F all P review 12B — September 28 - October 11, 2012 — Fall Preview — Mid Atlantic Real Estate Journal
www.marejournal.com
By Robert Schucker, R&S Landscaping . . .
By Steve Johns, PE, PLS, VanDemark . . . nomic downturn, or during the stimulus years.
continued from page 6B an essential part of any new development and a sound plan for dealing with or elimi- nating runoff is necessary for achieving Leadership in Energy and Environmental Design (LEED) and other “green” building standards. A roof garden can directly benefit building tenants in a number of ways, which increases the marketability of buildings where rooftop plantings are located. For example, the construction of a roof garden with soil, plants and a layer of trapped air, can insulate the building for sound, which otherwise can be a considerable yet neces- sary expense for buildings located in noisy urban areas. Sound waves that are pro- duced by machinery, traffic and airplanes are absorbed by the roofing materials and reflected back or deflected ac- cordingly. Recent estimates show that roof gardens with material layers of less than five inches can reduce sound by 40 decibels. Though a roof garden does not, by definition, have to be accessible to building tenants continued from page 10B Newark’s strong transit in- frastructure also includes the PATH light rail line and bus service, as well as Newark Lib- erty International Airport. The bottom line? We believe that in the next five to 10 years, Newark will evolve as New Jersey’s most exciting urban community. And while In addition, net rental in- come is included in modified adjusted gross income which is compared to the threshold amounts to determine if this Medicare tax applies. Gener- ally, modified adjusted gross income means adjusted gross income as determined on the tax return increased by any foreign earned income exclu- sion. For example, a married taxpayer earns $240,000 and owns a rental property that generates $20,000 of net rental income will be subject to the Medicare tax on $10,000 of the net rental income. Not only did the net rental income cre- ate investment income, but it also put the taxpayer over the threshold amount. Taxpayer will have to pay $380 of Medi- care tax. What we do not know about the Medicare Tax on Investment Income
studies and required road improvements. The largest impact these revised regu- lations have is the learning curve required by designers and regulators, as we all negotiate the multiple inter- pretations of the language within the codes. Over the past year we have seen a gradual increase in our total project load. How- ever, many of these projects are reduced versions of proj- ects on which we had started working a number of years ago. We have also seen an in- crease in larger projects, es- pecially in the energy sector, and some commercial devel- opers, who have proceeded with their projects with the idea that the completion of their projects will coincide with the return of a more vibrant economy. While still sluggish, we have seen a slight increase in housing projects, and al- though government-funded projects are holding steady, they are not as plentiful as they were before the eco- continued from page 4B • Insurance companies are looking to write financially stable firms, so present your company as a solid, financially sound business. • If your company has strug- gled over the past couple of years, demonstrate what you have done to weather the storm and what your plan is going forward – a 3 – 5 year plan is best, if possible. • Use your broker to help sell the viability of your company to the carriers. 5) Presentation is Extremely Important • Underwriters receive hun- dreds of submissions every week, and are unable to look at all of them. Those applica- tions with the most complete information end up at the top of the pile, increasing the likeli- hood that the carrier will offer a quote. • Make sure all information is updated, include explana- tions as to why exposures have gone up or down over prior years. Many businesses have seen revenues go down, em- ployee counts drop, and their property values drop. Showing that they are starting to trend upwards or have stabilized are attractive to underwriters. • Take an active role in com- pleting applications. These are not fun and many business owners are only too happy to let their broker complete them. By taking the time to com-
There are a number of items that are unclear and need to be clarified by the Treasury Department. It is unclear how the passive activity rules interplay with the Medicare tax. A taxpayer who has net losses from rental real estate will most likely have the deductibility of the losses limited under the pas- sive activity rules of Section 469. These losses will be car- ried forward and allowed as a deduction when the taxpayer has net rental income or dis- poses of the property. It appears that losses subject to limitation under the pas- sive activity rules will not be available to offset net invest- ment income. Thus, a taxpayer that has net rental losses of $30,000 that is not currently deductible due to the passive activity rules, will not be able to use these losses to offset the current year’s net investment income. or the general public, invest- ing in this feature for general use can produce a significant return on investment for building owners and develop- ers. Recent studies show that good landscaping and tree