R EAL E STATE J OURNAL the most comprehensive source for commercial real estate news
ISSUE HIGHLIGHTS Volume 25 Issue 16 Aug. 30 - Sept. 12, 2013 COMMERCIAL RE LAW
Marketed the property on behalf of the seller, Alliance Residential Co. HFF’sWashington, D.C. office closes $92.5m sale of Broadstone Laurel Highlands
W
ASHINGTON , D.C. — HFF has closed the sale of
mediate access to Interstate 95 and the Lorton Virginia Railway Express (VRE) sta- tion. Completed in 2011, the property features one-, two- and three-bedroom apart- ments plus three-bedroom townhomes averaging 1,119 s/f. Community amenities at the 96 percent leased class-A community include a resi- dent lounge, movie theatre, business center with coffee bar, fitness center, resort-in- spired pool, outdoor fireplace, outdoor grill stations, tennis and basketball courts and a bark park. The HFF team represent-
ing the seller was led by senior managing directors David Nachison and Alan Davis and director Brenden Flood . “The property’s immediate success speaks to the unfilled niche of large apartment homes sought by military and military related families around Fort Belvoir,” said Nachison. “The mix of apart- ment homes, which includes 65 percent two- and three- bedroom floorplans offers residents the opportunity to send students to Fairfax County’s newest, and very highly regarded schools.” ■
Broadstone Laurel High- lands, a 300-unit, class A multi-housing community in Lorton, VA. HFFmarketed the property on behalf of the seller, Alli- ance Residential Compa- ny . MetLife Real Estate In- vestments purchased Broad- stone at Laurel Highlands for $92.5 million free and clear of existing financing. Broadstone at Laurel High- lands is located at 8141 Mc- Cauley Way in Southern Fairfax County offering close
7-12A
Kislak’s Waisbrod leads apartment sales totaling $9.4m
proximity to the still-expand- ing Fort Belvoir and im- Broadstone Laurel Highlands
Portion of Washington, DC campus plan targeting LEED Gold certification American University awards Skanska USA $78 million contract for new East Campus
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WASHINGTON, D.C. — Skanska USA announced that its building business unit was awarded a $78 million contract fromAmerican University (AU) to construct the school’s new East Campus in Washington D.C., a significant portion of AU’s Campus Plan, and target- ing LEED Gold certification. The full amount will be booked in the third quarter for Skan- ska USA Building. The East Campus project will convert the Nebraska Ave. parking lot into an eight-acre mixed use development com-
construction of AU’s new Tenley Campus, which is home to the school’s Washington College of Law (WCL). Skanska is utilizing innova- tive construction techniques to ensure the project is delivered safely and in an environmen- tally-friendly manner that does not disturb the surrounding community. For example, Skan- ska will use prefabrication, constructing major elements of the buildings off-site before they are transported and then assembled on-site at American University. This method will significantly reduce congestion in and around the project site as well as deliver the project on-time with limited on-site working hours. Preconstruction and design on American University’s East Campus is currently underway. The campus will be open for occupancy in fall 2016. The project’s architect and designer is Little Diversified . AU’s Campus Plan is expect- ed to boost the local Washington D.C. economy by providing close to $400 million in new construc- tion and renovation projects along with employment oppor- tunities for local companies. ■
ICSC PA/NJ/DE
Atlantic City Convention Center Atlantic City, NJ Sept. 9 – 11, 2013
American University rendering
Section C
prised of additional housing, academic and office space. Skanska is responsible for providing construction man- agement services to build the East Campus’ six new build- ings, which collectively total 340,000 s/f. Skanska will also create 345 parking spaces located in underground and surface lots. “Skanska is proud to part- ner with American University in providing state-of-the-art learning and living space to meet the evolving needs of its students,” said Bill Brennan , co-chief operating officer for Skanska USABuilding’s Metro Washington D.C. office. “We have extensive expertise in
higher education construction, and are looking forward to col- laborating with one of the top universities in the country to offer an environment that pro- motes a positive and well-bal- anced lifestyle for the faculty and student body.” AU’s Campus Plan reflects the university’s desire to fur- ther strengthen its growing aca- demic prestige while continuing to be an asset to Washington D.C., as well as an educational, cultural, and aesthetic amenity to the surrounding community. The plan was developed in col- laboration with the District of Columbia Zoning Commission, and includes Skanska’s East Campus project, as well as the
Directory
Auction News ...................................... 3-4A Owners, Developers & Managers..Section B Green Buildings ............................ 13-18B Shopping Centers .................. Section C
Upcoming Spotlight September 13, 2013 APPRAISAL SPOTLIGHT
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Inside Cover A — August 30 - September 12, 2013 — Mid Atlantic Real Estate Journal
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Mid Atlantic Real Estate Journal — August 30 - September 12, 2013 — A
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A — August 30 - September 12, 2013 — Mid Atlantic Real Estate Journal
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1031tax.com.................................................................. 3A Accutech Environmental Services............................... 9B AEGIS Energy Services................................................ 7B All-Rite Construction................................................ FC-C Arrow Real Estate Services...................................9A,17C Azarian Group. ............................................................. 1C Bayshore Recycling..................................................... 15B BELFOR USA............................................................... 1A Bennett Williams.......................................................... 3C Bill Board Directory. .................................................. 19A BL Companies............................................................. 32C Bohler Engineering..................................................... 14C Borrus Associates........................................................ 20C BR Kreider.................................................................... 6C Business Card Directory. ........................................... 17A Capital Aerials............................................................ 12B CIRC Delaware........................................................... 