See beyond the numbers

Rising Costs Pose Challenges for Real Estate, Construction Companies

As South Florida’s residential and commercial real estate markets continue to rebound, real estate and construction executives are seeing rising input costs, a trend which is expected to continue to pose challenges for the industry over the next several quarters. Marc Feigelson of Kaufman Rossin

Construction expenses went up almost 15% in the last six months of 2013, according to a Miami Today article. Higher costs mean lower profit margins and an increased need to tightly manage cash flow and expenses.

Real estate developers weighed in on this and other industry trends during the Greater Miami Chamber of Commerce’s recent roundtable on “The Evolving Miami Real Estate Market.” The event featured panelists from Mckafka Development Group, Alliance Residential, Terra Group, The Allen Morris Group and Housing Trust Group.

Stephan Gietl, CFO, COO and managing partner of Mckafka Development Group, said he has seen a dramatic increase in construction costs over the last 18 months.  Several developers also voiced concerns about quality and meeting construction deadlines as the current building boom has stretched many subcontractors thin.

The panelists echoed some of the thoughts shared by construction executives in Kaufman Rossin’s construction industry power lunch that was moderated by Tom Hudson of WLRN earlier this year. At the lunch, Traci Miller of Miller Construction said material costs are skyrocketing, in part because of increasing demand from China. Insurance rates are also trending higher, said Lorin Montgomery of Corporate Insurance Advisors.

Rapidly changing costs make it more difficult for developers to prepare accurate pro forma projections, which are critical for developers to properly evaluate their investments.  Failing to adjust pricing formulas to take into account rising costs could wreak havoc on project returns.

So what can you do to manage your bottom line as expenses continue to increase? As margin compression continues in the industry because of increasing costs of land, labor, building materials, insurance and other costs, it’s more important than ever to have a financial professional evaluate your company’s financials to make sure your projects are structured appropriately.

Our accounting and consulting professionals can assist with minimizing your tax burden and advise you on strategies to improve cash flow and operating efficiencies.  Contact me or another member of our real estate and construction industry group to learn more.


Marc Feigelson, CPA, is an assurance and advisory services principal and real estate industry practice leader in Kaufman Rossin’s Miami office. Kaufman Rossin is one of the top CPA firms in the U.S. Marc can be reached at

See beyond the numbers

2014 Outlook, Trends for Commercial Real Estate in South Florida

More than 500 real estate developers, owners, investors, and other industry professionals attended the recent Marcus & Millichap CRE Forum. They shared insights, trends and outlooks for South Florida’s increasingly competitive commercial real estate market.

Foreign dollars keep flowing in

Marcus & Millichap CRE ForumNot surprisingly, Miami continues to be a hot spot for international investors. Great weather, favorable tax structures, diversity and openness to newcomers make this an attractive city for commercial real estate buyers. Investors from Latin America, Asia, Brazil, Russia and Germany have been pouring money into the market, and this trend shows few signs of slowing down this year.

The influx of foreign capital, as well as urbanization by young professionals, has created a comeback for the condo market. But it’s different this time around.

The main differences in this cycle are:

  • Diversified international investment from many regions, not just Latin America
  • Buyers using more cash and lower leverage to purchase
  • Urbanization of the region is driving demand
  • And on the developer side the capital stack continues to shift:
    • Lower loan-to-value ratios and, in some cases, lenders have been completely sidelined
    • Financing via equity and deposits is considerably more prevalent
    • Equity is more patient and resilient to downturns in the market

Retail, retail, retail

It’s all about retail, said panelists during the “The Miami Story: Outlook for Commercial Real Estate 2014” session. Matthew Whitman Lazenby, president and CEO of Whitman Family Development, was one of those panelists. He said his company, which specializes in retail development, management and leasing, is coming off a great year and looking forward to another successful year.

The session titled “The Next (RE)volution: Miami Retail Comes of Age” looked more closely at the retail segment, which is undergoing a paradigm shift.

International buzz about the opportunity for retail development in Miami has led to higher demand for space; that coupled with increased urban density means land prices are going up. As a result, commercial real estate developers have realized they must start using land more efficiently. And larger retailers are starting to downsize their footprints because online shopping has shifted a significant part of their sales from brick-and-mortar locations to digital storefronts.

The traditional model of a large anchor tenant and a sprawling parking lot is being replaced by mixed-use plans with multi-family housing on upper levels, retail on the ground floor and built-in parking.

South Florida also benefits from relatively good employment numbers and a steady stream of tourism, which keeps the local retail segment healthy.

