Marlton, NJ and an office in King of Prussia that opened in 2014.
“We’ve been serving numerous clients in and around Center City for a while now, so it makes sense to strengthen those relationships by opening an office here,” said Anthony Mannino, chief operating officer of WCRE. “This move will help create more opportunities for our professionals to network and collaborate with clients and partners, and to expand our commitment to community initiatives.”
Since its founding in 2012, WCRE has grown into a market leader in Southern New Jersey and southeastern Pennsylvania. The team has set a new standard in serving the needs of owners, tenants, and investors. The firm currently has more than 175 properties comprising 4.2 million square feet of office, retail, medical, industrial, flex and investment property in the region under exclusive watch.
Along with Mannino, WCRE’s Philadelphia team includes several well-known business leaders with deep roots in the city. Among them are Brian Propp, director of strategic relationships, Andrew Maristch, vice president corporate services & portfolios, Tony Banks, vice president, and Joseph Nassib, sales associate. Each brings a unique skill set, along with energy, passion, and the signature WCRE commitment to the community. Founding principal Jason Wolf, and Lee Fein, a senior vice president and industrial space specialist, will assist the Center City team from their respective bases in Southern NJ and King of Prussia.
Last year WCRE became affiliated with CORFAC International, a network of independently-owned, entrepreneurial commercial real estate firms with 78 offices worldwide. The move has helped elevate the firm and contributed to its latest expansion.
WCRE is a full-service commercial real estate brokerage and advisory firm specializing in office, retail, medical, industrial and investment properties in Southern New Jersey and the Philadelphia region. We provide a complete range of real estate services to commercial property owners, companies, banks, commercial loan servicers, and investors seeking the highest quality of service, proven expertise, and a total commitment to client-focused relationships. Through our intensive focus on our clients’ business goals, our commitment to the community, and our highly personal approach to client service, WCRE is creating a new culture and a higher standard. We go well beyond helping with property transactions and serve as a strategic partner invested in your long term growth and success.
Learn more about WCRE online at www.wolfcre.com, on Twitter & Instagram @WCRE1, and on Facebook at Wolf Commercial Real Estate, LLC. Visit our blog pages at www.southjerseyofficespace.com, www.southjerseyindustrialspace.com, www.southjerseymedicalspace.com, www.southjerseyretailspace.com, www.phillyofficespace.com, www.phillyindustrialspace.com, www.phillymedicalspace.com and www.phillyretailspace.com.
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If you’re in the business of commercial real estate, you are bound to have come across the sometimes dreaded American Institute of Architects (AIA contract), the most commonly used contract for construction projects in the United States. We say that its sometimes dreaded because the form is lengthy and somewhat dense. There is also a misconception that because the contract is a pre-set form, it cannot be negotiated or amended. But as you know, everything can be negotiated.
Below is a summary of some provisions in the AIA contract that you should pay particular attention to and if needed, should be negotiated in a way that helps your clients. While we are lawyers, the list below should not be taken as legal advice for you or your clients. Each deal and client is different and may require a different review of the contract. Should you need a legal review of a contract, please contact us.
PERIOD OF PERFORMANCE
Make sure that the commencement date and the substantial completion date of the project is a timeframe that makes sense and works for you. Not completing a project on time can lead to delay costs including liquidated damages and other ancillary costs of additional project construction.
Contractors want most of their payment at the beginning stages of the project while the other party always wants to hold money for substantial completion. You can negotiate the amounts and trigger dates for payment so that you can protect your client against delays in the project.
Indemnification means that one contractual party agrees to assume responsibility for certain judgments resulting from third-party claims against the other party. This clause deserves special attention in every contract and should at the very least be made mutual so that each party gets its costs covered if it is sued because of something caused by the other party.
Delays are inevitable in many different kinds of projects. But the risk of dealing with the fallout from project delays can be managed through contract negotiation. You don’t want your client to bear the brunt of delay costs caused by the other party. Liquidated damages or other compensable damages can be negotiated here.
Although the AIA contract is seen as a boilerplate static document, there are important provisions that should be on your radar and amended if necessary so that your client is protected. We suggest that any amendments be drafted by an attorney with experience in construction and ancillary industries.
For more information contact:
Marc Snyderman, Esq.
Snyderman Law Group
923 Haddonfield Road, Suite 300
Cherry Hill, NJ 08002
Antonella Colella, Esq.
