Pitfalls at the Intersection of Income & Estate Tax: Planning for Real Estate

Baker Newman Noyes Tax Principal Jean McDevitt recently joined MEREDA members for breakfast to present factors that must be taken into consideration for real estate owners when it comes to both income tax planning and estate tax planning.  Read on to learn what these considerations are and how they don’t often go hand in hand.

By Andrew Smith, BNN Tax Principal

No one wants to pay tax, or certainly not any more than they absolutely have to pay!  What many individuals don’t consider is that sometimes it’s better to pay taxes now to save even more taxes later or that what might make sense from an estate tax planning perspective may not make sense with regard to income taxes.

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MEREDA’s Morning Menu Breakfast Event – “Age-Friendly Communities: Adapting to Maine’s Changing Population”


Maine communities face a formidable challenge: How to meet the needs of their aging residents. As our state grows ever older (and Maine is already the oldest state), the need to make our towns and communities more age-friendly becomes more and more important. AARP national surveys indicate that a vast majority of people want to stay in their homes and communities as they age. Here in Maine, surveys show that nine out of ten residents 50 and older want to stay in their own homes and local communities as long as possible. The question is how our towns and cities can work together to help residents remain engaged, active, healthy and safe as possible.

The AARP’s Age-Friendly Community initiative envisions an inclusive and accessible urban or suburban environment that encourages active and healthy aging. Join MEREDA on December 11 at the Portland Regency Hotel as Lori Parham, AARP Maine state director, and Peter Morelli, AARP Maine Age Friendly Community manager, discuss Maine’s changing demographics and the age friendly community approach. In addition, Speaker of the House, Mark Eves, will share with us details of his Senior Housing Bond Initiative to address the fundamental mismatch between Maine’s housing supply and Maine’s housing needs.

Registering for this Event:

Payment is expected at the time of registration. No refunds will be granted to anyone who registers, but fails to attend or who cancels after December 5, 2014

Ticket Prices: MEREDA Member: $45 each | Non – Member: $55 each
Register After December 5: Prices increase $10 each

To register and for more information, visit www.mereda.org.

MEREDA’s Morning Menu is sponsored by Norway Savings Bank.

Norway Savings Transparent

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Changing the Status Quo of Investing with a Self Directed Retirement Account

By Laurie Bachelder, Principal, Freedom Wealth Advisors

Did you know

In 1974 the IRA was designed to be a self-directed retirement plan that provides tax deferred growth and was intended to provide the freedom to invest in an abundance of assets.  But somewhere along the way, one of the most important concepts of owning an IRA was lost, the concept of self direction and investing in assets that best suit investor. Many investors have been falsely misled to believe that the stock market is not only the best place but the only place to invest retirement money. There are many different permissible investments, investments beyond the traditional stock market which may suit different investors.  Investments such as: Real Estate, Tax Lien, Mortgage Note, Sports Teams, Businesses, Livestock, Private lending, Assets you know and understand.

The majority of qualified retirement plans can be self directed into non-traditional investments.  Plans such as …

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Fired for being Canadian?!? That’s OUTRAGEOUS!

By Tony Payne, Clark Insurance

An employee, alleging he was fired for being Canadian, took his employer to the Maine Human Rights Commission to contest his dismissal. The case fell flat when the employer produced a file that documented persistent and well-communicated short-comings in the employee’s job performance. The allegation really lost steam, though, when it also was revealed that the employer, himself, was a Canadian.

At the 2104 Annual Employment Practices briefing, hosted by Pro Search and Clark Insurance, featuring Gregg Frame of Taylor, McCormack and Frame, a variety of cases were used to illustrate practical approaches to successful personnel management.

What does this have to do with the real estate development? Activity in the sector has been growing as have new hires. Too often, employers get so focused on their business (a pending deal) that employee management can slip. It also is a business that is prone to lay-offs when hard times arrive.

