Cost Segregation Services 1
Who We Are Marshall & Stevens is a recognized leader in valuation. We assist our clients with planning, due diligence, negotiation and reporting issues related to mergers, acquisitions, divestitures, restructurings, financing, insurance placement and tax related transactions. Our in house specialists provide a full complement of valuation related services including transaction advisory, real estate, renewable energy, machinery & equipment, businesses and business assets, both tangible and intangible. 2
Overview At Marshall & Stevens, our Cost Segregation professionals understand the importance of client service. We value each client and assignment, knowing that our work becomes an integral part of your process. Our Cost Segregation professionals provide independent, credible tax consulting and advisory services. We are known for delivering high quality work through an insightful service oriented approach. Since 1932, our professionals have been providing critical valuation and advisory services to our clients. We recognize the importance of your decision making as it relates to tax strategies. With a nationwide team of cost segregation professionals with deep experience in tax advisory services, real estate, and construction, Marshall & Stevens has the ability to provide detailed, thorough and accurate cost segregation reports. Our goal with each report is to deliver the optimal tax benefit while adhering to the guidelines and precedents established by tax law, IRS publications and court rulings. 3
Cost Segregation Services Our Cost Segregation professionals helps buyers and developers of real estate and energy generation projects to optimize their federal taxation strategy. 4
Services Our clients rely on our services on a national basis for a variety of reasons, and our list of services below illustrate the complexity of their needs: Real Estate Services Acquisitions Interior Build Outs Renewable Energy Services Coordination with Appraisal Services Depreciation & Other Cost Recovery New Ground Up Construction IRC Section 48 Investment Tax Credits NNN Investments Real Estate Portfolios & Statistical Analysis Section 1630 Grants Tax Equity Investment Transactions Renovations of Existing Properties Tenant Allowances 5
How It Works Properties are analyzed to identify components that are eligible for accelerated tax depreciation & amortization. By accelerating depreciation expense, tax obligations are deferred to future years, which in turn generates a present value benefit. Commercial properties default to a 39 or 27.5 year depreciable life for tax accounting purposes 39 Yr Property Tax Life By performing a cost segregation analysis, certain property components are identified that are eligible for a 5, 7 & 15 year tax life 5 yrs 7 yrs Cost Segregation Impact on Depreciation 15 yrs Cumulative Depreciation Expense (dollars) 0 10 20 30 40 With Cost Seg Without Cost Seg 39 yrs Year 6
Our Expertise All members of the Marshall & Stevens Cost Segregation team use an engineering based approach to evaluate each project. This results in detailed and accurate reports that are customized to the specifications of the subject properties. We believe that this approach optimizes the benefit and the audit resilience of our reports. 7
Our Experience Health Related Property Types Retail Residential Dental Clinics Dialysis Facilities Hospitals Inpatient Rehab Facilities Medical Office Buildings MRI Clinics Nursing Homes Skilled Nursing Facilities Surgery Centers Auto Dealerships Bank Branches Grocery Stores Hotels & Resorts Mixed Use Properties Net Leased Properties Outlet Centers Restaurants Shopping Centers Apartment Complexes Assisted Living Communities High Rises Manufactured Housing Single Family Home Portfolios Student Housing Office Energy & Infrastructure Projects Biomass Energy Storage Geothermal Energy Generation Hydroelectric Power Generation Solar Energy Generation Wind Energy Generation Industrial & Commercial Assembly Bakery & Food Preparation Cold Storage Distribution Warehouses Manufacturing Storage Warehouses Building Renovations Flex Spaces Office Buildings Tenant Space Build Outs Specialty Data Centers Golf Courses Self Storage Theatres & Amusement 8
Our Clients We honor the confidential nature of our client relationships, and we honor client confidentiality as one of our great strengths. In that spirit, below we list the types of clients that we do business with, without divulging their names. Real Estate Accountants Attorneys Corporations Real Estate Brokers Real Estate Developers Real Estate Investment Trusts Real Estate Investors Real Estate Owners Real Estate Partnerships Renewable Energy Accountants Attorneys Banks Developers InsuranceCompanies Lenders Private Equity Firms Syndicators & Transaction Facilitators UtilityCompanies Tenants 9
Case Study Challenge Office Tower A client recently acquired a 786,000 square foot multi tenant office tower in downtown Milwaukee. The purchase price was approximately $105,000,000 of which $15,000,000 was allocated to land value. The remaining $90,000,000 was allocated to the building value. This Class A office building had a number of law firms as tenants with high end millwork & interior finishes. The building components that can be directly associated with the business & tenant functions or reasonably deemed demountable and/or decorative can be assigned a tax depreciation life of 5 or 7 years.in addition,land improvements such as paving, landscaping, and site lighting can be assigned a 15 year tax depreciation life. This creates a significant tax advantage over the default building tax life of 39 years. Unfortunately, it was not clear how to delineate between the building components and the business / demountable / decorative / land improvement components. For example, the lobby had a custom made built in reception desk and 15 tall crown molding both components that would qualify for a 7 year tax life. However, no detail on the original cost of these items was available. Without a more in depth analysis, the entire $90,000,000 building value wouldhavetobeassignedthe39 year default tax life. Solution Our Cost Segregation engineers were engaged to analyze the property. They conducted a detailed inspection of the common areas and each tenant space, reviewed the available construction drawings, and interviewed key personnel. A detailed report was delivered within a month, identifying and documenting all the components that qualify for a shorter tax life. Results By engaging our Cost Segregation team, the client was able to assign $7,000,000 to the 5 year and 7 year tax depreciation categories. As compared to putting the entire building into a 39 year life, this strategy reduced their tax obligations over the next six years of ownership by $2,300,000 (deferred to future years). The net result was a present value benefit of more than $1,400,000 of which approximately $508,000 was realized with the first subsequent tax filing. 10
Contact us For more information please contact us. Robert Owens, ASA Anthony Vu Director 201 North Franklin Street, Suite 3405 Tampa, FL 33602 813.345.5307 rowens@marshall-stevens.com Director 601 South Figueroa Street, Suite 2301 Los Angeles, California 90017 213.233.1517 avu@marshall-stevens.com 11
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