High-end Living in Manhattan! Questions to Ask Before Buying.

Let’s face it.  Manhattan is the real estate center of the universe, especially as it concerns luxury apartments.  The money flows into New York City because rich and successful people around the globe know that it is a cool place live.

If you are planning to buy a nice residence in Manhattan, here is a top ten list of questions you should ask –

  1. What are the views?  This is key because better views command a premium and it is much easier to sell a Manhattan residence if it has good views.
  2. Is the building in a cool location?  The upper east side, especially near Sutton Place is always in vogue.  Any location around Central Park is also primo!  Chelsea, West Village and Soho are hot also.
  3. Is the unit you are considering a condominium or co-op?
  4. Is the building new or has it recently been renovated?  Does it have modern features such as interactive audio-video, gym/spa and security systems?
  5. Does the unit have proper light and air?  Can you see yourself relaxing in it or is it stuffy?
  6. Does the building have a door man?
  7. How far is the nearest subway station?  This may be a very important issue if you plan to commute to work in the city.
  8. Does the apartment come with tax abatement?  If so, how many years are remaining on it?
  9. What is the social scene in the building?  Is it family-oriented or does is it attractive to singles?  Does it suit your lifestyle?
  10. Does the building come with parking?  If parking is important to you, what are the available options?

Be sure to consider all the facts before buying.  Manhattan is an exciting and energized place.  But each building has it’s own unique characteristics.  It must suit you.  After you buy a unit, you will need to adapt to your surroundings.  The building will not adapt to you.

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Information Technology and the Disruption of Global Taxation

We are at a crossroads of taxation in the U.S., as well as globally. The recent spread of anti-Government spending fervor in the U.S. has been spurred by the frustrations of taxpayers who are financially stressed, and are trying to cope with the new economic order. They have tightened their belts. But the Federal Government and the state governments have not yet gotten the message. Left to their own devices, governments will always spend more and tax more. That’s in the DNA of government bodies. Technology has started to change all of that. We have only seen the initial wave of resistance against excessive government spending and taxation. The real storm is brewing and its chief catalyst is information technology.

Technology has increasingly made location irrelevant, especially to corporations. Last week’s 60 Minutes story on how corporations can “relocate” key operations to countries with lower taxes and more attractive tax regulations was an eye opener. A software producer can shift the location of its source code; thereby instantly change its address.

High-speed communications also have made the delivery of services easier, faster and more complex. The delivery and exchange of services give rise to interesting phenomena. Services have exploded in the past decade. From software, to consulting, to professional services, small providers and individuals are now delivering value-added content. How does a government body accurately value these services? How does it track payment for said services? What if services are exchanged and the true cost is masked permanently? Clearly, there is a real threat to the ability of tax collectors to extract the tax revenues they need to sustain their bureaucracies.

The U.S. Government is under severe pressure and risks an ever-expanding migration of American companies to tax havens overseas. How will it cope with this loss of revenue AND loss of jobs?

Key megatrends to follow include –

1. The continued growth of small Internet-based businesses.
2. The inability of government bodies to track the torrential flow of information.
3. The threat that the ongoing economic problems in the U.S. will push dislocated professionals and blue collar workers to become digital entrepreneurs, resulting in a long-term disruption to tax collection conduits.
4. The growing irrelevancy of location and identification of businesses with their geographic origin.

This issue will impact all of us and therefore, I believe we should all be concerned. We know that by nature, governments depend on their ability to impose their will on a normally docile and captive tax base. Technology threatens that base and the means of control that have become increasingly obsolete. I foresee three eventual pathways that may evolve as a response to these megatrends. There are ominous possibilities which are Orwellian.

1. The tax reporting structure evolves globally as all nations realize that stability and enforcement are more important than competing with each other in a ratcheting down of taxes. This results in a “tax-equilibrium” where taxes are equalized globally with relative equality in corporate and personal marginal tax rates.

OR

2. We stay in a two-tiered system where countries such as the U.S. remain high tax environments and struggle to defy the tide of tax migration.

OR

3. The Orwellian nightmare comes true and governments everywhere impose strict sanctions and controls over communications (a la the Chinese model). Governments then control transactions and add taxes at every level. This model would greatly discourage innovation and freedom of information. It would also restrict the growth of business and exchange of services.

The next two years will most likely reveal much about how disruptive information technology will be to the existing tax structures.

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A Project Manager’s View of NYC Real Estate & Construction

 

By:       Darren Schumer, President, Descom Projects

As we near the end of the first quarter of 2011, the level of optimism for the NYC real estate industry is growing. Brokers are busy finding the right space for their clients (and negotiating the best deals).  Architects are busy creating space plans, and are now hiring again as new work has finally filtered through.  However, my brokerage sources tell me that two nagging factors continue to impede their ability to act swiftly. Financing difficulties and protracted decision making continue to delay deals, resulting in delayed construction starts. 

