Real Estate & Construction Accounting Blog

Advisor Insights

For the past several months, our Real Estate and Construction Group has been authoring a monthly column in Builders Exchange Magazine that offers advice to real estate and construction professionals.

So far this year, the following topics have been covered:

• The Benefits of Subprime Bonding  
• Selecting and Implementing Financial Software  
• The Value of a Niche Marketing Plan 
• Lessons Learned From the Construction Industry  
• Cancellation of Debt Income 
• Preventing Financial Fraud 
   

• Health insurers and group health plan sponsors are now prohibited from imposing pre-existing condition limitations on individuals who have not yet attained age 19 and from denying coverage to such individuals based on the existence of a preexisting condition. All such limitations and coverage denials, regardless of age, begin in 2014.
• Health insurers and group health plan sponsors are prohibited from imposing lifetime dollar limits on essential health benefits, and are required to sharply increase annual dollar limits on essential health benefits. Such annual limits will be eliminated starting in 2014.
• Coverage rescissions (except in the case of fraud or intentional misrepresentation) are prohibited.
• Plan-covered and insured individuals are given greater control over choosing a primary care physician and greater access to emergency services and related care.

To read more about these new rules, see this Executive alert from Baker Hostetler.

Go Directly From a 401(k) to a Roth  

Do you want to transfer your 401(k) plan assets to a Roth IRA? Under a recent tax law change, you can make the move in one fell swoop. Previously, it took two separate steps. In addition, another tax law provision taking effect this year may encourage this direct approach.

Click here to read more.

Should You Give to a Donor-advised Fund?

Wealthy entrepreneurs with charitable intentions may choose to set up a private foundation. But a more convenient alternative is gaining in popularity: the donor-advised fund.

This technique may be especially appropriate if you need to devote more time to business activities in the current economic environment. The fund does most of the hard work for you and requires less personal attention than a private foundation. In some cases, you might even convert an existing private foundation into a donor-advised fund.

Click here to read more.

New Law Revamps Student Loan Program

The new Health Care and Education Reconciliation Act of 2010—recently signed in conjunction with the monumental new health care law—includes dramatic reforms in the federal student loan program. This new legislation could affect families of all stripes for years to come.

Click here for a brief summary of four points you should know about.

Aurum Capital Markets Summary 

Please click here for a summary from Aurum Wealth Management Group on the performance of the major market indices through the end of May as well as a recap of the significant events influencing the markets.

This issue of Construction Connections includes the following articles:

• Improving Your New Business Pipeline
• National Outlook

Improving Your New Business Pipeline
By CutterCroix

For many construction companies, today’s marketplace seems harder than ever to survive, let alone thrive.  There are many external challenges impacting the company’s ability to achieve its business goals.  Some of these external forces include the lack of available credit to support new projects, cost increases in equipment, materials and fuel, shortages of skilled trade workers, increased competition, and unrealistic bids (i.e. low or no-profit bids).  So, how does a company grow its business in this challenging environment?  The answer is to improve its critical business systems, in particular (1) the acquisition of jobs (i.e. sales), (2) building the job or work performed, and (3) key support and tracking systems (e.g. accounting, field support/stores, equipment, etc.).  We will focus our attention in this article on the development and management of a systematic and disciplined approach to securing more of the right kinds of jobs.  While the company’s leadership team cannot control the national credit market or how its competitors will bid jobs, it can control how their company:
 

• Manages sales opportunities,
• Communicates and strengthens the relationship with current and prospective customers,
• Tracks the touches with leads, prospects and customers,   
• Develops bids/estimates (e.g. efficiency, consistency and profile),
• Presents professional and timely quotes, and
• Utilizes the time and resources of its managers and employees.

Click here for more of this article.

National Outlook

One of the quirks of a major shift in the direction of the economy is that a little bit of news can influence sentiment in a short period of time. So it’s a bit dangerous to make too much of the raft of good economic news that greeted the start of the second quarter. With that caveat in place, the data and economic surveys, coupled with upbeat earnings reports from the stock market are showing the first signs of a sustained recovery.

