Real risk comes from relying on unproven advice
Investment risk and return are highly correlated. Risk management consists of procedures designed to minimize the effects of a possible financial loss by (1) identifying potential sources of loss, (2) measuring the financial consequences of a loss occurring, and (3) using controls to minimize actual losses or their financial consequences. While it is not possible to eliminate all risk, we welcome the vetting questions from our clients’ trusted legal and accounting advisors.
RealAdvice pioneered the allocation of business combinations for state and local tax minimization. RealAdvice is the preeminent and undisputed industry benchmark leader for a process that will be standard practice within 10 years and is already changing the way that commercial real estate transactions are executed nationwide. And, until our process becomes a standard industry practice, property owners can expect to face challenges from assessors and regulatory agencies. Without proper process execution and documentation, the risk of an adverse outcome can increase substantially. Our track record is pristine.
Why haven’t I heard of this before?
Because for 10 years we have not needed to advertise; all business to date has come through word of mouth. We’re only publicizing what we do now because changing economic conditions have made it significantly more difficult to transact, and our services dramatically mitigate that challenge.
Importantly, we’ve also recently launched a new accounting framework and cloud-based expert system to guide our appraisal process, and these new innovations enable us to serve many more clients, with more accuracy than ever before. The accounting framework is based on FASB ASC 805 for purchase price allocations, and is the current standard for transparency and consistency
Why isn’t everyone doing it?
How can it be legal? Keep reading…
- RealAdvice has a proven track record for this type of work.
To date, RealAdvice has performed more than 1,100 PairedExpert appraisals, for a total consideration of more than $45 billion across 33 states. RealAdvice has hundreds of clients – some of the most prominent names in the industry – that use PairedExpert appraisals as part of their standard acquisition and disposition processes. We have such a large body of successful work that we have innovated the concept of allocation comparables in which intangible asset allocations are benchmarked against hundreds of similar properties. No one else can say that.
It’s more than just how many institutional companies use RealAdvice services, RealAdvice’s success record is unprecedented. In 2022, less than 1% of RealAdvice appraisals went to appeal, and we have a 100% success rate on these administrative actions.
Our methodology has also been repeatedly ratified by the courts. RealAdvice’s value allocation methodology was successfully confirmed on May 22, 2014, in the SHC Half Moon Bay, LLC v. County of San Mateo ruling, and again on July 3, 2018, in Orange County, Florida in Walt Disney Parks and Resorts US, Inc., v. Rick Singh, as Property Appraiser.
- Are you paying for an appraisal or for tax advisory services that include an appraisal?
Although lynchpin to supporting a legally appropriate allocation, the appraisal report alone won’t render a desirable outcome. The technical nuance of legal and regulatory differences, especially from state to state, presents a veritable minefield for the unwitting or inexperienced. Remember the adage, “it’s what you don’t know that kills you.” Without proper guidance, beginning with marketing of the asset and construction of the purchase and sale agreement, the likelihood of a client service failure is imminent. RealAdvice has conducted educational programs on allocations for state and local taxation for some of the nation’s largest legal and accounting firms. No one else can say that.
- RealAdvice results are reconciled to multiple standards for maximum legal, professional, and academic defensibility.
- RealAdvice appraisals identify, isolate, and quantify (1) real property, (2) tangible personal property, and (3) intangible property. This process authoritatively separates taxable and nontaxable elements of the contract price.
- Intangible assets are not taxable in 45 states.
- RealAdvice financial analysis compares the subject property to the similar transactions in the same property use category.
- For all RealAdvice appraisals, the risk rates for 18 separate components of value are analyzed according to the highest academic standards and Daubert legal standards.
- And, keeping property taxes low helps solve the rent affordability challenge many communities are facing, as well as increasing transaction volume and maintaining healthy employment levels.
- What’s so different about RealAdvice appraisal reports?
RealAdvice’s PairedExpert and Authoritative Allocation Methodology have been favorably vetted by the Federal Bankruptcy Court, both Florida Circuit and Appellate Courts, and the Florida Department of Revenue based on methodologies required by the Internal Revenue Service, the Securities and Exchange Commission, and the Financial Accounting Standards Board. RealAdvice is the only company that can claim to have its methodology successfully scrutinized and validated by so many authorities.
- What makes the RealAdvice PairedExpert approach superior?
Copycat appraisers may claim they provide the same service as RealAdvice, but unless an MAI appraiser and a CPA/ABV business valuer have both signed off on the appraised financials, your intangibles are being assessed by an unqualified amateur. Any appraiser can use rules-of-thumb to allocate some of the purchase price to intangibles such as goodwill, in-place leases, or leasing costs, but these allocations are subjective and at risk when audited, unless a certified public accountant with a specialized designation in business valuation has analyzed and signed off on the underlying financials, and the business assets valuation reconciles to the penny with the real property appraised value. Reconciling an objective business valuation with a real property appraisal is a difficult art that required almost twenty years to successfully develop and test. Only accountants who specialize in business valuation are professionally competent to determine and allocate business intangibles, and only accountants can properly defend intangibles allocations; our PairedExpert process does that. No one else can say that.
- What makes the RealAdvice Authoritative Allocation Method superior?
If considering another service provider, you should ask: are the intangibles allocated in your appraisal backed up by reference to all applicable overlapping law, regulations, and professional standards? Would your litigation counsel be able to use that appraisal to support an administrative action or other legal challenge? If not, how are you certain that your appraiser actually knows all the underlying valuation theory, law, regulations, and how to structure an appraisal that is compliant? Does that appraisal only contain a handful of intangible asset categories, or does it address all of the appropriate categories? “Goodwill” is merely an umbrella term for “intangible assets that someone doesn’t know how to identify.”
When considering innovative tax minimization approaches to federal (i.e., cost-segregation) and state/local (i.e., transfer and property tax) the perception of added risk to commercial real estate investment is common and even expected. However, for more than a decade, RealAdvice has invested significant resources to mitigate risk exposure by virtue of state-of-the-art enhancements to traditional valuation methodologies through the development of proprietary intellectual property and learning software systems. RealAdvice appraisals render litigation-ready, cited, defensible documentation in the unlikely case of an audit. RealAdvice has first-hand experience in successfully guiding hundreds of sophisticated investors through the closing and reporting process. RealAdvice’s PairedExpert appraisals are developed via the Authoritative Allocation Method and are specifically designed for overwhelming defensibility and accuracy that far exceed the common standard of care. The efficacy of this method has resulted in exponential growth of RealAdvice’s client base, consisting of some of the world’s largest and fastest-growing commercial real estate investment firms, all of whom rely on RealAdvice to remove any doubt that their assets’ tax liabilities are optimized for maximum returns.