Office Warehouse & Light Industrial

The building was purchased for $2,800,000. An analysis indicated that 17%, or $476,000, should be allocated to the value of the land, with the remaining $2,324,000 allocated to the improvements. The site exterior had been improved with concrete drives and sidewalks, chain link perimeter fencing with automated entry gates, and an underground storm water management system with 18” concrete pipes. In addition to these items we identified two flagpoles, directional signage, and concrete bollards which were protecting the entry gate control systems, all of which qualified for accelerated depreciation. The building interior included a two-story office section totaling approximately 7,500 square feet, with the remaining 25,000 square feet representing the warehouse area. Our walkthrough of the office section identified several components qualifying for accelerated depreciation, including carpet and vinyl flooring, a kitchenette with a special-use sink, disposal, and built-in millwork, and small IT closet with dedicated HVAC service. While the warehouse area was primarily used for storage purposes, we identified some electrical service which was dedicated to supporting warehousing equipment, which included two jib cranes as well as a bridge crane with spans. Large overhead fans were in place to assist with ventilation. As a result of the study we were able to segregate the $2,324,000 improvement/depreciable basis into the following depreciation classes:

5- year: $525,323
7- year: $72,276
15- year: $425,757
39- year: $1,300,644
TOTAL: $2,324,000

With 100% Bonus Depreciation the net first year depreciation was $1,055,365, with a first year tax savings of $390,485 and a payback ratio of 97:1