16B — January 31 - February 13, 2020 — Owners, Developers & Managers — M id A tlantic Real Estate Journal
www.marej.com
O wners , D evelopers & M anagers
Osprey Property Cos. sells Victoria Park at Walkersville Greysteel arranges sale of 80 unit affordable housing prop.
Crystal Window & Door Systems expands engineering assistance services
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to use the ADS method for calculating earnings and prof- its in determining dividend income to shareholders. Many REITs opt to use ADS depre- ciation to calculate taxable income anyway for varying reasons, including adding back bonus depreciation for state tax purposes. This ad- dback could result in a REIT having no taxable income for federal purposes, but having taxable income and paying tax for state purposes. For this reason, many REITs opt not to take advantage of bonus depreciation. Unless a REIT needs to use MACRS to lower taxable income to meet its distribution requirement, the change from MACRS to ADS most likely will not have a significant impact. Mortgage REITs most likely will not be impacted by the limi- tation since interest expense can be deducted to the extent of interest income. Lower Tax Rates REITs are required to dis- tribute at least 90% of tax- able income and pay tax on the remaining undistributed income. Under TCJA, the corporate income tax rate was lowered to 21%, so REITs will benefit from the lower tax rate if they are left with taxable income. Many REITs distrib- ute 100% of taxable income to avoid tax altogether, but a tax- able REIT subsidiary, which is taxed as a C Corp, will now also benefit from a lower 21% tax rate. Additionally, the FIRPTA withholding tax rate on REIT capital gain distributions was lowered from 35% to 21%. Victoria Park at Walkersville is located at 105 Sandstone Dr. Victoria Park at Walkersville is an affordable housing com- munity that was developed using the Low-Income Housing Tax Credit (LIHTC) program in growth, and address concerns prior to the effective date of law. Consider purchasing a moisture meter and thermal imaging, but, most impor- tantly, have a Standard Op- erating Procedure (SOP) for compliance with Local Law 55 Washington, D.C. office sold the Property on behalf of the seller, Osprey Property Companies. The property sold for $10.2M.
FIRPTA is the Foreign Invest- ment in Real Property Tax Act and applies to the gain on dispositions of an interest in US real property by a foreign person. This is a significant benefit to foreign taxpayers, who usually invest in US real estate through REITs to limit tax liability. Net Operating Losses (NOLs) REITs will mostly benefit from the changes to the new tax law, but there are also some negative impacts. NOLs created in 2018 or later can now only offset up to 80% of taxable income. TCJA removed the option to carryback an NOL to 2 years prior, so new NOLs can only be carried forward, but they can now be carried forward indefinitely instead of being limited to a 20-year carry forward period. The new 80% limitation could be problematic for a REIT because it can no longer offset all of its taxable income with NOLs. The 80% limitation is applied before applying the dividends paid de- duction, so in order to avoid tax altogether, REITs will need to distribute the remaining 20%. In conclusion, most of the changes under TCJA have a positive impact on REITs, with only a few negative impacts. There are additional provi- sions under TCJA that affect all real estate businesses that are not specifically unique to REITs, so they are not men- tioned above. Some of these provisions include like-kind exchanges and opportunity zones. Ashley Kettler, CPA is tax senior manager at Withum. 2008. Victoria Park at Walk- ersville’s 80 units provide hous- ing for tenants who are 62+ years old across a broad range of the low-income spectrum. “The seller has developed, owned, and operated several age-restricted affordable hous- ing complexes throughout the Mid-Atlantic and has a particu- lar focus on being a premium operator,” said Mathies.
ALKERSVILLE, MD — Greysteel , has arranged the
sale of Victoria Park at Walk- ersville, a 80-unit senior af- fordable housing property, located in Walkersville. Greysteel president & CEO, Ari Firoozabadi ;director, Henry Mathies ; and invest- ment associate, Fletcher Hultman from the firm’s
Crystal Window &Door Systems Engineering Team (Manager Sabrina Leung, center, and some of her team members shown above) offers many design and engineering services to support architects, GCs, and fenestration professionals.
