- DC
A multifamily community in Raritan, New Jersey Lefkowitz of Meridian Capital Group negotiates $46 million in financing
ISSUE HIGHLIGHTS Volume 30, Issue 13 July 13 - 26, 2018
Section 7-10A TAX ISSUES & ACCOUNTING
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three-bedroom luxury units. The property underwent ex- tensive renovations in 2016. The Lena is located 40 miles south of Manhattan and easy access to the city via NJ Tran- sit at the Raritan Station and several nearby highways. There is more than five million s/f of retail within a five-mile radius of the property, includ- ing the 900,000 s/f Bridgewater Commons Mall, in addition to 16 million s/f of occupied office space within 10 miles of the property. “This property is a trophy as- set in Central New Jersey with a sterling sponsor,” said Israel Schubert , senior managing director of Meridian’s NJ of- fice. “Meridian’s team worked closely with the sponsor and the lender to customize a deal that surpassed the client’s expectations.” tation into and out of Mexico with customs pre-clearance for faster, lower-cost service than trucks can offer. KCS’ state-of- the-art logistics network keep trains and shipments moving securely and on time through both the U.S. and Mexico. “As one of the best freight rail networks to and from Mexico, more industrial users with com- plex distribution and logistics networks are tapping North America’s impressive freight rail system to help move goods quickly and cost-efficiently to save costs in the last mile,” said Steve Pastor , VP of Global Supply Chain & Ports for NAI James E. Hanson. “As their de- mand for rail-oriented distribu- tion industrial space continues to grow, industrial development projects like the SW Interna- tional Gateway Business Park will become crucial in ensuring these lines can operate both efficiently and seamlessly and provide them with an ideal opportunity to leverage these rail networks to increase their profitability.”
ARITAN, NJ — Me- ridian Capital Group arranged $46 million
in financing to refinance a multifamily communi ty in Raritan, NJ on behalf o f C a s t l e L a n t e r r a Properties . The f i ve - y e a r l o an , provided by a balance sheet lender, fea- tures a rate of 3.75% and one year of interest-only p a y m e n t s followed by a
HURLEY AUCTIONS CELEBRATES 25 YEARS IN BUSINESS
Barry Lefkowitz
The Lena by Castle Lanterra Properties
based in the company’s Iselin office, negotiated the financing for this transaction. “Meridian initiated the loan for the refinance when rates were beginning to rapidly in- crease, and as a result of Me- ridian’s substantial and ongo- ing relationship with lenders, we were able to lock in a 3.75%
interest rate, a phenomenal rate in today’s environment,” said Lefkowitz. Located at 100 River Park Dr., the River Park at Rari- tan, which has since been rebranded to The Lena by Castle Lanterra Properties, is a four-story, class A, commu- nity comprised of 224 one- to
4C
Israel Schubert
30-year amortization schedule. Meridian senior vice president, Barry Lefkowitz , who is
MAREJ EVENTS August 9, 2018
Stonemont Financial provides funding for SW Int’l. Gateway Business Park NJ’s NAI Hanson&NAI Partners celebrate ground- breaking for 540-acre, 10million s/f industrial park
Philadelphia Medical Properties Conference August 23, 2018 Delaware CRE Forecast September 20, 2018 NJ Apartment/Multifamily For speaking and sponsorship information, please contact: Lea at 781-740-2900 or lea@marejournal.com
EL CAMPO, TX — NAI James E. Hanson (NAI Han- son) , and NAI Partners , a Houston member of the NAI Global network announced that they held the official ground-breaking ceremony on June 19th for the SW Interna- tional Gateway Business Park, a 540-acre rail-served indus- trial development project in El Campo at the intersection of U.S. 59/I-69 and CR 211. Both
SW International Gateway Business Park groundbreaking ceremony
firms are the marketing agents for the site which is a spec/ build-to-suit industrial park. With development spear- headed by Ridgeline Devel- opment and owner financed by Stonemont Financial Group , the SW International Gateway Business Park will bring up to 10 million s/f of class A industrial space and hundreds of jobs to the Houston area. Other key features of the master-planned multi-modal distribution park include: • 1.375 miles (7,260’) of front- age on US 59/I- 69 • Staging area for more than
200 rail cars • Foreign Trade Zone and addi- tional local and state economic incentives • Six Texas ports within 250 miles (Beaumont, Corpus Christi, Freeport, Galveston, Houston, and Port Arthur) • Kansas City Southern Cer- tification • The ability to deliver build- to-suits within 12 months of executed lease In addition to frontage on I-69 and easy access to Texas port cities, the Kansas City Southern (KCS) railroad offers seamless cross-border transpor-
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Berkshire Place Naples, FL $7,100,000
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Mid Atlantic R eal E state J ournal Publisher, Conference Producer . .............Linda Christman AVP, Conference Producer ...........................Lea Christman Associate Publisher ......................................... Steve Kelley Associate Publisher ........................................... Kim Brunet Associate Publisher ...................................... Marisol Chase Senior Editor/Graphic Artist ..........................Karen Vachon Office Manager ...............................................Kerrin Devine Contributing Columnists ............. Jason Price, Cushman & Wakefield Mid Atlantic R eal E state J ournal — Published Semi-Monthly Periodicals postage paid at Hingham, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, 350 Lincoln St., Suite 1105 Hingham, MA 02043 USPS #22-358 | Vol. 30, Issue 13 Subscription rates: $99 - one year, $148 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion 781-740-2900 | Fax: 781-740-2929 www.marejournal.com The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
