7-22-22

ISSUE HIGHLIGHTS Volume 34, Issue 7 July 22 - August 18, 2022

Assets represent a total of 536 units in Amherst, MA Eastern Union’s Muller secures $83.8M in financing for 2 multifamily properties

EW YORK — Mi- chael Muller , a se- nior managing director

SPOTLIGHTS

with East- ern Union , has arranged a total of $83.8 million in financing in support of The Boul- ders, a 256- unit, multi-

SOUTHERN NEW JERSEY 6-11A TAX ISSUES & ACCOUNTING

Michael Muller

family property in Amherst, MA, and Cliffside Apartments, a 280-unit property situated in neighboring Sunderland, MA. The combined apartment count amounts to 536 units. Eastern Union is one of America’s largest commercial real estate brokerages. Muller secured a ten-year mortgage of $44.805 million for The Boulders, which was built in 1974. The interest rate is floating at a spread of 2.83 percent plus the one-month SOFR. The financing allows for interest-only payments for the

Cliffside Apartments

The Boulders

first four years. The property consists entirely of market- rate, two-bedroom units mea- suring an average size of 844 s/f. The site’s total rentable area equals approximately 216,000 s/f. He also closed on a ten- year, $39-million mortgage for Cliffside Apartments, which was constructed in 1976. The interest rate is floating at a spread of 2.83 percent plus the one-month SOFR. As with

The Boulders, the financing allows for interest-only pay- ments for the first four years. Sixty percent of the property consists of one-bedroom units, with the balance comprised of two-bedroom, three-bedroom, four-bedroom and townhouse units. Average unit size for the Cliffside site is 532 s/f and the total rentable area is ap- proximately 149,975 s/f. All apartments are market-rate. The combined loan-to-value

5-11B

ratio was 75 percent. Financ- ing was provided through Newmark. The seller was Boston-based Northland. The identity of the buyer was not disclosed. “Tapping our strong rela- tionships with the lending community, Eastern Union was able to secure excellent leverage for this client,” said Muller. “These two properties had been held by their prior owners for 29 years.” MAREJ decided to sell, knowing the upside potential of the prop- erty due to its location and the quality.” Sweetwood commented on the sale, “I sold this property to a longtime client who owns many properties outside the area, so this is first-time ownership in an area attrac- tive because of its waterfront proximity and abundant local amenities. With more people working remotely, many peo- ple are moving south.” Conveniently located near the Garden State Parkway and Route 36, the property has diverse, abundant trans- portation with buses to New York City nearby and ferry services to Manhattan via the Seastreak Ferry Line, just a 20-minute drive from Keyport Village. Keyport is a borough in northern Monmouth County along Raritan Bay approxi- mately 38 miles south of New York City. MAREJ

BROKERAGE DIRECTORY

Section D

UPCOMING CONFERENCES & WEBINAR September 22, 2022

Holland, Waisbrod & Sweetwood of Kislak arrange sale of 132 units in Monmouth County, NJ for $29M

8th Annual NJ Apartment & Multifamily Conference Sheraton Edison Hotel October 6, 2022 How to Manage a Construction Project Zoom Webinar For speaking & sponsorship info., please contact: Lea at 781-740-2900 or lea@marejournal.com

KEYPORT, NJ — The Kislak Company, Inc. an- nounced the recent sale of Keyport Village Apartments, a 132-unit apartment com- plex at 251 Atlantic St. in Keyport, Monmouth County, for $29 million. Kislak marketed the prop- erty on an exclusive basis with

president Robert Holland and executive vice president Barry Waisbrod managing the assignment on behalf of the seller, Keyport Village Apartments DE, LLC. Ex- ecutive vice president Joni Sweetwood procured the purchaser and longtime client. The property consists of six, two-story, brick build- ings containing 22 studios, 78 one-bedroom units, 30 two-bedroom units, and two three-bedroom units with modern kitchens upgraded with stainless steel appli- ances and granite counters and a mix of hardwood floors Robert Holland

Barry Waisbrod

Joni Sweetwood

in the main living areas and carpeting in the bedrooms. Amenities include a fitness center, onsite laundry facili- ties and shopping and dining within walking distance from the property. Holland highlighted the team’s expertise in the trans- action and the future po- tential of the property, “The purchaser plans to upgrade the units, which will result in higher rents. I am proud of our teamwork getting this done.” Waisbrod added, “The seller with whom we have long term relationship took advantage of the strong market and

Directory ROP (Front Section)........................................... Section A Retail Development Reimagined...............................3-4A Financial featuring Tax Issues & Accounting............5-11A DelMarVa.............................................................. 12-13A Billboards & Business Card Directory..........................15A CRE Organization’s Events Calendar............................16A New Jersey..............................................................1-14B Pennsylvania........................................................15-BC-B Owners, Developers & Managers.......................Section C Brokerage Directory.......................................... Section D

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2A — July 22 - August 18, 2022 — M id A tlantic Real Estate Journal

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M id A tlantic Real Estate Journal

