With foreign capital pouring into the U.S. real estate market and continued controversy over prohibitive tax initiatives, it’s a wonder any of the accountants The Commercial Observer contacted had time to speak with us for our semiannual accounting issue.
But the experts were happy to chime in about a range of accounting matters currently affecting the real estate industry.
Below, a breakdown of firms making the biggest moves.
Stat of the Week
In honor of this week’s Power 100 rankings of real estate professionals, I figured I would create the first annual Power 5 rankings of the top submarkets by year-to-date leasing activity. To make things even across all 17 submarkets, they are based on leases signed and renewed as a percentage of the submarket’s total inventory. So without further ado, here are the Power 5.
As we all know and dread, it’s tax season. Between that and the sustained political brouhaha over tax reform and the series of fiscal cliffhangers in Washington, it’s a wonder any of the accountants The Commercial Observer contacted had time to speak with us for our semiannual accounting issue.
But the experts were happy to chime in about a range of accounting matters currently affecting the real estate industry. It’s also not surprising given, each accounting firm’s workload, that the industry is rapidly expanding in New York.
Last year, Deloitte relocated to a 430,000-square-foot office at 30 Rockefeller Plaza while many of the city’s other top firms grew their employee ranks, possibly signaling future land grabs. Below, a breakdown of firms making the biggest moves.
When the credit crisis hit and the real estate market all but collapsed, news of disgraced developers became commonplace, their tales more often than not layered with intrigue.
Take Kent Swig, who, after being divorced by his wife, filed an affidavit in May responding to a lawsuit filed by his ex-father-in-law, industry luminary Harry Macklowe, arguing that Mr. Macklowe embarked on a “vendetta” aimed at “starving” him of every last penny.
But as the downfalls of real estate tycoons like Mr. Macklowe, Shaya Boymelgreen, Bruce Eichner and Larry Gluck stack up like so many new developments across Manhattan’s skyline, analysts and the city’s landlords themselves have begun to wonder aloud if there’s a limit to how much real estate can be accumulated.
“A developer’s function is to develop property, and sometimes they develop and develop until they can’t develop anymore,” said appraiser Jonathan Miller of Miller Samuel Inc., a real estate appraisal and consulting firm based in New York City. “Where people fell short was that the market was more powerful than them … the market is brutal, and it has no compassion.”
In a reversal from just two years ago, lenders are once again agreeing to write down outstanding bank loans extended to real estate investors as the economy continues to rebound, analysts said.
As fundamentals such as rental rates and vacancy rates continue to improve, lending institutions such as J.P. Morgan Chase are increasingly willing to green-light write-downs, what accountants describe as a reduction in the book value of the real estate asset in question.
Accountants and financial analysts predict an increase in the use of 1031 Exchanges as tax cuts implemented more than a decade ago by then-President George W. Bush expire at the end of the year and other additional surtaxes threaten to add a 13.8 percent burden to real estate investors.
The tax strategy, so named for Section 1031 of the Internal Revenue Code, could draw renewed interest next year depending on how legislators vote on the tax cuts, which could increase from 15 percent to 23.8 percent if elected officials in Congress allow them to expire, said Kenneth Weissenberg of EisnerAmper.
Death and Taxes 2012
It’s a good time to be a bean counter in the United States. The Bureau of Labor Statistics predicts that the industry will grow by 15.7 percent between 2010 and 2020, with an additional 190,700 accounting and auditing jobs up for the taking during the same period. The job itself, meanwhile, has its perks (the top 10 percent earn $106,880), especially in New York City, where professional accountants earn the highest wages in the country.
Couple that with New York City boasting the most powerful commercial real estate leaders in the land, why wouldn’t an accountant want to count beans for a major brokerage or construction firm? Death and taxes, sure, but life, too!
Here, below, are some of the top accounting firms in the area, including the size of their local and national real estate divisions, in no particular order. Although as many as 25 firms were contacted by The Commercial Observer, not all returned our calls by deadline. As such, some have been omitted entirely.
Death and Taxes 2012
Since at least the early 2000s, carried interest, or the share of profits of an investment paid to an investor in excess of what he contributes to a partnership, continues to be a hot topic among not only real estate owners but hedge fund managers and private equity managers alike. Kenneth Weissenberg, a partner at EisnerAmper, spoke to The Commercial Observer about what commercial real estate owners should expect as the issue courses through Congress this year.