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By AZ Advisory Team, December 8, 2009 6:30 pm

So here’s a continuation of our topic: Forty Year Inspection Requirements

Floor and Roof Systems

Cast in place reinforced concrete slabs and/or beams and joists may often show problem due to corroding rebars resulting from cracks or merely inadequate protecting cover of concrete.

Patching procedures will usually suffice where such damage has not been extensive. Where corrosion and spalling has been extensive in structurally critical areas, competent analysis with respect to remaining structural capacity, relative to actual supported loads, will be necessary. Type and extent or repair will be dependent upon the results of such investigation.

Precast members may present similar deterioration conditions. End support conditions may be important. Adequacy of bearing, indications of end shear problems, and restraint conditions are important, and should be evaluated in at least a few typical locations.

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, December 2, 2009 2:14 pm

So here’s a continuation of our topic: Forty Year Inspection Requirements:

Steel Framing System

Corrosion, obviously enough, will be the determining factor in the deterioration of structural steel. Most likely suspect areas will be fasteners, welds, and the interface area where bearings are embedded in masonry. Column bases may often be suspect in areas where flooding has been experienced, especially if salt water has been involved.

Thin cracks usually indicate only minor corrosion, requiring minor patching. Extensive spalling may indicate a much more serious condition requiring further investigation.

Of most probable importance will be the vertical and horizontal cracks where masonry units abut tie columns, or other frame elements such as floor slabs. Of interest here is the observation that although the raw materials of which these masonry materials are made may have much the same mechanical properties as the reinforced concrete framing, their actual behavior in the structure, however, is likely to differ with respect to volume change resulting from moisture content, and variations in ambient thermal conditions.

Moisture vapor penetration, sometimes abetted by salt laden aggregate and corroding rebars, will usually be the most common cause of deterioration. Tie columns are rarely structurally sensitive, and a fair amount of deterioration may be tolerated before structural impairment becomes important. Usually, if rebar loss is such that the remaining steel area is still about 0.0075 of the concrete area, structural repair will not be necessary. Cosmetic type repair involving cleaning, and patching to effectively seal the member, may often suffice. A similar approach may not be unreasonable for tie beams, provided they are not also serving as lintels. In that event, a rudimentary analysis of load capability using the remaining actual rebar area, may be required.

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 5, 2009 3:04 pm

What Can Cost Segregation Do

• Cost segregation can provide real estate purchasers with tremendous tax benefits from accelerated depreciation deductions and easier write-offs when an asset becomes obsolete, broken or destroyed.
• CPAs can recommend using the cost segregation technique when a taxpayer constructs a building or buys an existing one. It can be used even if a structure was acquired several year s earlier.
• Buyers of real estate should obtain an engineering report that segregates assets into four categories: personal property, land improveme nts, building components and land.
• One of the areas of controversy is the distinction between tangible personal property and a building’s structural components. The tax court has set forth criteria CPAs can use in making a factual determination of whether property is inherently permanent and therefore excluded from the definition of tangible personal property.
• Advantages of cost segregation include the value of front-loaded depreciation deductions, write-offs of building components that need replacement and lower local realty-transfer taxes.

Disadvantages include the cost of the engineering study, the triggering of depreciation recapture a nd understatement penalties for taxpayers that use cost segregation too aggressively.

Purchasers of real estate can gain tremendous tax benefits by using a popular asset depreciation technique called cost segregation. Using this method, buyers view a real estate acquisition as consisting not only of land and buildings but also tangible personal property and land improvements. The tax savings come from accelerated depreciation deductions and possible easier property write-offs. A taxpayer can use cost segregation when constructing a building, buying an existing one, or, in certain circumstances, years after disposing of one so long as the year of disposition still is open under the statute of limitations.

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, October 6, 2009 10:19 pm

Before you can determine how much office space your business will need, you first need to understand how office space is measured for general rental or sale purposes:

Usable Area

The Usable Area is the actual area that can be occupied on a floor or an office. The amount of Usable Area on a multi-tenant floor can vary over the life of a building as corridors expand and contract and as floors are remodeled.

The Usable Area of an office is calculated by measuring to the finished surface side of the office side of corridor and other permanent walls, to the center of the partitions that separate the office from adjoining Usable Areas, and to the inside finished surface of the main portions of the permanent outer building walls.

Rentable Area

The Rentable Area is the tenant’s gross square footage of the entire office floor, minus the elevator core, flues, pipe shafts, vertical ducts, balconies, stairwell areas and other similar columns and projections. The Rentable Area of a floor is fixed for the entire life of the building.  It is not affected by changes in corridor sizes and configuration.

The Rentable Area of an office floor is calculated by multiplying the Usable Area of that office by the result of the division of the Floor Rentable Area of the floor by the Usable Area of the floor resulting in the Floor Rentable/Usable Ratio.

Building Common Area

The Building Common Area includes all the areas of a building that are used to provide services to building tenants. These are areas which are not included in the office area of any specific tenant. It also includes any other common areas and is added to the Floor Rentable Area to calculate the Rentable Area.

Before you can determine how much office space your business will need, you first need to understand how office space is measured for general rental or sale purposes:

Gross Rentable Area

Rent is almost always paid based upon the Gross Rentable Area which includes the Floor Rentable Area plus the pro rata share of Building Common Area.

Building Rentable Area + Pro Rata Building Common Area = Rentable Area

Load Factor

The Load Factor, or Rentable /Useable Ratio, is the percentage of space on a floor that is not usable plus a pro-rata share of the Building Common Area, expressed as a percent of Usable Area. AKA Common Area Factor or the Loss Factor. A Typical range is 10% to 18%.

Gross Rentable Area ÷ Usable Area = R/U Ratio

Conversion Formulas

• Load Factor (Load) = R/U Ratio – 1
• Rentable Area = Usable Area x R/U Ratio  
• Rentable Area = Usable Area x (1 + Load)
• Usable Area = Rentable Area ÷ R/U Ratio    

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.