M id A tlantic R eal E state J ournal Publisher, Conference Producer ..............Linda Christman AVP, Conference Producer ...........................Lea Christman Publisher ........................................................Joe Christman Conference Producer ...............................Jordaan Van Oort Editor/Graphic Artist ......................................Karen Vachon Contributing Columnist ...........................Roey Dor, Obligo Mid Atlantic R eal E state J ournal ~ Published Monthly Periodicals postage paid at Hingham, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal 117 HMS Halsted Dr., Hingham, MA 02043 USPS #22-358 | Vol. 34, Issue 6 Subscription rates: 1 year $99.00, 2 years $148.50, 3 years $247.50 & $4.00 single issue - plus postage REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Phone: 781-740-2900 www.marej.com

Roey Dor

4 Key Questions to Ask Before Implementing a Deposit-Free Renting Solution n rental housing, secu- rity deposits have long been the preferred way to protect property owners from damage and other losses. But as property management operations become highly au- tomated, security deposits are seen as more of a burden than a benefit. Savvy property managers have begun to look for security deposit alternatives. Here are 4 key questions to ask before implementing a deposit-free renting solution. 1. How is deposit-free renting better than taking a traditional deposit? Property managers take security deposits for good rea- sons. Maintaining protection against damages and unpaid rent is the primary reason, but deposits also provide screen- ing and establish account- ability with renters – they now have skin in the game. So how is a deposit alternative better than a cash deposit in check- I

ing these boxes? Handling traditional cash deposits is no picnic. Accept- ing, processing, and refund- ing deposits is a burdensome administrative process, made even more complicated by ongoing regulatory changes. The right deposit-free solu- tion will help you transition to a paperless process, saving many hours on administrative tasks. Your residents will also love keeping the cash to invest, save, travel, or spend. 2. How do I make sure that my residents are still accountable for damages? What good is a security de- posit alternative if renters are

continued on page 14A 3. How does deposit-free renting impact my leasing and accounting process? unsure about their account- ability and property owners are unable to understand pricing, coverage policies, and claims processes? When considering a deposit- free solution, it’s important to read the fine print and understand how the company describes its service to rent- ers. Is it clear that they are still accountable for damages or unpaid rent? What kind of protection is promised to you? Is there a claims process, and how are disputes handled?

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R etail D evelopment R eimagined

M id A tlantic Real Estate Journal — Retail Development Reimagined — July 22 - August 18, 2022 — 3A

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Agrifolio, Lombardi and Talbert orchestrate retail transactions in the Mid Atlantic region Horvath & Tremblay completes the sale of three retail properties for $9,473,153

fueling stations, a propane filling station, and an on-site air station and vacuum. The property features a new 10-year Double Net lease with annual rent increases that commenced in September 2021. The lease calls for annual rent increases throughout the base term. The property is situated at the con- vergence of US Rte. 206 and US Rte. 130, two of the area’s primary commercial and com- muter roadways. These two heavily trafficked roadways directly connect to I-295 and I-95. The property lies less than 1-mile from downtown Bor- dentown and is surrounded by densely populated residential neighborhoods and enjoys con- venient access to area schools and retailers. The property enjoys good visibility, signage, and frontage along US Rtes. 130 & 206. Bordentown is an affluent bedroom community of Philadelphia, located 30-miles northeast of the city. Horvath & Tremblay’s Lom- bardi and Michael Talbert

have facilitated the sale of Dunkin’ in Marlboro, NJ. Hor- vath & Tremblay exclusively represented the seller in this transaction at a sale price of $1,499,153. Dunkin’ is located at 34 US Rte. 9 N in Marl- boro, NJ. Dunkin’ has been at this location since it was constructed in 2004 and has 2+ years remaining on their Absolute NNN Ground Lease with two, 5-year renewal op- tions. The ground lease fea- tures an attractive 12.9% rent increase at the start of the first renewal option and a 12.5% rent increase at the start of the second renewal option, providing the investor with an attractive hedge against inflation. The property is set along US Rte. 9 NJ, 1-mile from the interchange with NJ Rte. 18, the areas two primary commercial and commuter cor- ridors. The property benefits from outstanding visibility and frontage along US Rte. 9, and is surrounded by national re- tailers and restaurants. MAREJ

ID-ATLANTIC — Horvath & Trem- blay has completed

the sale of three Mid-Atlantic retail properties for $9,473,153. Michael Lombardi of Hor- vath & Tremblay has suc- cessfully completed the sale of a Wawa in Hereford, PA. Horvath & Tremblay repre- sented the seller and procured the buyer to complete the transaction at a sale price of $7,365,000. Wawa is located at 1182 Gravel Pike in Her- eford, PA. The new construc- tion stand-alone convenience store and gas station had a rent commencement in March of 2022. The property consists of a 5,585 s/f convenience store and a gas station on a large 4.12-acre parcel of land. Wawa has a new 20 year, cor- porately backed, ground lease (Absolute NNN) with six, 5-year options. The lease fea- tures 10% rent increases every five years beginning in year 11 of the lease and continuing throughout both the primary

BP Gas Station

term and the option periods providing the investor with an attractive increase in revenue and a hedge against inflation. Wawa is strategically posi- tioned at the signalized inter- section of Chestnut St. (PA Rte. 100) and Seisholtzville Rd. (PA Rte. 29), the area’s two primary commuter roads. The property enjoys outstand- ing visibility from both roads and will serve as the primary convenience store and gas station for area residents and passing commuters.