Some of the news was good enough to embolden a minority of economists to start talking about a ‘V’ recovery instead of a double-dip ‘W-shaped’ recession.

Among the highlights of the data was a surprising rise in consumer spending during the first quarter, with the 3.5% rate of growth the highest in almost three years. March inflation was virtually flat from February and the core consumer price index was up only 1.7% in the previous twelve months, the smallest rate of inflation since early 2004. China reported stronger than expected growth in the first quarter at 11.9%, signaling better prospects that a global recovery was in higher gear. The Federal Reserve’s Beige Book of economic anecdotes showed that businesses here in the U. S. were reporting ‘somewhat faster’ rates of recovery than expected, even while indicating that loan volume and credit quality continued to decline. And in the bad news is better than worse news category, the NAHB reported on April 15 that its monthly builders’ index had risen four points in March, from 15 to 19.

The most encouraging report from the first quarter was the first significant growth in jobs during March. After mid-April revisions the Labor Department showed a gain of 220,000 jobs in March, approximately 150,000 of which were private sector created. March also marked the third straight month of job gains and the fourth month in the last five. Improving business conditions and consumer spending are only sustainable if steady progress is made in reclaiming the more than eight million jobs lost during the recession.

Click here for more of this article.

Prior issues are available at our E-Newsletter Archive. If you would like to subscribe to this free quarterly e-newsletter, send an email to info@skodaminotti.com.

If you have any questions about any of these articles, post a comment below or please contact our Real Estate & Construction Group at 440-449-6800.

2010 Real Estate and Construction Survey

Skoda Minotti is conducting our 3rd annual survey of the Northeast Ohio real estate and construction industries. Every participant who completes the questionnaire will receive a free copy of the survey results and analysis and have a chance to win a $50 gift card to Dick's Sporting Goods.

The goal of the survey is to provide professionals in the real estate and construction industries in Northeast Ohio with the invaluable insight into their industries.

As an added bonus, one out of every 20 survey participants will be randomly selected to receive a $50 gift card to Dick's Sporting Goods. Note that only the first 100 survey participants will be eligible for the gift cards, so act quickly.

Click here to complete the real estate or the construction survey.

Please feel free to contact Bob Goricki at bgoricki@skodaminotti.com or 440-449-6800 with any questions related to the survey.

Green Building & Green Leasing: What is it, and why should I care?

By Peter D. Brosse, Esq., Meyers, Roman, Friedberg & Lewis

Since the establishment of Earth Day, the creation of the Environmental Protection Agency (EPA), and issues brought to public light by the Oil Embargo in the early 1970's, Americans have become more sensitive to the environment and use of resources, including petroleum. However, we still continue to use many of the same chemicals, gasoline and other resources as we did before, subject, however, to regulation.  Recently, a revolution has begun with new attention to conserving energy and resources. This new "green revolution" is evident with the use of a new vernacular that has entered into our common language. Only a few years ago, such words as "green","sustainable," "renewable energy," "greenwashing," "LEED" and "Energy Star" were rarely, if ever, used.  Today, these are part of everyday speech. Nowhere has this "green revolution" been more evident than in the real estate industry.  Such words as "building green" and "green leasing" are commonly heard and many articles are written about the subject. When discussing green building and green leasing, the question that owners, developers and tenants typically ask is "What is it, and why should I care?"

Is there a difference between "green" and "sustainable?"

Yes, there is a significant difference.  When one considers green building or green leasing, it is really sustainability and not "green" that is the focus. "Green" generally means to be environmentally friendly. To be "sustainable" means more. When one refers to sustainability, it takes into consideration the life cycle of a product or a building. To say a product is sustainable, one needs to look at processes, procedures, materials, how the product is manufactured, and whether the product can be reused or ultimately finds its way to the landfill.

Click here for more of this article.

