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R EAL E STATE J OURNAL the most comprehensive source for commercial real estate news
ISSUE HIGHLIGHTS Volume 24 Issue 10 May 25 - June 7, 2012 Bayshore: The green solution
Financing from AXA Equitable to build Gallery of Bethesda Donohoe closes on $55 million in construction financing
B
ethesda, MD — The Donohoe Companies, Inc. announced the closing
of a $55 million construction loan to build “The Gallery of Bethesda,” a luxury high-rise apartment building located at 4800 Auburn Ave. The project is a partnership between The Donohoe Compa- nies and MPM Investments. The $55 million in construc- tion financing is funded by AXA Equitable. The Gallery of Bethesda will be a 250,000 s/f, 17-story residential tower containing 234 units, a ¼ acre public plaza and 4,600 s/f of retail. Amenities will include a rooftop pool, sundeck and club- room, a resident lounge, fitness room and coffee bar. The Gal-
21A
The Gallery of Bethesda
lery of Bethesda is the first of three buildings that Donohoe is developing in Bethesda. The three are collectively known as Woodmont Central, and consist of the Gallery of Bethesda; a second residential building to be known as 4850 Rugby; and
a six-story office building, cur- rently pre-leasing, called 8280 Wisconsin Avenue. At comple- tion, the project will measure 580,000 s/f Demolition has been com- pleted on site, and Donohoe Construction Company has
commenced work as general contractor. Miller and Long Concrete Construction will be the concrete contractor. Van- tage Management, an affiliate of Mid-City Corporation, will be the management and leasing agent. n
Industrial RE & Distribution Centers
51 Haddonfield Road in Cherry Hill, New Jersey Time Equities in partnership with Bergman RE Group purchases 100,000 s/f office building
Cherry Hill, NJ — Time Equities, Inc. (TEI) in
these types of transactions.” 51 Haddonfield Road offers office space ranging from 1,200 s/f to 22,000 s/f avail- able for immediate lease. Many of the 1,200 s/f to 3,000 s/f spaces are pre-built and move in ready for tenants. The brokerage team of Grubb & Ellis senior vice president Anne Klein and associate vice president Brian Sherlock will oversee leasing for the property. “We are excited to form this relationship with Time Equi- ties, which is well regarded in the commercial real estate industry and has a proven track record of creating value for turnaround properties such as 51 Haddonfield,” said Michael Bergman, president and CEO for Bergman Real Estate Group. “Our partner- ship is well capitalized and has the experience needed to successfully reposition the property through enhance- ments and an aggressive leas- ing campaign.” n
a joint ven- t u r e w i t h B e r g m a n R e a l E s - tate Group r e c e n t l y pur chased 51 Haddon- field Road, a 100,000 s/f
Section B
Michael Bergman
Directory
Auction News/Directory................. 4-5A Shopping Centers..........................7-17A Green Buildings...........................19-24A Owners, Developers & Managers....25-38A Calendar of Events. ..............................40A Industrial Distribution Centers. ......Section B
51 Haddonfield Road
office building for $3.4 mil- lion. “Through purchase of a non-performing note, we were able to restructure the deal alongside Bergman Real Estate Group, and enter at a basis that we feel will allow us to aggressively price lease rates. While Cherry Hill has suffered from the same mal- aise as the broader economy,
our long term approach to ownership gave us comfort in investing in a market that others were exiting,” said Aaron Medeiros, director of acquisitions at Time Equi- ties. “We hope to find other opportunities to recapitalize groups who have the ability to restructure their capital stack, but lack the necessary liquidity that is required for
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Inside Cover A — May 25 - June 7, 2012 — Mid Atlantic Real Estate Journal
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Mid Atlantic Real Estate Journal — May 25 - June 7, 2012 — A
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555 Route One South, Iselin, NJ 2,338 sq.ft.
