NYC firmgrows retail portfolio to 121 properties across the United States TEI announces purchase of Hamilton Commons inMays Landing, NJ for $60M
ISSUE HIGHLIGHTS Volume 32, Issue 5 March 13 - 26, 2020 FINANCIAL DIGEST FEATURING 1031 EXCHANGE
AYS LANDING, NJ — Time Equities Inc. (TEI) , a full-ser- vice New York City-based real estate firm, has announced its largest acquisition of the year with the $60 million pur- chase of Hamilton Commons, a 403,050 s/f power center located in Mays Landing. The firm, which remains bullish on retail, specifically open-air strip and power centers, has grown its portfolio to include 121 retail assets. The complex, located at 190 Hamilton Com- mons Dr., was purchased from national real estate invest- ment trust Retail Value, Inc. “We know retail, and over the course of the past five years, increased our portfolio by 35 retail assets. We con- tinue to expand nationally as we build up our retail platform in various secondary and ter- tiary markets,” said Ami Ziff , director, National Retail for TEI. “We continue to strategi- cally add to our retail holdings M
across the United States and plan to sustain this robust level of growth for the next several years.” While the exact terms of the transaction are undisclosed, Ziff, Jonathan Kim , Senior portfolio manager in the Na- tional Retail group and Grant Scott , senior associate in the National Retail group, repre-
sented TEI in-house; Chris Munley, Jim Galbally and James Graf at Jones Lang LaSalle (JLL) represented the seller. The shopping center, built in 2001, is in a high-traffic area of Atlantic County near the Atlantic City Express- way, the main thoroughfare connecting Philadelphia and
Atlantic City, and the Black Horse Pike, which carries more than 50,000 vehicles per day (VPD) on each artery. Hamil- ton Commons is currently 93% leased to 34 tenants including national brands, restaurants and retailers. The property is anchored by Regal Cinemas, Hobby Lobby, Marshalls, Ross Dress for Less and Big Lots. Ashburn market featuring nine-foot finished ceilings, highly-efficient and virtually column-free floorplans, a fit- ness center with showers, walkable retail amenities, prominent visibility along Rte. 7 and an exceptional lakefront setting. Lakeview East & West are well located at the intersection of Rte. 7 and Loudoun County Pkwy. minutes from the Dull- es Toll Road and Dulles In- ternational Airport. Loudoun County has seen significant office demand growth in the last few years as Northern Virginia’s technology, cyber security and defense sectors have surged. This location also offers easy access to the Loudoun County Entertain- ment District. Newmark Knight Frank’s executive managing direc- tors Jud Ryan and James Cassidy represented MRP Realty.
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NKF completes sale of Lakeview East andWest inAshburn, VA for $46.5Million
ASHBURN, VA — New- mark Knight Frank (NKF) announces the sale of 20130 and 20135 Lakeview Center Plaza in Ashburn, VA on be- half of MRP Realty . Known as Lakeview East & West with a total of 204,129 s/f, the two class A buildings were purchased for $46.5 million by
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Innovatus. “The Northern Virginia suburbs continue to attract institutional capital look- ing to capitalize on the re- gion’s growing technology and defense sectors,” said Jud Ryan , executive managing director at NKF. “Lakeview
East & West are considered two of the nicest assets in Ashburn and the expanding walkable amenity base should ensure future demand in this dynamic submarket.” Built in 2009, LakeviewEast &West are two of the highest- quality office buildings in the
Inside Cover A — March 13 - 26, 2020 — M id A tlantic Real Estate Journal
M id A tlantic Real Estate Journal — March 13 - 26, 2020 — 1A
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2A — March 13 - 26, 2020 — M id A tlantic Real Estate Journal WE FIX: CRAWLSPACES
Mid Atlantic Real Estate Journal
Mid Atlantic R eal E state J ournal Publisher, Conference Producer . .............Linda Christman AVP, Conference Producer ...........................Lea Christman Publisher ........................................................Joe Christman Section Publisher ............................................. Steve Kelley Section Publisher ............................................... Kim Brunet Editor/Graphic Artist ......................................Karen Vachon Office Manager ............................................... Kerrin Devine Contributing Columnist . Brad A. Molotsky, LEED AP O+M, Duane Morris LLP Mid Atlantic R eal E state J ournal — Published Semi-Monthly Periodicals postage paid at Hingham, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, 350 Lincoln St., Suite 1105 Hingham, MA 02043 USPS #22-358 | Vol. 32, Issue 5 Subscription rates: $99 - one year, $148 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion 781-740-2900 | Fax: 781-740-2929 www.marej.com The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