Nitin Motwani, a principal at Miami Worldcenter Associates who was a panelist in the outlook session, is very optimistic about South Florida’s commercial real estate market. Retail demand is strong, the high speed rail is helping, and hotels want to be here, he says.

There are still some questions to be answered, such as what’s the real value of these new mixed use assets and who will buy them (REITs bought the old model). However, the overall sentiment at the CRE Forum about the local commercial real estate market was mostly positive with real estate industry professionals looking forward to the opportunities and challenges 2014 will bring.


Marc Feigelson, CPA, is an assurance and advisory services principal and real estate industry practice leader in Kaufman Rossin’s Miami office. Kaufman Rossin is one of the top CPA firms in the country. Marc can be reached at

Tim Rubin is an assurance and advisory services manager and a director of client services for Broward County at Kaufman Rossin. Tim can be reached at

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South Florida Construction Executives Optimistic About 2014, But Challenges Remain

Construction executives gathered in Boca Raton last week for an exclusive power lunch with Kaufman Rossin and broadcast journalist Tom Hudson of WLRN. They shared their thoughts on the opportunities and challenges facing the South Florida construction industry, and they were optimistic; nearly all attendees said they anticipate more new business in 2014 than they had in 2013.

Terri Richards, CPAThe executives represented a variety of construction industry segments, including architects, land planners, residential and commercial builders, engineers and finishing contractors, as well as professional service companies that serve the industry, including lawyers, insurance brokers and financial professionals.

To start the conversation, attendees responded to this fill-in-the-blank statement: “2014 will be better than 2013 for the South Florida construction industry if _______________.” Here’s what they had to say:

  • If homebuyers feel safe from a national security standpoint, and there are no terrorist attacks, said William Bentz of W. A. Bentz Construction.
  • If we don’t continue to have serious labor shortages, said Todd Flegel of Merit Floors. He and other attendees, including Ursula Chavez-Iafrate of FAE Consulting and Kimberly Rodale of GFA International, said they have had to raise salaries to attract and retain workers, an increasingly common issue in Florida’s construction industry.  When the state’s economy and the housing market took a nosedive during the recession, many construction workers left the state to pursue other industries, such as the oil business. Getting them back has been a challenge.
  • If Florida eliminates commercial lease taxing, the industry will see more growth and more companies will move to the state, said Jonathan Flah of Sisca Construction. “Limiting sales tax on lease proposals would be tremendous,” agreed Ken Dubow, CPA, an entrepreneurial services principal at Kaufman Rossin. And it just might happen. Gov. Rick Scott recently announced that a $100 million reduction in the commercial lease tax is on his legislative wish list again this year.
  • If we are diligent about avoiding the pitfalls that happened last time, said Traci Miller of Miller Construction. Banks shouldn’t lend to people who can’t afford to buy; “there is nothing wrong with renting,” she said.

Other executives cited concerns ranging from bonding to government regulation and increasing costs.

“The biggest financial issue right now is getting payment and performance bonds,” said Todd Flegel. “Kaufman Rossin is helping us try to secure bonding by reviewing our financial statements.”

Material costs are skyrocketing, in part because of increasing demand from China, said Miller. Insurance rates are starting to go up, too, said Lorin Montgomery of Corporate Insurance Advisors.

Government regulation is also adding to costs and slowing down projects, said Brian Cheguis of Cotleur & Hearing, a landscape architecture company based in Palm Beach County, where he says there has been a noticeable increase in code inspections over the last several months. Many attendees echoed this sentiment, citing frustration with the “over-complicated,” “lengthy,” and “inconsistent” permitting and inspection process.

Inspectors have always been inconsistent, said Jeffrey Flegel of Merit Floors. “When things were busy, they didn’t look too closely because they didn’t have time. When things were slower, they looked more closely,” he said.

Despite the issues, attendees seemed optimistic about the industry and South Florida’s recovering housing market and economy.

Kaufman Rossin’s Client Services Principal Steven Demar, CPA, said that in 2007-2009, the accounting and construction industries experienced similar challenges. Many students changed majors and workers moved into other careers when the recession struck. But things are better now. Hiring is picking up, wages are rising, and the local housing market is back, he said. No one knows how long it will last, but – at least for the time being – there are plenty of encouraging signs.

“The momentum is here now,” said architect Ken Hirsch.


Terri Richards, CPA, is an entrepreneurial services manager in Kaufman Rossin’s Boca Raton, Florida, office, and a Certified QuickBooks ProAdvisor. Kaufman Rossin offers QuickBooks consulting services for a variety of industries, including construction. Terri can be reached at

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How Can We Create Sustainable Real Estate Development in South Florida?