18A Coastal Commercial Group....................................... IC-A Connell Foley.............................................................. 12A Create.......................................................................... 15C Earth Engineering...................................................... 11C Entech Digital Controls.............................................. 16B Fortna Auctioneers.com............................................. 4-5A Fowler Route............................................................... 20B G&C Electronics. .......................................................... 8B Genova Burns Giantomasi Webster........................... 13B Gerard Construction................................................... 19C Gilbeaux Associates, PC............................................. 12B Haftek CWS.................................................................. 2B Hollenbach Construction.............................................. 3B Hutchinson Mechanical Services............................... 14B Hylant Group.............................................................. 32C IFMA.........................................................................IBC-A Investers Real Estate Agency. ................................... 15A IREM................................................................ 6A,18-19B Jeffrey Realty.............................................................. 32C Jottan Inc.................................................................. BC-A Kaplin | Stewart. ....................................................... 10A Katz Properties............................................................. 7C Kay Realty................................................................... 32C Kline’s.......................................................................... 15B KW James Balliet......................................................... 2C Landcore........................................................................ 9C Law Offices of Ehrilch, Petriello, Gudin & Plaza.......11A Levin Management..................................................... 10C Liberty Elevator............................................................ 6B LMS Commercial.......................................................... 4C M. Miller & Son. ........................................................... 4B McMahon Associates. ................................................... 2C Metro Commercial...................................................... 15C Michael Baxter Associates............................................ 4C NAI Keystone.............................................................. 11C National Realty & Development............................... IC-C Nave Newell.................................................................. 4C P. Cooper Roofing......................................................BC-B PennCap....................................................................BC-C PILERA......................................................................... 4B Poskanzer Skott Architects.......................................... 6B Productive Painting...................................................... 2B RD Management.................................................... 22-23C REMCO Realty........................................................... 10C Retail Business Card Directory................................. 31C Retailers Brokerage Directory.............................. 28-29C Retailers Space Seeking Guide.................................. 27C Rhino Realty. .............................................................. 16C ROCK Commercial. ...................................................... 6C Security Resources........................................................ 2A Silbert Realty.............................................................. 17C St. John Properties..................................................... 18C Stark & Stark. ............................................................ 13C SUBWAY. .................................................................... 21C Target Building Construction...................................... 9C The Feil Organization. .............................................. IB-C Traffic Planning & Design............................................ 8C TRG. ............................................................................ 15C Value Companies..................................................... IC,5B Vandemark & Lynch, Inc........................................... IC-B Verrill Dana LLP. ......................................................... 8A Whitstone Associates.................................................. 14C WP Realty. .................................................................... 5C Zamir Equities............................................................ 15A MAREJ A dvertisers D irectory To advertise, call 1-800-584-1062
Mid Atlantic R eal E state J ournal Publisher ............................................................................Linda Christman Publisher ...............................................................................Joe Christman Section Publisher ................................................................Elaine Fanning Section Publisher ....................................................................Steve Kelley Associate Publisher ...................................................... Janine Hennessey Senior Editor/Graphic Artist ................................................ Karen Vachon Office Manager ....................................................................Joanne Gavaza Contributing Columnists ...............................Van Moody, and Jim Slinkard Mid Atlantic R eal E state J ournal ~ Published Semi-Monthly P.O. Box 26 Accord, MA 02018 (Mail) 312 Market Street, Rockland, MA 02370 (Overnight) Periodicals postage paid at Rockland, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, P.O. Box 26, Accord, MA 02018 USPS #22-358 | Vol. 24 Issue 16 Subscription rates: $99 - one year, $198 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Toll-Free: (800) 584-1062 | MA: (781) 871-5298 | Fax: (781) 871-5299 www.marejournal.com The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
Mid Atlantic Real Estate Journal
By Van Moody Mastering the Art of Healthy Business Relationships
L
et’s face it, business re- lationships can be tough and some even adversely
impact careers and the bottom line. Although relationships are a fundamental aspect of the human experience, our dealings with co-workers and superiors as well as clients and custom- ers are often riddled with strife and consternation. Difficult workplace relationships are far more than a nuisance, as they can cause anxiety, burnout, clinical depression and even physical illness. What’s more, highly toxic workplace affilia- tions can undermine your pro- fessional success and threaten your livelihood at large. The bottom line is this: the right relationships can propel you to great heights of achieve- ment; thewrong ones will tether you to mediocrity and mire you in disappointment. With this in mind, in striving for rewarding connections with others, it’s