Top 10 Opportunity Zone Clarification/Expansions of Final Regulations W BradA. Molotsky, LEEDAPO+M Duane Morris LLP ith the issuance of final regulations by the IRS and Trea- sury in December 2019 which will become effective onMarch 13, 2020, I thought it might be helpful to create a personal top ten clarifications or expan- sions of the final regulations. As an aside, deal flow remains frothy in the Opportunity Zone arena where we are focusing on real property acquisitions and development, business creations and equity raising in various OZs in New Jersey, Pennsylvania, Delaware, New York, Florida, California, Or- egon, Ohio, etc. Here are my personal top ten: 1. Working Capital Plan Timing – the Final Regu- lations increased the total months one is able to utilize a working capital plan up to 62 Months from the original 31 month safe harbor for QOZBs with a working capital plan; 2. Ability to sell assets from a QOZB – we now have
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clarification to enable a de- veloper more time to plan her/his adaptive reuse; for vacant property which was one year vacant when desig- nated as an OZ in 2018 and which remains vacant until purchase or real property that was vacant for three years prior to purchase – both with now count as “Original Use” property and represents a reduction from 5 years. This clarification will also enable a developer more time to plan her/his adaptive reuse of va- cant property; 5. Aggregation – the Final Regulations allow an owner to aggregate assets within a site and within adjacent sites for purposes of qualifying for the continued on page 6A
clarity that after ten years one can sell assets or interests from a QOZB and still have the capital gain elimination benefit. Huge clarification albeit expected from the IRS. 3. Real Property Strad- dling a site – two enumer- ated tests were clarified and articulated for qualifying real property that straddles a zone and a non-zone – the two tests are square footage and value; if you meet either test, you have met the overall test; 4. “Original Use” for Brownfields investments so long as they are made “safe” under applicable code. This expansion enables develop- ment of brownfields without the mandated substantial improvement test – good
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M id A tlantic Real Estate Journal — March 13 - 26, 2020 — 3A
EXPO 2020 W A L T E R R . C O H N , E S Q . WEDNESDAY, APRIL 22, 2020 The Wilshire Grand Hotel West Orange, NJ POA
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4A — March 13 - 26, 2020 — M id A tlantic Real Estate Journal
M id A tlantic R eal E state J ournal
Schubert, senior vice president of CBRE organizes panel IOREBA announces annual Developer’s Night date and speaker line-up
he Industrial and Office Real Estate Brokers Association
for CRE professionals in to- day’s changing industry” said IOREBA president John Johnson . With roots dating back to 1927, IOREBA is one of the nation’s largest regional commercial real estate or- ganizations of its kind and the oldest industrial and office real estate brokers association in the United firm Presidential Exteriors. Situated on a 5.19 acre site near the intersection of Re- search Blvd. and Research Place, the building featured a desirable 4.00 per 1,000 parking ratio and prominent visibility along Research Blvd.. “The suburban office mar- ket is ripe with opportunities to acquire assets at a basis that allows for capital rein- vestment and innovative as- set management strategies. These efforts are resulting in a turn-around of under-
States. With a membership more than 300 professionals, members connect and con- duct business in New Jersey, New York, Pennsylvania and Connecticut. The organiza- tion has continually evolved and expanded its offerings, designing useful educational programs and opportunities to develop strategic friend- ships within the industry.
Newmark Knight Frank ; Jesse Harty , senior vice president for Prologis; An- drew Merin , vice chairman of Cushman & Wakefield ; Ed Russo , president of Rus- so Development ; Samuel Morreale , founder & man- aging partner of VisionReal Estate Partners LLC ; and Peter Bronsnick , executive vice president of SJP Prop- WASHINGTON, DC — Edge , a full-service com- mercial real estate firm with offices in Washington D.C., Virginia, Maryland and Penn- sylvania, has brokered the sale of 2301 Research Blvd., a three-story, 93,000 s/f com- mercial office building in the Rockville section of Montgom- ery County for $9.25 million. Edge’s Capital Markets team, led by Joe Friedman and Haley Goeller , along with the landlord advisory team of Ken Fellows and Rob Pugh represented the seller, a major
erties . The event will begin with cocktails and networking from5pm to 6:30pm, followed by a buffet dinner and panel presentation. “IOREBA’s De- veloper Night is the highlight of the year for the NJ com- mercial real estate industry and this year’s notable panel of speakers will offer cur- rent and valuable insights life insurance company in this transaction. The buying entity was Hypnos Solutions LLC, an investment group based in India with an office in Texas. Constructed in 1973 and renovated in 1998, the medi- cal and professional building was 67% leased and a lender- owned REO asset at the time of the transaction. The rent roll included a solid base of medical tenants including Children’s First Pediatrics and Capital Women’s Care and just recently added re- gional exterior remodeling
of the New York Metro- politan Area ( I OREBA ) announced it will hold it’s 28th Annual Developer’s Night event