960 Holmdel Road, Holmdel, NJ SQFTs sq.ft.
1 Kalisa Way, Paramus, NJ SQFT
F lexible & creative ownership s uperior oFFice space available s
25 East Spring Valley Road, Paramus, NJ Fully Leased
510 Thornall Street, Edison, NJ SQFTs SQFT SQFTs SQFT
155 Passaic Avenue, Fairfield, NJ SQFTs SQFT SQFTs SQFTs SQFT
299 Market Street, Saddle Brook, NJ SQFTs SQFT SQFTs SQFTs SQFT
100-110 So. Jefferson Road, Whippany, NJ SQFTs SQFT SQFTs SQFTs SQFT
www.bergmanrealty.com
333 Meadowlands Parkway, Secaucus, NJ SQFTs SQFTs SQFT SQFTs SQFTs SQFT
51 Haddonfield Rd., Cherry Hill, NJ sq.ft.
25 A & B Vreeland Road, Florham Park, NJ SQFTs SQFTs SQFTs SQFT SQFTs SQFTs SQFTs SQFT
45 Eisenhower Drive, Paramus, NJ SQFTs SQFTs SQFT SQFTs SQFTs sq.ft. s sq.ft.
For Leasing Information Please Contact: John G. Osborne, Executive Director, Leasing, 732-855-8600 x 115 Kelly Ziegenfuss, Assistant Director, Leasing & Marketing, 732-855-8600 x 109
A — May 25 - June 7, 2012 — Mid Atlantic Real Estate Journal
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Mid Atlantic R eal E state J ournal Publisher ............................................................................Linda Christman Co-Publisher .........................................................................Joe Christman Section Publisher ..............................................................Michael Campisi Section Publisher ................................................................Elaine Fanning Senior Editor/Graphic Artist ................................................ Karen Vachon Production Assistant ......................................................... Rachel Rugman Office Manager ....................................................................Joanne Gavaza Editorial Consultant .............................................................. Ben Summers Guest Columnist .................................................Lee David Medinets, Esq. Mid Atlantic R eal E state J ournal ~ Published Semi-Monthly P.O. Box 26 Accord, MA 02018 (Mail) 312 Market Street, Rockland, MA 02370 (Overnight) Periodicals postage paid at Rockland, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, P.O. Box 26, Accord, MA 02018 USPS #22-358 | Vol. 24 Issue 10 Subscription rates: $99 - one year, $198 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Toll-Free: (800) 584-1062 | MA: (781) 871-5298 | Fax: (781) 871-5299 www.marejournal.com
Mid Atlantic Real Estate Journal
DEBT | EQUITY INVESTMENT SALES Capital Markets
Lee David Medinets, Esq. Residential Property and §1031 Exchanges
Innovative solutions and deep expertise for all of your commercial real estate financing needs.
W
hen investment prop- erty is sold, capital gains taxes must
generally be paid on any gain realized. With a §1031 Ex- change, however, investors are allowed by the IRS to postpone paying these taxes. This sub- section of the Tax Code states that “no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business, or for investment.” In addition to maintaining greater net profits for reinvestment, investors can use a §1031 Exchange to shift an investment from one geo- graphic region to another, trade older properties for newer ones to avoid deferred maintenance expenses and diversify a real estate portfolio. The IRS stipulates a number of requirements for a valid §1031 Exchange. Property own- ers must trade one or more relinquished properties for one or more replacement properties of “like-kind.” The replacement property cannot have been acquired for immediate resale, nor can it be the taxpayer’s per- sonal residence. However, it is the facts and circumstances of each transaction that determine whether a property is held for investment, rather than for personal use. Many have rec- ommended that – to be on the safe side – taxpayers should hold the replacement property for at least two years before converting it to personal use, and should make significant efforts during that time to use it for investment purposes. In the recent case of Reesink vs. C.I.R., T.C. Memo 2012-118, No. 2475-10 (April 23, 2012), the U.S. Tax Court has taken steps to better distinguish the holding purpose for residential property. In this case, the Court considered whether a single- family house was acquired by the taxpayers as a personal residence or as an investment. In 2005, Mr. and Mrs. Re- esink sold a 50 percent TIC interest in a San Francisco apartment building for the gross sales price of $700,000. They used the net proceeds a little over one month later to ac- quire a single-family house and a vacant lot in Guerneville, CA. Their mortgage loan application
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indicated that the property was purchased as an investment. “For Rent” signs were posted on the property. Flyers were distributed throughout Guern- eville advertising the property for rent. Two prospective ten- ants examined the property to consider leasing it, but each decided that they could not af- ford the asking price of $3,000 per month. The taxpayers never lowered their asking price, and the property was never advertised for rent in any local newspaper. The court did not say if the property was ever listed for rent with a real estate broker, although the taxpayers consulted with one. After failing to rent the Guerneville property for some time, Mr. Reesink wanted to sell the couple’s home in San Fran- cisco because they could not afford the carrying costs of all the real estate that they owned. Mrs. Reesink resisted this idea because she liked living in San Francisco and because she did not want to take their son out of his current high school. Nev- ertheless, the couple listed their home in San Francisco inApril, 2006, about six months after they acquired the Guerneville property. At that time, they con- sidered either moving to Guern- eville or moving in with Mr. Reesink’s sister. Two months later, when their San Francisco home was sold, they elected to move to Guerneville. That was almost eight months after they acquired the Guerneville property. Until they moved in, they had never stayed in the Guerneville property or used it for any personal purpose. On these facts, the court found that the Reesinks’ prin- cipal intention in acquiring the Guerneville property was for in- vestment, not personal use. The court stated that perhaps the