Michael Agrifolio and Mi- chael Lombardi of Horvath & Tremblay have successfully completed the sale of a BP Gas Station in Bordentown, New Jersey. Horvath & Tremblay represented the seller to com- plete the transaction at a sale price of $609,000. The BP Gas Station located at 231 US Rte. 206 in Bordentown, NJ. The property has been operating as a successful gas station and convenience store for many years. The property is improved with a convenience store, eight

Institutional Property Advisors completes the sale of 71,329 s/f, Montgomery County, MD shopping center

action and excited to help Milbrook Properties expand in the Mid- Atlantic with their first retail acquisition in Mary - land.” In a second retail transac- tion, IPA announced the sale of 227,333 s/f Eagle Plaza, a grocery-anchored shopping center in in Voorhees Twp., NJ. “Anchored by Albertsons’ subsidiary Acme Markets for over 40 years, Eagle Plaza is the area’s dominant grocery- anchored shopping center,” said Brad Nathanson , IPA senior managing director in- vestments. “Previous own- ership invested significant capital to improve the center’s curb appeal by delivering new modern village-looking facades that drove significant interest in the property. The availabil- ity nationally of grocery-an- chored shopping centers with a major value add opportunity within infill high income sub -

markets of a major city center are rare, contributing to the tremendous demand that was seen on Eagle Plaza.” Nathan- son represented the seller, Hutensky Capital Partners, and procured the buyer, First National Realty Partners. Constructed in 1977 and renovated over the past five years, Eagle Plaza is anchored by Acme Markets and Ross and is located at Voorhees Township’s main intersection, which is shared by a recently renovated Target, Chick-fil-A, Royal Farms, AMC Theatre, and Edge Fitness. Located 20 miles east of Philadel- phia, Voorhees Township is an affluent Southern New Jersey community adjacent to Cherry Hill and Marlton. There are over 80,000 people within three miles of Eagle Plaza and the average annual household income is more than $120,000. MAREJ

GAITHERSBURG, MD — Institutional Property Advisors (IPA) , a division of Marcus & Millichap an- nounced the sale of Gaither- stowne Plaza located in the highly affluent Montgomery County submarket of Gaith- ersburg, The property sold for $24.45 million. Gaitherstowne Plaza is a 71,329 s/f shopping center and is 100% leased. The aver- age tenure of tenants at the property is over 10 years and the roster includes national brands Gabe’s, AutoZone, Sherwin Williams and IHOP on an outparcel. “This is a generational acquisition as there are a limited number of transactions in esteemed Montgomery County, which is ranked as the nation’s fifth- wealthiest county by Bloom- berg,” said Dean Zang , IPA executive managing director. Zang and IPA’s David

Gaitherstowne Plaza

“Gaitherstowne Plaza’s lo- cation along the busy North Frederick Avenue corridor makes it a strong draw for ten- ants,” added Crotts. “Growing rents and strong demographics ensure the asset will continue to appreciate over time. We are appreciative of BIG USA entrusting us with this trans-

Crotts and Josh Ein rep- resented the seller, an entity related to BIG Shopping Centers USA , a subsidiary of the Israeli parent com- pany BIG Shopping Centers Ltd., and secured the buyer, Milbrook Properties , a Manhasset, New York-based investment group.

4A — July 22 - August 18, 2022 — Retail Development Reimagined — M id A tlantic Real Estate Journal

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R etail D evelopment R eimagined

The national off-price department store retailer is slated to open this fall RD Management signs lease with Burlington Stores at Harriman Commons in Monroe, NY

EW YORK, NY — RD Management LLC has signed a

ties at the power center, a gas station and 7,970 s/f pad site situated in front of BJ’s Whole- sale is planned. Two drive- thru parcel buildings, a 1,923 s/f proposed food hall concept with 3,300 s/f of outdoor patio seating, and future develop- ment of 3.52 acres northwest of Target are also in the works. “Adding Burlington to the center further validates Har- riman Commons’ presence in the community,” said Richard Birdoff , principal and presi- dent of RD Management. “Bur- lington and the future develop- ments planned will enhance the already booming center and offer community members even more shopping and din- ing options close to home while providing prospective tenants a diverse mix of retailers driving steady traffic.” MAREJ Katz & Associates reps. Seymour Street redev. for Montclair project MONTCLAIR, NJ — Katz & Associates is helping re- vitalize downtown Montclair by bringing top-notch retail and entertainment experi- ences to the Seymour Street redevelopment project. Katz’s Brian Katz and Amy Sta- ats are retail leasing agents for the project developed by Ironstate Development and Brookfield Properties . Located on Bloomfield Ave. alongside the Wellmont The- ater, the project features over 35,000 s/f of retail, as well as a 12,000 s/f outdoor plaza, 200 apartments, and 40,000 s/f of office space. Retail Anticipated to Open Summer 2022: • The Goddard School (9,962 s/f) – tenant rep by Harry Rosen, D.L. Rosen & Co. • Nami Nori (2,050 s/f) – ten - ant rep by David Mandel- baum, KAM Realty Group • Madison Reed Color Bar (2,428 s/f) – tenant rep by Nancy Erickson, Colliers • Montclair Mud Clay Stu - dio (3,300 s/f) – tenant rep by Amy Staats, Katz & Associates • Cornbread (1,533 s/f) – tenant rep by Navin Bhu- tani , Locate , and Sean Pyle, Sabre Real Estate Group • Brick City Vegan (844 s/f) – tenant rep by Navin Bhutani, Locate, and Sean Pyle, Sabre Real Estate Group MAREJ