on Monday, March 30th, 2020 at the Marriott Glen- pointe Hotel in Teaneck, NJ from 5pm to 10pm. The event offers real estate pro- fessionals the opportunity to network with CRE industry professionals and hear a panel presentation from dis- tinguished commercial real estate experts as they discuss trends in the commercial real estate marketplace in New Jersey. The speaker panel, or- g a n i z e d b y Ge o f f r e y Schubert , senior vice pres- ident of CBRE includes moderator David Simson , vice chairman & COO of
performing office assets and an evolution of the suburban office product category. The buyer identified this opportu- nity and recognized the tre- mendous upside potential,” said Joe Friedman , partner of Capital Markets at Edge. “This section of Rockville is experiencing a consistently- improving amenity base and growing population density along with its proximity to major demand drivers such as Adventist Shade Grove Hospital and the bio-tech/life sciences corridor. Edge brokers sale of Rockville office building for $9.25 Million
F inancial D igest featuring 1031 E xchange
M id A tlantic Real Estate Journal — March 13 - 26, 2020 — 5A
ERSEY CITY, NJ — Kathy Anderson , found- ing partner of Progress The Element in Jersey City, NJwill house 15,500 s/f of retail space & 279 covered parking spaces Progress Capital’s Anderson arranges $84Mconst. loan & $36M of equity for multi-family project J
of amenities, tenants will have access to a full-size heated pool, game room, yoga studio, fitness center, children’s play- room, rooftop terrace with bar- becue grills, fire pits, outdoor bar and a dog walk. The Ele- ment will also house 15,500 s/f of retail space and 279 covered parking spaces. Jersey City is known to be one of the most culturally di- verse cities in America. It has undergone exponential growth and is no longer considered an alternative to NYC, rather has become a destination in its own right. As an added bonus, The Element is located in a Qualified Opportunity Zone providing the investors with significant tax benefits. This is one of the first large develop- ment projects to break ground in an Opportunity Zone along New Jersey’s Gold Coast. Progress Capital is a com- mercial real estate advisory firm with over $40 Billion in closed loans and $150 Million of directly funded bridge loans. Since 1990, we consistently get our clients to the closing table… plain and simple!
Capital ar- r a n g e d a n $84 million construction l o a n p l u s $36 million of equity for the develop- ment of The Element, a
HI-LIGHTS MARCH 13 - 26, 2020 6-story apartment building located at 400 Claremont Ave. in Jersey City. The Element will consist of 631 units, 277 of which will
400 Claremont Ave.
be under 500 s/f. Call them what you will -- small studios or “micro-units”, there is a demand (mainly amongst mil-
lennials) who want to trade square footage for a convenient location with an abundance of amenities. The Element is
steps away from the West Side Light Rail Train Stop and will provide two private shuttles to the PATH. With over 70,000 s/f
CAPITAL SQUARE 1031 LAUNCHES ALL-CASH DST OFFERING 5-17A 1031 EXCHANGE
Procida Funding, LLC announces 100Mile Fund, LLC achieves a net return to investors of 11.56% for 2019
ENGLEWOOD CLIFFS, NJ — New Jersey-based real estate lender, Procida Fund-
i n g , L L C a nn o un c e d that the 100 Mile Fund, LLC , which it manages, ach i eved a net return to investors of
the communities in which we invest,” said Billy Procida , president and CEO. In 2019, the Fund originated 13 loans totaling $134,410,000 and had nine loans payoff for a total of $39,967,500. Highlight deals include the $39 million construction loan made to Forte Real Estate Develop- ment for “The View at Middle- sex,” a 200-unit apartment building development in the Borough of Middlesex, as well as a $10 million construction loan to The Mabie Group for the The View at Middlesex
have invested over $3 billion. The Fund recently completed a conversion to a real estate investment trust (REIT), which will allow investors to benefit from the tax deductions af- forded to REITs rather than pay ordinary income taxes. The Fund is open to accredited in- vestors and currently has over 150 members. “We have a very robust pipeline going into 2020 and will continue to do what we do best – do good by our clients and investors and focus on making an impact to improve
reconstruction of the historic Belle-Freeman Amusement Pier in Seaside Heights. The project’s plan currently fea- tures a 17,500 s/f multi-tier bar & restaurant, a pool club, and a proposed concert venue on the southern portion of the site. The project also includes five to six kiosk buildings, which The Mabie Group has already completed and is currently leas- ing. Approvals also allow for full restaurant and bar service on the beach adjacent to the development.
11.56% for 2019. Since the Fund’s inception in 2011, the Fund has achieved a net annual distribution of 12.8%. Procida’s 100 Mile Fund makes loans and other invest- ments in real estate within 100 miles of its office in Englewood Cliffs. Often, these investments have significant local impact which can be seen in a number of neighborhoods, such as Pat- erson and Camden, and Beacon and New York City, NY. Since 1995, Procida’s different funds
6A — March 13 - 26, 2020 — 1031 Exchange — Financial Digest — M id A tlantic Real Estate Journal
Financial Digest / 1031 Exchange By The Kay Properties Team What is a DST 1031?