Residential Real Estate: Making Modifications Work
By Brian Bader

Lew Ranieri, often credited with creating the mortgage-backed securities industry when he was at Salomon Brothers in the early 1980s, has returned to try to save America from the worst effects of that accomplishment. In 2008, Ranieri established the Selene Residential Mortgage Opportunity Fund, raising money primarily from foundations and pension funds, to buy and restructure failed mortgages created to feed the securitization process. In doing so, he is showing how mortgage modifications can work - and why the federal home-owners modification program (HAMP) has done so poorly by comparison.

Click here for more of this article.

CMBS: Special Servicers
By John Tax

Special servicers are the firms trying to correct mortgage loans in the later stages of delinquency or in actual default. Their role has become increasingly important as a result of the tremendous number of troubled loans According to a report by Standard & Poor's (S&P), servicers have been training their staffs to address the unique aspects of these loans, packaged as commercial mortgage-backed securities (CMBS). Almost 50 percent of these unresolved assets are loans originated in 2006 and 2007. Many of the loans are more complex than older ones, which mean it takes longer to resolve them, either by a full workout, a discounted payoff or foreclosure sale. Because of the time period in which they originated, many of the newer loans lack some of the safeguards present in the commercial loans originated before 2004.

Click here for more of this article.

Securitization: Covered Bonds
By Anthony La Malfa

The use of covered bonds as a source of home-mortgage funds is being encouraged by the U.S. Treasury Department and the Federal Deposit Insurance Corporation (FDIC) because they offer much greater certainty for the bondholders with respect to damages and rights.

Covered bonds contain a key element that is missing in many commercial mortgage backed securities (CMBS), i.e., a double layer of protection for investors, with the asset being backstopped by the issuer of the securities. The key difference between CMBS and covered bonds is that the latter requires lenders to retain the default risk. On the other hand, covered bonds fail to provide a good option for private labels because they require a capital base to retain loans on balance sheets and do not provide the higher level of leverage that was available with CMBS.

Click here for more of this article.

Leases: Subordination Clause Could Harm Tenants
By David Tevlin

Commercial lease agreements often are long and complex, with clauses neither party may expect will ever be triggered by events. But sometimes they are. One such is the lease subordination clause, by which the tenant agrees the lease is subordinate to any present or future mortgage that the landlord may put on the property. Accordingly, foreclosure of a mortgage (depending on the law of the state involved) either will automatically terminate the lease or entitle the lender, at its option, to terminate the lease.

Click here for more of this article.

Legal View: Second Circuit Rejects Champerty Defense
By Alvin Arnold

Champerty is not a word often heard these days, even though it is a living doctrine in modern law and on occasion has real bite. In a recent case, the Second Circuit Court of Appeals reversed a trial court ruling that had dismissed a mortgage trust's suit for indemnification for loan losses from the originator. Trust for Certificate Holders of Merrill Lynch Mortgage Investors v. Love Funding Corp., 391 F.3d 116 (C.A.2, N.Y.). However, the reasoning of the decision leaves some room for the distressed debt markets to be concerned.

Click here for more of this article.

Migration: Major Shifts
By Andrew Dalecki

Every type of real estate - housing, business, retail, and office - is impacted by population movements across the U.S. and across its borders. In its most recent report, based on new Census numbers, the Brookings Institution says the past ten years saw the greatest migration slowdown since the end of World War II. Significant events were the housing bubble and the worst recession in more than half a century, as well as major storms and terrorist attacks.

Click here for more of this article.

Cleveland Market Overview

Signs are pointed towards recovery for commercial real estate in Cleveland.  The vacancy rate was down over the previous quarter, with net absorption totaling positive 293,238 square feet in the first quarter.  In fact, with the exception of the Southwest and Downtown's Financial and Warehouse submarkets; all markets posted a positive overall net absorption for the first quarter of 2010.  The Cleveland office market ended 1st Quarter with a slight decrease in the overall vacancy rate, 21.8%, as sublease space outperformed direct deals.  Another good sign; rental rates are stabilizing, ending the first quarter at $17.90 per square foot. 

Nationally, as job losses abate and turn into employment gains across various industries and geographies, more markets are moving towards recovery.  This includes Cleveland because we lacked the high stock of inventory that plagued more developed markets (Las Vegas, Phoenix, Florida).  Cleveland should be in a good position to rebound quicker than other markets and continue to see an increase in activity and deal flow.

