WALKER BRYCE & ASSOCIATES
COST SEGREGATION & FIXED ASSET OPTIMIZATION SPECIALISTS
Cost Segregation and REITs... Explained.
Improve financial results. Attract targeted investors.
REITs can benefit significantly from cost segregation studies. Cost
segregation minimizes ordinary income to maximize return of capital
and/or capital gain related distributions. It also creates flexibility to
achieve various dividend objectives. The intrinsic benefits of REIT’s
combined with cost segregation can result in significant federal tax
savings for investors.
•A cost segregation study can decrease a REIT’s operating income,
allowing the REIT to distribute additional income as tax-free return
on capital to high tax bracket shareholders or retain additional cash
for investment opportunities.
•A cost segregation study can provide immediate reduction in
ordinary income through increased depreciation in exchange for
more Section 1231 capital gains in the future.
IRS Guided
Cost segregation is a conservative, IRS defined approach implemented
by a Walker Bryce & Associate's team of qualified professionals to
update depreciation schedules for correct component allocation.
Utilizing our experience allows clients to realize considerable cost
efficiencies.
Depreciation Strategy is Key to Dividend Results
•If a higher tax bracket shareholder is targeted, a cost segregation
study enables a REIT to maximize return on capital. This minimizes
the effective tax rate to the investor/shareholder.
•Relationships between dividend payout distributions across ordinary
income versus capital gains versus return on capital are key for
maximizing dividend yield and are often key in the growth of specific
targeted investor groups.
How Do We Work With REITs?
We begin our analysis by determining the strategic role as well as
financial objectives, operating policies and experience of each of the
three groups of funds:
•Private funds
•Funds registered with the SEC but not traded, and
•Funds publicly traded
In particular, we evaluate the REIT’s philosophy regarding growth via
acquisition of new portfolios versus growth via property or portfolio
appreciation and the resulting gains.
A REIT which has recently privatized or is positioning to do so is an
excellent candidate for cost segregation.
We analyze a portfolio in advance of it becoming a REIT. Specifically,
an UPREIT usually consists of an Existing Partnership representing
several properties and a new REIT that is contributing cash to create an
Operating Partnership. Often, it is beneficial for the Existing
Partnership to optimize its cash flow via cost segregation before
integrating all or some of its properties into the Operating Partnership.
REQUEST A FREE ANALYSIS
WORKING WITH REITs
Cost Segregation is an IRS
defined and sanctioned
approach that requires skills
and expertise in
Construction Engineering
and Taxes. The process
allows Commercial Property
owners to REDUCE
FEDERAL TAXES by
accelerating the
depreciation on their
properties by separating real
(essential) and personal
(non-essential) components
of building cost and
reclassifying the
depreciation on the personal
items from 39 years to 5, 7,
and 15 years.
COST SEGREGATION &
1031 EXCHANGES...
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"Cost Segregation is a lucrative tax
strategy that should be used in
almost every major purchase of
Commercial Real Estate."
-Wall Street Journal
June 2003
All properties constructed or
acquired since 1987, such as
car dealerships, fast food
restaurants, office buildings,
apartment buildings, and many
others qualify for cost
segregation and / or ‘catch-up’
depreciation.
Did You Know?
Cost Segregation is an IRS defined
and sanctioned approach that
requires skills and expertise in
Construction Engineering and Taxes.
The process allows Commercial
Property owners to REDUCE
FEDERAL TAXES by accelerating the
depreciation on their properties by
separating real (essential) and
personal (non-essential) components
of building cost and reclassifying the
depreciation on the personal items
from 39 years to 5, 7, and 15 years.
The Cost Segregation Study
allows corporations and
investors to reduce their taxable
income with accelerated
depreciation, resulting in
increased after-tax cash flows.
