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GMAC Real Estate
Tenant Alert
In This Issue:
Can this trend
save you money?
Management experts continue to tout the advantages of focusing on core
competencies, and outsourcing can help a company achieve its goals. The
integral role of real estate to the bottom line has sparked a trend in
the last three years: team-based outsourcing.
Turning over the real estate function to outside experts can increase
profits.
Corporate real estate managers have become more vital in this
outsourcing age. These executives protect the company's interests in
real estate transactions.
Effective outsourcing can produce huge gains, as one Manhattan firm
learned. By cutting 70 days from the sales cycle, the company's
outsourcing move added more than two months of unplanned revenue.
When choosing a real estate partner, businesses should consider the
following factors:
- Communication.
How well does the broker listen to and understand client needs? The
team approach makes open communication key to a successful outcome.
- Experience.
The New York real estate market differs dramatically from the markets
in Chicago and Los Angeles. Look for a seasoned firm with a proven
track record.
- Reputation.
Companies should ask for references when interviewing real estate
partners. Does the broker actually deliver the commitment level and
results promised?
Outsourcing
real estate can yield big savings under the guidance of an experienced
corporate real estate manager.
For more information, contact President George
Donohue at (212) 620-2611.
Executive View -
Do you have a real estate plan?
Executives use budget plans to guide their
companies. They use sales and marketing plans to
generate revenue and perhaps incentive plans to
motivate employees.
But few executives have a real estate plan to enhance profitability.
Many people only think about office lease expiration, future expansion
needs, and benefits of leasing vs. buying after it's too late.
Planning ahead, however, can bolster the bottom line. Try the following
exercise:
- Examine
your operating expenses, especially those related to rent,
electricity and real estate tax. Will cutting these expenses improve
your bottom line? Of course.
- Examine
your sales plan. Do you forecast an upward trend? Are you
planning to hire more staff? When? Does your present lease allow
expansion? At what cost?
- Examine
your office environment. Has it become crowded? Obsolete?
Inefficient? Your work environment affects staff productivity. Increasing
productivity increases profitability.
A real
estate professional can help you match your business plan to your real
estate plan.
It's a fact. Whatever the future holds for your company, these
developments will affect your real estate.
Bringing in a real estate advisor early in the planning process will
position your company for maximum efficiency and profitability in any
economic cycle.
For more information, contact President George
Donohue at (212) 620-2611.
Jargon - 1031
(Like-Kind) Exchange
Under Internal Revenue Code Section 1031, a property owner can postpone
taxes due on the sale of qualifying properties. A 1031 Exchange
involves trading one or more properties for one or more "like-kind"
replacement properties.
Like-Kind Property
Properties are of like kind if they are of the same nature or
character. Real properties generally are of like kind whether improved
or unimproved, but real property in the United States and real property
outside the United States are not like-kind properties.
Time Limits
A taxpayer has 45 days after transferring the property to identify
potential replacement properties. The exchange must be completed by 180
days after the transfer.
Does your firm
have enough liquidity?
While business owners may be tempted to use their capital to pay off
debt as soon as possible, doing so is one of the biggest mistakes that
a company can make.
Asset liquidity represents a company's bloodline. "Liquid assets" are
those that can be quickly converted to cash with minimum loss in value.
Liquid assets, including cash reserves and other working capital, allow
a firm to pay operating expenses-and to move on opportunities.
For instance, Microsoft has been reported to maintain more than $20
billion in cash and short-term investments. This capital positions the
software giant to take advantage of strategic acquisitions-or to
weather an emergency.
Liquid assets and real estate
Liquid assets are especially important when investing in real estate.
First, cash has greater purchasing power. If competing for a bid, the
person with cash will most likely win, even with a slightly lower offer
than the competition.
Secondly, some real estate opportunities require a specific percentage
of cash reserves as leverage. If a firm doesn't have adequate liquidity
after making the down payment, it won't qualify to purchase the
property.
Tips for proper leveraging
Businesses that practice proper leveraging typically do the following:
- Refinance
often. Refinancing not only reduces risk, but it can also limit
personal liability when the unexpected occurs.
- Invest
capital into other opportunities. Liquid assets typically yield a lower
return than those with less liquidity, like real estate.
Diversification helps dilute risk, while allowing firms to take
advantage of higher-yield opportunities.
- Deposit
capital into short-term savings. Cash is king. Maintaining adequate
reserves in short-term savings ensures quick access to capital when
needed.
For
more information on financing, contact Christian Deutsch at (212)
620-2619. Or visit the RECAP website at www.recapam.com.
GMAC Real
Estate / IPG New York
520 Eighth Avenue
22nd Floor
New York, NY 10018
Phone: 212-620-2611
Fax: 212-265-8751
GMAC Real Estate IPG is an independently
owned & operated firm.
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