More information on the real estate markets in North America is available courtesy of Jones Lang LaSalle .  For questions on this information, please contact Andrew Coleman or J.R. Fairman at (216) 861-7171.

Advisor Insights

Skoda Minotti is conducting our 3rd annual survey of the Northeast Ohio real estate and construction industries. Every participant who completes the questionnaire will receive a free copy of the survey results and analysis and have a chance to win a $50 gift card to Dick's Sporting Goods.

The goal of the survey is to provide professionals in the real estate and construction industries in Northeast Ohio with the invaluable insight into their industries.

As an added bonus, one out of every 20 survey participants will be randomly selected to receive a $50 gift card to Dick's Sporting Goods. Note that only the first 100 survey participants will be eligible for the gift cards, so act quickly.

Click here to complete the real estate or the construction survey.

Please feel free to contact Bob Goricki at bgoricki@skodaminotti.com or 440-449-6800 with any questions related to the survey.

Lower Your Worker's Comp Premiums with the BWC's new Drug-Free Safety Program

The new Ohio BWC Drug-Free Safety Program (DFSP) will be available for all Ohio employers, including previous participants, beginning July 1, 2010. The DFSP is easier to understand and implement, and provides a long-term discount for an unlimited number of years of participation.

There are two levels in the DFSP; eligible employers may elect to join either level of the program:

BASIC LEVEL: Participating non-group-rated employers receive a 4-percent discount by meeting all program requirements. These include completion of a safety review, accident reporting, accident analysis training for supervisors, employee education, supervisor skill-building training, alcohol and drug testing, and a written DFSP policy.

ADVANCED LEVEL: Participating non-group-rated employers receive a 7-percent discount by meeting all of the Basic Level requirements, as well as conducting 15-percent random drug testing annually, and completing a safety action plan. Advanced level participants must also provide a second chance after employee’s first positive test with BWC to specify exceptions.

For more information on how you can sign up for this program, please contact me at rgingerich@skodaminotti.com  or 440-449-6800.

How to Raise Cash for a Business

It "takes money to make money," but some of the conventional sources of cash have dried up for small-business owners. But that does not mean you should give up. If you lack the necessary funds to start a business or you need more money to expand your current operation, there are still several possible ways to raise the cash.

Click here to read more. 

Sweep Away "Nanny Tax" Concern

If you employ a household worker, such as someone to watch young children, you may be liable for the so-called "nanny tax." However, you can sidestep any dire tax consequences if you pay close attention to the rules.

Click here to read more.

Protecting Your Business from Embezzlement

It seems that every other day the newspapers feature a story where a longtime employee has embezzled money from his or her employer. You may sadly shake your head and blithely continue to go about your business. After all, this cannot happen to you ... can it?

Click here to read more.

Aurum Capital Markets Summary

Please click here for a summary from Aurum Wealth Management Group on the performance of the major market indices through the end of March as well as a recap of the significant events influencing the markets.

Not-For-Profit Seminar - June 8th

Skoda Minotti is pleased to announce that we will once again be hosting a not-for-profit seminar featuring nationally recognized not-for-profit expert Dick Larkin of BDO Seidman.

Dick will be presenting a not-for-profit industry update that will contain valuable insights for anyone involved in the not-for-profit industry. In addition to Dick's presentation, two Skoda Minotti professionals will also be presenting on Form 990 as well as an information technology primer for not-for-profit entities.

Seminar Details

• Location: Hilton Garden Inn, 700 Beta Drive, Cleveland, OH
• Date: June 8th
• Time: 8:00 - 11:30am
• Cost: $25
• Registration: Click here - http://www.eventbrite.com/event/674362035 

If you have any questions on the seminar, please contact Bob Goricki at bgoricki@skodaminotti.com or 440-449-6800 with any questions.
 

The Tax Court has held that, under the regs, a land surveying firm is treated as performing engineering services even though it employed no engineers. As a result, the Tax Court found that the firm was a qualified personal service corporation subject to a flat 35% tax rate.

