• Tue. Jun 21st, 2022

Year-end reminders for commercial real estate

Michael chase

Good year! It might not be until the end of October, but for commercial mortgage practitioners whose loans can take between forty-five and sixty days to close, it might as well already be the end of the year. With a few rare exceptions, most new loan applications are expected to be funded in early 2022.

As the New Year approaches, here are some things we are keeping an eye on and discussing with our customers.

Opportunity areas
The general rule of thumb is that an area of ​​opportunity shouldn’t be the deciding factor for a deal, but it can still have the potential to get a good deal. For investors seeking investments in the area of ​​qualified opportunity to help defer taxable gains, December 31, 2021 is an important deadline. This is the last date on which investors can claim a five-year holding and a ten percent mark-up on their initial investment base. The last deadline was December 31, 2019, which would have qualified investors for a seven-year holding and a fifteen percent increase in base.

Tax rebates (Massachusetts)
For most communities in Massachusetts, the annual deadline for a first-level appeal is February 1, with appeals based on the previous calendar year’s assessment. This means that February 1, 2022 will be the deadline to file an appeal based on the January 1, 2021 appraisals, which were the first real estate appraisals potentially impacted by COVID-19.

Phase I environmental site assessments
The industry standard for environmental due diligence reporting is ASTM E1527 for Environmental Site Assessment: Phase I Environmental Site Assessment Process. The current version of this standard, E1527- 13, is expected to expire on December 31, 2021. Once a new standard is adopted, it can be important for property owners to understand how their property may be viewed differently from their last environmental due diligence. .

Environmental, social and corporate governance (ESG) initiatives continue to gain ground and influence commercial real estate players. Whether it is a developer responding to a call for tenders, an equity fund seeking to maximize the value of its portfolio or an investor seeking to raise capital, understand the issues and related opportunities to ESG will become more and more important.

Changes in tax legislation
Ongoing discussions about infrastructure and social spending plans require corresponding plans for how to pay for it all. In hindsight, many declines in the real estate markets were the direct result of changes in tax laws. Serious concerns at the start of the year about potential changes to the tax provisions regarding 1031 exchanges, capital gains and estate planning appear to have subsided; however, the industry remains vigilant.

These are just a few snippets of topics we keep an eye out for, which also include construction costs, crypto for real estate, and the LIBOR transition, among others. Each of these could certainly fill an article on their own. While this is effectively the end of the year for new loan origination, there is still some work to do as we help our clients plan for the remainder of the year and into 2022.

Michael Chase is the Managing Director of NorthMarq, Boston, Mass.