Commercial Mortgages & Cost Segregation

Tom Barrack the chief executive officer of Colony Capital Inc. warned this morning on CNBC that the commercial mortgage market may be on the brink of collapse if banks don’t take action to help borrowers from defaulting. His comments follow the Senate’s passage of a $2 Trillion stimulus deal. While borrowers were encouraged to reach out to their mortgage holders; proactive banks are already contacting borrowers and deferring mortgage payments.

As you correspond with borrowers remind them there may be additional relief available in the form of tax incentives. Passed just over two years ago, the Tax Cuts & Jobs Act included the expansion of bonus depreciation. Bonus Depreciation gives commercial property owners the ability to take a significant portion of a property’s depreciation expense in year one versus over a thirty-nine year period. Cost segregation is the process that helps commercial property owners identify the depreciation expense eligible for bonus depreciation. Simply ask clients if they applied cost segregation to their commercial property. If the answer is no, it may be a viable option to help them meet their short to mid-term cash flow needs. Quotes on the potential cash savings can be facilitated in as little as three business days.

Following the 2008 financial crisis, cost segregation helped many distressed businesses remain liquid and solvent. Let us work together to keep our local businesses afloat and communities employed. Ultimately, we all hope this crisis passes quickly and things return to normal, but it is important to utilize as many tools as possible.