get these calls. Someone else handles the professional man- agement while you sit back and still have your investment money working for you. This is called a passive investment. So investing in a DST with multiple properties would let me put my eggs in multiple baskets without needing to manage any of the properties. If I sell my property to invest in a DST, wouldn’t I lose a lot of that money to taxes? You can defer the Capital Gains Tax through a 1031 ex- change. If you’re going to sell your property, you only have 45 days to identify replacement property or else you are going to be slapped with the Capital Gains Tax and/or the Deprecia- tion Recapture Tax (usually at a rate of 25%) along with state taxes and sometimes the NIIT (the Medicare sur tax). If you’re an accredited investor (mean- ing you have an annual income of at least $200,000 or have a net worth of over $1 million exclusive of primary residence), you can defer the Capital Gains Tax and its friends by investing your money into another prop- erty within the mandated time- frame. This property replace- ment is called a 1031 exchange after IRC section 1031, which allows for you to postpone pay- ing the aforementioned taxes if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Yes, exciting! But before you get carried away, there are a few more things you need to know about a DST 1031 ex- change. First, you can only acquire “like-kind” property. This means you can only invest money from a qualified real estate sale into DST property. A qualified real estate sale would typically be any property held for investment or business purposes. You also cannot invest mon- ey from selling your primary residence into a DST prop- erty (since you cannot 1031 exchange out of your primary residence) nor can you sell an investment property and invest it into a primary residence that you would live in. You must have both properties open to in- vestment or business purposes. Your debt counts as money you need to invest in the new property. If you have $700k in equity, and $300k in debt, Uncle Sam requires you to purchase $1 million or more in
property in order to defer taxes. You cannot get cash directly from the exchange. Instead, you need a Qualified Intermediary (also known as QI) to facili- tate the exchange. A QI is an independent third party who will hold the proceeds and be a part of enacting the 1031 ex- change through purchasing the replacement property. That’s where Kay Properties comes in. We provide DST properties that have passed our due dili- gence program and connect you with the properties that make sense for each investor’s situa- tion. We work with our clients to extensively review different real estate asset classes, loca- tions, the use of debt vs. debt- free real estate, etc. For more details on 1031 exchanges, DSTs and our process, please register at www.kpi1031.com or contact your Kay Properties representative. 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 compa- nies, full due diligence and vet- ting on each DST (typically 20- 40 DSTs) and a DST secondary market. Kay Properties team members collectively have over 115 years of real estate expe- rience, are licensed in all 50 states, and have participated in over 15 Billion of DST 1031 investments. This material does not con- stitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confiden- tial Private Placement Memo- randum (the “Memorandum”). Please read the entire Memo- randum paying special atten- tion to the risk section prior investing. IRC Section 1031, IRC Section 1033 and IRC Sec- tion 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 invest- ing in real estate securities including illiquidity, vacan- cies, general market condi- tions and competition, lack of operating history, interest rate risks, general risks of owning/ operating commercial and
multifamily properties, financ- ing 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 appre- ciation are not guaranteed. Securities offered through WealthForge Securities, LLC. Member FINRA/SIPC. Kay Properties and Investments, LLC and WealthForge Securi- ties, LLC are separate entities. This email, including attach- ments, may include non-pub- lic, proprietary, confidential or 90% test. This rule will enable much more flexibility in plan- ning multi phased projects; 6. Timing – clarity and ad- ditional flexibility on timing of the 180 day investment from the date of a gain was provided for partners of a partnership and sharehold- ers of an S corp. to invest amount of capital gains in a QOF 180 days from the due date (without extension) of the tax return of the entity they are involved with – this provides additional time for the partners or shareholders to participate in the program and will likely result in in- creased investment; 7. Business Property Gains – the ability to not have to net capital losses with capital gains on 1231 property enables more gains to be eligible for investment within OZs. The proposed regulations required gains to be netted against losses – the final rules allow for total gain to be invested, thus increas- ing the amount eligible for investment; 8. Personal property used in an opportunity zone busi- ness can be counted for pur- poses of meeting the “substan- tial improvement” test. This includes section 1245 prop- erty that is not included in the basis of a building which again increases the amount available for investment; and 9. Leases – • Leases from state and local governments and tribes are not required to be at market rate. This policy is intended to facilitate arrange- ments where governments
legally privileged information. If you are not an intended re- cipient or an authorized agent of an intended recipient, you are hereby notified that any dissemination, distribution or copying of the information contained in or transmitted with this e-mail is unauthor- ized and strictly prohibited. If you have received this email in error, please notify the sender by replying to this message and permanently delete this e- mail, its attachments, and any copies of it immediately. You should not retain, copy or use this e-mail or any attachment for any purpose, nor disclose all or any part of the contents to any other person. hope to encourage develop- ment by offering favorable leasing terms. • Leases that are not be- tween related parties are pre- sumed to be at market rate. • The working capital safe harbor is extended 24 months, for a total of 55 months, when a project is delayed due to a disaster and the opportunity zone is located in a federally declared disaster area. 10. Sin Businesses – Some would say that the allowance of less than 5% sin business as part of a property should not be a top ten, but we will leave that topic for a differ- ent day, in particular if the sin business is a cannabis business. Suffice it to say the final regulations allow for a 5% sin business component of overall revenue which is a useful clarification. On balance, the Final Regu- lations provided additional clarity and additional flexibil- ity for the Opportunity Zone programas a whole. Scheduled to become effective on March 11, 2019, these final regula- tions provide further impetus for investors and owners to engage in the program and continue the rapid pace of investment in qualified Oppor- tunity Zone areas throughout the US and in the US Virgin Islands and Puerto Rico. My view is that 2020 should continue to be an active in- vestment year for OZ projects and will continue the high velocity pace we saw through- out 2019. Brad A. Molotsky, LEED AP O+M is a partner with Duane Morris LLP in Cherry Hill, NJ.