Recently Closed Loans
Occupier Trends: Demographics and Talent Driving Space Decisions C Jason Price ushman & Wakefield has released a new re- port, Space Matters, which dives deep into four areas of importance to today’s tenants and landlords. It ana- lyzes the national trends be- hind office density, amenities, parking and concessions. The firm’s New Jersey research team assembled regional com- parison for one of these vital benchmarks. “With unemployment below 4%, companies are focusing on making smart decisions about their space – decisions that keep their employees happy and engaged,” said Revathi Greenwood, Americas Head of Research at Cushman & Wakefield. “Landlords are playing a critical role as well – ensuring their buildings stay competitive with a good mix of amenities, and afford- able parking, and of course concessions where necessary to attract top tenants.” The national report exam- ines in detail four top trends in office space: • Office density : Occupi- ers have been allocating less
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square footage per employee, but that trend is starting to slow down as businesses grap- ple with the right balance of personal, private, communal, and break space. • Amenities : Common ame- nities—such as fitness cen- ters and cost-effective food options—still remain very important. However, there is large opportunity for growth in how technology amenities are leveraged by occupiers and landlords. • Parking : In many urban sub-markets parking supply is a challenge. Prices have been increasing, and occupiers are looking at creative options to meet the challenge. Also looming in the future is what impact autonomous vehicles may have on parking demand. • Concessions : Free rent and tenant improvement allow-
ances increased over the past year, but gains were driven by gateway markets in 2017. This trend will spread and some secondary markets will soften as absorption slows down and/ or new supply comes online. NEW JERSEY CONCESSIONS According to Cushman & Wakefield’s New Jersey re- search team, the Garden State ranked high among U.S. mar- kets experiencing increased concessions in 2017. The re- gion’s 13.5% year-over-year jump is considerably larger than the national average and was only outpaced by San Jose/Silicon Valley and three gateway markets (New York, San Francisco, and Boston). “Free rent grew from an average of $13 to $14 psf last year, and TI allowances continued on page 3A
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M id A tlantic R eal E state J ournal Walgreens, KFC, Pep Boys, and Dunkin’ Donuts Horvath & Tremblay sells four retail properties for $13.59 million
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building is located in an ir- replaceable, urban-infill, location on the edge of the Johns Hopkins Hospital and Medical School Campus. Dunkin' Donuts recently completed a $250,000 reno- vation and modernization of the stand-alone property and store, which opened in December 2017. The initial 10-year lease has 9+ years remaining plus two, 5-year tenant renewal options. Horvath & Tremblay is one of the most active and successful Investment Real Estate Brokerage firms in the United States.
guaranteed, double net lease that has over 7 years remain- ing plus three, 5-year renew- al options. KFC has over 3.5 years remaining on the triple net lease. KFC has been in oc- cupancy and operating at the premises since 1986 and has consistently exercised their options, demonstrating their commitment to the location. Kyle Danielson and Bob Horvath represented the seller and procured the buy- er of Dunkin’ Donuts in Baltimore, MD. The prop- erty closed at a sale price of $843,000, a 5.93% cap rate. The unique, stand-alone
ID ATLANTIC — Horvath & Trem- blay have success-
fully completed the sale of four retail properties for $13,598,333. The properties include: Walgreens in New Jersey, KFC and Pep Boys in Pennsylvania and Dunkin’ Donuts in Maryland. Bob Horvath, Todd Tremblay , and Peter But- ler have successfully com- pleted the sale of Walgreens in Ewing, NJ. Horvath & Tremblay represented the seller to close the property for a sale price of $10,645,333 a 5.33% cap rate. Walgreens fully occupies a brand new, 14,680 s/f building located along North Olden Ave.. Walgreens operates under a new 20-year corporately guaranteed, triple net (NNN) lease with 50, 1-year renewal options. The quintessential pharmacy location, situated in front of a popular Shop- Rite grocery store, is set on a highly visible, highly traf- ficked, signaled intersection, along a busy retail corridor that serves Ewing Twp. and its 36,000 residents. Matthew Nadler worked to complete the sales of Pep Boys in Irwin, PA and KFC in Erie, PA closing at sale prices of $1.36 million and $750,000 respectively. Constructed as a build-to-suit for Pep Boys in 2015, the 5,546 s/f build- ing is located on an outparcel at the Norwin Town Square shopping center. Pep Boy’s operates under a corporate increased from $30 to $35,” noted Jason Price, New Jer- sey Research Director. “While vacancy rates are in line with historical norms, rental rate growth was strong during 2017; the rent uptick was partially propped up by the cost of concessions. For 2018, we expect free rent averages to remain stable, and TI al- lowances will likely shrink. Conversely, our Space Mat- ters report reveals that half of local markets in the U.S. are expected to see increased TI allowances in 2018.” Jason Price is the Tri State Suburban Director in Cushman & Wakefield’s U.S. Research Services Group. continued from page 2A Occupier Trends: Demographics and Talent Driving . . .
