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By AZ Advisory Team, November 30, 2009 1:38 pm

OK, so here are some good news in terms of the desired movement in the commercial real estate sector. Thirty five (35) percent of global investors plan to increase their property allocation in their portfolios over the next two years.  This is double the seventeen (17) percent who plan to reduce it over the same period according to the Barclays Wealth and Economist Intelligence Unit (BARC.L) survey. This is because they foresee better long-term returns in real estate than from stocks and bonds.

The U.S. was rated at the top as the most popular nation for investment, with 16 percent of the global investors saying they are expecting to see the best returns here. Sixty eight (68) percent of these investors said that the opportunities are in the commercial properties. Belief that properties are now undervalued was the second most common reason cited for increasing investment.

Barclay’s survey has 2,000 respondents. Forty percent were worth 500,000 pounds to 1 million pounds. An additional 40 percent were worth between 1 million pounds and 10 million pounds. Ten percent had assets of as much as 30 million pounds and the rest were wealthier.

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By AZ Advisory Team, November 26, 2009 10:28 pm

While we’re seeing trouble in the commercial real estate sector, increased and sustained consumer spending on the national level will produce more jobs and ultimately drive commercial real estate up.

For all of those trying to steer clear of Black Friday’s madness, retailers are cutting you a break.

In New York, Macy’s, Pier One and other big merchants are extending the year’s biggest shopping day beyond Friday to keep reeling in shoppers, as many need extra convincing to part with their pennies. Stores and online merchants are scrambling to come up with novel ways to motivate Black Friday shoppers after last year’s weak earnings. Sales were down 2.2 percent in 2008, the largest decline since the International Council of Shopping Centers started keeping records in 1970, according to the trade group.

This year, Lord and Taylor, Office Max and Century 21 are offering deals throughout the weekend. Others retailers started slashing prices before Black Friday. “They’d rather have a little less profit than watch the dollar walk away entirely,” said Larswell, who got an early $50 discount on  a leather jacket at a midtown store Thursday, a day before the sale was supposed to start.

Still, some shoppers out on Thanksgiving worried all the good deals would be gone by the weekend. And others thought the extended run defeated the point of Black Friday. “It’s about the thrill of the hunt,” said Jeanne Baskett, of Harlem, who was shopping along 32nd Street in midtown Thursday.

While there is hope that Black Friday shopping will be more robust than last year, many consumers are still sitting on the fence. According to the National Retail Federation, an estimated 77 million Americans will wait to decide whether to shop after checking out the deals, as compared to 57 million who expected to definitely hit the stores.

Happy Thanksgiving!

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, November 25, 2009 1:30 pm

Masonry Bearing Walls

Random cracking, or if discernible, definitive patterns of cracking, will of course, be of interest. Bulging, sagging, or other signs of misalignment may also indicate related problems in other structural elements. Masonry walls where commonly constructed of either concrete masonry remits or scored clay tile, may have been constructed with either reinforced concrete columns tie beams, or lintels.

Steel bar joists are, of course, sensitive to corrosion. Most critical locations will be web member welds, especially near supports, where shear stresses are high possible failure may be sudden, and without warning.

Cold formed steel joists, usually of relatively light gage steel, are likely to be critically sensitive to corrosion, and are highly dependent upon at least normal lateral support to carry designed loads. Bridging and the floor or roof system itself, if in good condition, will serve the purpose. Wood joists and rafters are most often in difficult from “dry rot”, or the presence of termites. The former (a misnomer) is most often prevalent in the presence of sustained moisture or lack of adequate ventilation. A member may usually be deemed inacceptable condition if a sharp pointed tool will penetrate no more than about one eight of an inch under moderate hand pressure. Sagging floors will most often indicate problem areas. Gypsum roof decks will usually perform satisfactorily except in the presence of moisture. Disintegration of the material and the foam-board may result from sustained leakage. Anchorage of the supporting bulb tees against uplift may also be of importance, with significant deterioration. Floor and roof systems of case in place concrete with self centering reinforcing, such as paper backed mesh and rib-lath, may be critical with respect to corrosion of the unprotected reinforcing. Loss of uplift anchorage on roof decks will also be important if significant deterioration has taken place, in the event that dead loads are otherwise inadequate for that purpose.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, November 24, 2009 2:58 pm

Overlooked Opportunity

Accounting professionals must be able to suggest and help implement cost segregation for their clients or employers so they can achieve maximum tax savings. In the past when taxpayers purchased real estate, they traditionally allocated 20% of the purchase price to land and 80% to buildings. While the IRS rarely questioned this simplistic approach, purchasers did themselves a financial disservice: They forfeited opportunities to achieve a better tax result.