Background. C corporations generally are subject to tax at graduated rates on their taxable income. (Code Sec. 11(b)(1)) The benefits of the graduated rates phase out after taxable income reaches a specified amount. By contrast, qualified personal service corporations are subject to a flat 35% tax rate. (Code Sec. 11(b)(2))

A corporation is a qualified personal service corporation if it meets the function and ownership tests: 

• Substantially all of its activities involve the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting. “Substantially all” means that 95% or more of the time spent by the corporation's employees, serving in their capacity as employees, is devoted to performing such services. Brokerage services, including commission-based financial services, are exempted from consulting services.
• Substantially all (95% or more) of the stock (by value) is held directly or indirectly by: employees performing the services or retired employees who had performed such services; or the estates of such employees, or any other person who, during the two-year period starting with the date that such an employee died, acquired that individual's stock because of his death. (Code Sec. 448(d)(2); Reg. § 1.448-1T(e)(4))

Facts. Kraatz & Craig Surveying Inc. (Firm) is engaged in land surveying in Tennessee. Land surveying is Firm's only activity. It does not employ any licensed engineers, is not associated with any firm that employs licensed engineers, and does not provide any services that State law requires to be performed only by a licensed engineer.
IRS determined a deficiency of $9,762 in Firm's Federal income tax for its tax year ending Dec. 31, 2005. In the notice of deficiency, IRS determined that Firm is a qualified personal service corporation under Code Sec. 448 subject to a flat 35% tax rate under Code Sec. 11(b)(2).

Parties' arguments. Firm argued that it did not meet the function test because it was not engaged in any of the types of services specified in the statute. Firm did not dispute the ownership test.

IRS argued that Firm's land surveying constituted the performance of services in the field of engineering pursuant to Reg. § 1.448-1T(e)(4)(i), which specifically treats land surveying and mapping as engineering.

Firm argued that the reg was invalid. Alternatively, it argued that if the reg is valid, it means that surveying and mapping services, if performed by an engineer, would qualify as services in the qualifying field of engineering. Under this argument, the reg would not apply in Firm's situation since it has no engineers.

Firm said that the Court should look to State law to decide whether surveying is in the field of engineering. Firm also contended that land surveying in Tennessee can be performed only by a licensed land surveyor and that it is not licensed to perform any activity which State law requires to be performed by a licensed engineer.

Court sides with IRS. The Tax Court held that whether a service is performed in a qualifying field under Code Sec. 448(d)(2) is to be decided by examining all relevant indicia and is not controlled by State licensing laws. It found that Reg. § 1.448-1T(e)(4)(i) is supported by the legislative history, by the ordinary meaning of the term “civil engineering,” which encompasses surveying, and by other indicia that surveying is regarded as within the field of engineering. As a result, it concluded that the reg is valid. Accordingly, it held that Firm's land surveying is a service performed in the field of engineering under Code Sec. 448(d)(2) and Firm is subject to the flat 35% income tax rate under Code Sec. 11(b)(2).

The Moral of the Story.  Professional service firms that may provide personal services that subject the Corporation to the flat 35% income tax rate should consider all viable options for organizing the business.  Other options of business organization may allow the stakeholders to take advantage of graduated rates.

References: For the tax rate for qualified personal service corporations, see FTC 2d/FIN ¶  D-1006 et seq.; United States Tax Reporter ¶  114.02; TaxDesk ¶  600,901 et seq., TG ¶  650. Information Courtesy: Thomson Reuters

This issue of Construction Connections includes the following articles:

• 2010 Construction Outlook
• Ten Steps to Safety
• Lost Productivity Damages
• Surety Market Update

The construction market ended 2009 in as bad a shape as it has been in for almost two decades, with non-residential construction plummeting and housing construction at record post-World War II lows. For the overall economy, however, the year ended with a host of indications that recession was morphing into recovery.