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EWARK, NJ — The Kislak Company, Inc. announced the 37,500 s/f medical office building located at 119-137 Clifford Street in Newark Salomon & Gralla of Kislak broker sale of Ironbound Medical Center for $4.25 million N
recent $4.25 million sale of the Ironbound Medical Cen- ter, a 37,500 s/f medical office building located at 119-137 Clifford St. in the heart of the Ironbound section of Newark. Kislak marketed the prop- erty on an exclusive basis. Sales associate Michael Salomon represented the seller, Ironbound Medical, LLC, and sales associate Julie Gralla represented the purchaser, FSG Mazel, LLC. The fully-occupied profes-
Michael Salomon Julie Gralla sional medical building has strong tenants including Ironbound MRT Clinic, La- fayette Chiropractic Center, St. Justine Nursey and many others. The property includes on-site fenced parking for 40 cars.
Ironbound Medical Center
“This transaction exempli- fies the strength of the com- mercial real estate market in Newark, especially in the Ironbound section,” said Sa- lomon. The newly renovated build- ing has undergone extensive capital improvements includ- ing a $1,000,000-plus gut renovation of the top and bottom floors, and half of the lobby. Approximately three miles from Newark Liberty International Airport, it is a prime location in the desir- able Ironbound section of Newark. Newark Penn Sta- tion, about 1.6 miles away, is a hub for trains, buses, and light rail only a short ride to New York City and a mono- rail to the airport, among other destinations. Gralla added, “There has been an unbelievable renais- sance occurring in Newark and this sale is a testament to the ever-growing strength of the market. We are very excited to be a part of the con- tinued improvement through- out this area.” Improvements to downtown Newark include a municipal project which will develop 22 acres between Newark’s central business district and the Ironbound with hous- ing, a three-acre park and a commercial center, linking the two neighborhoods by a pedestrian bridge over a highway. Michael Salomon and Julie Gralla are both rising stars at Kislak. Salomon joined the firm in 2013 and since then has completed transac- tions value at more than $20 million. Gralla joined Kislak in 2011. In 2012, she won the firm’s Rookie of the Year award, and she has com- pleted transactions valued at more than $65 million.
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www.marejournal.com F inancial D igest F eaturing T ax I ssues & A ccounting Gretchen Wilcox & David Fryer arranges financing G.S. Wilcox&Co. secures $25.5million infinancing for new luxury apartments in Warminster, PA M id A tlantic Real Estate Journal — July 13 - 26, 2018 — 5A
m o r t g a g e banking firm based inMor- ristown, NJ has secured $25 . 5 mi l - l i on i n f i - nancing for the Jackson- ville Station Community, a r e c e n t l y constructed 1 5 1 - u n i t , eight build- i ng l uxury c ommun i t y l o c a t e d i n Warminster. W
County, which opened in 2012. In alignment with the Borrow- er’s mission to develop luxury apartment communities that are not only multi-family but also transit-oriented, the Jack- sonville Station Community is optimally located across the street from the Septa Rail Station, which provides direct connectivity to Philadelphia in under 40 minutes. “Working off the strength of ownership’s property across the street, we were able to convince the lender to rate lock the loan very early in the lease up phase of the project,” Fryer said in a prepared statement. Founded in 1994 by Gretch- en Wilcox, G.S. Wilcox & Co. is a leader in the commercial real estate banking industry. The company is known for its success in providing debt and equity solutions to develop- ers, real estate private equity firms, institutional investors, and other owners of commer- cial real estate. laundry, and 24-hour main- tenance in an advantageous location surrounded by shops, restaurants, schools, and em- ployment opportunities. An inner suburb of NewYork City, Hackensack is located 12 miles northwest of Midtown Manhattan and is easily acces- sible via bus and New Jersey Transit in just under an hour, or by car in approximately 30 minutes. “Given Meridian’s substan- tial and ongoing relationship with real estate lenders, we were able to proactively lock the rate for this loan in De- cember, achieving a mid-3% rate in a rising interest rate environment, and holding this rate until the closing in May,” said Hammer. Founded in 1991, Meridian Capital Group is America’s most active deal maker and one of the nation’s leading commercial real estate finance and investment sales firms.
