Case Studies

Assignment:
A cooperative housing corporation (the “Corporation”) engaged us to perform an audit. The Corporation, located in Manhattan, owned a parking garage for use by its shareholders. During our review of the predecessor accounting firm’s workpapers, we noticed that a considerable amount of time was spent accounting for and reconciling garage rental income, and amounts due to the garage operator each month.

During the audit, we investigated this matter. Under the terms of the master lease, the garage operator was obligated to pay a fixed monthly rent to the Corporation. The garage operator was than required to bill the shareholders for the rent applicable to the occupied parking spaces. However, the monthly billing became the obligation of the Corporation. In addition, the garage operator’s obligation to pay its monthly fixed rent would be offset by the rent received from those shareholders who occupied the parking spaces. In the event that the amount of rent applicable to the shareholders’ parking spaces exceeded the amount of fixed rent due from the garage operator, the Corporation was required to refund the excess to the garage operator.

Result:
We determined that, in effect, each month the Corporation was providing the accounting for the garage operator, including billing and collections. This function was very time consuming both for the client as well as the auditors at the end of the year. The reason for this arrangement was attributable to a 6% New York City Sales Tax on parking. Under prior law, rent paid directly to a garage operator was subject to Sales Tax. However, if rent was charged by the cooperative housing corporation, the Sales Tax was not applicable. We researched this matter and determined that the law had changed. Rent paid by a shareholder directly to a garage operator under the terms of a master lease was not subject to the 6% Sales Tax.

Based on our findings, we advised the Board on a recommended course of action. Effective immediately, the garage operator began billing the shareholders directly, and paying the Corporation the monthly fixed rent. The client was very appreciative, because we improved their cash flow and also reduced the time, cost and resources required to provide the monthly accounting.

Assignment:
We were retained by a $108 million mezzanine lender and real estate fund to perform all bookkeeping and accounting functions, prepare tax returns, compile quarterly financial statements and provide a big four accounting firm with all documentation supporting the year end financial statements necessary to perform the annual audit.

Result:
The fund outsourced all the accounting and tax functions to Gettry Marcus and therefore did not have to hire an entire internal accounting department, including a Chief Financial Officer and additional staff, which would have incurred significant costs for salaries and benefits. A better fit for the fund was to pay for accounting services strictly based on time and to utilize the expertise of Gettry Marcus to provide these various accounting and tax functions on its behalf while keeping operating costs down. The client has been very pleased with the services provided by Gettry Marcus because it allows management to focus on running the operations of the Fund.

Assignment:
We were engaged to assist our client with the sale of a piece of property, formerly the main manufacturing site of the business. In assisting our client we assessed the risk of the purchaser not performing under a contract, evaluating the liquidly of the combined assets of all related companies through the contract period and long term planning for family succession. To meet the needs of the all the related companies, we met with our client frequently to focus on issues and proposed paths to solutions. Where needed, we brought in outside professionals with specific expertise.

Result:
Due to market conditions and our clients’ desire not to share in any future upside we worked with outside counsel and the client to develop a contract based on a non-refundable deposit if the buyer did not complete the purchase. During the contract period to protect the principal’s family we recommend the purchase of life insurance to protect against a lack of liquidity if the principle died. Additionally, with management we planned to maximize the use of the recording income to satisfy banking covenants. As the transaction closing date was extended, we were able to show our principal that he could do estate planning and transfer shares of the company by taking discounts on transfer of stock interests while maintaining total control.

Gettry Marcus’ total approach to the transaction, from the real estate transaction, to making sure the operating business flourished, to planning for the principal’s family, strengthened the firms relationship with the client.

Assignment:
A Gettry Marcus client, who owns a shopping center in excess of 1 million square feet, requested our firm’s advice and guidance with a potential sale, refinance and restructuring of a partnership agreement. The entire process evolved over a period of 12 months. The client’s objective was to obtain a consultant and trusted advisor who was capable of wearing many hats.

Result:
Our firm was part of numerous discussions and meetings with potential buyers to determine a potential selling price. The client decided to maintain ownership.

Afterwards, we arranged for the successful refinancing with a national company through one of the firm’s trusted mortgage brokers. The partnership agreement needed to be renegotiated, among the existing partners and their legal counsel, to reflect the current operations and understanding of the managing members. There were numerous potential tax traps with the restructuring, including potential technical termination of the existing partnership as well as abiding by complex IRS regulations under 1.704 (b) of the internal Revenue Code.

In this engagement, Gettry Marcus assumed the role of a trusted advisor and “quarterback” of the entire process.

Assignment:
We were asked by one of firm’s largest family-owned real estate clients to structure the partnership allocations with respect to a pending acquisition of a portfolio of properties. The properties would be owned by three generations of the family. The objective was to allocate as much depreciation as possible to oldest generation so as to shelter significant taxable income from other sources. In all cases, however, the client did not want to take a position that would be overly aggressive.

Result:
Using our deep technical knowledge of the very difficult partnership allocation regulations, we came up with a proposal that allowed the partnerships to allocate a percentage of depreciation deductions to the oldest generation that was far in excess of its percentage interest in the partnership. These allocations were reviewed by a “Wall Street law firm” that ultimately agreed with our proposal. Gettry Marcus was able to bring tremendous value to the family.