Some of the boldest pronouncements came from the National Association of Business Economists (NABE).  NABE conducted its annual meeting in October in St. Louis, and made headlines by declaring that the Great Recession was over. On the heels of their annual meeting NABE published its 2010 outlook. The forecast contained a number of major points:

• Gross domestic product will grow at a 3.2% rate for all of 2010 (this is an upward adjustment from NABE's earlier forecast).
• The jobless recovery will turn to a recovery adding jobs in the first quarter of 2010. NABE's economist panel predicted a decline in unemployment to 9.6% by fourth quarter 2010.
• Household spending will remain sluggish but the housing will gain momentum. Experts forecast a 38% jump in housing starts and an 8% increase in residential investment in 2010 due to low prices and low interest rates.
• Business investment will be the main engine of growth in 2010
• Corporate profits will climb 12.4% in 2010
• The dollar will remain weak. Short-term interest rates will remain below one percent and inflation will not be a problem in 2010.

Click here for more of this article.

Ten Steps to Safety
By Joseph Ventura, Safety Controls Technologies

The construction industry has struggled for many years with the answer to the question, "Can Management Prevent Accidents or Are Workers Responsible for Their Own Actions?" In the litigious society that we live, it has become more important to find someone "at fault" for an accident than it is to find out how we can prevent it from ever happening again.  Consider this:

• 20% of the nation's workplace fatalities occur in the construction industry
• The construction industry has the highest number of occupational injuries - 10% of all industries
• The cost of accidents accounts for approximately 6.5% of all construction dollars spent
• Construction companies with an effective written safety program have 36% lower accident rates, on average
• Maintaining a good safety record for at least two or three years can reduce a company's workers' comp and general liability insurance (GLI) premiums by as much as 40%

Most successful companies subscribe to the theme that "all accidents can be prevented." They institute training and qualification programs, safe performance incentives, and culture change; yet we still see construction accidents that result in lost time, and occasionally death, which is extremely costly in the shortsighted measure of money and, in real terms, impact to the worker's family.

Click here for more of this article.

Constructing a Claim for Lost Productivity Damages
(as seen in our Valuation & Litigation Advisory Insights e-newsletter)

Quantifying the cost of lost productivity when a construction project is disrupted through no fault of the contractor is a difficult challenge. An unanticipated disruption of the project typically causes the contractor to work less efficiently, which can lead to additional labor, equipment and material costs. This article explains that appraisers can use several methods when quantifying lost productivity damages, depending on the particular job's facts and circumstances and also notes that lawyers and damages experts need to work together closely to establish lost productivity and measure it appropriately.

Click here to read this article.

Surety Market Update

In early fall 2009 the National Association of Surety Bond Producers (NASBP) held it national seminar in Washington DC and, as you might imagine, the mood was less than cheery.

The association released its mid-year and 2009 projected results, which showed a 28.9% loss ratio, more than double the loss ratio for 2008. Beyond the negative results, the prevailing feeling that losses will continue to mount throughout the coming year influenced the mood. After five straight years of significant profits the surety industry is bracing for a difficult year in 2010; and it's making the kinds of adjustments that usually accompany a recessionary cycle.

Click here for more of this article.

Prior issues are available at our E-Newsletter Archive. If you would like to subscribe to this free quarterly e-newsletter, send an email to info@skodaminotti.com.

If you have any questions about any of these articles, post a comment below or please contact our Real Estate & Construction Group at 440-449-6800.

Our 2009 Real Estate and Construction Survey results support the belief that there is a lack of work and that the work that is available is bid extremely competitively. 81% of respondents chose "lack of work" as the biggest threat to their business over the next 12 months and 78% of jobs are seeing five or more bidders. 29% are even seeing 10 or more bidders.

For more survey results, click here to read, "Looking at the Future" from the January 2010 issue of Builders Exchange Magazine or contact our Real Estate and Construction Group at 440-449-6800.
 

Our Real Estate and Construction Group has released the results of its second annual survey of the Real Estate and Construction markets in Northeast Ohio.

The surveys cover a variety of topics, including political insight, financial issues, the local economy and industry trends. The survey was developed and analyzed by the Real Estate and Construction Group at Skoda Minotti with assistance from the real estate and construction experts at Ranallo & Aveni, LLC and Lake National Bank.

