Mid Atlantic Real Estate Journal — December 6 - 19, 2013 — 19A
www.marejournal.com
F inancial D igest By Alex Narcise, Wiss & Co. Real estate owners benefit from cost segregation studies
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f you are purchasing real estate, constructing a new building, expanding
sociated with the acquisition or construction of a building and properly classifies them as either real or personal property. The objective is to shift property (and the associ- ated dollars) from categories which have long tax lives to categories which have shorter tax lives so they can be depre- ciated on an accelerated basis (greater depreciation during the early years of the asset’s life). This minimizes taxable income and thus lowers overall tax obligations. The result is improved cash flow. Real estate entities who own substantial
commercial real estate could defer hundreds of thousands of dollars in tax deferments. Current law allows property owners to capture depreciation retroactively, as far back as 1987, providing the opportunity for even more substantial tax benefits. The types of properties with the best savings potential in- clude (but are not limited to): office buildings, retail stores and shopping centers, indus- trial and manufacturing plants, hotels/motels, apartment com- plexes/buildings, restaurants and medical facilities.
The process of a Cost Segrega- tion Study is thorough, detailed and in-depth but not intrusive and uses an engineering-based approach (as specified by the IRS). The study examines com- ponents such as a building’s walls, flooring, ceilings, plumb- ing, electrical, lighting, telecom- munications, heating and cool- ing systems. It also allocates “soft costs,” such as architect and engineering fees, for all components of the building. The analysis requires engineering and valuation skills in order to be effective and supportable. This means whoever performs
the analysis must have knowl- edge of elements such as con- struction methods, materials, costs, income tax regulations, court cases, revenue rulings, and procedures. Cost segregation does not eliminate the taxes owed. In- stead, taxes owed are deferred to later years which can result in significant savings today. Looking for more informa- tion? Please contact Alex Nar- cise at 973.994.9400 or anar- cise@wiss.com. Alex Narcise is the part- ner-in-Charge, Wiss Real Estate Services. n
or rehabili- tating an ex- isting build- ing, or relo- cating with leasehold im- provements, a cost segre- gation study
Alex Narcise
may reveal that your property can generate bigger tax sav- ings than you realize. A cost segregation study is a strategic tax-saving tool that examines all costs as- Cronheim Mortgage arranges $24m for Avon Marketplace Dev Morris and Andrew Stewart of Cronheim Mortgage have arranged permanent financing of $24 million for Avon Market- place, an upscale regional lifestyle center located in Avon, Hartford County, CT. The 10-year loan was struc- tured with five years of inter- est only, and amortizes over a 30 year schedule thereafter for the sponsor, Avon Mar- ketplace Investors, LLC . AvonMarketplace is owned and managed by an affiliate of DavidAdamRealty, which is among the most experi- enced operators of lifestyle retail in the region. Recent leases at the subject include BurgerFi, TCBY, and East- ern Mountain Sports, which have allowed the center to remain competitive in an evolving market. They cur- rently have Connecticut properties under develop- ment in Norwalk, Stamford, and Westport. The subject property, con- sisting of two freestanding buildings totaling 79,107 s/f on 17.29 acres of land, is currently 100% occupied by seventeen tenants, many of whom are nationally recog- nizable. Avon Marketplace is well positioned along Route 44. The property is highly visible with 790± feet of frontage and easily accessible. The retail market inAvon is sup- ported by a growing popula- tion of 23,778 residents with an average household income of $135,000, within a 3 mile radius of the subject. n
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