Commercial Real Estate Projects are, in many respects, the same as residential real estate investments except for their size. A commercial develpoment may well be many times larger in scale and thus require much more money. In this article we examine three of the most significant non-financial issues that an investor should consider before investing in a commercial real estate deal.
1) Selection of tenants
Given that most real estate investors are buying property to generate cash flow and generate profit from asset appreciation some time looking at the tenant mix of a commercial building can determine the potential profitability of a project.
Seeking creditworthy tenants may well assist in gaining finance on good terms from potential lenders - many lenders will make an offer that is based upon the credit rating of the larget tenant. So, finding a project with creditworthy tenants - or, at least, the expectation of finding them is a priority. Analysis of the tenant mix with a view to optimising it is an important part of the buying process.
2) Property Zoning
Success in real estate investment has much to do with land zoning. If zoning should change during redevelopment of a property then there will be significant additional costs associated with changing the use of the property to meet the new regulations. Due diligence is the key here. Hire a real estate attorney to check on the property to find out if there is a likelihood of re-zoning and other legal issues. Use the attorney to check that, for example, all necessary accesses are available and that rights of way have been established and any development will not cause rights of way conflicts.
3) Check Utilities
A thorough inspection of all utilities and their condition is mandatory. Reinstalling electrical systems and piping can be very costly and any defect should be factored into the offer price. In the worst cases, where pipes and wires are emebedded in walls, ceilings and underfloors the cost of renovation may make a project non-viable without complete demolition.
So, spend some time with an appropriate legal advisor, check and optimise the tenant mix and ensure that utilities are in serviceable condition. Although these factors may not be an immediate part of the financial considerations they should be as shortcomings in due diligence can prove expensive and, of course, issues uncovered should be reflected in the purchase price of the property.
Showing posts with label Three. Show all posts
Showing posts with label Three. Show all posts
Sunday, July 8, 2012
Thursday, May 10, 2012
The Three Stages Of Money Laundering
OK, many of us have seen movies or TV shows where counterfeiters throw money into large dryers with poker chips or dice or some other items to make the bills appear to have been out in circulation when in fact they've just been printed. Well, this has nothing to do with money laundering so the three stages of money laundering are NOT:
1) Gentle cycle No bleach
2) Tumble Dry on Low Heat
3) No Starch
And do not confuse stages with steps or transactions. Successful laundering, especially in large dollar amounts, is much more than 1-2-3 done. While some transactions can be very simple, others are complex and take much time and effort in order to avoid detection and that is the ultimate goal to avoid detection. It doesn't do the criminal any good to move and change money if it can be easily traced (and then seized). And it is a game in which the tools and tactics are constantly changing and evolving.
The Financial Action Task Force, FATF for short, is the multinational body that sets the global tone for AML efforts. Formed in 1989, it is based in Paris.The Financial Action Task Force (FATF) has a three-part working definition. Each part basically defined one of the stages:
PLACEMENT introducing the illicit funds into the financial cycle. Even if the funds already were in a bank or brokerage account (as in cases of embezzlement or frauds), it is that first step as illicit funds that we will view as placement. However, the most common example of placement is the drug dealer who needs to get large quantities of smaller currency bills into the banking system.
LAYERING the moving and transferring of the funds in order to disguise the origins and true ownership of the money. This phase can be the most important and the most difficult it truly separates the pros from the amateurs. Here the money can change accounts, form, ownership, country, etc. It can go into and out of trusts and shell companies, it can buy or sell real estate or hard goods, it can move through different jurisdictions anything to confuse or eliminate a paper trail. And finally, there is
INTEGRATION this is when the criminal takes economic advantage of the illicit funds and they appear to have come from legitimate sources. Maybe the drug dealer buys a mansion, or a high end car, or a yacht, or even planes to move drugs and other money (in the case of the planes, they will likely be bought through a front or shell leasing company, who will rent it to a front or shell freight company, so that when a plane is ultimately impounded by law enforcement somewhere, it cannot be traced back to the dealer).
So there they are, the three stages of money laundering: Placement, Layering, Integration.
1) Gentle cycle No bleach
2) Tumble Dry on Low Heat
3) No Starch
And do not confuse stages with steps or transactions. Successful laundering, especially in large dollar amounts, is much more than 1-2-3 done. While some transactions can be very simple, others are complex and take much time and effort in order to avoid detection and that is the ultimate goal to avoid detection. It doesn't do the criminal any good to move and change money if it can be easily traced (and then seized). And it is a game in which the tools and tactics are constantly changing and evolving.
The Financial Action Task Force, FATF for short, is the multinational body that sets the global tone for AML efforts. Formed in 1989, it is based in Paris.The Financial Action Task Force (FATF) has a three-part working definition. Each part basically defined one of the stages:
PLACEMENT introducing the illicit funds into the financial cycle. Even if the funds already were in a bank or brokerage account (as in cases of embezzlement or frauds), it is that first step as illicit funds that we will view as placement. However, the most common example of placement is the drug dealer who needs to get large quantities of smaller currency bills into the banking system.
LAYERING the moving and transferring of the funds in order to disguise the origins and true ownership of the money. This phase can be the most important and the most difficult it truly separates the pros from the amateurs. Here the money can change accounts, form, ownership, country, etc. It can go into and out of trusts and shell companies, it can buy or sell real estate or hard goods, it can move through different jurisdictions anything to confuse or eliminate a paper trail. And finally, there is
INTEGRATION this is when the criminal takes economic advantage of the illicit funds and they appear to have come from legitimate sources. Maybe the drug dealer buys a mansion, or a high end car, or a yacht, or even planes to move drugs and other money (in the case of the planes, they will likely be bought through a front or shell leasing company, who will rent it to a front or shell freight company, so that when a plane is ultimately impounded by law enforcement somewhere, it cannot be traced back to the dealer).
So there they are, the three stages of money laundering: Placement, Layering, Integration.
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