essential to evaluate relation- ships intelligently: What makes a great relationship? How do you keep a relationship great? What are the warning signs of trouble? While it’s so very easy to blame the other person in a distressed relationship, it’s far more effective to consider and assess the situation objectively and build your Relational IQ. What is Relational IQ? Relational IQ is the mind- set that helps us to better understand and control our
continued on page 14A professional relationships to maximize happiness and re- alize life-changing success. Relationships are an art, and most of us lack the skill and mastery to help break—or all together avoid—destructive patterns, disrespect, and de- ception. Far too many people also lack the ability to have productive connections with others—those that help you achieve goals, sharpen your mind, and generally uplift and
Mid Atlantic Real Estate Journal — August 30 - September 12, 2013 — A
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M id A tlantic R eal E state J ournal By Jim Slinkard, 1031tax.com The Risk and Reality of NNN Income Properties
N
ew buyers often re- quest a NNN income property with a high
seen and found by its potential customers? Do other national tenants surround the property? When the tenant vacates in 20, 30 or 40 years, can the prop- erty be easily converted to the needs of new potential tenants? Answers to these questions will help determine the strength of a property’s location. Let’s look at ground leases and fee simple income proper- ties. Fee simple property owners enjoy the tax benefit of building depreciation. Ground leased property owners are not able to depreciate their property. How- ever, their tenant builds, pays
for and maintains the property on the landlord’s parcel. The residual building often reverts to the landlordwhen the tenant’s lease expires, yielding great upside for the landlord. Please contact me if you would like to discuss additional pros and cons of ground lease and fee simple properties. NNN property buyers must look at these and other criteria when deciding which NNN property to purchase. I have helped clients purchase and sell investment properties for almost 40 years. It will be my pleasure continued on page 15A
cap rate, high credit tenant and long-term lease. My re- sponse to the buyer is: “How much risk are you willing to take?” Of course every-
Jim Slinkard
one wants the highest possible return when they purchase a NNN income property, but the reality is there’s no free lunch. The greater the cap rate, the greater the risk. I send a daily email of NNN properties tomy clientswith the newest andbestNNNproperties that come to market. The email is concise. It details the tenant, price, cap rate, state, lease type, lease guarantor, years on lease and rent increases. When my client sees a pos- sible match, he or she calls or sends an email requesting a full marketing package that we can review together. Now let’s talk about corporate guaranteed NNN properties versus franchise guaranteed NNN properties. A corporate guaranteed lease has the iden- tical security credit rating and financial strengthas a corporate bond issued by the same parent company. For example, a lease guaranteed by Walgreens or Chase Bank would have the same strength as their corpo- rate bonds. With a franchise guaranteed lease, the backing is normally less strong than a corporate lease. Investors seek a seasoned franchise operator with a consistent track record, sufficient financial strength and additional properties backing the lease. When the franchise guarantee is backed by the per- sonal guarantee of an operator withsolidfinancials, theguaran- tee becomes even stronger. Location, location, location – a quality NNN property is more about location than who guarantees the lease. I tell my clients that it is better to own a property in a great location with an average tenant than a property with a great tenant in an average location. What do the demographics look like? Is there a history of population growth within 1, 3 and 5 miles? Is the property on amajor retail corridor or onapad site adjacent to a Wal-Mart, Home Depot or Safeway? What is the traffic count? Is the property easily
NNN Properties Nationwide
JIM SLINKARD www.1031tax.com 800-454-0015
A — August 30 - September 12, 2013 — Mid Atlantic Real Estate Journal www.marejournal.com M id A tlantic R eal E state J ournal A uctions Max Spann Real Estate looking for buyers for remaining properties Archdiocese of Philadelphia raises $2.5 million in first-ever multiple site property sale
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HILADELPHIA, PA — The Archdiocese of Philadelphia’s first-
properties, a school and its neighboring convent in North Philadelphia, remain on the market. Here are the detailed auction results: • St. Bartholomew Convent - 5500 Harbison Ave., Phila. 19124 – Sold for $280K • St. Michael Business School - 1504-1506 N. 2nd Street, Phila. 19122 – Sold for $363K • Our Lady of Hope Convent - 3531-3535 N. 19th Street, Phila. 19140 – Sold for $118K • One acre residential parcel - Mill Road Circle, Rydal, PA 19046 – Sold for $357.5K • 48 acre rural residential parcel - 5800 Wismer Rd., Plumstead, Bucks County, PA 18947 – Sold for $860K (sold before auction) • 29.55 acre commercial
parcel - 570 Shelly Rd., Har- leysville, PA 19438 – Sold for $530K (sale completed after the auction) • All Saints School and All Saints Convent - 4623 and 4629-4635 E. Thompson Rd, Phila. 19137 Not sold The Plumstead and Har- leysville properties are owned by the Archdiocese, which will receive the proceeds. The other properties sold are owned by parishes so those proceeds will go directly to the parishes and not the Archdiocese. “We got our asking price on all of the properties sold,” said Deacon Thomas Croke, director for real estate services of the archdiocesan Office for Proper- ty Services. “The properties are finally starting to move. Folks are starting to get an interest in our properties.” n
ever multiple-site property auction (held on July 24th) got off to a fast start when a property in Bucks County sold even before the actual bidding began. A 48-acre rural residential-zoned parcel owned by the Archdiocese at 5800 Wismer Rd. in Plumstead sold for $860,000. Another $1.65 million was raised through the auctioning of five other sites, bringing the total raised to just over $2.5 million. Max Spann Real Estate and Auction Co., which conducted the auction, has agreements on all properties that were placed up for auc- tion with the exception of a final pair of adjoining proper- ties in Philadelphia. Those
