Value Of Cost Segregation Study: Multifamily Residential Property

Value Of Cost Segregation Study: Multifamily Residential Property

Renting is more popular than ever – the population of renters in U.S. cities has increased by over 30% since 2000. This has driven a commensurate increase in multifamily construction, and developers are striving to stand out from the pack. Current trends for attracting and retaining residents include time-savings services, flexible wellness zones, and pet-friendly amenities. These “extras” are attractive, but also add to a developer’s bottom line, and many seek out tax savings strategies to offset some of this initial investment.
Project MF is a 457,000SF rental community on the east coast. The facility consists of one four-story building, including 256 apartment units of various configurations. Of these, approximately half are standard apartment rentals, while the remaining units are fully furnished extended stay suites, available with month-to-month
leases. The developers of Project MF wanted to create a place tenants could live, work, exercise, and socialize, and were prepared to provide all the extras. With a depreciable basis exceeding $107M, the property includes a community lounge, conference rooms, café, fitness center, outdoor swimming pool, basement parking garage, and much more.

Our engineer took a deep dive into the beautiful surroundings of Project MF, and was able to carve out a great deal of personal property, while enjoying the view. Amenities Categorized as 5-Year Personal Property:

• Media theatre with 29 specialty seats and projection equipment
• Courtyard grills and fire-pits
• Outdoor sports equipment including stations for giant games of chess and checkers
• Multiple full-sized billiards tables
• Top-of-the-line equipment for three different Fitness Centers – a Strength Center, a Cardio Center, and a Studio for indoor cycling and group fitness classes
• Tubs and rough-in plumbing for the outdoor dog washing stations
• Specialty sinks and cabinetry in the café, where a complimentary breakfast is served daily
• High-end furniture and finishes in the extended stay units
Amenities Categorized as 15-Year Land Improvements:
• Stainless steel lap pool with built-in loungers
• “Tranquility” fountain
• Wooden trellis and pergola structures in courtyard
• Wire-fenced dog run

In total, the our engineer was able to move 18.7% of assets into 5-year personal property, and another 4.1% of assets into 15-year land improvements, resulting in a first-year tax savings of $8,494,266. The “extras” installed for the benefit of tenants brought a lot of financial benefit to the developers as well, and they
were very pleased with the study results.

Have a question? Contact Bruce Johnson, Capstan Tax Strategies.

As a founding partner at Capstan Tax Strategies, Bruce works closely with commercial real estate owners, investors, and accounting firms to provide practical, creative and client-specific solutions.

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