Expertise Beyond the Numbers

Interest Rate Hedging Solutions for the Commercial Real Estate Sector [Podcast]

In the following podcast, Ahmed El Nokali, a Senior Vice President with First National Bank (FNB), and Stephen Bishop, a Senior Manager with SC&H Group’s Tax Services team, discuss interest rate hedging offerings, as well as new tax changes for the commercial real estate sector.

With uncertainty around the U.S. Federal Reserve and potential interest rate hikes, there is an expanded interest in securing fixed-rate bank loans.

For commercial real estate companies that did not originally choose a fixed-rate loan option, there is significant risk, especially since the Federal Reserve is expected to raise interest rates several times over the next two years.

However, as a result of the recent Labor Department jobs report, the Fed may actually delay any interest rate hikes – creating more time and opportunity for securing these types of fixed-rate loans.

There are a number of interest rate hedging offerings for commercial real estate companies, as well as for corporations in the commercial and industrial (C&I) arenas.

In addition, from a tax perspective in Maryland, there has been some new legislation that will minimize the tax burden when transferring title of real property between related Limited Liability Companies (LLC).

LLCs are the most preferred ownership form for business and investment real property in the state. Prior law had imposed transfer and recordation tax when LLC membership interests were exchanged and the LLC had owned significantly valued real property. This was the case even if the transferor and the transferee were the same persons.

The new law simplifies the transfer tax rules and looks to the end owner to determine if a tax is required.

Both the interest rate hedging offerings and insights about transfer tax changes in Maryland reinforce how the commercial real estate sector is often very complex and dynamic when it comes to finance and accounting. Both offer significant planning opportunities for the industry. Therefore, it is important to have the right professionals on your team who can offer innovative cost reduction strategies to ensure that you are not overpaying taxes.

If you are a Maryland property owner and have questions about this new legislation, please contact Steve here.  To learn more about FNB’s interest rate hedging offerings, we welcome you to contact Ahmed here.

Readers Note: This podcast was recorded before Federal Reserve Chair Janet Yellen announced that the Fed did not have a timeframe for the next round of interest rate hikes.