Weaver: Beyond the Numbers

On this episode of Weaver Beyond the Numbers, Real Estate Edition, Howard Altshuler, Partner-in-Charge, Real Estate Services for Weaver and Rob Nowak, Partner, Tax Services for Weaver were joined by Andy Freundlich, Partner, Assurance Services for Weaver for a lively discussion on risk assessment and management in real estate.

“This last year has been amazing for lots of reasons. We think about how unprepared we are for everything,” Freundlich said.

Certain risks are known when it comes to things like deferred maintenance or entitlement risk, but building managers, asset managers, developers and tenants also face unknown risks.

How do real estate stakeholders prepare for the unknown? What are the what-ifs that haven’t been accounted for, and how do we prepare for what comes next?

Altshuler suggests that complacency can play a part in not being properly prepared.

“Instead of thinking, ‘That could never happen,’ think ‘Well, that could happen, so how do we deal with it? Is it feasible?,’” he said. “Is there enough benefit in the cost of preparing for risk? How do we assess the likelihood of risk?”

Planning for risks is an essential component of real estate, and having an internal committee brainstorming the “what-ifs” and how to respond to them is key to staying on top of risk management and protecting property from the unknown. That unknown could be anything from a cyberattack to a blackout or even a riot.

According to Freundlich, people are “always thinking about risk management.

“We’re thinking about insurance. We’re thinking about how we can be healthier.”

Looking at different scenarios to see what weaknesses there may be in risk management systems is an important aspect of the real estate business, and getting advice from experts is always a good place to begin.

On this episode of Weaver Beyond the Numbers, real estate edition, Howard Altshuler, Partner-in-Charge, Real Estate Services for Weaver, and Rob Nowak, Partner, Tax Services for Weaver were joined by David Vasquez, Partner, Business Tax Services for Weaver for a conversation about the questions and issues around the Paycheck Protection Program (PPP) first instituted in March 2020.

Weaver’s Rob Nowak, Partner, Tax Services, and Howard Altschuler, Partner-in-Charge, Real Estate Services, know many logistical challenges come into play when ordering something online. But what barriers exist on the backend for returning those online purchases?

Nowak and Altschuler discussed the world of reverse logistics to see if they could figure out what goes on when people need to return an online item and what logistics challenges companies face with a world turning more and more to ecommerce for all of their purchases.

Nowak wondered, if a specific ecommerce platform’s truck was already in a neighborhood dropping off items, why can’t they pick up a return, as well? But, in trying to answer this question, Nowak realized it might come down to logistics that are more complicated than a customer sees.

Altschuler saw specific online shopping trends posing additional challenges for logistics, such as online grocery shopping, where refrigerated goods may be difficult to handle from a return standpoint. In contrast, dry goods may be solvable challenges.

With the rise of online purchasing in traditional brick and mortar establishments like grocery, Nowak recognized the potential need for industrial growth in logistics centers.

“For every 10 logistics facilities, there might need to be one or two reverse logistics facilities just to handle the flow of goods back in, then redistribute those to their warehouses so those items can be resold,” Nowak said.

But, even if additional facilities were required to handle an influx of returns, Altschuler believed they’d utilize smaller spaces. “You’re not going to need a million-square-foot warehouse to hold returns unless it’s a regional depot or something like that.”

Howard Altshuler, Partner-in-Charge, Real Estate Services for Weaver, brought together a panel of Weaver real estate and tax experts, Rob Nowak, Partner, Tax Services, David Nolan, Senior Tax Manager, and Charlie Anastasia, Partner, Tax Services to discuss differed exchanges.

Sellers utilizing a deferred exchange have 45 days to identify a replacement property. There are three methods for property identification.

The three-property rule allows the taxpayer to identify up to three replacement properties of any aggregate fair market value. This method is generally used when there is a reasonable assurance that a suitable single property can be identified and acquired.

The 200% rule allows a taxpayer to identify unlimited replacement properties up to 200% of fair market value of the relinquished property. Taxpayers utilizing this method are typically seeking portfolio diversification.

The 95% rule allows taxpayers to identify an infinite number of properties without regard to fair market value. However, the taxpayer MUST acquire at least 95% of the value of properties specified.

The devastating Texas storm of 2021 has hosts Howard Altshuler, Partner-in-Charge, Real Estate Services for Weaver, and Rob Nowak, Partner, Tax Services for Weaver thinking about preparing for the next unknown. After all, the area has dealt with two in the last 12 months.

“We need to stop thinking things won’t happen,” Nowak urged.

While a pandemic and natural disaster aren’t exactly preventable, organizations can be more proactive than reactive. Altshuler shared his findings about data centers and how they fared well in the storm. “They have redundant systems and think about stuff nobody else does, which is what we need to do.”

Integrating redundancy, the hosts noted, has many implications, from design to codes to architecture. Much of the time, most think the costs outweigh the benefits, but that’s looking less and less true after every disruptive event.

Nowak brought the conversation back to tax liability. “There is a deduction available for unreimbursed casualties and losses, and it’s easier to submit these in a federally declared disaster. Documenting these losses is important, so check with your tax advisor if you sustained a loss.”

Gone are the days when remote sellers can afford to procrastinate their obligations to register and begin filing sales tax returns under the economic nexus laws requirements. 

On this episode of Weaver Beyond the Numbers, Real Estate edition, Howard Altshuler, Partner-in-Charge, Real Estate Services for Weaver, and Rob Nowak, Partner, Tax Services for Weaver, brought their dynamic duo powers to some hot real estate topics; what to do with excess office space made available due to the effects of the pandemic, and the growing needs of single-family workforce housing. One solution beginning to pop up in some areas is the conversion of office space to living space. But just because conversions are taking place, that doesn’t necessarily mean it’s a full solution to the problem.