lease with Burlington at Harriman Commons, a 706,230 s/f power center in Monroe (Woodbury). This will be Burlington’s second location in Orange County. Harriman Commons contin- ues to expand. In addition to the existing retail opportuni- Richard Birdoff

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F inancial D igest F eaturing T ax I ssues /A ccounting

M id A tlantic Real Estate Journal — July 22 - August 18, 2022 — 5A

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$87.1M financing arranged for New Jersey multi-housing community JLL Capital Markets arranged the financing for the 258-unit Valley and Bloom in Montclair

Bloom is conveniently situated in the main business district of the Township. The com- munity is located within one mile of two NJ Transit com- muter rail stations, Walnut Street Station and Bay Street Station, with direct service to Midtown Manhattan, and is proximate to the Garden State Parkway, Route 23, I-280 and I-80. The property is also near Montclair State University, Hackensack Meridian Health Mountainside, Nishuane Park and Eagle Rock Reservation. The JLL Capital Markets Debt and Equity Advisory team representing the borrow- er was led by senior managing directors Jim Cadranell and Jon Mikula and vice presi- dent Michael Lachs . “Valley and Bloom is a best- in-class asset that has per- formed extremely well. It was a pleasure to work with LCOR, Madison, and PGIM on this transaction,” said Cadranell. MAREJ

ONTCLAIR, NJ — JLL Capital Mar- kets has arranged

the $87.1 million financing of Valley and Bloom, a two- building, 258-unit, mixed-use multi-housing community in Montclair. In addition to the residential units, the property also includes 19,812 s/f of of- fice space, 19,921 s/f of retail space and an attached parking garage. JLL worked on behalf of the borrower, a joint venture be- tween LCOR, Inc. and Madi- son International Realty , to secure a seven-year, float - ing-rate loan through PGIM Real Estate , the $209.3 bil- lion real estate business of PGIM, the $1.4 trillion global asset management business of Prudential Financial, Inc. , on behalf of its core strategy. The six-story Valley and Bloom consists of studio, one-, two- and three-bedroom units with hardwood flooring, Cae - sarstone countertops, center

Valley and Bloom

islands, full-size washers and dryers, stainless steel appliances, tile flooring in bathrooms and 9.5-foot ceil- ing heights. The property’s amenity package includes two fitness centers, two roof - top terraces with barbecue

grills, two courtyard lounge areas with fire pits, a resident lounge/club room, a Click Café, a children’s playroom and indoor bicycle storage. The ground floor office space is currently leased to Regus Corporation and Sotheby’s

International Realty. The re- tail space consists of a mix of tenants, including Cycle Bar, Hand and Stone, Pure Barre, Row House, Amazing Lash, Waxing the City, AT&T and Sayola Restaurant. At 34 Valley Rd., Valley and

Cronheim Hotel Capital secures $22.0M acquisition financing for Doubletree to Embassy Suites Conversion in Plymouth Meeting, PA

We are excited to rebrand this hotel, offering high quality ac- commodations and added ser- vice value to our guests.” said Wayne West III, President and Chief Operating Officer, Newport Hospitality Group. Founded in 1991, New- port Hospitality Group, Inc. (NHG) is a leading hotel management company spe- cializing in select and full- service hotels. They operate more than 50 hotels across the United States. Their diverse portfolio includes indepen- dent boutique hotels and top brands such as Hilton, Marri- ott, Hyatt, Wyndham, Choice, and IHG. NHG takes pride in delivering superior owner returns, exceptional guest experiences, and rewarding hospitality careers. Services include new hotel develop- ment and acquisitions, local market sales, revenue man- agement, purchasing and capital renovation. MAREJ

PLYMOUTH MEETING, PA — Cronheim Hotel Capital (CHC) has secured $22.M for the acquisition of the DoubleTree Suites in Plymouth Meeting. The loan was originated with one of CHC’s balance sheet lender relationships. The buyer, Kingsbury Hos- pitality REIT I, plans to fully renovate the property and convert it to an Embassy Suites. The property is the only full-service hotel in Plymouth Meeting and is located near entertainment, shopping and dining at Plym- outh Meeting Mall as well as numerous corporate office spaces and Villanova Univer- sity. Kingsbury has engaged Newport Hospitality Group to manage the asset. David Turley , president of CHC, noted: “Business plan financing for hotels is receiving extra scrutiny in today’s lending environment.