1504 N. 2nd Street, Phila.
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Richard G. Warner, President NJ & PA Licensed Real Estate Broker Warner Real Estate & Auction Co., Inc. 109 East Grant Street, Suite B Woodstown, NJ 08098 Ph: (856) 769-4111 ext 710 Website: www.WarnerRealtors.com
P lace your B usiness C ard in our A uction D irectory T oday ! P romote Y our C ompany and its S ervices in our T wice monthly D irectory C all 800-584-1062 or E mail lchristman @ marejournal . com
Mid Atlantic Real Estate Journal — August 30 - September 12, 2013 — A M id A tlantic R eal E state J ournal A uctions COMMERCIAL REAL ESTATE AUCTIONS On-Site, Tues, October 1 @ 6 PM Shrewsbury Twp, GLEN ROCK, PA
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VI5HWDLO6SDFHRQ$FUH =RQHG+LJKZD\&RPPHUFLDO )RUPHU$UW*DOOHU\ 5HVWDXUDQW $GGLWLRQDO²6WRU\%5%$+RPH 12121 Susquehanna Trail
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6A — August 30 - September 12, 2013 — Mid Atlantic Real Estate Journal
www.marejournal.com M id A tlAntic R eAl e stAte J ouRnAl The landlord was represented by NAI Mertz Colliers International brokers warehouse 130,930 s/f lease
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LACKWOOD, NJ — Colliers Internation- al ’s Southern New Jer- Kärcher North America is a manufacturer of commer- cial, industrial and consumer cleaning equipment, with manufacturing and distribu- tion facilities throughout the country. Although they remain in Blackwood, Kärcher’s relo- cation to the 275,930 s/f build- ing at 500 University Court will enable them to double in B sey office recently concluded a 130,930 s/f lease with Kärcher North America at 500 Univer- sity Court in Blackwood.
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500 University Court in Blackwood, NJ
size. Occupying nearly half the building, Kärcher’s 130,930 s/f space features 10,000 s/f of of- fice space, 24’ ceilings, sixteen tailgate loading doors and one oversized drive-in door. Kärcher was represented by Marc Isdaner , senior vice president and principal of the Colliers International Southern New Jersey office; the landlord was represented by NAI Mertz . “Marc’s insight and market knowledge helped us find a facility that met our growth needs and is located within an area that is ideal for our em- ployees and customers,” said Dave Korty, VP of Logistics for Kärcher. n Meridian Group sells property at Shady Grove ROCKVILLE, MD — The Meridian Group announced that it has closed on the sale of 6.9 acres rezoned for resi- dential use at Shady Grove in Rockville. The Meridian Group, a real estate investment and develop- ment firm based in Bethesda, MD, sold the property to the Hanover Company for $16 mil- lion. Houston-based Hanover plans to build 366 apartment units on the site – formerly zoned for offices -- at Shady Grove Road and the I-270 in- terchange. Leading the sales effort for The Meridian Group was man- aging director Gary Block. “We had tremendous inter- est in this property thanks to its ideal location,” Block said. “Meridian and Hanover worked well together and hammered out a very good deal.” The deal included four office buildings at Tysons Corner totaling 900,000 s/f. n
September 30, 2013 25th Annual Friends of IREM ® Golf Outing at Commonwealth National Golf Club, Horsham, PA. Hosted by:
Join Friends and members of IREM in a day of fun and networking at one of Eastern Montgomery and Bucks County area’s finest
private golf clubs. This Arnold Palmer designed 18 hole championship golf course is only a half hour’s drive from Philadelphia.
1:00PM Shot Gun Start Format: Team Scramble – Foursomes will use each golfer’s drive four times
Contests include closes to the pin, longest drive, straightest drive and more.
6:00PM Cocktails, Dinner Buffet & Prizes
Golf and Dinner includes use of practice grounds, lunch, greens fees, cart, bag tag, golf course refreshments, locker room facilities.
