18A — February 8 - 21, 2019 — M id A tlantic
Real Estate Journal
www.marejournal.com
M id A tlantic R eal E state J ournal
Houlihan-Parnes Properties arrange 1st mortgage financing
By Robert Rahner, Cost Recovery Solutions, LLC Tax Cuts and Jobs Act winners and losers . . . ontinued from page 12A C
needed. As for getting goods into the airport, tenants need to understand requirements for deliveries. There may be a central distribution system for tenants to use, as well as specific procedures to get products and even employees through security checkpoints. Furthermore, businesses must sometimes vary their product offerings (e.g., no nail clippers or pocket knives) and restaurants must comply with rules that do not apply to a non-airport location (e.g., handling of knives to prepare food and open flames to cook food). These regulations can change frequently, too, mean- ing tenants must stay vigilant to remain compliant. Organization The Department of Trans- portation’s Airport Conces- sion Disadvantaged Business Enterprise (ACDBE) pro- With over a decade in the commercial real estate indus- try, working in brokerage and development across several as- set types including multifamily, IRVINGTON AND WHITE PLAINS, NY — Jeremiah Houlihan and James Cole- man of Houlihan-Parnes Properties have arranged 1st mortgage financing in the amount of $9.225 million for two multi-family properties in Irvington and White Plains. 111 North Broadway in Ir- vington is a three-story brick converted mansion that con- tains 17 apartments. 177 Grand St. located at the north- east corner of East Post Rd. in White Plains is five-story brick building that contains 56 apart- ments and nine ground floor retail stores. The 1st Mortgage Loans were CHARLOTTE , NC — Greysteel continues momen- tum and opens second office in 2019. Industry veteran, Michael Hehir will co-lead the launch of Greysteel’s office in Charlotte and expansion into the Carolinas. Hehir will specialize in ar- ranging sales of private client, middle market, and institution- ally owned multifamily proper- ties and portfolios. Additional- ly, Hehir along with President & CEO, Ari Firoozabadi will continue the company’s advancement throughout the Carolinas and build a practice group to serve the region.
and consolidates the various property improvement cat- egories to a single category called QIP, which eliminates the QLI category along with its benefits. QIP costs must now adhere to a 39-year deprecia- tion period, without any bonus depreciation – hurting all who in past years enjoyed the ben- efits of the previous code. Section 179 Expensing This section of the tax code allows property owners to deduct the full cost of quali- fying equipment / property (carpet, wallcovering, etc.) as an expense during the year it was purchased, rather than requiring the cost to be depre- ciated over time.
owners to claim a deduction for installing energy-efficient systems (such as interior lighting and heating/cooling systems) or modifying the building envelope to reduce energy costs. To qualify, the building’s total energy and power cost must be cut by 50% or more in comparison to a building meeting minimum industry standards. 2017 - Good The incentive, which went into effect in 2006, was ex- tended yearly up to and in- cluding the 2017 tax season. This deduction encouraged property owners to invest in energy-conscious construction and improvements. 2018 - Ugly – for now The jury is out on this one. The big question is whether it will be extended for 2018 since the incentive expired in 2017. However, signs are pointing to a retroactive ex- tension during Congress’ 2019 session, so investors and their tax professionals need to keep a watchful eye to see whether it actually will get passed. Conclusion So, who exactly wins and loses as a result of the Tax Cuts and Jobs Act? Own- ers with tenants, restaurant owners, and those thinking of making energy-efficient im- provements look to be holding the short end of the stick when it comes to reducing their tax burdens in 2018. However, the increase in bonus depre- ciation, expanded definitions of items and property eligible for 179 expensing deductions, as well as the significant boost in expensing limits will help soften that blow for those who know exactly how to take ad- vantage of this year’s changes. The more-challenging-than- ever tax code, combined with strict IRS requirements for claiming the new incentives, makes cost segregation a valu- able tax strategy for commer- cial property owners. Cost Recovery Solutions, LLC can help determine exactly how you can benefit from a cost seg- regation study and maximize the benefits to be gained from the new law. We welcome you to contact us at 732.548.3855 for a free projection of benefits on specific properties. Robert Rahner, CFA, ASA, CCSP, is the manag- ing director of Cost Recov- ery Solutions, LLC, located in Tinton Falls, NJ.