Snyderman Law Group
923 Haddonfield Road, Suite 300
Cherry Hill, NJ 08002
Your business is growing and you like your current location, so you’ve decided to renew your lease and either refresh or expand your space. GREAT!
Ready to expand your space? Did you call the movers yet?
That’s right. Movers. And contractors. And space planners. And IT specialists. And a host of other vendors that you haven’t even thought of yet. When you’re staying in the same location, the reality is that the To Do list can seem almost as overwhelming as if you were pulling up stakes and starting all over in a new venue. Because you ARE starting in a new venue. The address may be the same, but how you utilize the space to maximize productivity is a rare opportunity you need to take full advantage of. You have two options: refresh or expand. To capitalize on either one of these options, you need a detailed staging and logistical plan to minimize downtime and keep your employees as close to 100% productivity while you update or expand.
So where do you start? You hire a professional logistics management team to shoulder the responsibility of planning and executing the project. No matter how big or small your space, here’s what an experienced logistics management team brings to the table for each option…
OPTION #1: Refresh Your Space
Also called an office restacking, you need to look at this type of project as an employee retention tool. No doubt your business has markedly changed over the last 10 years, so your office environment needs to evolve to best support that shift in culture. Restacking changes and improves the look and feel of the work environment, and by redefining the space to include collaboration rooms/workspaces, you can change the corporate culture in the link of an eye to catch up with the times. A refresh re-energizes your employees, and shows you value their presence. New paint, carpeting, furniture, lighting, bathrooms, and more will make employees happier when they are at work, and warmly welcome new clients into your space when they visit. It’s a win-win.
OPTION #2: Expand Your Space
Here the biggest opportunity is to redefine the space. Are you adding new employees? Consolidating employees
from another location? Expanding the space for client interaction? A space planner will help you understand how much new space you really need (square footage/head count), and how much you should allot to common areas, workstation areas, private office areas, client showrooms, product production space, etc. An experienced logistics management team knows exactly what questions to ask to make sure you have the most comprehensive staging and logistics plan possible, so no detail is overlooked and no opportunity is missed:
(1) Where are you going to temporarily move active files and personal contents during your office refresh or expansion?
(2) Does the furniture have to be removed (new carpet installation) or just lifted in place (carpet tile installation)?
(3) Should you upgrade the furniture, or re-use what you have?
(4) How can you maintain productivity when computers or data centers need to be disconnected, moved, and reconnected?
The bottom line is refreshing and/or expanding your office requires careful thought and planning to keep your business thriving. The right logistics management team will help you hit the ground running as you launch your business into its next growth stage!
About Argosy Management Group, LLC
Argosy Management Group (AMG) is a leader in office relocation and logistics project/move management. AMG services companies throughout the U.S. and worldwide. AMG delivers a wide range of comprehensive services: move management and transition planning, space planning and furniture needs, office and industrial relocation and liquidation, storage solutions and asset management, furniture disassembly and installation, IT/ data center relocation, and rigging.
For more information, contact: Shawn O’Neil at 609-744-4112 or Paul Sipera at 609-760-8312, or visit
Let’s explore using an installment sale to evenly distribute tax liabilities stemming from a commercial real estate transaction. Do you own a property that has appreciated considerably and that you want to sell? Are you concerned about incurring a large capital gains tax liability or worse – ordinary income recapture? One option is to structure the sale as an installment sale. Here the buyer pays the cost of the property plus interest in regular installments, perhaps for 5 years, enabling the seller to reflect the gain for tax purposes over the entire payment period. Alas, the installment sales method can’t be used for the following:
• Sale of inventory. The regular sale of inventory of personal property doesn’t qualify as an installment sale even if you receive a payment after the year of sale.
• Dealer sales. Sales of personal property by a person who regularly sells or otherwise disposes of the same type of personal property on the installment plan aren’t installment sales. This rule also applies to real property held for sale to customers in the ordinary course of a trade or business.
• Stock or securities. You can’t use the installment method to report gain from the sale of stock or securities traded on an established securities market. You must report the entire gain on the sale in the year in which the trade date falls.
Items to note about installment sale transactions:
• Installment obligation. The buyer’s obligation to make future payments to you can be in the form of a deed
of trust, note, land contract, mortgage, or other evidence of the buyer’s debt to you.
• If a sale qualifies as an installment sale, the gain must be reported under the installment method unless you
elect out of using the installment method.
• Sale at a loss. If your sale results in a loss, you can’t use the installment method. If the loss is on an installment sale of business or investment property, you can deduct it only in the tax year of sale.
