A real estate investment trust (REIT) acquired a 300,000 sq. ft. retail shopping center for $25 million, which included both leased spaces and common areas.
Increase depreciation deductions and improve cash flow for the REIT’s portfolio.
The cost segregation study identified more than $7 million in assets that could be classified as personal property, such as signage, carpeting, and specialized lighting. Additionally, the REIT was able to separate the common area costs into shorter life categories.
By accelerating depreciation, the REIT was able to write off $2.5 million in the first year, which translated into $875,000 in tax savings. This improvement in cash flow allowed the REIT to pursue other acquisitions and reinvest in its properties.
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