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16C —April 28 - May 11, 2017 — Spring Preview — M id A tlantic
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r e s i d e n t D o n a l d Trump’s focus on curb- ing the trade deficit Cushman & Wakefield Pondering President Trump’s trade policy and impact on industrial real estate P
U.S. withdrawal fromNAFTA remain unlikely. “President Trump said he believes in ‘free trade but also fair trade,’ and as policy de- tails emerge, companies will start looking at their supply chain networks to determine the impact on operating costs,” said Jason Tolliver, head of In- dustrial Research, Americas at Cushman & Wakefield. “The importance of China, Mexico and Canada as export partners makes withdrawal from the North American Free Trade Agreement or a trade war with China unlikely scenarios.” The U.S. is engaged in com- incentive offers a 30% credit on project costs in the year the system was placed in service. There is no “look-back” option and no benefit in future—the incentive must be taken in the year the system was placed in service. Taxpayers must have a tax liability to take the credit, which is claimed via Form 3468. The size of the credit will begin to decrease in 2020, and it is expected to expire on Dec. 31, 2021. For the moment, how- ever, this incentive may confer a sizable benefit, especially since solar systems are classi- fied as short-livedMACRS five- year life and may be eligible for significant bonus depreciation under the PATH Act. Energy Star, another fed- eral tax credit program, ap- plies mainly to residential properties and offers credits that may range from 10-30% of project cost. Some caps do apply, but the program offers incentives on a tremendous range of building assets: insulation, lighting, appli- ances, windows, doors, solar systems, and much more. Visit www.energystar.gov for a better look at this incentive and the broad scope of assets to which it applies. In addition to federally- administered programs, many electric utility companies have their own powerful slate of incentives. The most generous monies are usually available for the installation of energy- efficient equipment in existing buildings such as lighting, HVAC, controls, VFD’s, chill- ers, boilers, etc. These rebates can either be “prescriptive,” which mean they provide a fixed rebate amount per qualifying measure, or they
plicated trade obligations with 20 countries through 14 free trade agreements. Free trade partners account for nearly 70 percent of U.S. exports and more than 80 percent of imports. The report considered two executive orders Trump recently signed to make trade policy tougher on foreign gov- ernments that subsidize com- panies that sell goods at below- market prices and calling for the Commerce Department to produce a report on every possible reason for the trade deficit in 90 days. Cushman & Wakefield’s in- dustrial research weighs the can be “custom” meaning they determine the rebate amount based on actual watts saved or kWh saved. The rebate amounts vary depending on the specific geography, but on average they improve the payback time of a project by 20-25%. Furthermore, these electric utilities may also provide rebates and incentives for the installation of energy efficient equipment in new construction or renovation projects. In these cases, the incentive amounts are usu- ally determined based on complex formulas that com- pare the actual energy usage with the energy building codes applicable at that time. These incentives can add up significantly in projects with a large footprint, like distri- bution centers, manufactur- ing plants etc. For rebates, pre-approval is usually required before any installation work can begin. Each utility has their own rules regarding project size, qualifying equipment, time- lines, cost caps, cost-benefit ratios, etc. The rebate process from beginning to end takes about 5 months on average. On top of rebates, the Mid- Atlantic electric grid operator provides “capacity incentives” for both retrofit and new con- struction projects. In essence, capacity incentives are mon- ies that can be received by bidding energy efficiency proj- ects into the electric capac- ity market auctions. These projects make it easier for the electric grid operator to meet electric demand during peak summer hours. Energy incentive programs
