Cost Segregation


Source Advisors


Big Box Retail Center


The $15,000,000 property had a home center, 2 home furnishing tenants, a specialty grocery store, a mattress retailer and 4 food service tenants. There were four buildings enclosing 300,000 square feet. There was approximately 600,000 square foot parking area which included asphalt, concrete, sidewalks, curbs, underground rainwater runoff and landscaping that could be treated as Land Improvements. The interior retail/food service spaces had millwork, data, point-of-sale, vinyl flooring, decorative light, electrical, plumbing and HVAC that could be treated as Personal Property.


The Source Advisors Cost Segregation engineers were engaged to analyze the acquisition cost. They then applied a cost model to allocate the purchase price to various trades and building components. They conducted a thorough inspection of the property where estimates were performed. Key property personnel were also interviewed. A detailed report was delivered, identifying and documenting all of the components that qualify for a shorter tax life.


Source Advisors reclassified 10% or $1,500,000 as 15-year Land Improvements and 15% or $2,250,005 as 5-year tangible personal property. This is toward the high end for a Big Box property. The results were driven up by the specialty grocer and high-end food service tenants.


Percent of reclassified property
Increased Depreciation in 1st year $3,701,925
Increased Depreciation in years 1-5 $3,317,925
Increased Cash Flow in 1st year $1,295,674
Increased Cash Flow in years 1-5 $1,161,064
Net Present Value over 39 years $794,327

*Assuming a 35% tax rate, 6% discount rate, 100% Bonus Depreciation and the property will be held for 39 years