cover surrounding a commer- cial property can increase the building’s value by as much as 6 to 15 percent. A roof garden offers the same aesthetically pleasing surroundings and additional environmental benefits. Of course, a roof garden might have even more of an aesthetic impact, since it can serve as a space for meetings or simple recreation, greatly increasing the value of a property and increasing em- ployee productivity by giving them a place to relax outdoors without having to travel. Perhaps one of the most overlooked benefits of a roof garden is one of the most ob- vious – they are an extremely visible symbol of a company’s commitment to environmental awareness and responsibility. In an era where everyone is striving to “go green,” a roof garden showcases that commitment in a way that a plaque or certificate never we still await the resurgence of residential development to join the office market in creating a true urban live-work environ- ment, we are confident that will occur given the number of approved projects on the boards. Our positive outlook stems from the fact that The Berger Organization has done busi-
It is also unclear how the net investment income Medicare tax will apply to real estate investors who qualify as real estate professionals. Generally, investors who spend substan- tial time in managing their real estate can qualify as a real estate professional and, there- fore, the income and losses from these properties will not be subject to the passive activ- ity rules. Generally, the real estate professional is treated as being in a trade or business of managing real estate. It is clear that income or losses from a trade or busi- ness are not included in net investment income. Therefore, does the net rental income and losses earned by a real estate professional qualify as trade or business income and not sub- jected to the Medicare tax? Robert Demmett is a partner at WithumSmith + Brown, PC, New York, NY. n ness here for more than 35 years. We know that New Jersey’s largest city is a great place to do business. Newark as a city is a main thoroughfare to Manhattan, and it is the next in line for a true renais- sance. Miles Berger is chairman and CEO of The Berger Organization . n Robert Schucker is the president of R&S Land- scaping, one of the region’s leading environmentally responsible landscape design and development firms. n could. The numerous benefits of a roof garden to an individual building, its marketability, and to building tenants are only the beginning. Beyond providing a proven return on investment, green roofs represent significant oppor- tunities for social, economic and environmental benefits, particularly in urban areas. A green roof can improve general air quality, reduce resistance to new develop- ment and, depending on the uniqueness of the project, can garner local, regional and national exposure for the developer. Green roofs are not a fad or a gimmick –they are a proven way to reduce the environmental impact of a property, benefit the com- munity and provide a highly visible way to demonstrate a commitment to sustainable development.
So far, 2012 has been a much better year than 2011, but we have a long way to go to get to pre-2008 levels of activity. While most con- sulting engineering firms are still wary about the future of the market, they are optimistic that 2013 will see even more improvement over 2012. In either case, they are now confident about their staffing levels and im- proved efficiencies, and are looking forward to being able to complete projects more ef- ficiently than ever before. More than ever, the most important criteria in select- ing a consulting engineering firm are qualifications and experience. Selecting a firm that has experience with and knows the required regula- tory process for the type of project needed by the client, will save the client time and money every time. Stephen L. Johns, PE, PLS, is vice president of engineering at VanDe- mark and Lynch. n plete them yourself, you are ensuring that the information is correct, thus eliminating confusing changes during or after the underwriting process. When carriers see information change, it raises questions as to the accuracy of the other in- formation, andmay undermine your ability to obtain the most favorable quote. • Make sure you start the process early. Your broker should be in the market no less than 90 prior to renewal and as far as 120 days prior. Rates are changing rapidly and those few months can make a big difference in the pricing you ultimately see. • Consider canceling prior to expiration and rewriting with the same or a different carrier if you receive indica- tions that your pricing will be going up. The sooner you renew the better chance of a smaller increase. While we are not seeing a true hard market due to an abundance of capacity, carriers are clearly looking for price increases and are willing to walk away from existing busi- ness if they cannot get the premiums they believe they need. Making your business as attractive as possible can help keep increases at a minimum in this shifting market. Frank DeLucia currently serves as senior vice presi- dent of HUB International Northeast. n
By Frank DeLucia, HUB Int’l. . . . continued from page 5B
By Miles Berger, The Berger Organization . . .
Robert Demmett, WithumSmith + Brown, PC . . . continued from page 11B
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