continued from page 8C in real estate, Delaware Statu- tory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, po- tential returns, and potential appreciation are not guaran- teed in any way; adverse tax consequences and that real estate is typically an illiquid investment. Please read care- fully the Memorandum and/ or investment prospectus in its entirety before making an investment decision. Please pay careful attention to the “Risk” section of the PPM/ Prospectus. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes, therefore, you should consult your tax and legal professional for de- impact of trade with China – the U.S.’s second largest trading partner and its third largest export market as well as a driver of the industrial- related warehouse demand in this country – and concludes that China remains too impor- tant of a trade partner for the U.S. to engage in a trade war. “China’s growing consumer class will exceed the entire U.S. population by 2026,” said Tolliver. “Similarly, when you consider the impact of increased cross-border trade flows between Canada, Mexico and the U.S. since NAFTA, it seems unlikely the U.S. would can be a very significant part of an overall tax strategy. Being mindful of the triple bottom line—people, planet, profit— is more important than ever. Property owners and their CPAs are urged to explore these powerful initiatives. Bruce A. Johnson, co- founder and partner at Capstan Tax Strategies, works closely with com- mercial real estate owners, investors, and accounting firms to provide practical,
tails regarding your situation. Securities offered through registered representatives of Colorado Financial Service Corporation, Member FINRA / SIPC. Kay Properties and In- vestments, LLC and Colorado Financial Service Corporation are separate entities. OSJ Ad- dress: 304 Inverness Way S, Ste 355, Centennial, Colorado. Kay Properties & Investments, LLC, is registered to sell se- curities in all 50 states. DST 1031 properties are only avail- able to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited enti- ties only (generally described as an entity owned entirely by accredited individuals and/ or an entity with gross assets of greater than $5 million dol- lars). If you are unsure if you are an accredited investor and/ or an accredited entity, please verify with your CPA and At- torney prior to considering an investment. You may be required to verify your status as an accredited investor. Leendert Jan Enthoven is president and owner of BriteSwitch LLC, a firm he founded in 2008 after a 16-year long career with Philips Lighting. The firm is specialized in finding, maximizing and capturing rebates and incentives for non-residential properties across the entire United States and Canada. n withdraw.” All three NAFTA partners recognize the need to update the agreement, Tolliver noted. However, the Cushman & Wakefield report notes that U.S. trade with Canada and Mexico has increased more rapidly than with any other countries since the signing of NAFTA in 1995, and U.S. warehouse inventory has in- creased by a net of 3.5 billion square feet. Tolliver authored the latest Cushman & Wakefield indus- trial research with colleagues Carolyn Salzer, Tina Aram- bulo and Jason Price. n creative, and client-specif- ic engineering-based tax solutions.
by bolstering U.S. exports and reduc- ing imports could drive policy chang- es that im- pact indus- trial real es- tate markets
Jason Tolliver
throughout the U.S., Cushman & Wakefield reported in a logistics and industrial re- search briefing released today. However, the report concludes that a trade war with China or 45L, the next federal energy incentive up for discussion, is like 179D’s little brother. It’s not quite as powerful, and it’s a bit different, but it’s still a good guy to have around. The 45L tax credit offers a one-time $2,000 credit per residential unit to eligible developers of energy-efficient residential dwellings. The credit is available for proper- ties constructed prior to Dec. 31, 2016 and may apply to townhomes, condos, single- family homes, and apart- ment buildings no more than three stories above grade. In order for the tax credit to be claimed, a third-party expert must test each dwelling unit to verify a 50% reduction in energy consumption in rela- tion to the benchmark set by the 2004 International Energy Conservation Code (a different metric than 179D’s ASHRAE). Just because one residential unit meets the criteria and earns the credit does not mean that all units in a property will do the same—a sampling of units is not sufficient to draw a conclusion and earn the 45L credit. Credits can be earned on newly constructed or reha- bilitated property, but they may be difficult to claim retroactively due to logisti- cal challenges in quantifying costs of materials. Solar power—perhaps the ultimate renewable energy source—has also been incen- tivized by a federal program since 2005. (Many states have complementary programs as well.) This one-time tax credit applies to photovoltaics and solar heating systems. The
continued from page 10C Energy Incentive Programs: Good for the Earth and the Bottom Line . . .
4 Reasons why 1031 exchange investors choose DST . . .
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