Financing for renovation projects seems to be getting better as funding has become available for 2011 capital projects.  At Descom Projects, we provide timely budgetary information very early during conceptual design.  We provide value by advising our clients on the costs for their overall project, and we apprise our clients on the status of the schedule.  Their lenders and equity partners receive timely and accurate cost and schedule updates, thereby facilitating accurate forecasting.

When we provide budgets for a project, we rely on our experience on past projects and on current market conditions to create a construction and development budget. These include what are known as “Soft Costs” such as design fees, permits and expediting fees, and various consultant fees.  They also include “Hard Costs” such as contractor costs, furniture, security and IT equipment, moving costs, etc. 

Along with budgeting costs, a time frame must be established which corresponds to the project scope. It is driven by current lease expiration, a new lease start date, or dates preferred by the client or tenant. A preliminary schedule is created that includes milestone dates to keep the process moving so opportunities are not lost.  The value of a project management team that works for the owner is that it acts independently on behalf of the owner.  The project management team’s interests are aligned with those of the owner.  This not only benefits the owner, but also the project team, ie., the broker who needs decisions on space and lease terms, and the architect who needs design and provides scope direction.  The project manager can work with the tenant as an advisor to expedite decisions regarding leasing, scope development, construction plans and move-in schedules.

I expect that owners and banks will increasingly rely on project management consultants as providers of value-added services.   If executed properly, this trend should enable owners to realize economic value on their real estate and construction investments.

 

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Information Wants to be Free!

The unrest in Egypt during the last two weeks further demonstrates the power of information technology in promoting and sustaining activism in nations where totalitarianism was deeply entrenched. Mubarek’s knee-jerk response was to cut-off Internet access. What dictators and and tyrants fail to grasp is that choking information is not an intelligent and viable long-term solution. We live in a world where information “wants to be free”. Cutting off Internet access may have slowed down the pace and organization of the protesters, but the price that was paid was very high. The Internet and social media are now part of the economic fabric of global trade and economics. The cost to the people of Egypt for this misstep will be in the billions of dollars.

Those that govern with the intent of controlling information access should study the effects of doing so on their nations’ economic vibrancy. Pervasive information and telecommunications technologies are facilitating change and serving as platforms for dissent. This will frighten those that want to impose their will upon people without really serving them. The good news for proponents of democracy and freedom is that ultimately, the information age will continue to undermine the old guard of autocratic leaders and will promote trade and a free exchange of ideas and innovation.

If leaders insist on tightly controlling information access, they will likely find themselves on the wrong side of history. One example is China, a nation that wants desperately to drive innovation and grow their economic powerhouse. Although the Chinese have learned how to reverse-engineer products and processes, they cannot truly build great leadership in innovation while imposing restrictions on information access and “thought control”. Innovation thrives where the culture is one of free information access and knowledge sharing. Fear and intimidation are the enemies of innovation.

P.S. Last week Goggle and Twitter created an alternative avenue for Egyptians that wanted to express their views but had lost Internet access. A hot line service was established that enabled Egyptians to call in and leave a voice messages. These messages are converted into Twitter posts! That’s innovative!

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Real Estate Podcast > Real Estate Financial Modeling

Podcast: Bruce Kirsch From Real Estate Financial Modeling

JANUARY 19, 2011 BY JASON SANDQUIST 5 COMMENTS

inShare1

bruce_kirsch_REFMBruce Kirsch is the founder and principal of Real Estate Financial Modeling, a solutions provider for Excel-based financial models, training and financial modeling consulting. He began his career at CB Richard Ellis where he marketed high-rise office buildings in New York City for redevelopment. He’s held a few different positions with well established companies working [...]

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China’s real estate bubble economy is in big trouble: Chanos

By Hao Li | 12/11/2010 9:25 PM HKT

Jim Chanos, founder of hedge fund Kynikos Associates, is arguably the most well-known short-seller in the world, having predicted the high-profile demise of companies like Enron. Now, Chanos is setting his sights on China, the world’s second largest economy. In a CNBC interview, he makes a compelling case for why the country is in big trouble

First, contrary to popular assumptions, China is a real estate-driven economy, not an export-driven one. He said real estate construction accounts for over 60 percent of the GDP while exports make up about only 5 percent of it. Moreover, this real estate construction isn’t done to meet actual demand from the market. Instead, they are propped up by distorted incentives and result in empty offices and residential buildings.

To read the rest of the article, please go to -

http://hken.ibtimes.com/articles/91204/20101211/china-s-real-estate-bubble-economy-is-in-big-trouble-chanos.htm

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Real Estate Private Equity in India

By Deepti Chaudhary & Devesh Chandra Srivastava, Mint, New Delhi

Dec. 28–More real estate private equity (PE) investors are turning developers, investing money from their funds into their own projects to shield themselves from the vagaries of the sector.A lack of transparency, the murky nature of land transactions in India and project delays that are holding up their exits are forcing PE investors to take the reins into their own hands…http://bit.ly/eexG1M

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B.I.M. Who Picks Up The Tab? By Michael Avramides, A.I.A

BIM: WHO PICKS UP THE TAB?