ARMINSTER, PA — G.S. Wilcox & Co. , a commercial
Gretchen Wilcox
David Fryer
The financing, arranged by Gretchen Wilcox , president & CEO, and David Fryer , principal, was secured with a 10 year term and a 30 year amortization through Allianz . The client was a repeat bor- rower of the firm’s.
Jacksonville Station Community in-ground pool, the subject property is situated directly
Featuring 12 different unit types with a clubhouse and
across from its sister com- munity, The Station at Bucks
Meridian Capital Group’s Hammer and Karpel arrange $19million in financing for Summit Gardens
HACKENSACK, NJ — Meridian Capital Group ar- ranged $19 million in financing
to refinance a multifamily c ommun i t y in Hacken- sack. The seven- y e a r l o an , provided by a balance sheet lender, fea- tures a rate o f 3 . 6 2 5% and was ne- gotiated by Meridian vice p r e s i d e n t , JudahHam- m e r , a n d senior vice
Judah Hammer
Zev Karpel
president, Zev Karpel , who are based in the company’s New York City headquarters. Located on Acadia Rd. in Hackensack, NJ, Summit Gardens consists of 14 two- story, garden-style buildings
Summit Gardens in Hackensack, NJ fully-equipped kitchens, hard- wood floors, dishwashers, and heat and hot water included in
containing 135 one- and two- bedroom apartments. Units feature amenities including
the monthly rent. The commu- nity also boasts benefits such as lush landscaping, onsite
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T ax I ssues & A ccounting
Leveraging both firms’ years of experience serving the valuation & appraisals niche market Sobel & Co. Valuation Practice and EAC Valuations LLC merge L CVAs and many other cer- tifications that broaden the scope of both firms.
of experience serving the valuation and appraisals niche market, we are posi- tioned to effectively address the needs of the corporate business community,” Sobel continued. The well-established EAC brand will continue to go to market independently, as well as together, under Sobel Valuations. This flexibility enables them to assemble a team of professionals across a wide range of disciplines. Their combined staff hold designations including CPAs, CFEs, MBAs, CFFs, ASAs,
and IFRS), Appraisals of Intangible Assets, Deferred Compensation, and Purchase Price Allocations for Finan- cial Reporting, and Fair Market Value Appraisals for Property Tax, Insurance, Corporate Planning, Merg- ers & Acquisitions, and Gift/ Estate Appraisal. EAC has almost 50 years as a leader in the valuation community completing more than 14,000 appraisals for clients rang- ing from multi-billion dollar companies to privately-held manufacturing and service companies. Joining our depth
of experience with Sobel & Co.’s 60+ year legacy is a positive step for both orga- nizations, and most impor- tantly, for the clients we serve,” added Merenda. The move will reinforce existing services and further expand the menu of Sobel & Co.’s valuation capabili- ties, which include busi- ness valuations, financial reporting valuations, stra- tegic advisory services, com- mercial damages, corporate and partnership disputes, matrimonial dissolutions, estate and gift valuations, shareholder and partner buy-outs, mergers & acquisi- tions and a diversity of other valuation services. Whether the company is a start-up or a mature established organi- zation, an independent busi- ness valuation is a proven tool for strategic planning. Team members from both practice groups will collabo- rate to enhance and compli- ment these options, adding valuations for machinery and equipment, commercial and industrial real estate, in- tangible assets, and deferred compensation to the mix. The practice will also provide ap- praisals for insurance place- ment, personal property tax disputes and purchase price allocations. Waterstone Defeasance closes on a $11.5 Million CMBS Loan FRESH MEADOWS, NY — Waterstone Defeasance recently closed a defeasance transaction for a $11.5 mil- lion CMBS loan, secured by an office property in Fresh Meadows, NY. Waterstone guided the owners through the defeasance process co- inciding with the owners’ refinance of their loan. As the defeasance consul- tant, Waterstone managed the activities of the numer- ous parties involved with the transaction in order to meet the borrower’s closing schedule. Parties associated with a defeasance transac- tion typically include the servicer, servicer’s counsel, borrower, borrower’s coun- sel, securities broker, cus- todian, accountant, rating agencies, and the successor borrower.