DoubleTree Suites in Plymouth Meeting value for all involved. We look forward to many more transactions with them.” “This is a unique opportu- nity given the demand in the market and the hotel’s struc-

Through an extensive mar- keting effort, we’re pleased to have found Kingsbury attractive debt terms that will allow them to execute on their plans and create

tural elements – atrium-style layout and full-service din- ing outlets. Embassy Suites by Hilton continues to be a leading upscale all-suite hotel category for many travelers.

6A — July 22 - August 18, 2022 — Tax Issues/Accounting — Financial Digest — M id A tlantic Real Estate Journal

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T ax I ssues /A ccounting

American Society of Cost Segregation Professionals member Cost Recovery Solutions promotes Hazem Tawfik to senior project engineer

quisition/divestiture consult- ing. Both service offerings require extensive research to prepare the final reports that support his findings. Hazem graduated from NJIT with a degree in mechanical engineering, and became in- terested in working for CRS because, “I enjoyed the pros- pect of being challenged daily. Combining my engineering skills with learning the world of cost segregation caught my interest. I also enjoy travel- ing to different parts of the country and abroad for site visits – it helps me get away

from my desk!” “Hazem is a huge asset to the CRS team,” said manag- ing director Rob Rahner . “His enthusiasm, experience and professionalism bring so much to the table, and we are excited to see what he’ll accomplish next as he contin- ues to grow and take on more responsibilities.” One of Hazem’s ultimate ca- reer goals is to become a Certi- fied Cost Segregation Profes - sional (CCSP), the highest lev - el of professional achievement awarded by the American Society of Cost Segregation

Professionals (ASCSP). He’s currently an ASCSP member and will be eligible to become certified after seven years in the industry and complet- ing rigorous testing covering technical/engineering, legal, tax, ethical and other relevant industry issues. Looking to his future with the company, Hazem shares, “It’s great to be part of the CRS family. Starting my career here allowed me to grow into more responsibilities such as more extensive client interaction and supporting business de- velopment activities. Learning about different building types and structures is also giving me valuable skills that will help when I decide to build my own home one day. I started at CRS not knowing much about tax incentives and valuation compared to what I know now, and I still enjoy learning more every day.” MAREJ NEW YORK, NY — David Lulgjuraj, Michael Cunib - erti and James K Cole- man of Houlihan-Parnes Properties have arranged 1st mortgage financing in the amount of $1 million encumbering a property at 48 Pinehurst Ave. which is a 5-story walkup apartment building containing 20 apart- ments in the Washington Heights section of Northern Manhattan. The loan has a fixed in- terest rate of 3.875% and a 10-year term on a 30-yr amortization schedule. The loan was placed with a New York-Based Commercial Bank. Lulgjuraj, Cuniberti and Coleman have arranged a 1 st mortgage in the amount of $2.6 million encumber- ing a property located at 18 Palmer Ave. in Bronxville. The property is a mixed use three-story walkup apart- ment building containing 8 residential apartments, five retail spaces and a parking garage. The loan has a fixed inter - est rate of 3.7%- and six-year term on a 30-yr amortization schedule. The loan was placed with a New York-Based Com- mercial Bank. MAREJ Houlihan-Parnes arranges first mortgage financing for NY apt. bldg.

liability and improve ROI for clients by increasing deprecia- tion deductions on commercial building assets. His responsi- bilities include identifying all property-related costs that can be depreciated over 5, 7 and 15 years, conducting site inspec- tions, estimating asset costs and performing thorough data analysis using proprietary modeling software. He also performs tangible asset ap- praisals for various purposes such as purchase price alloca- tions, fixed asset impairment, 1031 exchanges, asset-based financing valuations and ac -

INTON FALLS, NJ — Cost Recovery So- lutions LLC (CRS) ,

a premier provider of value-added and tax-sav- ing consult- ing services for commer- cial property owners and tenants, has

promoted Hazem Tawfik to senior project engineer. In this role, Hazem performs comprehensive cost segrega- tion studies that lower tax Hazem Tawfik

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M id A tlantic Real Estate Journal — Financial Digest — July 22 - August 18, 2022 — 7A

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8A — July 22 - August 18, 2022 — Tax Issues/Accounting — Financial Digest — M id A tlantic Real Estate Journal

www.marej.com

T ax I ssues /A ccounting The latest edition of the easy-to-digest newspaper addresses important real estate investment themes Kay announces new “ 1031 Times ”, covering Current Topics for 1031 Exchange & DST Investors

ay Properties & In- vestments, a national leader in Delaware

of the limited-edition peri- odical by going to https:// www.1031times.com. “Like all of the educational 1031 Exchange material and programs we produce, the real intent of the 1031 Times is to help potential clientsinves- tors better understand the potential risks and benefits of DST 1031 investments, and whether they might be a the right fit for investors consid - ering a 1031 exchange,” said Kay. Specifically, the Kay Prop - erties 1031 Times will cover topics like :

