Downtown Dallas Apartment Complex Cost Segregation Study

Approach & Results

Client Profile
A CPA firm recently engaged McGuire Sponsel to carry out a cost segregation study for their client, a prominent real estate investment firm, who recently acquired a substantial apartment complex in downtown Dallas, Texas, for approximately $91 million.

Process
The engagement commenced shortly after the property transaction, which was finalized on December 21, 2023. The formal engagement letter was signed on March 11, 2024. On February 15, 2024, our Fixed Assets team carried out an extensive on-site evaluation, carefully assessing the property and scrutinizing all pertinent documentation. This meticulous approach enabled the precise identification and strategic reclassification of assets into more advantageous depreciation categories.

Study Results
The cost segregation study was completed on March 15, 2024. Through our expert analysis, we successfully reclassified over 15% of the depreciable basis from 39-year property into 5- and 15-year property categories. These reclassified personal property assets, all of which qualified for bonus depreciation, amounted to more than $12 million of the total project value. The study generated an increased first-year cash flow exceeding $3.7 million, while the net present value of cash flows over the investment’s lifespan surpassed $2.7 million.