IVINGSTON, NJ — “We are pleased to announce that EAC Valuations PA has joined the Sobel & Co. Valuation Practice to create Sobel Val- uations LLC, a wholly-owned subsidiary of Sobel & Co. ,” said Alan Sobel , managing member of the firm. “From the first time Frank Merenda , president and CEO of EAC Valuations, met with the Sobel & Co. valuation team, we quickly recognized the power of com- bining our two groups. By leveraging both firms’ years
The Sobel & Co. Valua- tion Practice will benefit from Frank’s adherence to EAC’s long standing mis- sion, his deep commitment to its high standards and his well-regarded valuation and appraisal expertise gained throughout his years in the top leadership role at EAC. “I am glad that I have the opportunity to draw on my experiences conducting a wide variety of valuations, such as Fair Value (both ASC
Construction Financing • Commercial Mortgages Financing Development
Recently Closed Transactions
$5.35 Million Commercial real estate loan to refinance a 27,000 square foot medical office building located in Middlesex County, NJ. $32.4 Million Construction to permanent mortgage loan for the development of a 134-unit multi-family property with 14,500 square feet of retail space located in Monmouth County, NJ. $5.0 Million Construction to permanent mortgage loan for development of a 22,000 square foot medical office building located in Somerset County, NJ. $2.4 Million Commercial real estate loan to refinance two mixed use properties with 19 residential rental units and one 2,200 square foot retail unit located in Philadelphia, PA.
$17.25 Million Commercial real estate loan to refinance a 54,000 square foot automobile dealership property located in Bergen County, NJ. $18.0 Million Construction to permanent commercial real estate loan to finance development of an 80-unit multi-family property located in Bergen County, NJ. $4.9 Million Commercial real estate loan to refinance a 72-unit multi-family property located in Orange County, NY. $6.4 Million Commercial real estate loan to refinance an owner-occupied 100,000-square foot warehouse distribution building located in Middlesex County, NJ.
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ead today’s business technology headlines and you’ll see that By Michael Mullin, Integrated Business Systems Why property management, construction and development firms need cloudaccounting functionality R you can scale up or down to meet business objectives with maximum cost efficiency. system with modern applica- tion program interface APIs, such as Smartsheet, Procore and Hyphen Solutions.
petitors adopt cloud-based software that can be main- tained remotely and accessed 24/7 from anywhere via the internet. Those who move their management and ac- counting systems to the cloud will gain significant benefits. Three Ways Cloud Ac- counting Systems Can Boost Your Business 1. Basic Cloud Benefits Scalability and flexibil- ity. You can implement cloud solutions quickly and easily, and realize immediate op- erational improvements. You pay only for the resources you need at any given time, so
upgrade your accounting or management software or be concerned about disruptions that cause costly downtime. Reliability and security. Leveraging SaaS can reduce IT costs and increase infra- structure security. Cloud- based solution providers go a step further, offering soft- ware plus value-added ser- vices such as security, busi- ness continuity and disaster recovery (BCDR) features. Integration. What good is moving to the cloud without easy integration? With cloud- based software, you can easily integrate your accounting
c l o ud and s o f t w a r e - as-a-service (SaaS) im- p l eme n t a - t i o n s a r e quickly re- placing on- p r e m i s e s legacy man-
Consistency. Your entire team can run the same ap- plication anytime, anywhere. This breaks down informa- tion silos, delivering consis- tent, up-to-date information with minimal effort. Out of the office and using a tablet? No problem. The software application functions on all devices using the same in- terface. Automatic upgrades. Updates run unnoticed in the background, meaning you don’t have to remember to
2. Real-time Advantages A cloud setup delivers real- time management functional- ity – a necessity in today’s business climate. For ex- ample, a cloud accounting system updates data imme- diately on entry and provides all system users with digest- ible, usable information for data-driven decision-making. As a result, your team be- comes more agile, responsive and mobile. And that mobility permits remote and real-time collaboration with customers, suppliers and teammembers, who can access the same data and toolsets in the format best suited to their needs. These can include self-service reports, dashboards and por- tals. Leveraging up-to-date information for optimal de- cision-making helps improve your ROI and makes good business sense. 3. High-value Applica- tions Property management, con- struction and development executives can choose from two types of cloud software solutions. A deep solution in- cludes applications for finan- cials, contracts, budgets and costs, while a broad solution covers a range of areas such as construction accounting, purchasing and customer relationship management (CRM). Cloud-based manage- ment solutions can help you and your employees enhance productivity by offering work- flow, document management and Wiki resources. And you can find the right pricing structure for your business based on resources used rath- er than user-based licensing. Cloud ERP: Your Solu- tion for the Present and the Future Cloud management and accounting systems continue to be smart investments. In fact, Gartner, the world’s top research and consulting firm, projects that “at least half of large enterprises will successfully implement a software-as-a-service strat- egy by 2025 and run their core ERP systems in the cloud.” If legacy systems and dated software are hindering your company’s growth and com- plicating everyday business continued on page 18A
Michael Mullin
agement and accounting sys- tems. Property management, construction and develop- ment organizations will soon have to join this trend or be left behind while their com-
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Real Estate Journal — Financial Digest — Tax Issues & Accounting — July 13 - 26, 2018— 9A
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T ax I ssues & A ccounting
By Jeffrey P. Roude, CPA and Michael Benguigui, CPA Qualified Opportunity Funds encourage long- term investments in economically distressed areas
T
he Tax Cuts and Jobs Act (“TCJA”) enacted a new opportunity to in-
deferred gain is increased by an additional 5% of the original gain. Hence there is a potential
in investments made with the QO Fund. Please note that this permanent exclusion would only be beneficial for any gain appreciation after December 31, 2026 since the original gain which was invested in the QO Fund will need to be recognized. In a real estate deferral struc- tured as a like-kind exchange, the investor would need to in- vest all of the proceeds related to the sale of the disposed prop- erty, and the gain and return of capital proceeds. This is not the case with QO Funds since the investor would only need to invest gain from the previous
transaction.