The survey results were gathered in May of 2009. The survey was conducted via e-mail and was sent out to Northeast Ohio real estate and construction professionals, including the local membership of Associated Builders and Contractors, Building Owners and Managers Association International, Commercial Real Estate Women, National Association of Industrial and Office Properties and Ohio Contractors Association.

To request a complete copy of the survey, please email Roger Gingerich at information@skodaminotti.com. Please use the subject line “Real Estate and Construction Survey.”

Although private construction investments declined 20.6% between September 2008 and September 2009 and other statistics confirm the trouble the construction industry has been facing, there are bright spots, according to the newest Census Bureau figures.  The manufacturing and power construction sectors saw increased investments and publicly-funded investments in construction did increase. Click here to see more construction industry spending statistics.

Regardless of the challenges contractors are facing, more emphasis should be placed on managing overhead.  You also have to be smart, you can’t tear the company completely down at the risk of losing the ability to secure and perform work in the future.  Looking for ways to better manage overhead and improve the financial position of your construction business? Click here for an article sharing Lessons Learned from the Construction Industry or contact our Real Estate and Construction Group at 440-449.6800.
 

If you have purchased, constructed or invested in real estate in the last few years, you may have heard the term “Cost Segregation Study.” Although the overall concept of a cost segregation study has existed for awhile, it is still not widely utilized, nor is it completely understood how it can enhance cash flow and bet the cornerstone of a property owner’s overall tax plan.

To learn how you can take advantage of a cost segregation study, click here to read our article from the latest issue of Properties Magazine.

Interested in learning more about a cost segregation study for your business? Contact the Skoda Minotti’s Real Estate and Construction Group, with offices in Cleveland and Akron, at 440-449-6800 or visit our web site. 

The CPAs, business and financial advisors in Skoda Minotti's Real Estate and Construction Group recently authored an article for Builders Exchange Magazine.

The article summarizes some important accounting and tax provisions that construction professionals need to keep in mind. The article highlights the American Recovery and Reinvestment Act, the Energy Policy Act of 2005, qualified rehabilitation and low income housing tax credits.

To view this helpful article, click here.

Looking for a Cleveland or Akron accounting firm that provides services to the construction industry? Contact the Real Estate and Construction Group at Skoda Minotti at 440-449-6800.

As the demand for new construction continues to dry up, contractors can continue to expect more competition for commercial and industrial construction projects. The reason for this increased competition is that many projects are in holding patterns as tightening credit markets have left the private sector scrambling to find capital. This leaves only those who can self fund projects (i.e. institutions, higher education, hospitals and public projects) seeking bids on new construction.

Unfortunately for contractors, increased competition drives more aggressive bidding practices.  In some cases, contractors are bidding work at a break even or sometimes a loss in order to keep employees working.  This is a dangerous formula that can leave a construction company bankrupt.  All it takes is one bad project to force a contractor out of business.

Crain’s Cleveland Business reported on this trend in their February 9, 2009 article titled “Construction costs’ decline a sign of times.”  The benefactors to these times are the consumers.  Not only is increased competition amongst contractors driving down bid prices, the decreased demand for materials has driven down construction costs.  Steel and fuel prices in particular have fallen recently.  As a result, we are currently in a deflationary market for building.

Discipline is the key to longevity in the construction business.  Contractors that mitigate their contract risk exposure and follow fundamentally sound cost and profit guidelines will survive in the long run.

We’re pleased to announce the availability of our Northeast Ohio Real Estate and Construction Survey. The survey covers more than 40 questions regarding the real estate and construction industries. In addition, the survey offers more in-depth coverage of timely topics in the real estate and construction industries such as green construction, cost segregation and the Economic Stimulus Act.

For a sample of the survey results, please read Survey of Northeast Ohio’s Real Estate and Construction Market.

If you would like to request a complete copy of the survey results, please contact me at 440-449-6800 or rogergingerich@skodaminotti.com.