Statutory Trust investment strategies and education. Dwight Kay, Founder/CEO of Kay Properties and pub- lisher of the 1031 Times, ex- plained that the 1031 Times was designed to help educate investors on the DST 1031 Exchange marketplace, and provide high-level answers to specific questions his firm’s team of expert DST represen- tatives hear from investors daily. “Inside this timely newspa- per, readers will read about very relevant topics like how to create a potentially crisis-

resistant real estate portfolio, how DSTs help investors re- place debt in a 1031 Exchange, and why now might be the best right time to sell investment properties. The newspaper is offered free of charge as part of our commitment to provid- ing educational resources to 1031 exchange DST investors nationwide. Request your com- plimentary copy today and in addition to a print version de- livered to your doorstep, read- ers can also receive instant access to an electronic version of the publication.” said Kay. People can receive a copy

● How to Eliminate Active Property Management ● 5 Things Investors Must Do When Doing a 1031 Ex- change ● How to Avoid Getting Clobbered Smacked with a Large Tax Bill and Defer Capi- tal Gains Taxes ● Risk Factors To Consider When Investing in DST 1031 Investments ● Why Debt Free DSTs May Make Sense for 1031 Investors Wanting to Lower Their Over- all Risk Exposure in Today’s Turbulent World View the newest issue of the 1031 Times now. Alex Madden is VP of Kay Properties and Invest- ments. About Kay Properties and www.kpi1031.com Kay Properties is a national Delaware Statutory Trust (DST) investment firm. The www.kpi1031.com platform provides access to the mar- ketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients, independent advice on DST sponsor com- panies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST sec- ondary market. Kay Proper- ties team members collectively have over 150 years of real estate experience, are licensed in all 50 states, and have par- ticipated in over $30 Billion of DST 1031 investments. MAREJ This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk section prior investing. IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation. There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, general risks of owning/operating commer- cial and multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed. Nothing contained on this website con- stitutes tax, legal, insurance or investment advice, nor does it constitute a solicitation or an offer to buy or sell any security or other financial instrument. Securities offered through FNEX Capital , member FINRA, SIPC.

Statutory Trust equity placements and champi- on of provid- ing the most up-to-date educational material for DST inves-

tors nationwide, announced it recently published its exclu- sive “ 1031 Times ”, a publica- tion designed exclusively for 1031 Exchange and Delaware Alex Madden

Attract more sellers and buyers: offer free, annual property tax reviews.

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M id A tlantic Real Estate Journal — Financial Digest — Tax Issues/Accounting — July 22 - August 18, 2022 — 9A T ax I ssues /A ccounting Mark Scott, Commercial Mortgage Capital Are those storm clouds on the horizon?

www.marej.com

s all of us are expe- riencing, there are many changes in the

other sources of real estate capital have stepped to the sidelines on the hottest asset class of multifamily and also in industrial. Previously we might have expected a 50- 70% positive response rate of retail center or office building (for reasons don’t have to be explained here). Now to see increasing lender rejections, in conjunction with rising rates should be a concern for all of us in the CRE industry. As I said…. We all saw this coming! The Fed warned us. Many of us didn’t want to see it. Many of us didn’t

banking system as bank after bank exits the lending market. Multiple regional banks are currently no longer locking or committing to rates in this market. Many have shuttered new originations, and several are reneging on Term Sheets and threatening to not honor commitments and /or re-trade and adjust previously agreed upon rates. Changes in lend- ers pipelines may be under- standable (or in their opinion justified); remember that MAC or Material Adverse Change clause that appeared after the great recession?? The MAC is

being used now. The real storm cloud is that suddenly small and regional banks are starting to question how to underwrite the future and thus have exited the market. It is not just one or two banks, but it is certainly more than a handful and growing. Loans that used to be placed rather easily, 60% LTV multifamily loans, in- stead of getting 10 bids from 10 banks contacted, suddenly that positive response rate has dropped to 7 of 10 banks. So now 30% of banks and life insurance companies and

want to believe it (yours truly included). The velocity of the changes we are seeing, rising inflation, rising interest rates, and now lenders exiting the market does indicate stormy days ahead. It may be time to get your umbrella out! Commercial Mortgage Capi- tal, a proud partner of US Re- alty Capital, leverages strong, long-term relationships with a national network of lenders to create innovative debt & equity solutions. Mark Scott is founder and principal of Commercial Mort- gage Capital Corp. MAREJ

e c o n omy afoot. Plenty of changes in the world political and economic out- look as well as the issues here at home. Most appar-

