REAL ESTATE & CONSTRUCTION

 

REAL ESTATE & CONSTRUCTION

Real Estate

Commercial real estate has been significantly impacted by the Covid-19 pandemic experiencing higher carrying costs due to delayed projects; non-payment of rent; an acceleration of retail store closures; increasing costs related to new health compliance procedures; the shutdown of travel affecting lodging; and a shortage of labor due to health concerns and unemployment policy.  These challenges come on top of issues that existed previously, such as higher land, construction and labor costs.

Getzler Henrich can assist real estate owners and operators with:

Operational analysis –review of operations to identify inefficiencies, opportunities for overhead reductions and service changes

Preliminary collateral assessment – evaluating market competition, physical conditions, operations, and capital needs to discern primary sources of under-performance

Cash management – working with the accounting and finance staff to manage cash by stretching out payables, accelerating collection of receivables and aggressively scrutinizing discretionary outlays

Asset repositioning strategies – analyzing the competitive market and conditions to identify key improvements, functional changes or other opportunities to add value

Collateral recovery/disposition strategy – when necessary, Getzler Henrich can quickly explore options for sale to a compelling buyer, receivership, deed-in-lieu or an open market disposition program, outlining a disposition strategy and assist with the sale

Pre-Bankruptcy and Bankruptcy Plan Formulation – assessing the net equity of a portfolio and proposing a restructuring plan

 

Construction:

The pandemic shut down construction in many parts of the U.S., resulting in severe cash-flow issues and significant inefficiencies related to the stop/start of projects.  Prior to Covid-19, the construction industry was already facing challenges, including Intensifying cost pressures; skilled-labor shortages, higher materials costs, digital technologies and fixed-bid pricing trends. 

Over the next five years the industry is expected to experience an influx of activity due to infrastructure upgrades and higher demand in certain real estate segments, including warehousing, multifamily housing and single-family housing.   Significant strides are being made in the areas such as project management, labor site control, robotics and modularization.  Those companies that have invested in their internal capabilities and have adopted new and creative approaches to their businesses will be the beneficiaries, while those that have not will struggle with higher material and labor costs as pricing becomes more competitive. 

Getzler Henrich has decades of experience working with construction companies, where we have identified and addressed some of the major causes of our clients’ distress, including:

  • Unsound estimating methodologies
  • Operating outside areas of expertise or geographical footprint
  • Inability to convert change orders
  • Poor project execution
  • Poor working-capital management
  • Revenue chasing
  • Lack of focus on liquidity
  • Ownership changes

Ultimately, turnarounds in the construction business are tied to liquidity, work- in-process and vendor leverage, so financial statements do not tell the whole story. Due to percent-of-completion job costing, project-accounting income drivers are estimates based on assumptions which are not always accurate or timely.  Therefore, cost-to-complete needs to be validated, and a cash flow by project that ties to vendor expectations and predictable accounts receivable generation needs to be modeled.

      Case Study

      Moonlight Basin