Cost: $325 per player
The Institute of Real Estate Management (IREM), an affiliate of the National Association of REALTORS (NAR®) is commemorating its 80th anniversary this year. IREM membership includes 17,000 professionals, 81 chapters in the US and 8 International chapters. IREM designations are recognized industry-wide as symbols of unparalleled commitment to professional education, ethics and integrity. Delaware Valley Chapter of IREM serves 29 counties in Eastern Pennsylvania and the entire state of Delaware.
For reservations or more information call 856-786-9260 or visit www.irem3.org
M ID A TLANTIC R EAL E STATE J OURNAL C oMMeRCial R eal e state l aW
Mid Atlantic Real Estate Journal — August 30 - September 12, 2013 — 7A
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John Comie Connell Foley LLP
Tony DiFlavis, Esq. Arrow Real Estate Services, LLC
Bruce Gudin Ehrlich, Petriello, Gudin & Plaza
Jason T. Shafron, Esq. Archer & Greiner, P.C.
Charles Katz-Leavy Verrill Dana LLP
Jeffrey Silberman Kaplin Stewart
Charles Katz-Leavy, Verrill Dana LLP....................................................................................................... A Tony DiFlavis, Esq., Arrow Real Estate Services, LLC.......................................................................... 9A Jeffrey Silberman, Kaplin Stewart ..........................................................................................................10A Bruce Gudin, The Law Firm of Ehrlich, Petriello, Gudin & Plaza.................................................. 11A Jason T. Shafron, Esq., Archer & Greiner, P.C. ......................................................................................12A
A — August 30 - September 12, 2013 — Mid Atlantic Real Estate Journal
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C ommercial R eal E state L aw
f you own real estate, there may be an occasion when a neighbor, contrac- By Charles Katz-Leavy, Verrill Dana LLP Do you have a license for that? When you need more than a handshake I
In many or most cases, the handshake deal does not offer sufficient protection to the property owner. In such an instance, a temporary license agreement may be the best option for the land- owner. The following is an example of what could happenwithout a license agreement: Neighbor asks: “We will be renovating our building and surrounding property for the next two weeks. Would it be ok if our employees park in your lot during this time period?”
Owner of Parking Lot an- swers: “No problem. Your people are welcome to park on the western side of our lot.” Hand shake ensues and the deal is made. The following week, one of the neighbor’s employees slips and falls on a patch of ice when exiting her car. The employee sues the property owner for failing to properly maintain the driveway. Re- gardless of whether the prop- erty owner is found liable for that employee’s injuries, the original “handshake” agreement has just become
an unexpected lawsuit. To avoid such a nightmare, the parking lot owner should have required the neighbor to enter into a license agree- ment with certain landowner protections. What is a license agree- ment? In real estate, a license agreement allows the user (“licensee”) to use the prop- erty of the landowner (“li- censor”) subject to certain terms and conditions. In general, licenses tend to be for shorter periods of time and are revocable, meaning
the licensor can terminate the license upon notice to licensee. The idea is that the licensee is using the property with permission and subject to certain terms. The licensee may or may not compensate the licensor for its use de- pending on the deal reached by the parties. Additionally, license agreements typically are much shorter than a com- mercial lease and therefore significantly less expensive to produce. What are the benefits of a license agreement? Generally, license agree- ments can be terminated by the licensor on written notice to the licensee. Because li- cense agreements are usually revocable, they typically are not recorded and therefore do not impair record title. Another important con- sideration is that a license agreement typically includes terms to protect the land- owner. For example, a well drafted license agreement should contain insurance and indemnification clauses to protect the licensor from lia- bility. The license agreement should require the licensee to maintain liability insurance, and it should shift the risk of liability to the licensee by requiring the licensee to indemnify the licensor for any and all damages that occurred from its use of the real estate. In the parking lot example, the licensee should have been required to maintain compre- hensive liability insurance and to indemnify the park- ing lot owner from any and all claims made by any of its employees relating to their use of the lot. If this had been done, the licensor would have been more protected from the risk of the injured employee. If you have any questions about leases, license agree- ments, or other real estate issues, please contact Charlie Katz-Leavy of Verrill Dana LLP. Charles M. Katz-Leavy is an attorney at Verrill Dana LLP, which has of- fices in Maine, Massachu- setts, Connecticut and Washington, D.C. Charlie handles commercial and residential real estate transactions. n
tor, or some- o n e e l s e seeks a favor. For example, s o m e o n e may want to temporarily use or pass t h r o u g h your proper-
Charles Katz-Leavy
ty. When someone seeks to use your real estate for only a short period of time, you may think a simple handshake agreement is good enough.
We have the experience to guide you all the way from the property line to the dotted line.
No matter how big or small your real estate project is, we have the right size team to efficiently see you through.