hat is a DST 1031? I’m hearing my real estate inves-
tor friends and CPA men- tion it may be a good exit strategy for my appreciated real estate but I need to know more about it… First, let us explain a DST. DST stands for Delaware Statutory Trust. Here’s the full technical definition: a separate legal entity established under a trust created for the purpose of holding, managing, administer- ing, investing, or operating a property, or for allowing busi- ness/professional properties to have multiple trustees where each owner has beneficial in- terest for federal tax income purposes and every owner gets an undivided fractional inter- est in the DST property. These properties are not limited to the state of Delaware, but the idea of a DST was created under Delaware law. A DST allows each investor to own a fractional interest in a property with other investors, not as limited partners, but instead as their own individual owner inside the trust. Every- one will receive his or her own percentage share of the poten- tial income, tax benefits, and potential appreciation of the whole property. Each owner is treated as owning an undivided fractional interest. This allows the minimum investment to often be as low as $100,000, allowing investors to not only be able to invest in properties that can be too expensive to purchase individually (like large multifamily apartment communities, office buildings, industrial properties, single tenant net lease retail, self- storage facilities, and medical offices), but to invest their money into multiple properties, diversifying their real estate portfolios. Okay, so a DST is a type of property ownership that can have multiple trustees where each owner gets their own fractional interest while being treated as an individual own- er…why should I be interested in that? Well, let’s say you’re a land- lord of a multifamily residen- tial property. You’re the one the tenants call when there’s a leak, a mouse, cockroaches, loud tenants upstairs, bed bugs… it’s your job to handle all the problems. Fun! So much for retiring from the daily grind! But in a DST, you wouldn’t
continued from page 2A Top 10 Opportunity Zone Clarification . . .
M id A tlantic Real Estate Journal — Financial Digest — 1031 Exchange — March 13 - 26, 2020 — 7A
Financial Digest / 1031 Exchange
8A — March 13 - 26, 2020 — 1031 Exchange — Financial Digest — M id A tlantic Real Estate Journal 14A — March 13 - 26, 2015 — M id A tlAntic Real Estate Journal
Financial Digest / 1031 Exchange 1031 E xchang
By Alan Fruitman, 1031tax.com The NNN Triple Net Property Book By Geoff Hauer, 1031tax.com NNN Prope ty – A Safe Harbor in a Stormy Economy
Y ou will experience tre- mendous enjoyment owning NNN proper- s inds of change in the economic cycle grow, investo s in- A
(having year-to-year leases and fixing roofs, plumbing and toilets), reading The retur s over long r periods. The nature of NNN ropert es, their leas terms and tenant profiles provide added security for investors looking to ride out the storm of challenging economic conditions. The real estate fundamentals of NNN properti s provide the first line of security. NNN properties typically have high- traffic, high visibility locations which appeal to a broad range of p ospective tenants. NNN properties often have stylized box buildings with regular site layouts and ignage rights. These features help occupying NNN Triple Net Property Book would be a waste of your time. There is a reason both va- nilla & chocolate ice cream are top sellers. Even though people consider vanilla to
be plain and perhaps bor- ing, they still enjoy it. As- suming this analogy is true, usinesses maintain viable operations through economic cycles and appe to a multi- tude of tenants or buyers on the lease turn or disposal of the asset. NNN properties offer a sec- ond line of security in their long leas durations and lease terms. NNN property leases range from 5 - 20 years, often with rent increases through- out. These timeframes span economic cycles providi g sta- ble or escalating i come over time. They provide attractive ret rns rela ive to government and co pora e s curiti s and comparing a single-tenant NNN property to vanilla ice cream would be reasonable. For example, when you take a bite of vanilla ice cream, you know it will taste good, even predictable. When you