designations include (but are not limited to) tracts of land in the Atlantic, Bergen, Camden, Essex, Hudson, Middlesex, Monmouth, Morris, Ocean, Passaic and Union Counties. Please click here to reference the complete list. The New York approved designations include (but are not limited to) tracts of land in the Bronx, Kings, New York (Manhattan), Nassau, Queens, Richmond (Staten Island), Rockland, Suffolk and Westchester Counties. Please click here to reference the continued on page 18A
Qualified Opportunity Zone Designations: State governors were re- quired to nominate Qualified Opportunity Zones within their state to the U.S. Department of the Treasury by March 21, 2018 to be considered for ap- proval. As of May 21, 2018, the Treasury announced that 20 states and two U.S. territories have designated QOZs includ- ing New York and New Jersey. This designation is retained for the next 10 years until it would be required to be renewed. The New Jersey approved
centivize real estate invest- ment and de- velopment in l ow- i nc ome communities a c r o s s t h e country. This new i nc en - tive creates
of an overall basis step up of 15% on the deferred gain. 3. Elimina- t i on o f the gain on cer- tain proper- ties held by a QO Fund.
Jeffrey P. Roude Michael Benguigui
Qualified Opportunity Zones (“QOZs”) in which investors who previously recognized a taxable gain can defer or elimi- nate it by investing the gain proceeds into a Qualified Oppor- tunity Fund (“QO Fund”). QOZs are designated low-income housing communities in the United States (or Puerto Rico) in which a population census tract is above the poverty rate, or median family income does not exceed a percentage of the statewide median family income. This program is designed to be a complement to other Fed- eral incentive programs such as Low-Income Housing Tax Cred- its or New Market Tax Credits. The Tax Incentive to Invest in a QO Fund 1. Tax deferral of previous dis- position gain. The investor interested in ben- efitting from this newly created programmust invest their gain from a previous transaction in a QO Fund, which can be structured as a corporate or partnership entity. Please note that this can be any gain from the sale of real or non-real property, even assets which generate ordinary income. The gain is deferred by investing the amount of the gain into a QO Fund, hence the return of the capital portion does not need to be invested in order to benefit from the deferral. The investment must be made within 180 days after the sale of the property which triggered the gain. The gain is deferred to the earlier of (i) the date on which a QO Fund is disposed or (ii) December 31, 2026. 2. Basis increase of a QO Fund. An investor’s initial tax basis of a QO Fund is initially zero since the cash being invested is from a transaction in which the gain is being deferred. However, if the investor holds its interest in a QO Fund for at least five years, the tax basis is increased by 10% of the deferred gain; if the interest is held for at least seven years, the basis of the
Investors that hold the Oppor- tunity Fund investment for at least 10 years can receive the added benefit of paying no tax on any realized appreciation
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10A — July 13 - 26, 2018 — Tax Issues & Accounting — Financial Digest — M id A tlantic
Real Estate Journal
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T ax I ssues & A ccounting
ASSACHUSETTS — The Communi- ty Preservation Freddie Mac Conventional Loans to refinance existing debt on four properties totaling 366 units CPC delivers $25.4 million to refinance multi- family portfolio in Western Massachusetts M the properties are located in Hampden County and one is in Worcester County.
refi, or rehab - Freddie Mac’s suite of products provides the flexibility and terms that our borrowers are looking for,” said Nicholas Petragnani, Jr. , senior vice president & regional director at CPC. • Coachlight Village which closed on a $5.8 million con- ventional loan, consists of four, two-story buildings on 5.2 acres located in Agawam in Hampden County. • Security Manor which closed on a $4 million con- ventional loan, is a four- story brick building located in Westfield in Hampden
County. • Van Deene Manor which closed on a $7.2 million con- ventional loan, is a garden apartment complex on a 4.9-acre site located in West Springfield in Hampden County. • Sturbridge Meadows which closed on an $8.4 mil- lion conventional loan, con- sists of two properties located approximately a quarter- mile from each other on the same street. The properties are located in the Town of Sturbridge in Worcester County.
