Overview
A 95,000 SF lifestyle center in Los Angeles. Open-air retail with restaurant tenants, distinctive architecture, surface parking and pedestrian-friendly common areas. 2016 construction. Acquired for $24,000,000 in 2024.
The Cost Seg Smart engineered analysis identifies $4,631,578 in accelerated bucket components (31.3% of the $14,793,600 depreciable basis after a 38.4% land valuation).
What the analysis identifies
The 95,000 SF property carries the component density typical for a lifestyle center. The component inventory pulls the following share into accelerated buckets:
- storefront systems, decorative interior finishes, track and display lighting
- tenant-specific HVAC and refrigeration, point-of-sale infrastructure
- the parking lot (typically the largest 15-year line in retail), pylon and monument signage, site lighting, landscaping
- decorative wall coverings, specialty tile, and resilient flooring throughout tenant spaces
Item-level engineering documentation supports each classification — photographs of mounting details, mechanical schematics for HVAC and plumbing classifications, electrical schedules for dedicated-circuit identification.
Reclass breakdown
| Bucket | Amount | % of basis | MACRS section |
|---|---|---|---|
| 5-year personal property | $2,661,160 | 18.0% | Section 168(e)(3)(B); Section 1245 |
| 7-year specialty | $150,048 | 1.0% | Section 168(e)(3)(C); Section 1245 |
| 15-year land improvements | $1,820,369 | 12.3% | Section 168(e)(3)(E); Section 1250 |
| 39-year structural | $10,162,022 | 68.7% | Section 168(c); Section 1250 |
| Total depreciable basis | $14,793,600 | 100% |
Land value (excluded from depreciable basis): $9,206,400 (38.4% land allocation, Los Angeles CA market).
Year-1 federal tax savings
Assuming 100% bonus depreciation per the One Big Beautiful Bill Act (OBBBA, 2025), the full accelerated bucket components are deductible in year 1:
- Accelerated bucket total: $4,631,578
- Federal tax savings at 37% top bracket: $1,713,684
For a passive investor, the deduction creates a passive loss offsetting passive income. For a taxpayer qualifying as a real estate professional under Section 469(c)(7), the deduction offsets active income — including business operating income from non-real-estate sources.
Methodology applied
The engine applied the following parameters:
- Era profile: 2016 build, finish density and component weights calibrated to construction-era patterns
- Geo factor: 1.13 (Los Angeles MSA, metro calibrated)
- Component count: 46 distinct line items in the inventory
- Indirect cost multiplier: 1.25 (standard 25% indirect uplift covering soft costs, contingency)
- PPI multiplier: 1.04 (BLS construction cost index applied from build year to acquisition year)
- QC status: PASS (engineered analysis cleared all 16 quality-control checks)
The land valuation used the statistical source. Properties where the county assessor record is within reliability tolerances may produce a different land allocation; the engineered methodology applies the most defensible source available.
Audit considerations specific to this property
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Storefront classification: Storefront entries and display windows that can be removed without damage to the structural opening qualify as 5-year personal property. Permanent curtain wall systems do not. The engineering documentation distinguishes.
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Tenant improvements vs landlord improvements: TIs paid by the landlord and meeting the permanence test are 5-year for the landlord. TIs paid by the tenant are the tenant’s depreciation. The audit examines lease and capital-improvement documentation.
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Parking lot allocation: The full parking lot, including subbase, asphalt, striping, and curbs, is 15-year land improvement. The cost allocation reconciles against site work line items in the construction or acquisition documents.
Return profile
| Metric | Value |
|---|---|
| Study cost (typical) | $10000–18000 |
| Year-1 federal tax savings (37% bracket, 100% bonus) | $1,713,684 |
| Year-1 ROI on study fee | 95×–171× |
| Total accelerated depreciation pulled forward | $4,631,578 |
The ROI calculation reflects gross year-1 tax savings against the typical study cost range. Net present value of the strategy depends on hold period (longer holds capture more time value) and recapture treatment at sale.
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