Michael Avramides, A. I . A. 1. 2011

Three colleagues walk into a bar: an Owner, a Contractor and an Architect. The Owner orders something quick and practical as time is of the essence.  The Contractor negotiates separately with two different bartenders to gets the best drink for the cheapest price.  And the Architect is worried about the design firm’s liability in the event that the other two end up incapacitated.

Of course I’m only kidding.  We are not like these fictitious stereotypes in a cheap joke.  But in real life, how expensive is Building information Modeling (BIM) for the design and construction industry and who should pay for BIM?  As with most things in life, it depends on how each player benefits.  If there is value, say in saving dollars, or demonstrable efficiency.

Let’s look deeper into each group realizing that we all fit in somewhere between the optimist and the pragmatist; the person running with that “gut feeling” or like our sister state Missouri would insist, having the “show-me” approach.

At one end we have Owners who have decided that BIM is the way to move forward, knowing that BIM is not a panacea and they may even encounter other acronyms along the way, such as COLs (Curves of Learning) or even LOMs (Law of Murphy’s). Meanwhile their colleagues, the “second-mover” strategists, are sitting on the sidelines waiting to see how the numbers really add up.  Who’s right?  They both are.  The optimistic Owner may be paying a premium to have a new project BIM’ed (adding a virtual notch on his virtual belt) but will see the design/construction cycle compressed, and the skeptics can learn on, clearly ignoring inflation, someone else’s nickel.  They, too, will (eventually) benefit.

Architects are similarly disposed to sometimes accept and sometimes avoid risk.  The more adventuresome have already made the investment, and in fact, there is evidence to suggest that hardware, software, training and other BIM requisites are not the imposing costs associated with BIM projects.  BIM is a tool that requires skill and talent in order to be used successfully, however the real costs are not for gearing up a design office.  Historically, managing the design process ate up the design fee.  This has not changed, and similarly the expense is not in creating electronic data, but managing the data.

As designers we’d also like to assume that you can charge a premium for providing this service.  For now we

probably can, but the marketplace has a way of taking perceived premiums, turning them into competitive advantages and finally settling on what we will all consider normal (and expected) business practices.  Regardless, take comfort in the indisputable fact that efficiency will generate profit.  It may happen right away or it may take time, but that’s why Architects are sometimes referred to as planners.  So Architect, plan thyself.  And for those design professionals who are techno-phobes, remember: your like-minded kindred spirits of a couple of decades ago, fearing and never adapting to Computer Aided Design (CAD), were able to push their mechanical pencils (and sometimes their offices) into oblivion.  For the record, no one is asking you to change your thinking, what’s changing is how your thinking gets transformed.  Love it or hate it, in order to be shared, thoughts – even the most brilliant ones — must become digitized.

CONTRACTORS see the fastest return on their BIM investment.  It is not always a given that the designer will provide a BIM model, and even if provided, it may not be everything that a Contractor needs in order to comprehend and undertake the construction process.  Even starting “cold” and using BIM for its fundamental clash detection – previewing physical conflicts between trades — BIM is worth the price of admission.   It then becomes easier to realize how we can adapt these new tools from the old methods and integrate others, like suppliers and subcontractors into an increasingly efficient team.

Now, what goes around comes around.  Not to sound like a Buddhist convert but the BIM model has a reincarnation of sorts for the Owner (please, no hate-mail from Buddhists).  This database, this encyclopedia of the project, can make Ownership easier to manage.  The Facilitates Management discipline can distill highly relevant data from the BIM model.  Did we give Owners another reason to pick up part of the tab?  Yes, and after a few drinks you can try to explain in the best pub tradition of quoting Olde English:  “Ye who benefitith, payeth,” and hope he remembers the next day.

And  by the way if  you do happen to catch me bellying up to the bar, remember, drinks are on me! (really of course, I’m only kidding!).

Michael Avramides is an Architect / BIM Consultant in New York. Please send comments to MCA@Avramides.com

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Supply Chain Integration

There seems to be a critical change occurring in the construction industry supply chain.  Owners, developers, contractors and government agencies are demanding a tighter integration of procurement, coordination, delivery and cost management activities.  The industry is completely reinventing itself with pervasive technologies and web-enabled tools leading the way.  This change is not only inevitable, but it also brings with it, a vast range of opportunities.   With the help of my colleagues and industry associates, this blog will be expanding the supply chain discussion in 2011.

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Staying Positive!

As we approach the end of 2010, I encourage my fellow Americans to appreciate what a wonderful country we live in, and to renew the confidence and positive spirit we are known for. I realize that we have been in an economic malaise, but I am convinced things will get much better. Do not underestimate the entrepreneurial spirit that is embedded in the fabric of America, along with our ability to innovate. That’s the driving force which will fuel our economic resurgence. Have a great 2011!

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