Medical Buildings/Hospitals

imagesCAP7OQ6VTiming is everything, especially true in real estate. Now is the time to consider cost segregation for  your medical facility.    

Whether you own or lease a medical building, dental office, clinic or are a commercial real estate broker who works with medical leasing/owning……then you should consider a cost segregation study for your property/client.

Our cost segregation studies have reduced our health care clients’ taxes on a range of buildings, including:

• Hospitals
• Ambulatory surgery centers
• Continuing care retirement communities (CCRCs)
• Dental offices
• Medical facilities
• Cancer and radiology centers
• Physician’s office buildings
• Skilled nursing and assisted living facilities
• Pharmaceutical


Whether you are looking at a commercial loan to purchase or lease a property or to finance improvements, including CS  in the commercial loan process, will improve the quality and security of a loan for the lender and enhance cash flow for the borrower. The impact of including cost segregation can be staggering…..the effective debt service coverage can go from 1.22 before CS to 1.84 after a CS Study. What was once a good loan, becomes a great loan.

saintAnth_MedCtrFor Medical Leased Space:

When negotiating your new lease, it is also very important to incorporate in your lease language that it will allow you, not your property owner to take the depreciation on your space improvements. In most leasing situations, the property owner will contribute money toward your construction budget—Tenant Improvement (TI) allowance—as an inducement to rent the space. This allowance, plus additional funds you invest in your improvements and medical equipment is can bring significant cash flow to you by engaging in a “fully engineered” cost segregation study.

Cost Segregation Examples:

MEDICAL CENTER TYPICAL                                 RETAIL PHARMACY
Cost Basis: $22,157, 85                                      Cost Basis: $1,750,000
Accelerated: $6,425,787 (29%)                        Five-Year Tax Benefit: $345,000
First Year Tax Benefit: $3,656, 787
Five-Year Tax Benefit: $5,060,650

Cost Basis: $2,515,015                                       Cost Basis: $5,541,228
Accelerated: $1,154,059 (45%)                        Accelerated: $1,828,605 (33%)
First Year Tax Benefit: $194,306                        First Year Tax Benefit: $1,015,537
Five-Year Tax Benefit: $403,921                        Five-Year Tax Benefit: $1,345,560


Medical Building: Leased Space
Cost Basis: $1.7 million
Accelerated: $2,530,998 (44%)
First Year Tax Benefit $496,192 (cash value over $150,000)
Five Year Tax Benefit $1,199, 739 (cash value over $425,000)

Corporate HQ: Leased Space
Cost Basis: $459,140
Accelerated: $459,140.42  (79%)

Other Benefits of Cost Segregation

  1. The in-depth look at the building and it’s components, allows a bank to assess potential hidden value
  2. An increase in debt-service coverage, sometimes by 3:1 or more
  3. Real Estate Taxes are reduced commensurate to the reclassification of personal property
  4. Property insurance premiums are lower due to reclassification of personal property
  5. Lower operating expenses
  6. Reduction of risk to bank by requesting the after-tax cash savings be reserved against debt service