Business Improvement Ideas
How to Improve Your Business by Managing Your Real Estate and Using Appraisal and Appraisal Consulting Services.
Real estate represents one of the largest capital outlays for businesses. Even leased real estate, where rental payments exceed the market value of the fee simple real estate after seven to ten years, amounts to one of the largest operating expenses for businesses. Yet few businesses have professional staff dedicated to the management of their real estate. Consequently, all too often real estate assets are not maximizing their potential yield for their businesses. Not only does this impact corporate income and returns to shareholders, but it also consumes excessive capital, distracts staff from the business core focus, and it often negatively impacts business flexibility due to the lack of proper real estate for their core business operation. Federal Appraisal & Consulting LLC is dedicated to helping its clients maximize their profits and returns, which is more critical than ever in this ever-changing, fast paced, competitive business environment. Here are several actions that businesses can take to maximize their real estate investment yields and values.
1. Strategic Planning Develop and maintain a place for real estate in the company strategic plan. By integrating real estate into its strategic planning, companies can transform their real estate (owned or leased) from an isolated cost center into a strategic asset. Among other benefits, a strategic plan that includes real estate will help companies use space more efficiently, achieve greater flexibility in space utilization and core business operations, and reduce operating costs. While the strategic planning should be coordinated by a senior real estate professional, such as an MAI designated appraiser, overall, this is a team effort. Much of the support for strategic planning must come from numerous sources, including appraisers, consultants, accountants, attorneys, engineers, brokers, and property managers. Federal Appraisal & Consulting LLC provides numerous appraisal and consulting services to large corporations and small businesses, individuals, and their managers and fiduciaries for the purpose of real estate strategic planning. We also offer various issues solutions and management solutions that assist in the strategic planning for real estate. Follow the links above for more information.
2. Surplus Real Estate Eliminate surplus real estate. Surplus assets include un-utilized and under-utilized real estate and can be owned or leased or can even include real estate that does not maximize market share, distribution, or corporate goals. Largely overlooked in large corporations, often small companies fail to address this issue for lack of work force and other priorities. Once identified, a holding/disposition program should be implemented. The program should reflect the goals of the company strategic plan. The program will resolve the surplus through sales, leasing, gifting, conversion/development/restructuring to new uses and to other alternatives as discussed herein. The surplus real estate elimination program should be a team effort, and includes appraisers to identify surplus and set acceptable prices and yields. Federal Appraisal & Consulting LLC provides numerous appraisal and consulting services to large corporations and small businesses, individuals, and their managers and fiduciaries for the purpose of eliminating surplus real estate. We also offer various issues solutions and management solutions that assist in the strategic planning for real estate.
3. Alternatives to Simple Ownership and Simple Leases Employ special financing and transfer structures, such as sale-leasebacks or other structured lease transactions, 1031 exchanges, barter transfers, and securitization (monetization). Such structures help businesses move real estate assets off their books, cut costs and raise capital for new investment or other purposes. Federal Appraisal & Consulting LLC provides numerous appraisal and consulting services to attorneys and accountants for purposes such as deal and financial structuring. See our Accountants and our Attorneys pages.
4. Cost Reduction Strategies & Tactics
1. Review real estate operations, management, and administration. Analyze basic costs, such as contract services, staffing, janitorial, utilities, security, general maintenance, parking, electromechanical and plumbing, elevators and escalators, and preventive maintenance. Employ benchmarking and best practice studies to analyze the performance of a company real estate against its competitors. Review a company’s organization and management structure as it relates to its real estate operations. Federal Appraisal & Consulting LLC provides customized research and consulting services. See our issues solutions and management solutions and research services pages.
2. Conduct Lease Audits. Lease audits examine landlords pass through rents and expenses, such as operating expenses, CAM, real estate taxes, utilities, and insurance, and help companies identify errors and recover overcharges. Audit/analyze all major leases prior to execution and then every several years or as required by the lease. Lease audits should be conducted by an appraiser experienced with accounting records or accountant familiar with lease analysis. Lease analyses, because they are forward looking, should be conducted by appraisers. Federal Appraisal & Consulting LLC provides lease audit and analysis services. See our Lease Audit and Analysis page.
3. Actively manage property taxes. Such management ensures that companies pay no more than their fair share of real and personal property taxes. This should include an annual review of all real estate assets with market values over $3,000,000. Even leased real estate should be reviewed annually, since most leases give tenants rights to appeal assessments. The review should be conducted by an appraiser or a professional with real estate valuation and property tax experience. Federal Appraisal & Consulting LLC provides complete property tax management and appeals services. See our Property Tax and Property Tax Management pages.
4. Segregate costs. Cost segregation improve the depreciation of various elements of a real estate asset and can dramatically increase after-tax cash flows. Conduct a cost segregation study immediately after completing construction or after acquisition. The study should be written by an appraiser or engineer with accounting experience. Federal Appraisal & Consulting LLC provides complete segregation services. See our Cost Segregation page.
5. Manage income taxes. Actively seek out real estate tax savings ideas. We have listed many ideas in this article, but many others exist. Management should maintain relationships with accountants, attorneys, and other real estate professionals, such as appraisers, for the purpose of seeking tax saving ideas for their real estate. See our Tax Savings page for more information on this topic.
6. Maintain vigilance concerning environmental issues, legal issues, and development and use rights issues. Such issues require management activities off-site, often where and with whom managers are not accustomed to operating; however, proper vigilance can avoid non-compliance issues, damage to title and to marketability, and can ensure a proper holding/disposition strategy. Management should maintain relationships with various types or real estate professionals, in particular appraisers and brokers, for the purpose of maintaining information about the market that their real estate is in. This service is most likely to be provided by local professionals: appraisers, brokers, property managers, or attorneys. Federal Appraisal LLC provides customized research and consulting services.
See our issues solutions and management solutions and research services pages.