Quality Quarterly Q4 2017 - Issue #35

CASE STUDY NO. 45 – COST SEGREGATION by David Koller, ASA and Eli Varol

Our case studies section features actual problems brought to our attention through V&A appraisers and QC reviewers, clients, colleagues at competing firms, and

general news publications. Eli Varol joined Cushman & Wakefield in September as a Senior Director starting up the Cost Segregation consulting practice within Valuation & Advisory. Cost Segregation is a consulting service that can unlock significant hidden value in real estate holdings. It is applicable to all types of commercial real estate, and Eli will rely on our V&A professionals to help promote this service to clients. About Eli: Eli has 18+ years of Cost Segregation consulting experience. He has a bachelor’s degree in mechanical engineering and an MBA, both from Washington University in St. Louis. He is a Senior Member of the American Society of Cost Segregation Professionals. With the addition of the Cost Segregation platform, we have expanded our ability to serve our clients. We now have the capability to incorporate Cost Segregation into Purchase Price Allocations and other Valuation & Advisory assignments. It is a great tool with which to reach out to new and existing clients in order to stay in touch and demonstrate the depth of our platform. The following describes Eli’s first assignment awarded through the Valuation Michele Kauffman has a long-standing business relationship with a professional home staging company. The client acquired a Los Angeles area warehouse in 2015 and subsequently made capital improvements to the property. In a conversation with this client, Michele let them know that we have an in-house Cost Segregation practice and it may be worth their time to have a conversation on this topic. She advised that even though they bought the property two years ago, they were still able to pursue the Cost Segregation tax strategy. With their affirmative response, an introductory call was set up. & Appraisal network. INTRODUCTIONS

WINNING THE ASSIGNMENT Based on this initial conversation, we were able to provide the Client with a detailed benefit projection that shows an estimated present value benefit range between $63,000 and $108,000. We also provided a fee quote. Cost Segregation should always have fixed fees rather than percent-of-savings or results-contingent fee arrangements. BENEFIT TO V&A PRACTICE Cost Segregation is a low risk/high reward consulting service. It is a value-add that provides benefits to property owners that are typically many multiple times the fee charged. The benefit is 100% achieved within a few years of ownership. By bringing in a value-adding complimentary service, Michele was able to strengthen this client relationship. We are seen by the client as not only an important part of the project financing process, but also as a trusted advisor looking out for the client’s business interest. At the same time, there is no conflict of interest or impairment to Cushman & Wakefield’s all-important objectivity in appraisal assignments. WORKING WITH THE COST SEGREGATION PRACTICE Eli looks forward to having many similar success stories within V&A. A cost segregation web presence is now live and includes a number of case studies. It can be found at www.cushmanwakefield.com/ cost-seg . At the website, you can also find a link to an online questionnaire. If you have a recent or upcoming client property acquisition or construction project in mind as a potential Cost Segregation opportunity, please fill out this questionnaire. Eli will then prepare a courtesy benefit projection and fee quote that can be shared with your clients.

CASE STUDIES

4