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By AZ Advisory Team, November 13, 2009 8:00 am

How the Technique Works

The process of cost segregation begins at the time of purchase. Accounting professionals should advise clients or employers buying real estate to use an engineering report to segregate assets into four categories. This article focuses on cost segregation for buildings.

The building. Buyers should attempt to maximize a building’s value; any residual value will be allocated to nondepreciable land. Although a building’s separate components (such as its roof) all are considered part of the building itself, there is merit to valuing and depreciating each component separately (albeit, on the same depreciation schedule). This way, if one of the building’s components subsequently becomes worthless, the taxpayer can write it off immediately.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, November 12, 2009 8:50 am

Alex Zylberglait of Marcus & Millichap is proud to offer Square One Center, a one-story Class B medical office building with approximately 17,600 square feet of rentable space. The property was built in 1999 of concrete block. It is located right off West Dixie Highway next to Aventura, Florida. The building has ample on-site parking with a 6 to 1,000-square foot parking ratio.

The property is 100 percent occupied and has a majority of medical tenants. It is located proximate to Aventura Hospital, which recently underwent a $130 million expansion. There is ease of management for an investor with all NNN leases.

Aventura is an affluent suburban submarket in northeastern Miami-Dade County, a mile from the beach. The city is located centrally between Ft. Lauderdale and Miami. Aventura has been a rapidly growing area for several decades as people are drawn to the region’s beaches and excellent year-round climate. Minutes from the property are Highway I-95, Biscayne Boulevard and Aventura Mall.

Property Type: Office
Subtype: Medical Office

Property Name:
Square One Center

Property Address:
20880 West Dixie Highway
Miami, FL 33180

Price: $4,100,000
Size: 17,600 Rentable SqFt

Contact Alex Zylberglait for his expert investment advisory services on this office property Square One Center.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, November 11, 2009 6:40 pm

Alex Zylberglait of Marcus & Millichap Real Estate Investment Services is pleased to present 14705 NW 25 Ct, consisting of approximately 49,000 rentable square feet, located in Opa-Locka, FL. Construction of this concrete block industrial facility was completed in 1966 on a 2.02 acre site. It is a Class B property in its market. There is approximately 9,000 square feet of office space with central A/C. There is also mezzanine storage space in the building. The warehouse has three dock-level doors and four grade-level doors. The clear height is 22 feet. The property is currently vacant. The building was recently renovated in 2004, renovations included interior office build-out and the roof. Opa-Locka is a primarily industrial community located in northern Miami-Dade County. The property’s neighborhood consists of a harmonious mixture of industrial and commercial development. The neighborhood is well located with respect to transportation arteries and employment centers. It is strategically near the Golden Glades Interchange. The interchange connects the Palmetto Expressway, Interstate 95, and the Florida Turnpike. Downtown Miami and the Port of Miami are easily accessible using I-95. Industrial areas in Hialeah and Doral are accessible using the Palmetto. The Miami International Airport is accessible using both I-95 or the Palmetto. Located nearby the property is the Opa-Locka Airport which supports the business aviation community and light cargo traffic to the Caribbean.

Property Address:
14705 NW 25th Ct
Opa-Locka, FL 33054

Property Type:
Industrial Warehouse

Parcel Size: 2.02 AC
Rentable Square Feet: 48,846
Floor Area Ratio (FAR): 0.56 FAR
Zoning: I-2 Industrial – Heavy Manufacturing District
Parking: 22 Spaces
Landscaping: Trees and bushes
Street Frontage: NW 147th ST
Cross Street: NW 25th Ct

Contact Alex Zylberglait for his expert investment advisory services on this distressed asset industrial warehouse in Opa-Locka.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, November 10, 2009 5:09 pm

Real Capital Analytics, Inc. estimates that commercial real estate loans in default, foreclosure, or bankruptcy now total roughly to $130 billion are finding its way out in the market as distressed assets.  Investors will score bargains on office building premium properties. This last quarter of 2009 through 2011 would be the best time for investors to buy at or near cyclical lows. View Alex Zylberglait’s listings – Office and Industrial Buildings in Miami.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, November 9, 2009 10:32 am

Real estate professionals are now trekking to Latin American countries and elsewhere to recruit new investors as international buyers are activating the market and reactivating sales in South Florida.  Foreign investors are learning how to invest in commercial real estate in South Florida / Miami area as they become aware that assets have never before been so depreciated in a country like America. It’s now cheaper to buy an apartment in Miami than in major Latin American cities, such as Buenos Aires, Mexico City and large cities in Brazil. South Florida’s appeal remains strong among foreign jet setters, who are drawn to the beachfront metropolis as much for its palm trees and fine weather as its United Nations-like cultural inclusivity.  There’s also a sense that the market may only get marginally worse before bottoming and mending.  This all add up to a handsome opportunity for thousands of global buyers. Read news report.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, November 6, 2009 3:51 pm

Present-Value Savings

Each $100,000 in assets reclassified from a 39-year recovery period to a five-year recovery period results in approximately $16,000 in net-present-value savings, assuming a 5% discount rate and a 35% marginal tax rate.