This favorable tax treat- ment did not apply to most other types of buildings or building improvements, and made restaurants a favored as- set class for many investors. Under the new law, restau- rants no longer qualify for the reduced depreciation schedule. Owners may benefit more in the first year than they have in the past due to the new 100% bonus depreciation. However, as shown in the table below, in subsequent years they will be significantly worse off since they can no longer depreciate the entire building over 15 years. 2018 – Somewhat Good, Mostly Ugly
gram links federal funding for government-owned airports to nondiscriminatory hiring practices. To create an even playing field, airport owners may task the mall developers to meet a specific percentage of ACDBE-qualified businesses. Prospective tenants may be able to structure their busi- ness in such a way to take advantage of this program. It’s an avenue worth exploring if a business is having trouble getting in the door. Once inside the airport, the environment is ripe for suc- cess. Given the unique setting, due diligence is needed, but a careful and knowledgeable attorney can guide business owners through the process. Then, it’s time to take flight. Marcy E. Hamilton is a partner in the real es- tate and lending group at Pittsburgh-based law firm Meyer, Unkovic & Scott. Hehir’s firsthand market knowledge combined with Greysteel’s industry-leading platform will provide a seam- less expansion into the North and South Carolina markets. Both states have experienced strong population and job growth in recent years, fuel- ing housing demand. South Carolina remains a popular destination for households on the move, ranking in the top 10 states in the U.S. for inbound relocations. placed with a NY Savings Bank for seven-year terms at a 4.75% interest rate with a 2-yr inter- est only component on 30-yr amortization schedules. The lender charged no commitment fee and the loan has sliding scale prepayment penalties. 177 Grand St. retail, office and land, Hehir has sold over 2,000 units with $200 million in total sales vol- ume. Prior to joining Greysteel, Hehir was managing partner at Basecamp Apartment Advisors, Inc. a company he founded, where he focused on multifam- ily sales.
Greysteel expands to the South- east - Opens 2nd office of 2019
2018 Benefits Lost from Elimination of Qualified Restaurant Property
2017 15-Year Schedule
2018 39-year Schedule w/100% Bonus
Depreciation Change
Year
1 2 3 4 5
$246,600 $1,074,800 $828,200
440,200 354,500 302,000 298,900
75,900 -364,300 75,900 -278,600 75,900 -226,100 75,900 -223,000
5-Year Total Depreciation
-$263,800
$1,642,200 $1,378,400
Qualified Improvement Property (QIP) and Qualified Leasehold Improvements (QLI) Definitions of these two items are similar with subtle differences. QIP refers to the cost of interior improve- ments any time after the date that the building was first constructed. To qualify as a QLI, the improvement must be made at least three years after the building is constructed, and must be for a tenant space (typically within an office or retail building). The QLI deduction benefits whoever makes the improve- ment - either the landlord or a tenant. 2017 – Great and Good In 2017, QLI was eligible for both a 15-year deprecia- tion schedule and 50% bonus depreciation. While QIP had to adhere to the longer 39-year schedule, it too was eligible for the 50% bonus. While not as great as the deduction for QLI, QIP savings were still a better deal than what was around the corner in 2018. 2018 – Ugly The new tax act simplifies
2017 - Good for some In 2017 and years prior, 179 expensing limits were set at $500,000. This expensing incentive encouraged many investors to improve their properties. 2018 - Great for more Expensing limits double for 2018 to $1 million. Also, own- ers can now claim expenses for residential rental property and eligible expenses can now include: • Qualified energy efficient heating/air conditioning prop- erty, fire protection/alarm systems, security systems and roofs • Certain tangible personal property, mostly used to fur- nish lodging The new rules will allow most small/medium-sized property owners to write off the entire cost of qualify- ing upgrades and equipment bought in 2018. These changes will make a big difference for many more companies. Section 179D Commercial Buildings Energy Efficiency Deduction Section 179D primarily en- ables all commercial building
continued from page 2A A pre-flight checklist . . .
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