Retail Facility Cost Segregation Study

Approach & Results

Client Profile
A CPA firm contacted McGuire Sponsel to conduct a cost segregation study for their client, who recently acquired a retail facility in Vacaville, California, for approximately $29.5 million. The client sought to optimize their tax strategy for this significant real estate investment.

Process
Our team was engaged to perform the cost segregation study shortly after the building’s purchase on July 27, 2023, and signed the engagement letter on August 1, 2023. Our Fixed Assets team conducted a thorough site visit on September 19, 2023, examining the property in detail and reviewing all relevant documentation. This comprehensive approach enabled precise identification and reclassification of assets into shorter depreciation categories.

Study Results
The cost segregation study was finalized on November 9, 2023, and delivered impressive results for the client. We were able to successfully reclassify over 25% of the depreciable basis from 39-year property into 5- and 15-year property. These personal property assets, all eligible for bonus depreciation, accounted for over $4.5 million of the total project cost.

As a result of this reclassification, the study yielded an increased first-year cash flow of over $1,370,538 for the client, surpassing the original projection by more than $149,000. Furthermore, the net present value of cash flows over the life of the investment exceeded $978,000.