REITs come out ahead in light of TCJA QBI deduction for qualified REIT dividends is not limited by W-2 wages or UBIA of qualified property. Section 163(j) Interest Expense Limitation continued from page 2B
While Crystal currently uses thermal performance model- ing for glazing options, the CMA Program adds in spac- ers, window frames, and other components to the assessment. “Our capabilities with the NFRC’s CMA Program will greatly enhance our ability to help design and construction professionals make the best decisions for their fenestration products,” said Sabrina Leung, Architectural Sales and R&D/ Engineering Manager. “With so many glazing, spacer, coat- ing, and configuration choices available, Crystal’s engineer- ing team will be able to use the CMA Program software tools to ensure the customer’s desired fenestration selections and configurations achieve energy code or advanced speci- fication targets.” transactions and brownfields sites, environmental insur- ance procurement and cover- age issues, public fund- ing opportu- nities, regu- latory com- pliance coun- seling, and litigation for commercial, indus t r i a l , residential, and individual clients. Franey’s practice has focused on regulatory compliance and transactional matters, par- ticularly in the areas of air and water quality, redevelopment, sustainability, permitting, energy efficiency and renew- able energy development. Over the last several years, he has primarily worked with complex regulated industries, notably including petroleum refining, chemical processing, oil and gas operations, metal manufacturing, and electric generating facilities. Bryan Franey
QUEENS, NY — Nation- al manufacturer Crystal Window & Door Systems has expanded its offerings of project engineering assistance services for architects and fenestration trade customers. The Crystal R&D/Engineer- ing Department has recently qualified to use the National Fenestration Rating Coun- cil (NFRC) Component Modeling Approach (CMA) Program and its online direc- tory. This powerful tool will give Crystal the ability during the project’s design and speci- fication phase to estimate and optimize selections of window types, configurations, glazing options, and frame and spacer components to maximize over- all window energy perfor- mance and energy efficiency ratings.
Section 163(j) limits the in- terest expense a taxpayer can deduct to the sum of: • The taxpayer’s business interest income • 30% of the taxpayer’s ad- justed taxable income (ATI); and • The taxpayer’s floor plan financing interest expense A real property trade or business can make an election out of the Section 163(j) inter- est expense limitation and de- duct all of its interest expense, but electing out of Section 163(j) means adopting ADS depreciation, which has longer useful lives and does not allow for bonus depreciation. The election is irrevocable. The current proposed regulations provide for a safe harbor for REITs to make the election out of Section 163(j) as a real property trade or business if it holds real property, interests in partnerships holding real property, or shares in other REITs holding real property. In addition, ATI is calcu- lated without reducing taxable income for the dividends paid deduction, which is favorable. The dividends paid deduction usually offsets all of a REIT’s income, so without including it in ATI, the REIT will be left with a higher ATI and thresh- old for the interest expense. The higher the ATI, the less the limitation will be. REITs are already required your staff trained in NYSMold certifications (www.NAETI. com) or get affiliated with a NYS mold assessor or reme- diator (www.LEWCorp.com). Perform a visual survey for moisture intrusion and mold continued from page 7B
MGKF’s Spergel & Franey present at the PA Bar Institute’s RE Institute 2019
PHILADELPHIA, PA — Manko, Gold, Katcher & Fox partners Jonathan
H. Spergel and Bryan P. Franey presented on “Fundamen- tals & Hot Topics in En- vironmental Law for Real Estate Law-
Jonathan Spergel
yers” at the Pennsylvania Bar Institute’s Real Estate Institute 2019 in Philadelphia on December 6. The program addressed the liability for con- tamination in Pennsylvania, the state’s Land Recycling Program (Act 2), changes to the Management of Fill Policy, as well as recent updates on emerging contaminants. Spergel is the managing partner of MGKF where he started his legal career in 1993. He handles a wide va- riety of environmental legal issues, including the environ- mental aspects of commercial
of 2018 in place. Le e Wa s s e rman i s founder of LEW Corp., a nationally recognized industry leader who spe- cializes in Environmental microbial and lead-based paint issues. NYC mold law and the property owner’s responsibilities
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