22A — January 21 - February 17, 2022 — M id A tlantic Real Estate Journal
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M id A tlantic R eal E state J ournal
Rittenhouse Realty Advisors reveals newnational CRE platform
fore, 1031 exchanges may not be an option for house flippers and housing developers that build homes for sale. Deferral of H By Patten Mills and Kevin Hodge, ROCK The 101 on the 1031 ave you considered how much more you could achieve with
PHILADELPHIA, PA — Rittenhouse Realty Advi- sors (RRA) announced that it has co-founded, along with five other independent brokerage firms, a new national com - mercial real estate platform - Global Real Estate Advi- sors (GREA) . In doing so, RRA will be part of one of the largest privately-held broker - ages in the industry. GREA brings together some of the top brokers in the indus - try to achieve superior results with offices serving the North - east (Philadelphia, New York and Delaware), Southwest (Austin, Dallas and Hous - ton), Midwest (Detroit and Chicago), Southeast (Atlanta, Hilton Head and Florida), and Pacific Northwest (Portland). This is a truly unique com - mercial real estate platform not offered in the current mar - ketplace. All of our clients will benefit from shared resources and technology. The national platform will showcase RRA’s property listings to an ex - BRIDGEWATER, NJ — A 3,158 s/f office space at 711 E. Main St. in Bridgewater has been leased to Greenix Inc. by Richard and Monica Skydell. The transaction was managed by Sheldon Gross Realty president Marcy Gross and vice president E ric Weston . “This lease represents a new location for our pest control business, and it’s ideal for several reasons,” said Matt
continued on page 24A Is a 1031 Exchange the Right Strategy for Me? Commercial property own - ers’ goals guide investment strategy. The biggest con - sideration is whether a 1031 exchange will improve returns above inflation and cost. Like the options of retirement sav - ings accounts that incur taxes before depositing (Roth IRA) and accounts that do not incur taxes until withdrawn (401K), the 1031 exchange provides the option to defer payment of taxes on gains. While 1031 ex - changes can lower transaction costs and free up capital in the short-term by deferring capital gains taxes typically paid upon the sale of a property, it must provide sufficient benefit to justify the associated costs. Every deal is different, and What’s the Catch? An exchange must be initi - ated prior to the sale of the original property. Sale pro - ceeds cannot be accessed once involved in a 1031 exchange without being subject to taxes. Potential replacement proper - ties must be identified before or within 45 days of initiating a 1031 exchange with the sale of a property, and there are limits on the number of potential properties that can be identified. Settlement must be within 180 days following the sale of the initial property. Time limits can result in hasty decisions distorted by tax im - plications, for example, over - paying for a property in order to meet the requirements of a like-kind exchange and defer taxes. Contract stipulations that make sales contingent upon successful identification or purchase of replacement properties are one form of protection for owners. Capital gains taxes are de - ferred, not forgiven, through a 1031 Exchange. As investors anticipate the risk of poten - tial increases to capital gains taxes, taxable transactions may be completed with the mo - tivation to pay capital gains at the current rate and reset the tax basis rather than rolling profits into a 1031 exchange. While 1031 exchanges can improve efficiency and liquid - ity in markets by providing the capital required for certain exchanges, assets become less liquid when involved in a 1031 exchange as it may not be rational to sell a property if accumulated capital gains taxes have a significant nega - tive impact on profit from sale.
