Real Estate

Embarking on a major construction or capital project represents a tremendous growth opportunity for your organization. These projects are often among the largest, most complex financial expenditures that an organization may make. For organizations driven by real estate, increasing operating income and asset values are major concerns. As competition and pace of change within the real estate industry continues, our professionals offer solutions that clients might not have considered.

Our services for the real estate industry include:

• Business Property Taxes
• Captive Insurance
• Construction Audit
• Cost Segregation
• Credits & Incentives
• Dispute Advisory Services
• Energy Assessment

Our real estate accountants and advisors have backgrounds in construction management, engineering, real estate litigation support, audit, tax and accounting. They possess a unique blend of talents to help developers, owners, managers, REITs and others in the real estate industry. Their experience allows them to help through the entire lifecycle of a project, from project inception through its completion, and the ongoing tax and accounting compliance.

Click here for a graphic overview of this process.

Project Inception

Our experienced real estate professionals help owners and developers before construction begins. We work closely with management to look at the feasibility of the project and use our experience to identify associated risks and opportunities. We work with the project team to analyze financial risks, economic feasibility, entity structure concerns, tax issues and exit strategies.

We assist our clients in uncovering the various credits and incentives available at the federal, state and local levels to enhance the viability of a project. In particular, we focus on multi-state credit reviews and we help clients obtain the available credits as well as assist in structuring and negotiating incentive packages. These may include tax abatements, training grants, energy incentives or historic credits.

Building Design

We work closely with the owner, project architects and engineers, helping to identify alternate approaches that can maximize tax attributes, such as depreciable lives and 179D energy tax incentives, for which we provide the required certifications.

Our engineers also provide software modeling of building energy use, and consult on the cost effectiveness of various “green initiatives” to help management evaluate payback and ROI.

In addition, we have worked as an integral part of the construction team, assisting with the application of lean methodologies.

Pre-construction Phase

Our construction and finance professionals work with the building owner to analyze and fine tune the construction budget and the legal advisors to help craft a contract that meets the expectations of both the owner and contractor. Our team assists in the negotiation process to develop a favorable contract and identify critical tasks and areas of potential risk. Early involvement in a project often leads to a greater ROI for our clients. Our services include:

• Pre-execution review of contract language
• Pre-construction review of labor billing rates
• Comparison of labor billing rates to industry and regional standards
• Estimation of appropriate uplifts for tax burden and labor fringe costs
• Estimation of appropriate uplifts for insurance, small tools, etc.
• Creation and implementation of a contract audit process
• Implementation of a contract payment application structure, enabling efficient and effective periodic reviews

Construction Phase

Our professionals work closely with the owners, as their advocate, assisting with financial oversight of the construction process. In this role, we provide an ongoing assessment of the financial and cost components of the project, including:

• Validation of labor cost billings and identification of non-compliant charges
• Validation of material purchases and identification of non-compliant charges
• Reconciliation of subcontractor bid process with the contract
• Analysis of equipment lease billings for non-compliant charges
• Reasonableness review of general liability, contractor default insurance, and other applicable insurance and bond charges
• Validation of lien waivers in accordance with contract requirements
• Review of total billings for duplicate payments
• Reconciliation of actual costs to estimated costs

Closeout

In the closeout phase, we work to ascertain whether contract requirements are fulfilled, and help to streamline the final closeout process. In particular, we focus on:

• Appropriate release of liens and satisfaction of contract conditions
• Acceptability of closeout reporting and accounting items
• Appropriate disposition of contingency and allowance funds
• Reconciliation of overhead charges and labor burdens
• Accounting for materials and properties to be provided to or returned to the owner
• Reconciliation of the final billing to actual costs
• Assistance with the recovery process of monies owed to the owner from the contractor

The closeout period is also when we perform the cost segregation analyses and the 179D energy efficiency certification studies. Should events arise where there is a dispute, our team of construction professionals along with our team of experienced litigation support specialists stand ready to assist in working towards an amicable settlement.

On-going Tax and Audit Services

Brown Smith Wallace has deep expertise in the real estate industry with proven results for many satisfied clients in the following areas:

• Entity planning and implementation
• Credits and incentives including historic rehabilitation tax credit planning and audits
• Real estate tax, international and US, federal and multi-state reporting, including sales and use taxes
• Like kind and involuntary conversion tax deferred transactions – 1031 and 1033
• Outsourced accounting needs
• Divestiture planning
• IRS audit representation
• Financial statement audits

Brown Smith Wallace provides a wide range of real estate tax, accounting and audit services such as entity planning and analysis; tax return preparation, encompassing multi-state analysis, credits and incentives, including historic tax credits, sales and use taxes, international taxation, and 1031 and 1033 transactions; divestiture planning, and outsourced accounting. See Tax and Audit services for more information.

ROI Lookback

In the justification of any capital expenditure, there are assumptions regarding the costs and benefits that will be realized. An ROI Lookback compares those assumptions to what is later realized. These analyses are typically performed to help management:

• Improve the capital project justification and approval process, identifying areas where the process may be improved, or pitfalls may be avoided, for future projects
• Identify opportunities where benefits are not being fully realized to help improve the overall ROI on the project. These improvement opportunities often extend to other, similar projects
• Update the performance projections of the audited project. This is often useful in making management decisions or budget projections for the audited project
• Improve procedures, methods, controls and resource utilization for the implementation of future projects

These analyses focus on the financial and operational aspects of the project, but also encompass a broad-based review of the relevant business assumptions, tactics, and ramifications. The analyses attempt to identify the root cause of problems identified.

Analyses may be performed at any time after the project performance has stabilized. For larger projects, this is generally after one full year of operations. Follow-up evaluations may be warranted for projects that experience changing performance over time.