That’s why Frame opened his remarks by admonishing his audience that Maine’s employment-at-will statute comes with a big “EXCEPT….” disclaimer. The exceptions are that if an employee falls into a protected class, employers cannot simply act with impunity – they need to have a sound and well-documented business reason for their actions. To illustrate his point, Frame polled the large room of participants and determined that everyone fell into some protected class whether due to age, gender, nationality, religion, sexual orientation, etc.

The laws are in place for a good reason. Employees should be judged on performance and not for characteristics over which they have no control.

Employees who take their employer to the Maine Human Rights Commission often do so because their termination or disciplinary action has come as a surprise. “I’ve always had good reviews!” “Everyone does exactly what you’ve singled me out for.” “Hey, you’re picking on me because I’m (fill in the blank of a protected class).”

Where employers get themselves in trouble is when they or a supervisor have not been consistent and clear about the employee’s job performance or the financial condition of the company in the case of potential layoffs.

Frame offered a number of steps that can keep both employees and employers out of conflict:

1)      Review and deliver an employee handbook that clearly states job performance expectations: showing up for work, absences, vacation time, harassment prohibitions, reporting requirements, etc.

2)      Post all required workplace notices whether there is one employee or one hundred. It’s helpful to employees and regulators see it as an indicator of employer responsibility.

3)      Have employees conduct a self-assessment periodically to help determine their self-perception versus job performance expectations.

4)      Be sure all supervisors are regularly trained and understand that ignoring prohibited workplace behavior is unacceptable (e.g. bullying, harassment, substance abuse, etc.)

5)      Use annual performance reviews to also review the employee handbook. It eliminates someone saying, “I’ve never heard that before.”

6)      Address unacceptable behavior quickly with an objective of improving performance. Not only will it keep people on track but it will let other employees know you manage consistently and impartially.

7)      Be sure that employees sign that they have read and understood the employee handbook and also any disciplinary document that ends up in their file.

In the case of termination, if the decision is final, make the meeting brief and do it in the company of a third party such as a supervisor or other staff member. Frame said the third party should not speak but rather simply be present and taking notes. Should anyone fear a violent reaction to a dismissal, requesting a police presence is a good idea. Safety comes first.

Frame estimated that defending an allegation taken to the Maine Human Rights Commission would cost between $5,000 and $20,000 in legal fees. If taken to court, legal fees can range from $20,000 to $60,000 not including any financial judgments that may be rendered. Those costs can be greatly reduced by solid documentation and fair employment practices.

Gratefully, there is insurance coverage known as Employment Practices Liability Insurance. A discussion with us will help determine the extent of coverage that is best for the employer.

Finally, Frame said there are occasions when he has advised clients to simply pay up when their mismanagement is irrefutable. Claiming one’s actions are justified simply because the employee is considered a horse’s rear end just doesn’t fly. Worse yet, if the employer has in fact discriminated against the employee, the law provides a justifiable and reasonable remedy to protect people from abuse and capricious decisions.

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Design the right time for building technology

By Matt Eaton, IT Service Consultant, WGTECH

Commercial building developers need to consider all of the factors that make a building attractive to potential tenants, and one of the most overlooked areas is the infrastructure required to support today’s technologies. From Internet connectivity, to cloud computing, to wireless printing, technology is crucial to running a business. Just about every company that we help move into a new office space complains about the cost and expense of installing the infrastructure they need to run their business. It’s a shame, because much of this infrastructure is so easy to install and costs so much less when done during construction. Tenants definitely favor sites that are move-in ready, and may even pay a premium for those with the right infrastructure in place.

Despite the advances made in wireless technologies, the biggest issue today is the same that it has been since the advent of desktop computing: cabling. The good news is that every device – computers, printers, security cameras, etc. — no longer needs a specialized cable. Almost all of today’s networked devices have standardized on the Internet Protocol (IP) for connectivity, which means they all can use the same cabling infrastructure to support the wireless network. However, there are a lot more network-enabled devices now than ever before: mobile phones, multifunction printers/copiers/scanners, ID badges and door key fobs, audio equipment, and tablets have joined laptops in their need for wireless connectivity, with more announced every day. This means that office suites need lots of overhead “runs” for wireless access points. And they need to be on CAT 6 cabling to support the latest equipment.