Planners, LLC will be with you every step of the way. If you are looking to implement a Workplace Wellness Strat - egy for your office in 2022, contact our FacilityManagers today to get started! Caro l i ne She l l y i s founder & principal of HF Planners. MAREJ increase your chances of suc - cess McKirdy, Riskin, Olson & DellaPelle, P.C. has specialized in this field for over fifty years. Please feel free to contact us for a complimentary consultation. Thomas Olson is man- aging shareholder with McKirdy, Riskin, Olson & DellaPelle, P.C., with more than 35 years of experience handling real estate tax appeal matters. Michael Realbuto is associated with the firm. MAREJ Pritchett, district manager, Greenix Inc. “In addition to downtown Bridgewater offer - ing exceptional visibility in terms of drive- and walk-by awareness, the township is perfectly suited as a central hub for dispatching service providers. As an example, New Brunswick is only a 20-minute drive, while Edison, Morris - town, and Woodbridge all are just 25 minutes away.” MAREJ panded audience from private owners in local markets to institutional investors with multi-market portfolios. Addi - tionally, Rittenhouse Capital Advisors will have access to more diverse debt and equity options through its expanded national reach. RRA will remain indepen - dently owned and operated. We have earned a stellar reputation by translating in - dustry experience and market knowledge into an extraordi - narily high volume of trans - actions. We will continue to offer that unparalleled service, unmatched expertise and a relationship-oriented style that our clients expect. We are excited to be a mem - ber of GREA and offer these ad - ditional resources to our clients in order to achieve their goals and maximize returns. MAREJ
your money if you didn’t have to pay g o o d o l e ’ Uncle Sam? T h e 1 0 3 1 like-kind ex - change pro - g r am p r o - vides bus i -
taxes makes exchanges of subopt imal investments f o r m o r e pr oduc t i ve investments
Patten Mills
Kevin Hodge
more feasible for property owners. A small business owner may rely on a 1031 exchange to put all value from the sale of their busi - ness and real estate towards an investment that provides passive income in retirement, such as a property with long- termNNN leases. An investor may decide to leverage their residential rental portfolio to level-up to a larger-scale investment with potential for higher returns like a new mixed-use development. Any commercial property within the United States can be exchanged for another com - mercial property. For instance, a company relocating from Maryland to Pennsylvania can use a like-kind exchange to apply profits from the sale of the company’s office building in Maryland directly towards the purchase of an office build - ing in Pennsylvania without paying capital gains taxes. Properties can be exchanged across state lines, however, tax treatment at the state level varies. Pennsylvania currently does not acknowledge the 1031 exchange at the state level. Therefore, either PA’s Per - sonal Income Tax (PIT) or PA’s Corporate Net Income Tax is still due at the time of sale depending on if the exchange is completed by an individual or corporation. All properties involved in a 1031 exchange transaction must be owned for business use or as a long-term invest - ment, but a portion of a pri - mary residence may be used in a 1031 exchange if utilized for business or investment pur - poses. Any amount of equity in a property being sold can be rolled over but not without incurring tax exposure. All equity from the sale of a prop - erty must be put towards the purchase of a new property or properties, which must be of equal or greater value than that of the sold property or portion put into the exchange. If not, there will be a tax on the remaining gain.
ness owners and investors the ability to roll proceeds from the sale of one investment property into the purchase of another, thereby deferring any capital gains taxes on profits from the sale and allowing more capital to be spent to - wards the new asset. A wide variety of motivators based on circumstance including retirement, portfolio growth acceleration through leverage, relocation, or optimization of facility efficiency for your business could incentivize individuals and corporations to upgrade properties using a 1031 exchange. Providing A Leg Up for Business Owners and Investors Since 1921 For the last century, indi - viduals and corporations have utilized the 1031 exchange program as an economic tool to leverage and expand in - vestment in real estate. In a 2020 study, Ling and Petrova concluded that investment in replacement properties purchased through like-kind exchanges is on average 15.4% greater and capital expendi - tures approximately $0.50 higher per square foot than properties purchased through fully taxable sales. Business owners and investors, large and small, utilize the 1031 exchange program, with the average price of properties exchanged from 2010 to 2020 being approximately $575,000. While Internal Revenue Code specifies that properties must be like-kind, this just means that the property must be commercial and not a per - sonal residence. Office condo - miniums, automotive service businesses, shopping centers, apartment buildings, and land for future development are just a few examples of real es - tate assets that can be traded through like-kind exchange. Stock in trade is excluded as the program is not appli - cable for those purchasing a property with the intention of immediately selling it after making improvements. There -
Sheldon Gross Realty brokers deal on 3,158 s/f office space
continued from page 20A The impact of this historic pandemic in our lifetime will prove to be a changing force in how companies do busi - ness in the future. Companies should choose to embrace the challenge and be a part of developing the workplace trends of the future, and HF Workplace wellness in an . . . continued from page 17A How to successfully handle a . . .
of your property during one of the freeze years (i.e. you put an addition on the property or get a zoning change for a higher and better use). V. Seek help While these guidelines above provide a basic outline of the process, tax appeals can be complicated, and each case presents its own intricacies. The tax appeal process can be com - plicated, and an experienced tax appeal attorney can help you
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