16B — August 29 - September 11, 2014 — Owners, Developers & Managers — M id A tlantic
Real Estate Journal
2014 G overnor ’ s C onference
By Chris Cervelli, CCIM, Cervelli Management Corporation Cervelli Management: providing services to the real estate industry for over 29 years
agement and disposition of distressed assets. We use our own cash and we don’t rely solely on third party invest- ments. We are careful and con- servative in our investment strategies. Some have said this has lead to missed opportuni- ties however we like to think it points to a slow, sure and steady investment plan that will lead to passive income and asset accumulation. More importantly, this strategy has lead to consistently higher returns and has never jeop- ardized our partner’s invest-
ment. Here are a few examples of our investment strategy… Our group purchased a 36,000 s/f office building in Hudson County that had gone dark. Within 90 days of clos- ing we had the building 50% occupied. Within 180 days we had the building 75% occupied. Within 3 years the building was fully leased and financing was secured. We withdrew our equity and continue to enjoy a very healthy cash flow. The value of the building has in- creased over 350% as a result of our business acumen.
Within the last 5 years we purchased a rural underper- forming subsidized apartment building with substantial rent losses in Morris County. Within one year we increased the net income and have been enjoying a positive 8% cash on cash return. This was a result of aggressive, unyield- ing collection policies and cost control measures. The value of the project has increased over 200% as a result of our efforts. Within the last 7 years our group purchased an urban subsidized apartment build-
ing in Jersey City. As a result of our hands on management we substantially increased the net income in just 2 years and within the next year we extracted our equity out of the project. We have been enjoying a steady cash flow for many years. This property is in the heart of an urban area with neighborhood challenges. We like to boast that this prop- erty is in great condition and our lender recently did an inspection and stated it had the cleanest common areas in the county! In addition, our rent-vacancy loss is less than 4%. The value of this asset has increased over 300% as a result of our efforts. We saw the value in these deals that others did not and we unlocked that value with professional hands-on man- agement. If you would like to learn more about our team please visit our booth at the Governor’s Conference on Sep- tember 22nd and 23rd or reach out to us at 201-868-6300. Chris Cervelli is a broker associate at Michael Cer- velli Real Estate, LLC. n continued from page 10B purposes. Recently released proposed regulations under Section 752 make it clear that the IRS will not recognize bottom dollar guarantees as valid guarantees of partner- ship debt. Under the proposed regulations, a partner only bears the economic risk of loss if the partner is liable for amounts that the partnership does not satisfy. The new proposed regula- tions will not be effective until published in final form. However, for those partners who have bottom dollar guar- antees in place at the time the regulations are finalized, a seven year transition rule is provided. In conclusion, the proposed regulations, if finalized in their current form, will pro- vide that a partner is not able to both mitigate his or her economic risk and increase his or her outside tax basis when he or she guarantees partner- ship debt. Accordingly, main- taining a partner’s share of partnership debt will require that the partner take on a real economic burden. n The bottom dollar guarantee...
ervelli Management Corp and Michael Cervelli Real Estate
LLC ha v e been provid- ing broker- a g e , ma n - agement and c on s u l t i ng servi ces to the real es- tate industry for over 29
years. In addition, we have partnered with local inves- tors and institutions in the purchase, rehabilitation, man-
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