own a NNN property, your monthly income stream will be quite good; it will also be 100% predictable. To complete the analogy, let’s associate chocolate ice cream with a multi-tenant prop- erty with short-term leases. Examples of multi-tenant property include apartment buildings, shopping centers, or office buildings. Income from a multi-tenant prop- erty will vary each year and it will take a signifi- cant amount of your time to manage and maintain the property. Again, some people avoid the volatility of equity arkets. The hird line of securi- ty comes from the nature of the tenan s occupying NNN properti s. Ten nts typic lly consist of publicly traded com- panies or st ong priv t ly held companies. The corpor te- back d nature of NNNprop rty leases reduces vacancy risk for investors. Should an occupying business fail, NNN pro erty lease terms obligate t e ten- t to continue rent payments through t the lease term. Only a corporate bankruptcy can void the lease, which,
prefer vanilla, others prefer chocolate. It’s nice to have options. Here’s why many investors enjoy owning single-tenant NNN property. NNN is a type of lease in which the tenant maintains and pays for all property maintenance, taxes and insurance. Ten- ants include Walgreens, CVS Pharmacy, Chase Bank, Wells Fargo, Chipotle, Pane- ra, McDonald’s, Dollar Gen- eral, Home Depot, Wal-Mart, AutoZone and almost every other national retailer you see while driving through the most prime retail corridor near your home. Landlords are mostly individual real es- tate investors, just like you. Here’s the best part – These Fortune 500 tenants sign long-term leases that range from 10 to 25 years. The price to purchase a NNN prop- erty begins at approximately $1,000,000. To make a long story really short, owning a NNN property gives you the freedom to work on your day job, travel or do things other than worry about your real estate investment. The reason you are reading this article is because you want to learn more about NNN property. There are random articles and piec- es of information scattered throughout various news- papers and websites. The reason I wrote The NNN Triple Net Property Book is to provide concise and qual- ity information to real estate investors like you. Chapters in The NNN Triple Net Property Book range from Passive vs. Ac- tive Income, Location Mat- ters, Two Happiest Days of Owning a NNN Property, Build a Diversified Portfo- lio, High Leverage = Risk, Which States Should You Target or Avoid, Is an Envi- ronmental Problem a Deal Breaker, The Process & the Property, Franchise vs. Cor- porate Lease, Pros and Cons of a Ground Leased Property, What Is a Letter of Intent, Four Reasons Why Investors Utilize 1031 Exchange, and References Matter. Visit the 1031tax.com web- site or call Alan Fruitman at 1-800-454-0015 to receive a list of available NNN prop- erty and a complimentary copy of The NNN Triple Net Property Book. n whil not a zer -c ance risk, is a low r probability event that is easier for investors to assess than the vaca cy risk seen across reside tial, office or industrial roperties occupied by non-credit-worthy tenants. M y NNN property tenant are in recession-resistant busi- ness verticals. Fast food chains, dollar stores and auto r pair/ auto part stores all ben fit from th “flight to affordability” that occurs as consumers seek out value menus, chase deals on daily nec ssities and witch to “do-it-yourself” mode. This is evident in historical financials: McDonalds had 3.8%, 5.0% and 5.6% c mparabl store sale g owth in 2009, 2010 and 2011. AutoZon had 6.6%, 5.4% and 6.3% and Dollar Tree had 4.1%, 6.3% and 6. % comparable store sales growth across th sa e period. NNN prop rty tenants are often well capit lized and have efficient operations th t are able to withstand sl er eco- nomic conditions. For instance, ast f od operators have finel tuned business perations and employ cutting-edge supply chain a d customer experi- ence automati n. These te - ant e skilled at managing cost and optimizing customer experience, making them well positi ned to maint in profits a the econo y falters. Since NNN p operties are well-suited to ride-out tough economic times, many inves- tors choose to se k out these pro ert es as equity markets become less-certain. Working with a trust d advisor such as t e brokers of 1031tax.com will increase the chance of find- ing the optim l combination of property, tenant and le se o provide the best security/ return mix. With billions of dollars in nationwide NNN property transactions, span- ning multiple economic cycles, the broke s of 1031tax.com are highly skilled at identifying the best NNN oppo tunities and guiding clients to a successful cl sing so they can ride out the next st rm in relative c mfort. Geoff Hau r is an inde- pendent real estate broker and part of 1031tax.com. Visit 1031tax.com or call Geoff a 1-800-454-0015 x6 to receive nationwide list of NNN properties and learn more about our comprehen sive gui e on investi g in NNN properties: he N N T i l Net Property Book.
