Mega Mixed-Use Corporate Office Park
Madison SPECS, a leading Cost Segregation company based in Lakewood, New Jersey, recently
undertook a comprehensive engineering and tax assessment of one of the largest mixed-used corporate
office parks in the country. Despite the magnitude and scale of the job, Madison SPECS was able to
complete the study in record time from initial discussion to final report.
A prominent real estate investment group asked Madison SPECS to execute a Cost Segregation study of a
500 acre office park (roughly 4-million square feet), the facility comprises office, industrial, research,
distribution and manufacturing spaces. It is spread over 11 primary and three support buildings. The main
buildings range from 104,000 square feet to over 900,000 square feet. The company’s 24,000 employees had
relied on a fleet of electric personal-use cars to traverse the huge indoor spaces. After reviewing the
lease agreements between the prior and current Landlord and the active and retired Tenants, SPECS identified
an enormous opportunity since the current owners would be able to take advantage of certain Tenant
Improvements that were made and paid for by the prior and current Landlord.
The facility’s sheer size was one of the challenges of the project, as SPECS Segregation
Engineers Mario Bertinelli and Thomas Varney could attest. “They really don’t build on this
scale anymore,” says Mr. Varney. “We walked for five days straight just to complete the site
Also, complex systems and furnishings filled the buildings. For example, all the offices and lab areas
had been designed with walls that could be demounted and reconfigured. There were, therefore, thousands of
linear feet of demountable wall partitions to be recorded, measured and priced. In case of power shortages,
the buildings had colossal, redundant transformers and switchgear, along with 14 emergency generators. There
was an overhead conveyer system that snaked through three of the buildings to transport manufacturing parts,
as well as entire floors of locker rooms and showers to accommodate the thousands of employees who had worked
three shifts a day there. The company even had a wholly-owned utility company located on site to provide
steam, chilled water and compressed air via underground tunnels to the 11 buildings engaged in industrial
Adding to the difficulty of the project was its timeframe. The client needed final results in hand within
Accustomed to tackling the unique challenges of each study, the Cost Segregation Engineers took hundreds of
photographs and detailed notes. They worked collaboratively with the facility’s maintenance personnel to
examine its many complicated systems. The next step was to turn over the data and records to SPECS’ team
of Cost Analysts in Lakewood to help identify the assets eligible for accelerated tax depreciation and then
accurately determine their value. From there, the process moved to Madison SPECS’ operations team where
the engineering and tax components of the Cost Segregation study were integrated. Director of Operations Moshe
Becker designed a sophisticated software solution that allowed all the information to flow seamlessly into one
document. According to SPECS CEO Eli Loebenberg, “Regardless of the vast amount of information and tight
schedule of this project, it was a seamless process. We were able to service this client with the same speed,
accuracy and thoroughness that we do every client.”
The real estate investment group seemed to be equally impressed, having just already requested another
Cost Segregation study from Madison SPECS for a second property in their portfolio.
While handling the project was no big deal to the Madison SPECS staff accustomed with managing multiple
projects big and small, the numbers in Madison SPECS’ final report were a big deal to the client.
They were as jaw-dropping as the facility itself.
- The facility’s total cost was $46,750,000. Of this total, the Cost Segregation study permitted
$5,905,781, or 13%, to be reclassified from 39-year to 5-year MACRS (Modified Accelerated Cost Recovery System)
- $2,925,082, or 6%, was reclassified to 15-year MACRS property.
- This reclassification of assets resulted in a Net Tax Benefit of $201,260 in the first year and a $2,266,664
Net Tax Benefit over the first six years.
POST SCRIPT . . .
While the Cost Segregation study for the nation’s largest corporate office park was in progress, many other
projects were also in the pipeline. During this same period, Madison SPECS was preparing a Feasibility Study on a
two-million square foot property while simultaneously handling Cost Segregation studies for a number of other
- A four-story, 130 unit senior living apartment complex in California. The building contained 82-one bedroom
and 48-two bedroom apartments. First year benefit is $269,842.
- A one and two-story, multi-tenant shopping plaza, comprising 218,052 square feet in nine buildings (30 tenants)
in Florida. First year benefit is $464,729.
- A 24-building apartment complex with 224 units in Virginia. The complex also included a fitness center.
First year benefit is $497,769.