Although the cost segregation technique always was available to real estate purchasers, it often was overlooked as a tax-savings tool. Recently, however, buyers have begun to recognize that despite some drawbacks, cost segregation can dramatically increase tax savings. They are, therefore, taking advantage of this opportunity, challenging the “business as usual” mantra.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, November 23, 2009 2:59 pm

Add Amenities

Finally, you can also consider adding amenities to the property to make it more appealing and valuable. Value enhancing amenities can include something simple like creating a playground in a multifamily property or adding free wireless Internet for your retail tenants. Or you can add more extravagant amenities like a daycare center in your office building or an outdoor courtyard in a hotel property.

In summary, when scouting for commercial properties, look beyond the historical data and see what things you can employ to make the property more valuable. All other important factors considered, choose the one that gives you a lot of room to utilize value-generating strategies that is non-existent or yet untapped by the present owner and therefore not part of the price.

Know your property’s potential before you close the deal to realize maximum gains — after you have modified its usage to a more profitable one, after you have made improvements and added amenities, after increasing rents accordingly, and after decreasing expenses. The best deals are made when you buy a property, not when you sell a property!

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, November 20, 2009 4:31 pm

Practical Tips To Remember

CPAs should routinely recommend that their clients or employers use cost segregation studies whenever the expenditures for a structure, including leasehold improvements, equal or exceed $750,000.

Cost segregation can be used for new construction and improvements, for the purchase of existing structures and for buildings acquired in prior tax years—even if the building has been disposed of.

A taxpayer that uses cost segregation for a previously acquired structure must file IRS Form 3115, Change in Accounting Method.

If a taxpayer disposes of a building for which cost segregation was used, it should consider the recapture considerations associated with this disposition.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, November 19, 2009 4:09 pm

U.S. commercial real estate transactions rose in the third quarter for the first time since around 2007 but is still way down from a year earlier, said the National Association of Realtors. This organizatio, which hosted the 2009 REALTORS® Conference & Expo in San Diego which ended last Monday, said in its report that Commercial Leading Indicator for brokerage activity index rose 0.9 percent from the prior quarter’s fifteen-year low to 102.4, the first rise since the second quarter of 2007. Still, the index is 11.1 percent below the 115.3 reading in the third quarter of last year.

But NAR’s chief economist, Lawrence Yun, stressed that the lack of financing for commercial real estate transactions is slowing down our economic recovery. Yun addressed the government to take action to relieve some of the lending pressure as banks become troubled with the increase of toxic loan portfolios over-leveraged by commercial properties that are losing value now.  Banks then become shy about lending money which create a challenging environment for commercial transactions.

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By AZ Advisory Team, November 18, 2009 11:27 pm

Decrease Expenses

Evaluate the historical operating statements of the property to determine if there are areas where you can decrease expenses. For example, perhaps improving the property with more energy efficient light bulbs in the common areas will drastically reduce your monthly electrical bills. Or perhaps you find that the gas company can individually meter the units so that instead of paying for the gas, you can fairly pass that expense onto the tenants. In the vast majority of instances, a commercial property owner can cut expenses without significantly impacting the operations of the real estate itself.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, November 17, 2009 11:00 pm

Losses due to commercial real estate loans are what U.S. regional banks face greater exposure to according to a Fitch Ratings report. This may increase the possibility of their future ratings being downgraded. The risk is generally manageable for large financial institutions while the downgrades would be more prevalent among the regional mid-sized to smaller banks.

“The potential for further deteriorations in commercial real estate portfolios is a major contributor to Fitch’s negative outlook for the banking sector,” said Thomas Abruzzo, co-head of Fitch’s North America financial institutions group. “Loan losses are increasingly likely given the expectation for ongoing declines in commercial real estate markets,” he said in the report.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By Alex Zylberglait, November 16, 2009 9:32 am

As we continue to track the amount of debt in distress across all product types and geographies, it is evident that it’s a matter of time until lenders begin to divest these assets. Even though they currently do not have as much pressure to realize losses immediately they will eventually have to do something about it. Considering they are not generally lending money at this time, the increased defaults will only make their balance sheets that much more unattractive. Having said that, I do not believe that we are likely to see an RTC 2 of some sort but rather the divestiture of troubled or toxic assets will likely come in the form of waves; that is as bank’s balance sheets gradually improve they will likely divest of certain assets over time. The wildcard in all of this, of course, is any kind of government intervention that would act to accelerate or decelerate this probable scenario.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.