ty and ben- efit greatly by reading T h e NNN Tr iple Net P r o p e r t y Book if your goal is to re- ceive passive income (no c r e a s i n g l y seek saf har- or in NNN pr ope r t i e s . NNN proper- ties in their purest form a r e i n g l e t nant prop- ert i es wi th
“The reason I wrote The NNN Triple Net Property Book is to provide concise and quality information to real estate investors like you”
Alan Fruitman Geoff Hauer
property management or vacancy) from your real es- tate investments. However, if managing your apartment building is still enjoyable credit-worthy tenants, long- term leases and no landlord responsibilities. Capitalization rates ofte range from 4% to 7%, provid ng investors st
M id A tlantic Real Estate Journal — Financial Digest — 1031 Exchange — March 13 - 26, 2020 — 9A
Financial Digest / 1031 Exchange
ave you received con- flicting answers to the same question from By Lauren Speidel, Exeter 1031 Exchange Services, LLC Unraveling the Mystery of 1031 Exchanges: Property Holding Periods H
determine your intent to hold the property for investment. The issue is whether you can prove you intended to hold the property for investment. The easiest way to demon- strate intent to hold a property for investment is to do just that – hold the property for invest- ment long enough to demon- strate intent. The longer you hold the property the stronger your argument. Advisors Recommend Holding the Property for 12 Months or More Advisors often recommend you hold the property for at
least one year to prove intent. Holding the property for at least one year means you will straddle two tax periods mak- ing it easier to prove intent to hold. Dealers Do Not Qualify for 1031 Exchange Treatment Dealers, developers, builders will typically not qualify for 1031 Exchange treatment be- cause the hold the property for sale as “inventory” and not for investment. They may be able to qualify for 1031 Exchange treatment by segregating as- sets intended to be held as rental or investment from those
assets being held for sale. If your intent is to buy, rehab and sell or buy, build and sell property, you are holding the property for sale as inventory in your real estate business and will not qualify for 1031 Exchange treatment. Holding Property in an Entity Can Complicate Transactions The holding issue becomes more complicated when you hold property in an entity such as a partnership or multi- member LLC. The entity can sell the relinquished property, purchase replacement property
and qualify for 1031 Exchange treatment. It becomes more complicated when some inves- tors want to go separate ways. You should seek advice today to have time to prepare for a future 1031 Exchange trans- action. The longer you hold property prior to a 1031 Ex- change, the more conservative the course of action is and the easier it will be to prove that you have satisfied the Qualified Use requirement. Lauren Speidel is regional manager of Exeter 1031 Exchange Services, LLC Midwest Regional Office.
different 1031 E x c h a n g e Qualified In- termediaries? You are not alone. There are too many technical and complicated gray areas in
the 1031 Exchange industry. Tax codes, regulations and rulings leave many questions unanswered or unclear. These gray areas result is differ- ent interpretations, confusing opinions or misleading infor- mation. We will explain these differences through an article series entitled Unraveling the Mystery of 1031 Exchanges. Property Purchased Just Prior to 1031 Exchange The IRS has routinely said if you purchased the relinquished property just prior to a sale and 1031 Exchange you are holding the property for sale rather than investment. The IRS has also said if the replace- ment property is sold immedi- ately after your 1031 Exchange transaction it was not held for sufficient time to qualify for 1031 Exchange treatment. Little Definitive Authority on Holding Period While there is no actual hold- ing period required, the IRS stated in one Private Letter Ruling that a holding period of two (2) years would be suf- ficient to meet the Qualified Use Test, and numerous courts have taken similar positions. Intent to Hold is Critical The time you hold property, although important, is not the only factor the IRS will use to NorthMarq’s office negotiates acquisition financing of $900,000 EAST RUTHERFORD, NJ — Robert Ranieri, senior VP/ managing director of North- Marq’s White Plains office arranged acquisition financing of $900,000 for 189 & 193 Park Ave., a 3,644 s/f retail property located in East Rutherford. Financing Details: • 5-year term • 25-year amortization schedule • NorthMarq arranged the permanent-fixed loan for the borrower through its relation- ship with Columbia Bank .
10A — March 13 - 26, 2020 — 1031 Exchange — Financial Digest — M id A tlantic Real Estate Journal
Financial Digest / 1031 Exchange
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M id A tlantic Real Estate Journal — Financial Digest — 1031 Exchange — March 13 - 26, 2020 — 11A
Financial Digest / 1031 Exchange
Towne 1031 Exchange, LLC
Investment Property Exchanges Made Easy. Go with Someone You Know and Trust. Towne 1031 Exchange, LLC, a subsidiary of TowneBank, can handle every aspect of your tax deferred exchange. From documenting your like-kind exchange, to the safekeeping of your funds, our priority is to assist with all your 1031 needs. With more than 25 years of experience, Towne 1031 Exchange offers the highest level of professional expertise and personal service.
Ute Heidenreich Esq., President Ute.Heidenreich@townebank.net (757) 673-1586
Leila Bradley AVP, Exchange Officer Leila.Bradley@townebank.net (757) 686-7078
109 E. Main Street, 7th Floor, Norfolk, Virginia 23510
Towne 1031 Exchange LLC cannot provide legal or tax advice. Please consult an accountant and/or attorney.
EQUAL HOUSING L E N D E R
3/3/20 6:43 PM
12A — March 13 - 26, 2020 — 1031 Exchange — Financial Digest — M id A tlantic Real Estate Journal
Financial Digest / 1031 Exchange By Wolf Hanschen, Peregrine 1031 Energy Partners 1031 Option: Outside the Bricks
ith the cap-rates on triple-net real estate properties
average, many investors see it as an opportunity to sell real estate at a high and buy into another asset class at a low. “It’s obviously a great time to be selling real estate but not so much buying it,” said Michael Hershenberg, a real estate professional who has referred 1031 clients to Peregrine for the past several years. “These royalty properties give my cli- ents the opportunity to not only diversify their portfolio, but also to realize higher monthly income levels than they would with brick and mortar proper- ties alone.” In 1968, the IRS published
the Revenue Ruling 68-331 further clarifying Section 1031 of the 1954 Act. The ruling established that real estate ownership interests, whether above or below the ground, met the definition of “like kind” for an exchange. Over the past four decades, court rulings have reaffirmed that oil and gas royalty inter- ests qualify as “like-kind” to all other forms of real property. In addition, several Revenue Rul- ings and Private Letter Rulings have further established the like-kind nature of royalties when exchanging out of tradi- tional real estate.