• Unstated interest. If your sale calls for payments in a later year and the sales contract provides for little or no interest, you may have to figure unstated interest, even if you have a loss.
Sellers who decide on this strategy are cautioned, however, that an installment sale carries more risk than an outright sale of the property. Here are some areas of concern this CPA believes the seller must review in depth with his/her seasoned attorney (and if you need one you can call us at Abo and Company or my buds at WCRE): Carefully assess the creditworthiness of the buyer and possibly obtain personal guarantees if the purchaser is a business; Evaluate the future income producing capability of the property to make sure it provides sufficient
cashflow to enable the buyer to make the payments; Use an interest rate competitive with current market rates so as not to squash the deal; and Obtain a significant enough down payment, perhaps at least 20%, to have a cushion if buyer default occurs, and to cover the expenses if foreclosure becomes necessary. Business property transactions are often complex, and the services of knowledgeable professionals can be vital in developing strategies that make it possible to bring a contemplated transaction to a successful conclusion.
FOR MORE INFORMATION:
Martin H. Abo, CPA/ABV/CVA/CFF is a principle of Abo and Company, LLC and its affiliate, Abo Cipolla Financial Forensics, LLC, Certified Public Accountants – Litigation and Forensic Accountants. With offices in Mount Laurel, NJ and Morrisville, PA, tips like the above can also be accessed by going to the firm’s website at www.aboandcompany.com.
An investment in a Qualified Opportunity Fund that is in turn invested within a Qualified Opportunity Zone is entitled to certain tax deferral of capital gains, certain basis step-up and, if held long enough, the ability to not have to pay tax on the appreciation of investment within the fund beyond the initial deferred gain.
On December 22, 2017, as part of Congress’ House Resolution 1, the concept of a Qualified Opportunity Zone (QOZ) was added to the toolbox of potential community development tools. In this Alert, we explain what a QOZ is and offer strategies to help real estate developers take advantage of the benefits of QOZs. In short, an investment in a Qualified Opportunity Fund that is in turn invested within a QOZ is entitled to certain tax deferral of capital gains, certain basis step-up (which will lower tax on sale/disposition) and, if held long enough (10 years or more), the ability to not have to pay tax on the appreciation of investment within the fund beyond the initial deferred gain. As explained below, QOZs are in low-income areas; thereby, investment in these areas is incented by the creation of the ability to defer gain within them.
What is a Qualified Opportunity Zone?
A QOZ is a census tract that is located in a low-income community (LIC), i.e., an area designated as such due to it having a 20 percent poverty rate. The qualification process to designate QOZs will end on March 21, 2018:
• QOZs must be located within a LIC as shown on the census map.
• The governor of each state must nominate their desired LICs to the U.S. Treasury Department by
March 21, 2018. Each state may only nominate up to 25 percent of the eligible LICs within a given state, noting that up to five percent of the 25 percent may be non-LIC tracts that are contiguous to other applicable LICs.
What is the Benefit of a Qualified Investment in a Qualified Opportunity Zone?
If designated as a QOZ, the bill allows investors to defer short- and long-term capital gains realized on the sale of property if the capital gain portion of the sale or disposition is reinvested within 180 days in a Qualified Opportunity Fund (QO Fund).
Benefits of Investing Within a Qualified Opportunity Zone Fund
• Owners of low tax basis properties can sell these properties and defer the capital gains to the extent the gains are invested in a QOZ; and
• QOZs are likely to attract investor capital that is looking to defer capital gains, thereby making
the QOZs potentially more valuable than non-QOZ properties.
Recognition of Gain
• Gain is required to be recognized on the earlier of a disposal of the QO Fund investment or December 31, 2026.
• Gain is reduced over time in the following manner:
• The basis of the QOZ investment increases by 10 percent of the deferred gain if the investment is held for five years from the date of reinvestment; and
• The basis of the QOZ investment increases by 15 percent (i.e., an additional five percent) of the deferred gain if the investment is held for seven years from the date of reinvestment. In other words, the gain on which capital gains is paid is reduced to 85 percent of the original gain.
• Appreciation on investments within the QO Fund that are held for at least 10 years are excluded from gross income (i.e., if held for 10 years, the appreciation is not taxed).
What is a Qualified Opportunity Fund?