Contact: Attorney Charles M. Katz-Leavy (207) 253-4920
Portland, ME • Boston, MA • Augusta, ME • Stamford, CT • Washington, DC www.verrilldana.com
VERD.17249 RealEstatePracticeAd.2013.FR_v4.indd 1
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Mid Atlantic Real Estate Journal — August 30 - September 12, 2013 — 9A
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c oMMeRciAl R eAl e stAte l Aw By Tony DiFlavis, Esq., Arrow Real Estate Services, LLC Lease Commencement: Start Me up
I
n the movie Casablan- ca, one memorable line is when Rick Blaine (Hum-
walks, parking lots, driveway, entrances, exits and common areas. The delivery to the tenant also may require the satisfac- tion of other contingencies such as issuance of a landlord’s architect certificate of comple- tion; permanent or tempo- rary certificate of occupancy; contractor and subcontractor waiver of liens; and comple- tion of punch list items. Any additional contingencies the landlordmay require due to the specifics of the deal should be included in that paragraph. A good practice point is to
abstract your lease commence- ment paragraph and note the dates of the various date benchmarks on the abstract for later inclusion into the Lease Commencement Agreement attached to the lease as an ex- hibit and to be signed by land- lord and tenant. This extra step ensures the confirmation of the correct dates in the agree- ment, critical for confirming when the lease, rent and lease expiration occurs. The tenant usually will want the rent to commence when it opens its store for business to the pub- lic. The landlord should set
specific dates (usually 30, 60 or 90 days after landlord delivery to tenant) for the completion of tenant’s construction and store fixturing period. This is a critical period, especially for the inexperi- enced tenant. The landlord should monitor the progress of tenant’s construction. An- other suggestion would be to have the tenant’s contractor provide the landlord with a timeline of work so the land- lord can monitor the progress (or lack thereof) thus allowing early landlord intervention to avoid any present or future
disputes. Despite the continuing slow economy, a proactive landlord who nurtures his novice tenant in the ways of the commercial lease will have the beginning of beautiful business relation- ship. Tony DiFlavis, Esq. is the General Counsel for Arrow Real Estate Services, LLC a client-centered organiza- tion providing a full comple- ment of commercial real estate brokerage and con- sulting services with offices in Doylestown, PA. n
phrey Bogart) tells Captain L o u i s R e - nault (Claude Rains) “Louis, I think this is the beginning of a beautiful friendship.” Jus t l i ke
Tony DiFlavis
Rick and Louis, carefully draft- ing the delivery and commence- ment lease provisions, the landlord and tenant can begin their relationship by avoiding future disputes concerning dates. This is the primary func- tion of the lease commence- ment paragraph in a shopping center lease; to confirm the keys dates for when the lease starts and rent is to be paid and, ultimately, when the lease will end. It is important for the tenant to understand the subtle differences and deliv- ery obligations for each party. This is especially important when the landlord is dealing with tenant/franchisee or lo- cal retailer unfamiliar with a shopping center lease. While most new store leas- ing today involves second gen- eration space, there are new shopping center projects being developed with each type of project having its own bench- marks. For example, in a new shopping center, delivery of the store to the tenant can be affected by impediments, such as weather, material avail- ability, labor issues and other obstacles. The landlord should carefully craft the lease commencement language to allow the greatest flexibility to deliver the store to tenant. While some tenants may object to an unspecified delivery date, this permits the landlord to retain the tenant without penalty or lease ter- mination that larger national tenants would demand. Usu- ally, the lease commencement clause will state the lease term to begin on a specific lease execution date, but may use a different date for the rent com- mencement. The landlord obli- gations to deliver the premises to the tenant should be made contingent upon the comple- tion of landlord construction work. Regarding new shopping center development, this would also include the completion of all improvements to the shop- ping center, including side-
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c oMMeRciAl R eAl e stAte l Aw By Jeffrey L. Silberman, Esquire, Kaplin Stewart Mechanics’ Liens in the New Age
M any aspects of real e s t a t e p r a c t i c e have changed since
“180”. Under the former law, Pennsylvania was one of the few states that allowed a contractor to waive its and its subcontractors’ rights to file a lien before the job even started. This was done by simply executing and record- ing an agreement stating that the contractor waived its right to file a mechanics’ lien. A pre-construction lien waiver offered owners and lenders a significant degree of protection from having their projects encumbered by mechanics’ liens. However, the law changed
and brought Pennsylvania back to the more common way of dealing with liens. Except in certain limited circumstances, pre-construc- tion lien waivers were ruled unenforceable. A contractor can still waive or release its right to file a lien, but only to the extent of payment. Therefore, as in most states, to safeguard against liens, the owner and its lender should trade payment for a release of liens for the work for which the contractor is being paid.