Installing that cable after a space has been built-out or renovated is a lot more expensive than doing it during construction – up to three times more expensive, in our work with companies throughout Maine. The old rule of thumb was to put one “drop” into each defined space or office suite; today it’s much safer to triple or even quadruple that. It is easy for the construction crew to lay them in place while they’re building, and eliminate much of the hassle and expense for the tenant.

For offices that plan to build out a data center, HVAC is another issue to consider. Most buildings have a central air conditioning unit, and the developer usually adds a vent into the room designated for the data center. The problem is, these vents rarely provide enough cooling capacity, and most tenants need to install an additional, dedicated air conditioning unit. Planning for that during the design phase by adding the right power and venting is a huge help for tenants, and can save them significant expense.

Another overlooked area is Internet connectivity – most customers prefer to have options for Internet service providers (ISPs), and offering them a choice of vendors is very attractive. Even if tenants don’t necessarily have a preference, they can choose services from multiple vendors to support business continuity. If one vendor’s service goes down, the tenant has protection from the alternate, and can continue operating. Some building owners establish a referral program with the ISP to aid the relationship on both sides.

When should all of these decisions be made? In our experience, the best time to call in a technology provider to discuss power points, cabling, cooling, and network options is during the design phase. That’s when the technology provider can give insight into overall building issues as well as options that can make the move-in ready offices and suites that attract customers. It’s a cost-effective way to make your building stand out from other choices, and to get off on the right foot with your new tenants.

Matt Eaton is IT Service Consultant for WGTECH, a Westbrook-based provider of advanced information technology solutions and services. WGTECH has served Maine and Northern New England businesses for more than 15 years with custom-tailored solutions and flexible support services, and focuses on finding the right technologies to help each customer succeed. Reach Matt at MEaton@WGTECH.com, or visit the company online at www.WGTECH.com

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MEREDA Announces Additions to its Board of Directors

Eben Adams, Amy Booth

Eben Adams, Amy Booth

Eben Adams of South Portland and Amy Booth of Cumberland have been elected to the board of directors of the Maine Real Estate & Development Association (MEREDA), a statewide organization of commercial real estate owners, developers and related service providers.

Eben Adams is a partner at Pierce Atwood LLP, whose practice includes all aspects of real estate law with a focus on commercial and residential development, acquisitions, sales and leasing. Eben has extensive experience representing developers of condominium projects including residential, commercial and mixed-use condominiums. Eben regularly assists energy companies with real estate matters including wind power leases and transmission corridors.

Prior to joining Pierce Atwood in 2000, Eben served as a law clerk to the United States District Court Judge Gene Carter. Previously, Eben served for four years as a legislative assistant to U.S. Senator William S. Cohen in Washington, D.C.

Eben is listed in The Best Lawyers in America and Chambers USA for Real Estate Law, with bar admissions in both Maine and Massachusetts. Eben served on the Board of Directors of the Casco Bay Hockey Association from 2008-2012. Eben is a graduate of Bowdoin College and the University of Maine School of Law.

Amy Booth joined CBRE | The Boulos Company’s Property Management Group in 1994 as Senior Property Manager and is currently Senior Vice President. Her years of experience include zero-based budgeting; coordination of capital improvement programs; and negotiating maintenance contracts. Ms. Booth’s responsibilities include overseeing the property management division encompassing the management of over 40 properties totaling in excess of 4M square feet of commercial space. Amy works directly with clients to achieve their real estate goals and has extensive experience in drafting and negotiating leases and renewals, creating and executing tenant relation programs and assisting tenants with current and future space needs. She supervises the property management team and reviews maintenance-related contracts and programs for cost effectiveness and efficiency.

Amy holds an Associate Broker’s License in the State of Maine, and serves on The Board of Directors for the Center for Grieving Children, and participates on their golf and business development committees. She also serves on the MEREDA Conference Committee. Ms. Booth was formerly with MB Management, a residential and commercial asset management and real estate development company.