A QO Fund is an investment vehicle that is organized as a corporation or partnership for the purpose of investing in a QOZ property that holds at least 90 percent of its assets in QOZ property. Note, there are presently no limitations on the amount of the investment, and there are no overall limits on the total investment that the collective funds can make. Moreover, the QO Fund, if it so desires, could invest in Low Income Housing Tax Credit deals, historic tax credit deals and New Markets Tax Credit deals if it so desired within the QOZ.
Qualified Opportunity Zones Viewed as an Economic Tool
The permitted creation of a QO Fund that can: 1) receive appreciated property within 180 days of a sale or disposition; 2) appropriately shelter it with an applicable investment within a QOZ; and 3) enable up to 15 percent of the gain to be deferred until sale of the investment or December 31, 2026, enables a 15 percent increase in the basis of the asset that is subject to gain recognition, which results in a very powerful means to reduce applicable tax.
Moreover, if one does not sell or dispose of the property within the QO Fund in the QOZ for 10 years or more, the appreciation of such property (beyond the initial deferred gain, which is taxable), will be not be subject to tax. This potential to appropriately avoid capital gains on a future sale should encourage funds to be invested in QO Funds that will in turn invest in QOZs. These QOZs, as noted above, will be in LICs that might not otherwise have seen such an investment, which should thereby act as an economic driver within these more difficult investment areas.
Owners of properties within LICs should be considering whether to reach out to the applicable governing authorities within their state to have their properties tendered by their governor for inclusion within the QOZ designation. If a property is not proposed as a QOZ by March 21, 2018, the opportunity to be designated as a QO Z is likely to be lost forever (absent a future reopener, which is unc ertain).
Attorneys in the Real Estate Practice Group and the Corporate Practice Group at Duane Morris will continue to monitor and provide updates on any related developments once applicable regulations from the Treasury Department are issued.
If you have any questions about this alert, please contact Brad A. Molotsky, Arthur J. Momjian, any of the attorneys in the Real Estate Practice Group, attorneys in the Corporate Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm’s full disclaimer.
Let’s look at how accelerated depreciation of commercial property can help your business. As a commercial property owner, how would you like to receive cash flow from tax savings of 7%-10% of your building cost within the first five years of ownership? That’s $70K-$100K for each $1M in building costs!
Accelerated Depreciation of Commercial Property – It’s YOUR Money!
Cost Segregation is an IRS-approved application by which commercial property owners can accelerate depreciation and reduce the amount of taxes owed. This savings generates cash flow that owners often use to reinvest in the business, purchase more property, apply to their principle payment or spend on themselves.
But we at STRYDE take it one step further with our “Engineered” Cost Segregation. Our engineers break down
your building into the smallest of components, e.g. carpeting, plumbing, & light fixtures, etc. to maximize your
depreciation. Engineered Cost Segregation is the answer.
Engineered Cost Segregation for Accelerated Depreciation of Commercial Property
The study accelerates the depreciation of your building/renovation components into faster depreciation categories such as 5-,7-and 15-year rather than conventional 27.5-and 39-year schedules. Five-and 7-year items might include decorative building elements and electrical for dedicated computer equipment. Fifteen-year items might include site utilities, landscaping and paving. This engineered cost segregation study results in a much higher depreciation expense and significantly reduced taxable income for the property owner. Best of all, the IRS ruling states cost segregation can be applied to all categories of buildings purchased or built since 1986, including renovations, and there is no need to amend your tax returns. This provides for the results to be easily applied to your tax return.
“I’m Already Doing That.”
It is true that a fair number of CPA’s may apply some of the benefits of Cost Segregation but an Engineered Cost
Segregation Study is the only way to truly maximize your benefits and get all of the depreciation and money your
entitled to. Our goal is to support your CPA or tax advisor with the most accurate cost segregation study results so you can realize maximum savings and increased cash flow. Our service utilizes a performance based method that is affordable for your commercial property application.
Do You Qualify for Accelerated Depreciation of Commercial Property
Even though 90% of all commercial properties do qualify for this benefit, there are a few rather broad minimum
requirements. They are: any building that was purchased or built within the last 20 years of $500,000 or more, OR,
has renovations within the last 20 years of $250,000 or more, AND, has paid federal taxes with in the last 3 years,
or plans to this year. There is also a “catch Up” method, in fact, 75% of our projects are older buildings.
FIND OUT WHY YOUR COMMERCIAL REAL ESTATE DEPRECIATION COULD BE WORTH 40% LESS IN 2019
For over 16 years, STRYDE has been delivering quality, affordable, engineer-based cost segregation studies to a wide range of individuals and businesses. Our team of experts can help easily apply the results to your current financials with your CPA or financial professional to assure successful results. In addition, our national coverage and expertise allows us to work with customers and properties across the United States.
