Tax Reform Should Attract New Capital to Commercial Real Estate

According to a recently published piece in Asset Securitization Report, investment in commercial real estate (CRE) will be buoyed by the tax reform legislation signed into law early last year in several ways. One benefit noted is a CRE exemption for the limitation of the deduction for net business interest to 30 percent for adjusted taxable income. Another way in which tax reform will benefit CRE is the option to immediately write-off the cost of various asset purchases (generally property with a depreciation recovery period of 20 years or less). This provision is available until the start of 2023.

A final benefit afforded to CRE, which otherwise was largely rescinded from personal properties, is the right to tax-free, like-kind exchanges. These are particularly important for REITs, which invest directly in CRE and underwrite CMBS conduits. SFIG will continue to monitor the effect that tax reform has on the CRE industry, as well as the broader effect of tax reform across all asset classes and the industry generally.

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