Cost segregation is the result of changes in tax regulations that, in some cases, allow accelerated depreciation schedules to be applied to certain components of an income-producing property. Faster depreciation equals larger write-offs, which reduces current taxes on distributions to investors.

According to Mark Labell, a partner in Wien & Malkin LLP, some parts of a property that are not structural components of a building may qualify for depreciation schedules as short as seven or even five years, compared with the standard 39-year "straight line" depreciation the IRS permits for the structure itself.

"We ordered a cost segregation study for First Stamford Place, because it was acquired relatively recently, and seemed to be a likely candidate to benefit significantly from the new method," says Mr. Labell. The First Stamford Place study, prepared by a CPA firm specializing in the complex rules governing cost segregation, resulted in the identification of $6.5 million of accelerated depreciation deductions, yielding the approximately $1.2 million of savings to the partnership.

"With the massive capital improvements we have underway throughout the W&H Properties portfolio, we are employing strategies to reduce taxes on distributions from those assets," adds Mr. Labell.