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What is CAPEX in accounting?
Capital Expenditures (CapEx) Capital Expenditures are, in the context of commercial real estate, funds used by a company to acquire or upgrade physical assets that cannot be expensed as a current operating expense for tax purposes. These expenditures can include a new roof, tenant improvements, or building a parking lot, among others things.
What are CAPEX reserves?
CapEx reserves refer to funds that are set aside for future capital expenditures or long-term capital investments in a property. To create a CapEx reserve, an amount of money, usually on a per square foot or per unit basis, is reserved monthly or annually. CapEx reserves are sometimes required by lenders.
Does CAPEX affect real estate investment performance?
In the case of apartments, CapEx for building expansions were found to be negatively related with property investment performance. CapEx on tenant improvements were found also to be negatively associated with real estate investment performance for all four property types.
What is the difference between CAPEX and capital expenditure?
CapEx Reserves are funds set aside on a per unit or per square foot basis to cover future expenses at a property incurred from property or material improvements. Capital Expenditures do not relate to the day to day operations, so they do not affect the NOI of a property.