Revitalized Retail Facility Cost Segregation Study

Approach & Results

Client Profile
A CPA firm contacted McGuire Sponsel to conduct a cost segregation study for their client, a retail property investor who acquired a substantial retail facility in Bowling Green, Kentucky, for $14.8 million in July 2023, with a vision to renovate and modernize the property by year’s end.

Process
Our Fixed Assets team was engaged on March 28, 2024, allowing for a thorough analysis of both the original structure and the recent improvements. We conducted an intensive on-site evaluation on April 4, 2024. This detailed inspection, coupled with an exhaustive review of purchase documents and renovation records, enabled our team to uncover numerous opportunities for strategic asset reclassification, maximizing the tax benefits for this revitalized commercial property.

Study Results
The cost segregation study was completed on April 15, 2024. Through meticulous analysis, our team reclassified over 25% of the depreciable basis from standard 39-year property into more advantageous 5- and 15-year categories. This reclassification encompassed personal property assets totaling more than $2.5 million, all of which qualified for bonus depreciation.

This strategic asset categorization generated significant financial benefits. The study produced an increased first-year cash flow exceeding $931,000, surpassing the initial projection by over $257,000. Moreover, the net present value of cash flows over the investment’s lifespan was calculated to exceed $590,000.