A Great Recession… For Accountants!

Mizarro Vic 201x300 A Great Recession... For Accountants!

The Great Recession has seen property values plummet, and commercial vacancy rates soar along with the anxiety of brokers, landlords and developers. But one part of the commercial real estate industry in New York, essential but often overlooked, has continued to flourish: the accounting firms. Real estate clients represent only a fraction of the workload of most firms–including top outfits like Marks Paneth & Shron LLP, Eisner LLP, Rothstein Kass, Anchin Block & Anchin, Friedman LLP, Citrin Cooperman, Rosen Seymour Shapss Martin & Company LLP, Deloitte and Weiser LLP–but their real estate sectors have seen growth.

Why? Simple: Their clients need help, especially when it comes to cost-cutting and revenue-raising.

“Things have been wonderful,” said Ken Weissenberg, a partner and co-chair of the real estate services group at Eisner LLP. “They need me in good times because I can help make them money. They need me even more in bad times because I can save them money.”

Eisner does accounting, taxes, deal structuring and litigation for about 35 real estate groups, handling about 750 commercial properties totaling 5 million square feet, including public companies like First New Jersey, said Mr. Weissenberg. Twenty-five accountants are involved in real estate, only about 5 percent of the overall staff–but there was no dedicated real estate group five and a half years ago. The firm expects 30 percent annual growth in its revenue and client base each year, over the next five years.

Others among the aforementioned top accounting firms with real estate practices expressed similar anticipations of future growth, with or without the Great Recession.

Part of this growth can be attributed to the expanded role of accountants in commercial real estate. Instead of merely balancing the books, some accountants are now involved in the day-to-day operations of various New York buildings.

“The business model for accountants has sort of changed,” said Victor Mizzaro, partner and co-chairman of real estate at Citrin Cooperman, which has about 30 partners involved in real estate. “We’re still doing the basic services-tax returns, auditing. Now we’re more involved in consulting stages. It expanded our role within our clients and made us more valuable for our clients. We’re busier with different consulting projects.”


WHEN IT COMES TO consulting, commercial real estate clients are most interested in two things: cutting costs and increasing revenues-and there are unique approaches that real estate companies take into, um, account when doing so.

Rosen Seymour Shapss Martin & Company LLP, which works with commercial brokerage Newmark Knight Frank, as well as residential ones like Prudential Douglas Elliman and Brown Harris Stevens, prides itself in seeking innovative ways of cost-cutting. They look at payroll and rent expenses and renegotiate insurance rates, and tell clients to use electricity from third parties with cheaper rates and to seek energy credits. They also track labor credits for security guards, which refund $6,000 per guard per year, according to Martin Greenberg, a managing partner, and Neil Sonenberg, the senior partner in charge of real estate operations.

“We look at every legitimate angle for our clients to save,” Mr. Greenberg said. “We’re as busy as we have been, because we’re uncovering these credits. We’re not taking the path of least resistance.”

Rosen Seymour has approximately 165 professionals and 22 principals in the firm, and about a quarter of their business comes from real estate. They project 30 percent annual growth, with 20 percent growth in the real estate sector.

Having said that, the real estate industry is not entirely rosy.

“We don’t see the rental market coming back as of yet-it’s at least a year, year and a half,” Mr. Greenberg said. “It’s a worrisome market out there.”

One of the biggest signs of the downturn is the lack of transactions. Investors are hesitant to open their coffers until there are visible signs of improvement. But the accounting firms chug onward nonetheless.

Marks Paneth & Shron LLP has seen relatively steady work and even a slight increase in the real estate sector. “I think we’re in a period of waiting,” said Vincent Barra, a partner there involved in real estate services. “The transactional activity will improve when the financing markets loosen up a little bit.”

The firm has 100 professionals, including 14 partners, involved in the real estate industry, with clients that include landlords, developers and REITs. Real estate represents about a quarter of the firm’s overall work.


BUT PART OF THE vigor of the accounting firms can be attributed to their resilient essential services, which don’t depend on the ups and downs of the market. These services, instead, pretty much depend on the calendar.

“A lot of our work is core work of audits and tax returns that have to be done regardless,” said Howard Landsberg, partner of real estate services at Weiser.

“We have a combination of steady, recurring, recession-proof aspects,” said Robert O’Brien, vice chairman and U.S. real estate leader at Deloitte. “That provides us with a solid core base.”

These services are also necessary for all segments of the real estate industry, meaning an accounting firm can take on a diverse range of clients. Deloitte is one of the largest accounting firms in the country and one of the “big four” auditors, servicing the likes of REIT Vornado Realty Trust, the brokerage Cushman & Wakefield and private-equity firms such as Blackstone Group and Apollo Real Estate Advisors.

Huge clients to be sure, but Deloitte’s operations are equally massive, with 2,000 people nationwide involved in real estate, and just under 200 in the New York area. They have around 1,000 real estate clients nationwide and around 100 in New York. Yet these efforts are only about 5 percent of Deloitte’s overall revenue, meaning that potentially devastating turns in the real estate market don’t cripple the company. Mr. O’Brien said that Deloitte experienced a dip in work that was tied to transactions in late 2008 and the first three quarters of 2009, but tax work increased.

However, 2010 has been better.

“We’re already seeing some more transaction activity, where there was virtually no transaction activity in 2009,” Mr. O’Brien said. “It won’t be nearly close to 2006 or 2007.” But: “We’re seeing a lot of opportunity among distressed debt and distressed assets.”

The accounting firms’ fortunes are aided by booms-the bullish years from 2003 to 2007 saw them capitalize on their clients’ aggressive expansion, transactions and the free flow of capital.

But in rougher times, like those now, they’ve continued to grow, and have transitioned from staples of the economy to catalysts of cost savings. It’s bean-counting at its purest. And when the next boom comes along, the accounting firms are well positioned to spin that green visor around and pounce.

“You’re going to see some survivors and thrivers coming out of this–existing real estate companies that strengthen their position because of this downturn,” Mr. O’Brien of Deloitte said. “You’ll also see new players. We’re positioning ourselves so we’re the firm of choice for those new players.”



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