For further information, please contact MEREDA’s Vice President of Operations, Shelly R. Clark at 207-874-0801.

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Downtown vs the suburbs: How office markets need to change with the times

By Cameron Woodford, Commercial Properties Inc.

Office property fundamentals have steadily improved during the economic recovery. However, the office market will face some very unique challenges in the coming decade as workforce demographics affect corporate real estate decisions. Each office subtype, even in the same geographic market will face unique challenges. The differences are, perhaps, most easily summed up in comparing downtown and suburban markets.  Absorption rates of Portland’s downtown office space continue to outpace those of suburban office. Landlords should take note, as this does not appear to be a short term trend, but reflective of the shift in workforce demographics as one generation steps into retirement and another takes their place.

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Six things to consider when purchasing investment real estate

By Chris Paszyc, CCIM, Broker, Partner, CBRE | The Boulos Company

So, you’re sitting on a pile of cash like Warren Buffett because nobody won the March Madness Bracket Challenge, trying to decide where to invest next. You like the idea of owning an income-producing piece of commercial real estate where you collect a rent check each month, receive a pre-determined return on your initial investment and don’t have much responsibility. Simple, right? However, there are a number of variables to consider when you’re evaluating a commercial real estate investment offering. 

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MEREDA’s Morning Menu Breakfast Event – “Real Estate Development 101”: What You Need to Know

BreakfastLogoThis is the third installment in our “Real Estate Development 101” series, this time being held in Biddeford! We hope you will join us in York County for what is sure to be a very interactive session.  Please come to the event prepared to ask questions!

The development process brings together a number of diverse professionals: bankers, brokers, architects, engineers, etc. Developers themselves come from a number of different disciplines, and also work with a number of these same professionals along the way. But, how does one actually get started?

Make plans to join the Maine Real Estate & Development Association (MEREDA) on November 18 at the North Dam Mill in Biddeford for breakfast as we host this third in our “Real Estate Development 101” series, where a developer, a banker, and an architect walk through the typical process of a development timetable.

Panelists include Doug Sanford, Pepperell Mill Campus, Rob Tillotson of Oak Point Architects, and Bill Kany of Saco & Biddeford Savings Institution.

Program: 8:00- 9:00 AM
Buffet Breakfast: 7:30 – 8:00 AM

North Dam Mill, 2 Main Street, Biddeford, ME

Registering for this Event:
Your RSVP is requested by November 13, 2014. Payment is expected at the time of registration. No refunds will be granted to anyone who registers, but fails to attend or who cancels after November 13.

Registration Fees:
Members: $45pp | Non-Members: $55pp
-After November 13, prices increase by $10 pp

For more information and to register, visit www.mereda.org.

This MEREDA “Morning Menu” Breakfast Event is Sponsored by Saco & Biddeford Savings Institution.

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MEREDA’s Morning Menu – Environmental Issues in Business Transactions: Practical Problem Solving, including the Maine Voluntary Response Action Program

Make Your Deal Work – Avoid Environmental Pitfalls and Delays

BreakfastLogoAfter several decades of living with environmental liabilities, most developers and brokers understand the road map through environmental issues, and the value of an environmental site assessment. But what are the new and developing issues and how can you avoid them? What useful tools and steps are now available in 2014 to keep the deal on track? And is the DEP really here to help?

Join MEREDA for breakfast on November 13, 2014 from 7:30 – 9:00 AM at DoubleTree by Hilton in South Portland as our panelists focus on practical problem-solving strategies to keep deals on track and resolve environmental issues. And the DEP VRAP is here to help – really.

Payment is expected at the time of registration. No refunds will be granted to anyone who registers, but fails to attend or who cancels after November 6, 2014

Ticket Prices: MEREDA Member: $45 each | Non – Member: $55 each
Register After November 6: Prices increase $10 each

For more information and to register, visit www.mereda.org

This “MEREDA Morning Event” is sponsored by Norway Savings Bank & Pierce Atwood.

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