Mark Scott

ent to all of us are rising en- ergy costs as we refuel our cars. Rising food prices at the grocery are raising un- certainty in the markets. The War in Ukraine, its impact on raw material prices and food prices, is still just beginning to filter through the system. These inflation factors (CPI In - crease 7-9%) are yet to be fully reflected in interest rates. We have seen interest rates rise more than well over 150 basis points in the past 12 months. It is taught in business school that interest rates equal the REAL rate plus the INFLA- TION rate, thus, maybe rates should be in the 7-9% range? We all saw it coming. The Fed promised 6-8 rate increases in the future and many of the investment banks are indicat- ing we could see 8-10 Fed rate bumps in the near term. The cost of short and long term debt is on the rise. The economic volatility, the quick rise in rates, equities in correction and bear market territory, have resulted in those storm clouds that I see building on the horizon. The storm clouds consist of chang- ing liquidity levels in our CRE MMCC arranges $4.8M in financing for a Rite Aid in Monroeville, PA MONROEVILLE, PA — Marcus & Millichap Capi- tal Corporation (MMCC) has arranged $4.8 million in financing for a Rite Aid prop - erty, located at 4111 William Penn Highway in Monroeville. The financing was secured by MMCC’s Jared Cassidy , first vice president, based out of the Washington DC office. The 65% LTV loan has a 10-year term, 30-year amorti- zation and an interest rate of 3.63%. The property is located directly across the street from the Miracle Mile Shopping Center. MAREJ

Call Mark Scott Today 201-787-7111

COMMERCIAL MORTGAGE CAPITAL

2022 CLOSINGS TO DATE

$4,387,500 Mixed Use Montclair, NJ Acquisition Loan $14,800,000 120 Multi-family Units

$12,700,000 222 Multi-family Units Parsippany, NJ Refinance $28,500,000 126 Multi-family Units Netcong, NJ Acquisition Loan

Ewing, NJ Refinance

$12,000,000 Warehouse Yonkers, NY Acquisition Loan

$27,000,000 400 Multi-family Units Parsippany, NJ Refinance

Please note our new address: 64 Diamond Spring Road Denville, NJ 07834

Many thanks to our valued clients and lenders!

10A — July 22 - August 18, 2022 — Tax Issues/Accounting — Financial Digest — M id A tlantic Real Estate Journal

www.marej.com

T ax I ssues /A ccounting

By Lynn Mucenski Keck, CPA, MST The tax break commercial real estate investors might need after COVID-19

The decrease in debt princi- pal is often referred to as a discharge of indebtedness or cancellation of indebtedness. Under certain circumstances, the Internal Revenue Code al- lows for income related to the cancellation of indebtedness to be excluded from a taxpayer’s income in instances of a title 11 (bankruptcy) case or where the taxpayer is insolvent. Insol- vency is defined as the excess of the liabilities over the fair market value of assets. The ability to claim insolvency at the entity level is limited to C and S corporations. For partnerships, the most com- mon entity type for real estate holdings, insolvency must be measured at the individual partner level. This can pose an issue because, often times, the individual partners are solvent (i.e., not insolvent). However, being insolvent or in bankruptcy is not the only way that taxpayers involved in real estate can exclude cancel- lation of debt income. Provided the taxpayer is not a C cor- poration, cancellation of debt income can be excluded if the debt discharged is considered qualified real property busi- ness indebtedness (QRPBI). QRPBI is debt that is incurred or assumed by the taxpayer in connection with real property

and adjust her basis in her real property by $50,000 as of January 1, 2022. If the property is not held directly by an individual, but instead is held by a partner- ship, then the determination of whether debt is QRPBI (and the application of the FMV limita- tion) is made at the partnership level. However, the decision as to the basis reduction is made and elected at the partner level. This allows each partner to weigh their unique individual income tax circumstances and come to their own conclusion. Individual taxpayers, includ- ing partners in a partnership, must file Form 982 to defer the treatment of cancellation of debt income and elect to reduce their basis in depreciable prop- erty. Such an election must be made on a timely filed return, including extension, and can only be revoked with the con- sent of the IRS. For real estate investors who restructured certain real prop- erty debts due to the COVID-19 pandemic, the ability to defer the cancellation of debt income could be a great tax planning opportunity, allowing them to avoid immediate taxable in- come and IRS cash payments. Lynn Mucenski Keck, CPA, MST is principal at Withum. MAREJ service and knowledge that sets agencies, such as Surety, apart. Having ‘family’ in the name is more than words. It is part of the culture and evident at every level of the organization. Open communication is encouraged, leading to an environment where there are no barriers and employees’ ideas flourish.” The South Jersey native who when not working might be found fishing, hiking or at the shore goes on to add, “I’ve worked for two other title companies and hands down, the commit- ment to service is unmatched at Surety and I look forward to furthering our growth with the dedicated Souder Team.” “Nick is a force to be reckoned with,” said Red Bank Branch Co-Managers, Christina Meyer and Debbie Freedman. “His passion for superior customer service paired with honing and improving his skills every day make him a pleasure to man- age. We are very excited to be on this journey with him.” MAREJ

