Hartford Business Journal

10 Hartford Business Journal • October 29, 2018 • www.HartfordBusiness.com EXPERTS CORNER Federal tax law brings numerous changes for commercial property owners By Edward Reitmeyer T he Tax Cuts and Jobs Act is the most sweeping change to the U.S. federal income tax laws in over three decades, and it will have an effect on every U.S. taxpayer, but none more so than taxpay- ers engaged in the real estate business. Let's focus on some of the signifi- cantly impacted financial aspects of commercial real estate. Section 179 property The tax law increases the maximum amount of assets a taxpayer may ex- pense under section 179 to $1 million. The law expands the definition of section 179 property to include the fol- lowing improvements to nonresiden- tial property: roofs, heating, ventila- tion and air-conditioning property, fire protection, and alarm systems and security systems, as long as improve- ments are placed in service after the date the building was first opened. This was not available to real estate entities in the past. Opportunity zones Recently, there has been a national rush to acquire Opportunity Zone assets under a new program that aims to draw long-term investments in low-income communities by providing a federal tax incentive for investors. In April, Gov. Dannel P. Malloy nominated 72 low-income zones in 27 municipalities across Connecticut as Opportunity Zones. The new law and regulations allow investors to roll their gains into new projects in these zones throughout the country. By investing a gain into a qualified Op- portunity Zone project, investors can achieve sub- stantial deferrals for payment of the tax on the gain. In addition, if held for 10 years, the investment will receive a "free" step-up in basis, thus making it virtually free. 1031 exchanges 1031 real estate exchanges, which allow investors to sell a property and reinvest the proceeds in a new property while also deferring capital gains taxes, survived the new tax law. But personal property no longer qualifies for the tax-deferred ex- change. Thus, real estate owners that have had a cost segregation study to accelerate depreciation, by assigning shorter useful life to personal prop- erty, may have a harder time deferring depreciation recapture. Interest expense limitation The deduction for net business inter- est expense is limited to 30 percent of the taxpayer's adjusted taxable income. Adjusted taxable income is roughly EBITDA (earnings before interest, tax, depreciation and amortization) before 2022 and roughly EBIT thereafter. The FOCUS: Real Estate By Natalie Missakian Special to the Hartford Business Journal F rustrated by rising prices and limited choices for marketing their properties online, a group of Connecticut real estate professionals have launched their own listing service specifically for the state's commercial real estate industry. Managed by the Greater Hartford Association of Realtors (GHAR), the service, found at CTCList.com, has been gaining momentum since its Aug. 1 de- but, said GHAR CEO Holly Callanan. Callanan has been traveling around the state promoting the new service in recent weeks, and said the goal is to have 100 percent of Connecticut's commercial realty agents participating. "We're getting more users every single day," she said. "The key is to get everybody on board because that makes it a stronger service." The site is pow- ered by national commercial real estate listing service Catylist, which bills itself as an alternative to costlier, large commercial services like LoopNet. Commercial agents around the country have complained that prices for LoopNet, the dominant player in the in- dustry, have skyrocketed since publicly traded commercial real estate data giant CoStar acquired the company in 2012. Others have accused CoStar of filing lawsuits to squelch competition, leav- ing brokers with few choices, accord- ing to news reports. "They've used litigation to suppress innovation in the space," Elie Finegold, former head of global innovation and business intelligence at CBRE, the world's largest commercial broker- age, told real estate publication The Real Deal in September. (CoStar has countered that it is merely protecting its intellectual property.) While agents say such services can cost several thousand dollars a year or more for a set number of listings, CT- CList costs $600 a year for National As- sociation of Realtor members ($900 for non-members) and listings are unlimited. The rates, however, are subject to change as membership grows, Callanan said. The service, designed as both a marketing platform and information exchange, is open to any licensed com- mercial broker in the state, and GHAR is pro-rating the annual fee for those who joined after Aug. 1. As of mid-October, 37 member agents, mostly from the Hartford region, had listed over 500 properties on the fledgling site. "People really like it and we expect it to grow exponentially as more people are familiar with it," said Joel J. Witkiewicz of Advance Realty CT in Bristol, chair of the Connecticut Commercial Real Estate Alliance, which spearheaded the project. Witkiewicz said commercial agents in the state had long been asking for a one- stop shopping place to post their inven- tory and search for market information, a service residential agents already en- joy through the Multiple Listing Service (MLS) database. The alliance, GHAR's commercial division, pitched the Catyl- ist program to the larger association, which agreed to take it on. The website allows members of the public to sign up for free accounts to search available properties, while paid subscribers get access to detailed list- ings, market statistics and other tools. Full members can create customized reports and brochures, send broadcast emails, look up property histories and comps, receive personalized market updates and have fliers translated into different languages through the system. Witkiewicz said another popular feature is "wants and needs," where members of the public or brokers can post requests for properties. Edward Reitmeyer, Partner-in-Charge, Tax & Business Services and Chair, Real Estate Department, Marcum LLP Tracking Inventory Greater Hartford Realtors launch property- listing service for commercial brokers The Greater Hartford Association of Realtors has helped launch a new statewide listing service for commercial properties (shown above) that aims to compete with national listing services like LoopNet.

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