Even with this small incon- venience, lenders still had a very effective way of making sure that their mortgages would not be subordinate to a mechanics’ lien – the “open- end” mortgage. An open-end mortgage gives an entire mortgage priority from day one, even though the loan will not be fully advanced on day one. This means that if the lender advanced one dollar at closing but recorded a proper open-end mortgage, the entire loan amount is protected, even if a lien for $1,000,000 was recorded the
next day.
In 2012, the open-endmort- gage protection was thrown for a loop with the decision in CommerceBank/Harrisburg, N.A. v. Stephen F. Kessler & Lisa K. Kessler et. al . In brief summary, and reading the case in a conservative light, the Kessler case held that a mortgage is not an open- end mortgage if the loan has any funds for non-construc- tion items, such as interest reserve or soft-costs. As we all know, most construction loans have non-construction components. If a lender has a “regular” mortgage, any lien filed could have priority over unadvanced loan proceeds. The case has left lenders scrambling for solutions. One solution we have seen is that the lender makes 2 loans, one for construction dollars only, and one for non-construction dollars. The construction- only loan would qualify as an open-end mortgage, thereby reducing (though not elimi- nating) the exposure to liens. This requires additional documentation and transac- tion costs. Another solution we have seen is that the lender ad- vances the entire loan into an escrow account, so that the entire loan is funded and no lien can jump in front of future advances. The prob- lem is that the entire loan is advanced and accruing interest during the entire build-out. The other problem is that title insurance companies have gotten crushed recently with mechanics’ lien claims. As the economy soured, more projects failed and more contractors were forced to file liens. Most title compa- nies are taking the position that title insurance was not meant to insure mechanics’ liens and they are making coverage for liens virtually impossible. Our world changes fast these days so it’s important to watch closely. Jeffrey L. Silberman, Esquire is a principal of Kaplin Stewart in the Real Estate, Business & Finance Department. n
the market downturn , but perhaps none more d r a m a t i c than deal- i n g w i t h mechanics’ liens.
Jeffrey Silberman
Since the mid-2000s, pro- tecting owners and lenders against the prospect of me- chanics’ liens in Pennsyl- vania has done a complete
Contact: Jeffrey A. Silberman 910 Harvest Drive, Blue Bell, PA 19422-0765 • 610-260-6000 • www.kaplaw.com Other Offices: • Cherry Hill, NJ 856-675-1550 • Philadelphia, PA 215-567-3120 Kaplin Stewart At t o rne y s a t Law Getting you through the maze of real estate law. Strategy. Skill. Success.
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Mid Atlantic Real Estate Journal — August 30 - September 12, 2013 — 11A
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C ommercial R eal E state L aw Over 50 years of experience The Law Firm of Ehrlich, Petriello, Gudin & Plaza
T he law firm of Ehrlich, Petriello, Gudin & Plaza has provided quality legal services to cli- ents in New Jersey and New York for more than five de- cades. Our law firm provides a variety of services for in- dividuals and businesses in many areas of law. Ehrlich, Petriello, Gudin & Plaza, founded in 1955, is a full-service law firm with of- fices in Newark, New Jersey, Morristown, New Jersey and New York City. You can feel confident placing your legal needs in the competent, capa- ble hands of our experienced attorneys. Founded in 1955, the firm has grown in diversity of practice areas and accumu- lated experience to become one of the premier mid-sized law firms in the New Jersey- New York metropolitan area. Our clients include individu- als, small businesses, large corporations, publicly traded companies and government agencies. Our attorneys have lectured to industry groups, providing our expertise in diverse areas of law to other attorneys and interested members of our community. We are active members of the state and local Bar Asso- ciations and industry groups that serve the needs of our clients. We are active in local government, with one of our attorneys currently sitting on a local zoning board of adjust- ment. We are assisting citizen groups and are active in local government in Newark in an effort to make Newark a bet- ter place to live and work. For over 50 years, we have successfully represented our clients in cases arising from breach of contracts, business disputes, divorce and family law issues, negligence and personal injuries, collections of debts, and other varied and important matter. We are one of the highest volume filers of landlord-ten- ant eviction cases in New Jer- sey. Partner, Bruce E. Gudin is the author of The Guide to Landlord Tenant and Related Actions in the Superior Court of New Jersey, which publica- tion is considered to be the leading landlord-tenant law treatise relied upon by both judges and practitioners. n
Partner Profile
ruce E. Gudin , is the managing partner of the Landlord-Tenant Department at Ehrlich, Petri- B
after graduating from Yeshi- va University’s Benjamin N. Cardozo School of Law and is currently counsel to many Landlord’s as well as the New Jersey Property Owners Association. Gudin attended undergraduate at Farleigh Dickinson University in Hackensack, New Jersey and C.W. Post in Long Island, NY where he received his B.S. Degree Magna Cum Laude
in business. While attending C.W. Post he was awarded the Wall Street Journal Award for outstanding academic perfor- mance. Since graduating law school Gudin has been a fre- quent lecturer on the subjects of Debtor and Creditor Law, Credit and Collections Risk Analysis, Advanced Landlord/ Tenant Law, Residential and Commercial Evictions in New Jersey, Commercial Leasing
Considerations, and on Section 8 Housing in New Jersey. He regularly lectures for the Na- tional Business Institute, Lor- man Education Services, and to the New Jersey Institute For Continuing Legal Education. Gudin is also an active member of the New Jersey Apartment Association where he regularly consults on legislative issues affecting the multi-family housing industry.