CPAs play a central role in the cost segregation process. They are the most likely people, in addition to a good broker, to recommend use of the technique to their clients or employers. CPAs also will review and implement the findings in the required engineering report. This article will guide CPAs through the process by discussing how cost segregation operates, providing a comprehensive example of the technique in a real estate acquisition and outlining its advantages and disadvantages.

Stay tuned for the continuation next week.  Thanks!

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, November 5, 2009 3:04 pm

What Can Cost Segregation Do

• Cost segregation can provide real estate purchasers with tremendous tax benefits from accelerated depreciation deductions and easier write-offs when an asset becomes obsolete, broken or destroyed.
• CPAs can recommend using the cost segregation technique when a taxpayer constructs a building or buys an existing one. It can be used even if a structure was acquired several year s earlier.
• Buyers of real estate should obtain an engineering report that segregates assets into four categories: personal property, land improveme nts, building components and land.
• One of the areas of controversy is the distinction between tangible personal property and a building’s structural components. The tax court has set forth criteria CPAs can use in making a factual determination of whether property is inherently permanent and therefore excluded from the definition of tangible personal property.
• Advantages of cost segregation include the value of front-loaded depreciation deductions, write-offs of building components that need replacement and lower local realty-transfer taxes.

Disadvantages include the cost of the engineering study, the triggering of depreciation recapture a nd understatement penalties for taxpayers that use cost segregation too aggressively.

Purchasers of real estate can gain tremendous tax benefits by using a popular asset depreciation technique called cost segregation. Using this method, buyers view a real estate acquisition as consisting not only of land and buildings but also tangible personal property and land improvements. The tax savings come from accelerated depreciation deductions and possible easier property write-offs. A taxpayer can use cost segregation when constructing a building, buying an existing one, or, in certain circumstances, years after disposing of one so long as the year of disposition still is open under the statute of limitations.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, November 4, 2009 8:10 am

Increase Rent

The value of your commercial real estate property can also be increased by increasing the rent. In reviewing the historical data on a property, take notice of whether the tenants are paying market rent or whether there is potential for a reasonable mark up in rents. Determine how the improvements you make to the property can justify your rent increase. Pay close attention to both the upper and lower level of rents that are being charged for similarly situated types of real estate so you don’t price yourself out of the market.

Also, after repositioning the property or changing its usage and after upgrading with a LEED certification, you could charge a premium for these modifications. The upgrades will make your property more desirable, especially now that rents and tenants are decreasing, compared to properties that weren’t upgraded.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

Comments (4)

By AZ Advisory Team, November 3, 2009 8:10 am

Alex Zylberglait of Marcus & Millichap is proud to offer Square One Center, a one-story Class B medical office building with approximately 17,600 square feet of rentable space. The property was built in 1999 of concrete block. It is located right off West Dixie Highway next to Aventura, Florida. The building has ample on-site parking with a 6 to 1,000-square foot parking ratio.

The property is 100 percent occupied and has a majority of medical tenants. It is located proximate to Aventura Hospital, which recently underwent a $130 million expansion. There is ease of management for an investor with all NNN leases.

Aventura is an affluent suburban submarket in northeastern Miami-Dade County, a mile from the beach. The city is located centrally between Ft. Lauderdale and Miami. Aventura has been a rapidly growing area for several decades as people are drawn to the region’s beaches and excellent year-round climate. Minutes from the property are Highway I-95, Biscayne Boulevard and Aventura Mall.

Property Type:
Office

Property Name:
Square One Center

Property Address:
20880 West Dixie Highway
Miami, FL 33180

Price: $4,100,000
Size: 17,600 Rentable SqFt

Contact Alex Zylberglait for his expert investment advisory services on this office property Square One Center.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, November 2, 2009 11:31 pm

Change the Property’s Intended Usage

Often times, changing the use of a commercial real estate property can drastically change the value of the property. For example, suppose you find an old industrial warehouse in the middle of a bustling epicenter. Instead of keeping it as an industrial warehouse, you can seek a zoning variance to convert that warehouse to a hotel, or a condo building, or an office building, or any commercial use that makes sense for that location.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.