Real Estate and Construction Case Studies
It’s not what you have… it’s the way that you have it
An apartment developer client came to AGH with a question of how to best allocate development costs for a new project. AGH worked to structure the transaction to help the client reach their long term investment goals AND their short term sales goals. In the end, our suggestions helped the client meet their business strategy of limiting taxes due from future sales.
Defer the tax to the max through a tax-free exchange
An investor client was about to sell a hotel for a substantial gain, creating a large capital gain tax liability. To help this group preserve its profit, AGH advised them to consider a tax-free exchange, which allows capital gain taxes to be deferred if another income-generating property is purchased within a specific timeframe. The investors decided to buy an apartment building, which not only deferred taxes but allowed them to deploy all of the investment capital to purchase another appreciating asset.
Sharing… and protecting the wealth
A developer in Tennessee wanted to make an employee a part-owner of one his buildings. However, his business was structured in a way that the employee would have become a part-owner of the entire company. AGH helped the developer change his company structure to achieve his goal. We established the new building as a separate operating entity, so the employee became a partner of the building, but did not have a stake in other properties.
Recovering construction costs
An institutional real estate investor asked AGH to conduct a post construction examination for a $75 million real estate project in which they were an equity partner. The study focused on recovering excess construction costs from the client’s former partner in charge of property development. We helped the client narrow their list of items needing to be reviewed and met with the property developer to begin testing. Ultimately, we identified accounting errors associated with how the developer allocated costs between multiple projects, which enabled our client to recover substantial dollars that would have otherwise been lost.
Knowledge in the nick of time
Institutional real estate investors regularly call on AGH to perform due diligence prior to making an investment. AGH has performed due diligence procedures on projects ranging from $25 million to $250 million. Recently, a client about to close on the purchase of a $100 million shopping center project received substantial benefits far outweighing the cost of our services. During the 30-day window for due diligence, when we compared seller records to lease agreements, we discovered that the seller had inadvertently overstated the project’s rental income in their cash flow model. As a result of this discovery, our client was able to negotiate a lower purchase price.
Digging out from under a bad IT system
A home builder came to AGH to find out why it was having so many financial surprises. It turned out that the company’s antiquated technology made it difficult to track increasingly complex costs. AGH identified more sophisticated software and helped incorporate it into the builder’s technology system, making it possible for the company to better track where it spends its money and get a handle on spiraling costs.