strongest evidence of the Re- esinks’ investment intent came from Mr. Reesink’s estranged brother, a witness for the IRS, who testified that Mr. Reesink told him on several occasions that they planned to move to the Guerneville property af- ter their son graduated from high school. That would have been significantly more than two years after they acquired the Guerneville property. This testimony gave weight to the position of the taxpayers that they had changed their minds because of financial difficulties when they decided to move to Guerneville in 2006. In concluding that the tax- payers had satisfied their burden of proving that they purchased the Guerneville property principally for invest- ment, the court distinguished this case from Goolsby v. Com- missioner, T.C. Memo. 2010- 64. In Goolsby, the Tax Court found that the taxpayers did not have a bona fide investment intention when they acquired the replacement property. In Reesink, the court pointed out that in Goolsby (a) the taxpay- ers made the purchase of the re- placement property contingent on the sale of their home; (b) they sought advice concerning when they could move into the replacement property; (c) their rental efforts consisted solely of placing one advertisement in a local newspaper; (d) they began refinishing the basement of the replacement property within two weeks of acquiring it; and (e) they moved into the replacement property within two months of acquiring it. Goolsby and Reesink help to define the burden of proof that taxpayers will be expected to meet if they move into a replacement property before continued on page 3A
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ABC DE & EPA.................33A Aldo Design Group. ..........34A All-Rite Construction Co.. 15A Auction Advisors.................3A Bayshore Recycling. .........21A Bergman RE Group............1A Brahney.............................26A Brasler Properties..............1B Bussle Realty Corp.............4B Capitol Aerials..................20A CBC Bennett Williams.....12A CBC Pennco Real Estate....9B CBRE.................................15B CGT...................................34A Cooper Roofing..................27A Crystal Window & Door Systems, LTD.......23A Cushman & Wakefield......17B Dermody Properties........ IC-B Earth Engineering Inc.. ...13A Expert Publishers, Inc........1A FOWLER...........................31A Franchise World. .............. 11A Friedman RE Group...........9B GAI Consultants...............13A Gilbeaux Associates, P.C.. 20A Griffin Land........................2B Haftek CWS......................28A Heller Industrial Parks......5B High Associates...................7B Hillcrest Paving and Excavating...................9B Hollister Construction Svcs.............12A Hurley Auctions..................4A Hutchinson Mechanical Svcs.. .............21A IES Engineers...................10A
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M id A tlantic R eal E state J ournal Of HUD, income- and age-restricted properties Gebroe-Hammer offers expertise in disposition and acquisition L executive VP, who noted numer- ous properties have expiring rental contracts that are not be- unit age-restricted complex in Southern NJ. Jarvis, along with executive VP Joseph Brecher, arranged the transaction on behalf of the seller. IVINGSTON, NJ — As hundreds of New Jersey’s HUD, income- and age-re-
They wrote the policy.
We make sure they write the check.
strictedmulti- family proper- ties continue to operate in the f ace o f e s c a l a t i n g non-perform- ing debt and exponentially accumulating
ing renewed, leaving the government a s we l l a s the landlords unprepared. “These own- ers are con- t i n u i n g t o operate their
“Privately owned income- and age-restricted multi-family properties are rather ‘hot’ right now since they are characteris- tically well-occupied and well- maintained,” said Brecher, who noted the seller had marketed the property intermittently during the past several years. “Of course, strong relationships and a good reputation among lenders, government agencies and prospective buyers are all critical to facilitating a sale.” “As the availability of for-sale market-rate apartment build- ings continues to fall short of heightened demand throughout New Jersey, investors of all types – from individuals to insti- tutional entities – are seeking to add income- and age-restricted properties to their portfolios,” said Ken Uranowitz, managing director. n
M. MILLER & SON Public Adjusters Since 1960
David Jarvis
Joseph Brecher
1211 Liberty Ave., Hillside, NJ 07205 � Tel: 908-355-4800 [email protected] � www.mmillerson.com
interest, penalties and other fees, the brokerage specialists at Gebroe-Hammer Associates are negotiating trades of these over-leveraged properties to the satisfaction of all involved par- ties. From the sellers, buyers and tenants, to the lending in- stitutions and state and federal government agencies, the firm is gaining sales approvals and accolades at the same time. “There are hundreds of HUD properties in New Jersey. Many cannot or won’t be able to secure refinancing in the wake of grow- ing debt,” said David Jarvis,
properties, negating their bot- tom line even further, without being foreclosed upon, which would prove highly disruptive to the tenants.” According to the 18-year multi-family brokerage veteran, it is critical to identify a buyer who sees the long-term perfor- mance potential in HUD prop- erties and is willing to assume the debt. In some cases, Jarvis also has been able to negotiate specific components of the sale, including a transfer-tax waiver. Such was the case in the recent trade of a fully occupied 200+-
Recent Financings Arranged By Meridian Capital Group
continued from page 2A Residential Property and §1031 Exchanges . . .
a bright line test, but at least they clarify some of the distinc- tions regarding the use of §1031 Exchanges for residential prop-
erties. Lee David Medinets, Esq. is senior counsel for Madi- son §1031. n
the end of the recommended two-year holding period. The two cases do not yet suggest
Hunters Glen 1,124 Units $49,000,000 Delran, NJ
Steward’s Crossing 241 Units $27,200,000 Princeton, NJ
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