Over the course of the 16 years we’ve been doing engineered Cost Segregation, we’ve had zero dismissed deductions and zero push-back, where the IRS says, “we’ll allow that deduction, but only this much ”
Our background allows us to provide not only the best possible results, but also strictly adheres to all IRS guidelines and provides our clients with all of the verifying documents and Audit defense.
HOW TO GET STARTED
Follow the IRS recommendation for application: Get an Engineered Cost Segregation Study. It’s easy:
- Call your local STRYDE affiliate for a no-cost preliminary property analysis to illustrate your potential savings.
- Engage STRYDE to begin your cost segregation study. The process is usually completed in four to six weeks, after which we provide the cost segregation study to you and your CPA.
- Your personal CPA will apply the results to your tax return and you will realize your tax savings dollars. This is your money!
- The NEW Tax Law provides a unique opportunity that you must act on during 2018 in order to fully capitalize on this change.
New Assignments Bring Additional 113,000 Square Feet Under Firm’s Control
March 1, 2018 – Marlton, NJ – Wolf Commercial Real Estate (WCRE) is pleased to announce that it has been appointed exclusive agent for 13 new projects in the Southern New Jersey and Philadelphia region.
WCRE continues to raise the bar with an aggressive marketing and branding strategy and has increased its South Jersey and Philly presence. WCRE will assume marketing, leasing and sale responsibilities for an additional 13 properties totaling approximately 113,000 SF.
The team at WCRE now oversees over 175 properties throughout the PA/NJ market encompassing over 4.2M square feet of office, retail, industrial, healthcare and investment real estate.
“We see endless possibility in the properties our clients have entrusted to WCRE, and we are excited to connect new prospects with these assets.” said WCRE managing principal Jason Wolf.
The New Projects awarded to WCRE during the first two months of 2018 are as follows:
- 1140 White Horse Road, Voorhees, NJ (25,000 SF Retail Building)
- 1030 Auburn Road, Woolwich, NJ (4.2 Acres)
- 601 Route 130 North, West Collingswood, NJ (2,113 SF Commercial Building on .35 Acres)
- 605 Route 130 North, West Collingswood, NJ (1,200 SF Commercial Building on .27 Acres)
- 513 Centennial Drive, Voorhees, NJ (6,700 SF Office Building on 1.31 Acres)
- 1504 Blackwood Clementon Road, Blackwood, NJ (3,000 SF Office Building on .34 acres)
- 297 Easton Road, Horsham, PA (.62 Acres)
- 146 East Evesham Road, Cherry Hill, NJ (.92 Acres)
- 133-136 Route 73, Voorhees, NJ (25,000 SF Medical Office on 2.85 acres)
- 816 North Black Horse Pike, Gloucester Township, NJ (1.39 Acres)
- 162 West Cohawkin Road, East Greenwich, NJ (25,000 SF Retail Property on 2.5 Acres)
- 55-59 High Street, Mount Holly, NJ (13,000 SF Office Building on .12 acres)
- 735 Bethlehem Pike, Montgomeryville, PA (3,234 SF Retail Building on .39 acres)
- 700 W Browning Road, Collingswood, NJ (8,250 SF Retail Building)
A marketing brochure for each of these properties is available upon request.
WCRE is a full-service commercial real estate brokerage and advisory firm specializing in office, retail, medical, industrial and investment properties in Southern New Jersey and the Philadelphia region. We provide a complete range of real estate services to commercial property owners, companies, banks, commercial loan servicers, and investors seeking the highest quality of service, proven expertise, and a total commitment to client-focused relationships. Through our intensive focus on our clients’ business goals, our commitment to the community, and our highly personal approach to client service, WCRE is creating a new culture and a higher standard. We go well beyond helping with property transactions and serve as a strategic partner invested in your long-term growth and success.
Learn more about WCRE online at www.wolfcre.com, on Twitter & Instagram @WCRE1, and on Facebook at Wolf Commercial Real Estate, LLC. Visit our blog pages at www.southjerseyofficespace.com, www.southjerseyindustrialspace.com, www.southjerseymedicalspace.com, www.southjerseyretailspace.com, www.moorestownofficespace.com, www.moorestownmedicalspace.com, www.phillyofficespace.com, www.phillyindustrialspace.com, www.phillymedicalspace.com and www.phillyretailspace.com.