South Florida real estate executives recently came together for an exclusive power lunch with Tom Hudson to discuss the state of the industry. They were asked to fill in the end to this sentence:  We can create healthy, sustainable real estate development over the long term, if we ______________.  

Participants gathered at Kaufman, Rossin’s Miami office on June 10, 2013, for a lively discussion moderated by broadcaster Tom Hudson, host of the new WLRN radio program The Sunshine Economy.  The firm is the exclusive sponsor for the program.

The group included developers, real estate investors and other professionals who serve the industry.

One topic that held the group’s attention was the percentage of cash deals in the current environment, with funds coming in from Latin America.  Investors suggested that the current South Florida environment is one they can get behind.  Karl Finegan, managing principal for Aeterna Capital, declared himself “bullish” on South Florida.

Sustainability was also a hot topic. Attorney Jeffrey Bass raised questions about the permitting process, suggesting that new developments have, in the past, been rubber-stamped.  Sustainability, he implied, would require a stronger regulatory hand and a more strategic approach.

“For the great prior successful building boom in Miami, we built for the night,” Bass said. “In order to be sustainable, we need to start thinking about how we’re going to build for the day.” That means we need office space, mixed use developments, the right balance between commercial and residential, and pedestrian-friendly areas, he says.

Stephen Nostrand, CEO of Colliers International and a University of Miami real estate professor, had a different take on the word “sustainability,” speaking of the environmental impact of development and arguing for increased density to create a truly walkable city. We are promoting too much outward growth, Nostrand says.

Margaret Nee, president of Commercial Real Estate Women (CREW), agreed that South Florida needs urban density and less sprawl. And in order to support the local real estate market, we need job growth.

This led to discussion about whether our infrastructure can support that type of growth. Craig Perry, president of homebuilder Centerline Homes argued that building vertically is not only more of a challenge for a developer, but also doesn’t meet the demands of the market.  “People to who move to Florida want a yard and a pool,” he said.

Marc Feigelson, CPA, an assurance & advisory services principal at Kaufman, Rossin, is much more optimistic for the sustainability of his clients’ projects in the current environment.  “They’re much less leveraged than they were a few years back,” he said, noting that he sleeps better at night knowing the clients he serves aren’t carrying huge debt loads these days.

Next week investment executives will join us in Boca Raton for “Kaufman, Rossin Presents: Power Lunch with Tom Hudson” as we address this statement: “The one thing that can accelerate growth in the South Florida investment industry is ______________.”

You can watch videos and view photos of our power lunch series on YouTube and Flickr, and keep an eye on our blog for highlights. We invite you to join the discussion online and keep the conversation going on Twitter by following @KaufmanRossin and @WLRN and using hashtag #SunshineEconomy. Let us know what you think of the radio show and the lunch series!


Janet Kyle Altman is marketing principal for Kaufman, Rossin & Co., one of the top CPA firms in Florida. She serves as a board member for the Women’s Fund of Miami-Dade and as a board member and immediate past chair for Friends of WLRN. Janet can be reached at

See beyond the numbers

2012 Real Estate Tax Appeal Deadlines

Dan WagnerMiami-Dade, Palm Beach and Broward counties have all recently issued their annual Truth in Millage (“TRIM”) notices. It is important to carefully review your notice to make sure your property tax assessments are accurate. Many times, we find that clients’ property assessments are incorrect or inflated. Property owners wishing to appeal the assessed valuations and tax liabilities reflected on their 2012 TRIM notices have a very limited time to do so.

If you feel that your assessment may be too high, the deadlines to appeal your property taxes are approaching:

  • September 17, 2012 – Palm Beach
  • September 18, 2012 – Broward
  • September 18, 2012 – Miami-Dade

When appealing your assessment, you will have to comply with a new requirement to pay at least 75% of the taxes by the delinquency date or have the petition denied. For example, in the case of 2012 appeals, the partial payment of tax must be received by March 31, 2013.

The steps to appeal your property assessment can be challenging. If you need assistance with this process, please contact a Kaufman, Rossin professional or contact the following resources directly who specialize in these tax appeals:

Mitchell Feldman – FBS Property Tax Abatement, LLC
305.350.7360 or

Michelle Cohen – LeaseGuard, Inc.
561.998.2800 Ext. 1 or


Dan Wagner is an associate tax principal in Kaufman, Rossin’s State and Local Tax (SALT) practice. Kaufman, Rossin & Co. is one of the top CPA firms in the country. He can be reached at