Owners of royalty assets receive a percent of the gross monthly revenue generated by oil and gas companies who drill and operate wells on their prop- erty. Unlike oil and gas drilling investments, royalty owners do not get billed for exploration, drilling or operating wells, nor do they share in any of the risks or liabilities associated with that side of the industry. “I view royalties as the triple- net version of energy owner- ship,” said Deborah L., a repeat 1031 client of Peregrine. “I get a direct-deposit into my bank ac- count each month, I get a 1099 from the operators in January,
and I go about my life. It’s the definition of ‘mailbox money’.” Many clients will avoid boot on their exchange by allocating any leftover equity to royalties that might remain after their primary real estate purchase. Because royalties are com- pletely divisible, Peregrine can ‘carve-off’ the exact amount of property needed to fully utilize their exchange proceeds, down to the penny. In addition to the tax sav- ings of a 1031, royalties also provide owners with a deple- tion allowance each year that allows them to shield 15% of their gross royalty income, regardless of their carryover basis. That means that inves- tors whose cost basis in their previous property was zero would still pick up the 15% tax savings off their royalty income in perpetuity. Often viewed as a natural hedge against inflation, the attractive return profile of royalties along with the non- correlated nature of the asset class make it a worthwhile op- tion to consider when mapping out exchange options. Wolf Hanschen is the co- founder and managing di- rector of Peregrine Energy Partners with offices in Dallas and Denver. Cronheim arranges $16.5MMacquisition financing for tech office campus CHATHAM, NJ — Cron- heimMortgage secured $16.5 million in financing for the acquisition of a five-building tech office park. A national lender funded a 10-year term with one-year of interest only followed by 30-year amortiza- tion at 75% LTV. The rate was locked at 3.75%. The 137,000± s/f aerospace technology office campus is 100% leased, with more than 96% of the in-place income re- ceived from investment-grade tenants. The property’s location near major military installations and tech infrastructure ide- ally position it for aerospace technology tenants working on sensitive government con- tracts. The buildings have “dark fiber”, significant “SCIF” space and redundant backup power sources to ensure con- tinuous operations. This has provided very strong historical occupancy.
compressed to their low- est levels in decades, in- vestors are l o o k i n g t o a l t ernat i ve solutions for 1031 replace- ment property.
One strategy more people are now using is the addition of producing energy royalties to their replacement property mix. With oil and gas prices near the bottom of their 15-year
Why 1031 Accommodators, LLC ® ?
1031 Accommodators, LLC® is a full service intermediary with the experience and expertise to facilitate even the most complex exchange transactions. We have assisted investors, like you, to defer hundreds of millions in capital gains. We pride ourselves on our ability to provide a smooth and worry-free exchange so that you may concentrate solely on locating your new property. Our documentation and procedures ensure strict compliance with the IRC Section 1031 regulations. Essentially, we are here to make it easy for you to build wealth and preserve profits.
Our company was established in 1993. We were one of the first exchange companies in the Northeast.
Kim T. Schooley, our Certified Exchange Specialist, has over 20 years of experience in the business. As well as being a former IRS agent, he is a practicing Certified Public Accountant.
For exceptional service, and more information, contact our Exchange Coordinators at (888) 828-1031.
M id A tlantic Real Estate Journal — Financial Digest — 1031 Exchange — March 13 - 26, 2020 — 13A
Financial Digest / 1031 Exchange
EXCHANGE REAL ESTATE f o r PRODUC ING OI L AND GAS ROYALT I ES
YES , ROYALT I ES QUAL I FY AS " L I KE -K IND" TO TRADI T IONAL REAL ESTATE
T r an s a c t i on S i z e F l e x i b i l i t y Supe r i o r Ca s h F l ow ( 9 - 1 1% Avg ) No R i s k o f Cap i t a l Ca l l s
No Fund Structure- Investor Independence 15%Annual Tax Depletion Shield Natural Hedge Against Inflation
SINCE 2004, PEREGRINE’S FOUNDERS HAVE HELPED CLIENTS EXCHANGE OVER $250 MILLION FROM REAL ESTATE INTO ROYALTIES There are risks associated with owning oil and gas royalties. The above information is for general purposes only and is not a solicitation to buy or an offer to sell any securities. General information in this brochure is not intended to be used as individual investment or tax advice. Consult your personal tax advisor concerning the current tax laws and their applicability and effect on your personal tax situation. Risk factors including commodity prices and production can significantly impact the value of the asset and ability for an individual to get liquid. This is neither an offer to sell nor a solicitation of an offer to buy interests in oil and gas royalties.
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