ello, Gudin & P l a z a , PC head- quartered in Newark, NJ. He was a dm i t t e d to practice law in 1989
Bruce Gudin
LAW OFFICES EHRLICH,PETRIELLO, GUDIN & PLAZA A Professional Corporation
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12A — August 30 - September 12, 2013 — Mid Atlantic Real Estate Journal
www.marejournal.com
C ommercial R eal E state L aw
n the recent era of difficulty in some sectors of the com- mercial real estate market, By Jason T. Shafron, Esq., Archer & Greiner, P.C. Commerical real estate litigation against guarantors and debtors in today’s economic climate I
today determining that they would rather pursue actions against obligors and guaran- tors first, without aggressively pursuing foreclosure. Lenders also have varied internal ac- counting rationales for not wanting to foreclose on a com- mercial property. These litiga- tion decisions are made more complicated by the unsettled case law in New Jersey with respect to the application of a non-statutory fair market val- ue credit in a deficiency action on a note or guaranty where there is a related mortgage on commercial property. When
a financial institution is con- sidering a deficiency action or litigation on a note or guaranty that is also secured by com- mercial real estate, the timing of such an action and evidence of value may be crucial to the debtor’s right to require a fair market value credit under the current conflicting New Jersey case law. In the typical residential mortgage and note scenario, New Jersey’s deficiency action statutes, N.J.S.A. 2A:50-2 et. seq., apply. These statutes re- quire a lender to first foreclose on the mortgaged property
before the lender can bring an action in the Law Division to recover a money judgment on a note, guaranty or other similar instrument. These are often referred to as the “foreclosure first” rules. If the deficiency ac- tion statutes do not apply, then the lender can bring an action to recover a money judgment in the Law Division at any time without filing of a foreclosure action. The foreclosure first rules do not apply where (a) the debt is for a business or commercial purpose, except a two to four family residence where the owner or his immedi-
ate family lives, (b) residential property which is not a one to four family residence where the owner or his immediate family lives, (c) the mortgage is not the primary security for the debt, or (d) the mortgage is a second mortgage where the first mortgage is held by another lender. In the residential context where the deficiency action statutes apply, as part of the mortgage foreclosure action, the statutes require that any guarantor or obligor under the note be made part of the foreclosure action. Further, in the complaint filed, the plain- tiff-lender must offer to give a fair market value credit as of the date of the foreclosure sale in any case where the plaintiff lender was the purchaser at the foreclosure sale. Interestingly, the origins of what became the statutory fair market value credit began during the De- pression in the 1930’s where, not wholly unlike our current real estate climate, collapsed economic conditions had de- stroyed the market for real estate and made it impossible to secure anything beyond a nominal bid at judicial sale. The statutes also mandate that as part of the foreclosure, the defendant has the right to contest the amount of the fair market value, and in most cases will be afforded a fair market value hearing. The thorny issue with re- spect to the application of a fair market value credit rears its ugly head in cases where the deficiency action statutes do not apply – otherwise known as a “non-statutory fair market value credit.” It is in this con- text that the case law in New Jersey does not provide clear guidance as to the debtor’s entitlement to a non-statutory fair market value credit, and timing of the related actions may become significant. Until the 1990s, the leading case on the issue of the applica- tion of the fair market credit related to a commercial loan was 79-83 13th Avenue Ltd. v. DeMarco, 44 N.J. 525 (1965). There, the Court found that in the commercial context, the right to a fair value deduction can be pursued only in the foreclosure action itself by way of an objection to the sale. Part of the basis for this decision was the Supreme Court’s rec- ognition in the mid-1960’s that continued on page 14A
lending insti- tutions and borrowers are facedwith dif- ficult litiga- tion decisions with respect to foreclosure anddeficiency actions. With
Jason T. Shafron
defaulting commercial real es- tate loans secured by property which cannot be sold or can be sold only at substantial dis- counts, lenders are more often
Archer & Greiner, P.C., is a full-service law firm with over 175 lawyers in nine offices serving Fortune 100 clients, small to medium-sized businesses and individuals throughout the region for over 80 years.
For more information on our firm and how we can help serve you, contact Jason T. Shafron, Esq. : 201-498-8510, email: jshafron@archerlaw.com
HACKENSACK, NJ PRINCETON, NJ FEMINGTON, NJ HADDONFIELD, NJ SHREWSBURY, NJ PHILADELPHIA, PA WILMINGTON, DE GEORGETOWN, DE NEW YORK, NY
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