he COVID-19 pan- demic has had a dramatic impact on

used in a trade or business and is secured by such prop- erty. For property acquired on or after January 1, 1993, QRPBI includes debt used to acquire, construct, reconstruct, or substantially improve real property. Whether a taxpayer is engaged in a trade or busi- ness is not always an easy question to answer and rental arrangements utilizing a triple net lease need to be carefully reviewed to ensure they qualify as a trade or business. As always, there is a catch. The IRS is not going to allow an exclusion from taxable income out of the kindness of its heart. Instead, the Internal Revenue Code essentially allows a swap; in exchange for an exclusion of cancellation of debt income re- lating to QRPBI that is not due to insolvency or bankruptcy, the rules allow a taxpayer to elect to reduce the tax basis of the taxpayer’s depreciable real property under section 108(b)(5). The amount of the exclusion and basis reduction is the excess of the outstanding principal amount of the debt less the FMV of the business real property immediately before discharge. The FMV of the property is reduced by any other qualified real property debt secured by the property. Let’s look at an example. mitment to making sure that our tax structure is attractive to businesses and individu- als and supports our growing economy,” said Governor John Carney. “That, along with Delaware’s low cost of living, plus top-notch healthcare, education and recreation, add up to one great place to live.” About Delaware Prosperity Partnership Delaware Prosperity Part- nership leads Delaware’s eco- nomic development efforts to attract, grow and retain busi- nesses; build a stronger entre - preneurial and innovation eco- system; and support employers in place marketing Delaware to potential employees, highlight- ing Delaware as a great place to work, live and play through its LiveLoveDelaware website. DPP advances a culture of in- novation in Delaware, working with innovators and startups to spotlight and celebrate suc- cesses and connect them with the resources they need to suc- ceed. MAREJ

Assume that Julia acquires a building in 2018 that she uses in a trade or business. In 2021, the building is subject to a first mortgage of $110,000 and a sec- ond mortgage of $90,000. The FMV of the building in 2021 is $150,000. In 2021, Julia’s bank agrees to reduce the second mortgage debt from $90,000 to $30,000, resulting in cancella- tion of debt income of $60,000. The outstanding principal debt immediately before discharge was $90,000, which exceeds the FMV of the property less the first mortgage ($150,000- $110,000) by $50,000. There- fore, Julia would be able to exclude $50,000 of income and would be required to include only $10,000 of cancellation of debt income. For Julia to ensure the $50,000 is not included in taxable income, her aggregate adjusted tax bases of depre- ciable real property must be at least $50,000. The basis reduction, provided by section 1017, will apply beginning on the first day of the taxable year following the year of discharge (or immediately before the dis- position if the property is dis- posed of before the end of the taxable year). In our example, Julia would have to include the $10,000 of cancellation of debt income in her 2021 tax return MARLTON, NJ — Nick Souder of Surety Family of Companies (Surety) , a title insurance agency serving resi- dential and commercial clients in New Jersey, Pennsylvania and nationally, celebrates his one-year anniversary with two milestone announcements. The experienced business develop- ment executive has been an integral part in launching the Souder Team – a group of title industry specialists that will expand the company’s reach in Central NJ, specifically Mer - cer, Middlesex and Monmouth counties. Simultaneously Soud- er worked hand-in-hand with company management to open its new office in Red Bank and home to the Souder Team. During his busy year, he has focused on strengthening client relations and building new rela- tionships through networking. Like many who join Surety, Souder speaks highly of the company. “With title insurance being a regulated industry, it is

commercial real estate values, and in some cases resulted in property no longer being able to sup- port the debt with which it is encumbered.

Lynn Mucenski Keck

The decrease in value of com- mercial property has forced many owners to restructure their debt. However, the result- ing forgiveness of a portion of the debt does not automati- cally result in federal taxable income. Favorable rules, which were put into place for taxable years after 1992, could allow the cancellation of debt income to be deferred for federal in- come tax purposes even if the taxpayer is not in bankruptcy or insolvent—as is normally the case. Taxable income is closely linked to when a taxpayer receives economic benefit. So it makes sense that if you previously had a $100,000 bank loan and the bank de- creases the principal balance to $80,000, then your $20,000 economic benefit should be included in taxable income. WILMINGTON, DE — Ac- cording to WalletHub’s recent- ly released 2022 Tax Burden by State report, Delaware has the distinctive advantage of having the third-lowest tax burden in the United States. Delaware also has a lower cost of living than most of its East Coast neighbors, a median household income 6.3% higher than the national median and high- wage job opportunities in the manufacturing and advanced manufacturing industries. With a total tax burden of 6.22%, Delaware ranks near the top for tax favorability — only Alaska and Tennessee have lower tax burdens. The listing is formulated based on the three components of state tax burden – property taxes, in- dividual income taxes and sales and excise taxes — as a share of personal income. Delaware is one of just five states in the nation – and the only state in the Mid-Atlantic region – with no sales tax. Unlike tax rates, which vary

Delaware has one of lowest tax burdens in US widely based on an individual’s circumstances, tax burden mea- sures the proportion of total personal income that residents pay toward state and local tax- es. In addition to low total tax burden, Delaware is among the states with the lowest property tax burdens with a percentage of 1.77%. The Cost of Living Index Calculator shows how far salary goes for housing, utilities and more in Delaware.

Souder celebrates one year at Surety with the Launch of the Souder Team

Delaware also ranks among the top three states nation- wide for favorable business tax. The comprehensive report Location Matters, sponsored by KPMG and The Tax Foun- dation, assesses the business tax burden in two categories of cities — major and mid- sized — throughout all 50 states, accounting for the wide range of tax impacts faced by businesses, such as property tax, income tax, sales tax and others. “Delaware’s favorable posi- tion in national tax burden rankings underscores our com-

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