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Strategies & Market Trends : Commercial Real Estate tic.............tic,,, -- Ignore unavailable to you. Want to Upgrade?

To: Perspective who wrote (195)	3/15/2009 5:26:44 PM
From: Elroy Jetson	Respond to of 442

Actual depreciation is far less than straight-line tax-code depreciation, let alone accelerated depreciation. As with a bridge or a petroleum refinery, the periodic maintenance keeps these buildings in top condition, including a certain degree of functional obsolescence especially when this is cosmetic. When a commercial property is razed, this is almost always the destruction of a fully functional building whose use is being intensified and the basis of the old building is included in the new one. The exception to this are sudden changes, such as a new law relating to asbestos insulation. These are taken as a one-time charge rather than depreciation. .

To: Perspective who wrote (195)	3/16/2009 10:28:58 AM
From: Smiling Bob	Respond to of 442

Sorry I'm not invested enough to warrant the time necessary to research The choice cuts have been consumed. Elroy, who seems to be better versed in RE accounting, has answered somewhat From a tax/logic standpoint, I have to agree with his actual vs tax depreciation conclusion. So I would think depreciation would have little relevance in the actual market value, which is what I'd be concerned with. The clock starts ticking every time it changes hands The property would have to have far greater residual value than what the govt says over 39 years. I would think over that time period even under a worse case scenario actual appreciation would offset recognized allowable depreciation. Assessing whether a REIT paid too much for property is another story.