CPC continues to expand its agency lending platform, a one-stop-shop that pro- vides borrowers with a team of experts that have deep experience in Freddie Mac and Federal Housing Admin- istration lending products. From originations to under- writing and facilitating the deal flow through closing, CPC provides a team solely dedicated to facilitating the Agency lending process. CPC is dedicated to bring- ing flexible capital to owners of multifamily buildings in underserved and growing communities. The company has leveraged its more than four decades of community revitalization experience and strategic relationships with government partners to pro- vide a suite of loan products uniquely tailored to fit the needs of building owners, large and small. CPC is a long-time Freddie Mac Seller/Servicer and of- fers a range of competitively priced, reliable mortgage products for the acquisition and refinance of multifam- ily properties. This includes Freddie Mac’s conventional financing with loans rang- ing from $5 million to $100 million with 5- to 10-year terms, and Small Balance Loan product which helps to close that gap in the mar- ket for flexible financing for small buildings by offering loans from $1 million up to $7.5 million with flexible terms, prepayment options, competitive low rates, and streamlined pricing, under- writing, closing, and funding process. About the Community Preservation Corporation (CPC) Established in 1974, CPC is a nonprofit affordable housing and community revitalization finance com- pany that believes housing is central to transforming underserved neighborhoods into thriving and vibrant communities. The company has leveraged approximately $10 billion in private and public investment to finance more than 185,000 units of housing. CPC’s work with its partners has helped re- vitalize countless neighbor- hoods and provided quality housing for families, senior citizens, and individuals with disabilities.
The new loans were used to refinance the existing debt on four multifamily buildings, with each carrying a 10-year term with three years of interest only payments and 30-year amortization. “Over our more than 40 years of community lending, CPC has been committed to providing products that serve a diverse range of capital needs for multifamily owners and purchasers of all sizes. Whether it’s for acquisition,
Co r p o r a - tion (CPC) , a nonprofit a f f o rdab l e housing and community revi tal i za- tion finance c o m p a n y , closed $25.4 mi l l i on i n
Nicholas Petragnani, Jr.
conventional Freddie Mac financing for a portfolio of properties located in West- ern Massachusetts. Three of
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Real Estate Journal — Financial Digest — July 13 - 26, 2018 — 11A
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M id A tlantic
F inancial D igest
ith a median house- hold income of about $115,000 and a pov- By Todd Hitt, Kiddar Capital Community Alignment Opens Door to Big Development in Falls Church, Virginia W a small-town feel compared to the high-rise urban pockets around the Rosslyn, Claren- don, and Ballston metros. positive impact on the local economy.
& Washington will be heavily community-oriented, including local concept restaurants, a community engagement plaza, a rooftop terrace for commu- nity events, and a theater for local performing arts group Creative Cauldron. We re- ceived approval for the project on April 9 of this year. I have no doubt that working closely with the local govern- ment to align ourselves with the community’s needs is what has allowed us to be so suc- cessful in Falls Church. But conscious capitalism isn’t only for this one locality, and it’s not just for real estate. Community alignment is what has allowed Kiddar Capital to be successful BETHESDA, MD — Walk- er & Dunlop, Inc. announced that it has hired Mark Be- sharaty as senior vice presi- dent and chief production of- ficer to lead a new initiative focused on multifamily small loans. Besharaty has origi-
investing across private eq- uity, infrastructure, venture, credit, energy, and hospitality, as well as real estate. I encourage every investor to do business in a way that benefits their communities, and watch what it does to your profits. Todd Hitt is an American businessman, social impact investor, thought leader, and Washington, DC area native whose assets span real estate, privately held growth companies, intel- lectual property, opportu- nistic debt, venture capital, and hospitality. He is the founder and CEO of Kiddar Capital. nated over $2 billion in overall commercial real estate volume over the course of his career, including $1 billion of multi- family loans. Besharaty will be based out of the company’s Irvine, CA office.
And it has: not only did the project bring the first ma- jor grocer to downtown Falls Church, it created around a hundred local jobs and added an estimated 3 percent to the city’s tax base. In a Bisnow article last fall, Rappaport Executive Direc- tor of Leasing and Brokerage Jim Farrell called the award- winning project “a catalyst for future development in Falls Church.” We’re now lining up for a successor mixed-use project at 100 North Broad St., known as Broad & Washington and located at the intersection of the two biggest roads run- ning through the city. Broad & Washington will include a class A office building and an apartment building, both above retail, and will also house Kiddar’s headquarters. We currently work out of the office building on the site, and will move back in once con- struction is complete. Like 301 West Broad, Broad
erty level of 3.6 percent (according to the US Cen- sus Bureau), Falls Church h a s b e e n ranked mul- t ipl e t imes as one of the
Falls Church has recently become more open to develop- ment, in part to broaden their tax base, but developing there requires projects to solidly align with community needs. That’s why my firm, Kiddar Capital, invests there. I’m a big believer in conscious capital- ism, and have argued many times that investing in your community is not only good for the community, it’s good for your bottom line. That’s certainly true in Falls Church, and it’s what has allowed us to be so successful there. Our first project in the area was 301 West Broad St., a mixed-use project with 286 luxury apartments above a flagship Harris Teeter grocery. Other developers had looked at the site, but discarded it due to local zoning laws. Research by my team at Kiddar uncovered that the city council could grant a special exception if the proj- ect would make a significant
Todd Hitt
best places to live in the United States. USA Today named it the best place to live in Ameri- ca based on education, poverty, and life expectancy. US News & World Report identified it as the country’s healthiest community. It’s home to great public schools, and 98 percent of residents hold high school diplomas. Eighty percent have a bachelor’s degree or higher. But Falls Church isn’t a county. It’s an independent city, with a strong identity and resistance to urbanization that doesn’t have clear long-term benefits for its community. That’s part of the reason “The Little City” has much more of
Walker & Dunlop hires Besharaty to lead amultifamily small loans initiative
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12A — July 13 - 26, 2018 — Financial Digest — M id A tlantic
Real Estate Journal
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F inancial D igest
Kennedy Funding Financial Securing funding for properties in less-than-ideal locations
S
o you've finally found that perfect piece of real estate – but unfortunate-
what will happen in the event a borrower defaults on their loan. For properties in and around cities, lenders presume that that they can easily recuper- ate their money in the event of a defaulted loan. In rural areas, however, if a borrower defaults and the bank fore- closes, the property could wind up on the market for months or years before a buyer comes along, devaluing it and creating a headache for the financing institution. The intended use of land in a rural area also impacts conven- tional lenders' considerations.
For example, financing institu- tions face limits on foreclosing on a farm if the owner derives their primary income from the property. That can add 12 months from the date of default before foreclosure proceedings can even begin. The risk of getting tied up in years of re- cuperating efforts is enough to discourage most conventional lenders from issuing loans to these types of properties. Some lenders simply don't see the value of extending financing to properties so far away from highly-traveled areas. For commercial proper-
ties in particular, conventional lenders fall into the trap of thinking that the lack of a mass market means the lack of a market altogether. Conventional lenders' reti- cence aside, there are alterna- tive financing solutions, chief among them direct private lenders, who can work around these stringencies if they see the value of the property or the potential of the deal. They are not beholden to the same strict procedures as conventional lenders, so they can make exceptions to the rules that a traditional financing institu-
tion cannot. This gives them the latitude and the flexibility to extend loans to a property far from a population center. However, direct private lend- ers aren't in the business of handing out money. There has to be true potential in or- der to fund a deal far from a major population center. Fac- tors such as housing, major highways, competition, and other commerce in the area are all brought into account. If you articulate the great value and potential you envision for the property, a direct private lender can share in your vision. “When a borrower comes to us with an opportunity in a remote location, we always ex- amine it to see the merits of the deal,” said Kevin Wolfer, CEO of Kennedy Funding Financial. “Oftentimes, there are factors which indicate that this deal will be successful and profit- able – and those are deals we are happy to fund for qualified borrowers.” Partnering with experienced lenders that can point to proven successes is key to a positive working relationship. Ken- nedy Funding Financial has a track record of supporting investments with tremendous potential because we see the value of the investment, just like you do. Progress Capital Funds $2.3M for acquisition of vacant Jersey City gas station site TINTON FALLS, NJ — Kathy Anderson , managing partner of Progress Capital ,
ly, the bank doesn’t seem to agree be- cause it’s not located near a population center. Traditional financing in- stitutions are
Kevin Wolfer
not willing to fund deals outside of cities or other major popula- tion center, citing risk aversion. Banks and other conventional lenders are concerned about
T H E M I D A T L A N T I C R E A L E S T A T E J O U R N A L P R E S E N T S T H E ANNUAL COMMERCIAL BROKERAGE DIRECTORY Deadl i ne Ju l y 13
approved a $ 2 . 3 m i l - lion Bridge Loan, funded by Progress Capital’s di- rect lending p l a t f o r m , ‘Progress Di- rect’, for 350
Kathy Anderson
Contact Marisol Chase for more information on Pennsylvania 781-740-2900 mchase@marejournal .com or Kim Brunet for more information on New Jersey 781-740-2900 kbrunet@marejournal .com
Pavonia Group, LLC to the acquire the gas station at 348 Baldwin Avenue in Jer- sey City. At the time of the acquisition the gas station was vacant with approvals to construct a 45-unit multifam- ily building. The interest-only Progress Direct loan represents a 90% loan to current “as-is” property value. The term of the loan is 12 months accompanied by a fixed-rate of 12%.
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