Friday, September 1, 2017

Lower Property Taxes are Silver Lining for Landlords in Weak Retail Market

In April, the Indiana Supreme Court handed Kohl's Corp. a victory when it agreed not to review a lowered property assessment that was awarded to one of Kohl's stores because of the growing vacancy and dropping values of other shopping centers in its area.
This gave Kohl's a refund of $219,000 as a result of the worsening retail real estate landscape for their County, as well as other local governments throughout the country.
But property owners and retailers say lower tax bills, which are a large part of operating costs, will help to keep them in business. "This is one of the ways to lower operating costs and the new owner would then be able to negotiate better deals with tenants and keep them in the mall," said Thomas Dobrowski, executive managing director of capital markets at real-estate services firm Newmark Knight Frank.
More retail landlords are defaulting on loans than owners of other property types. In the first seven months of 2017, the loan balances of these defaulted mortgages increased roughly 20% to $1.34 billion, according to data from Trepp Inc.
Buyers of struggling malls that pay low prices often quickly pursue a reassessment of the property based to lower the tax bill. Assessors say more store owners and mall landlords are lodging appeals for a lower assessed valuation for their shopping centers and malls.
"There's a cottage group of people who do nothing but appeal tax assessments. They're tax agents, and their job is to look for loopholes to get property taxes lower," said Tim Wilmath, chief appraiser at the Palm Beach County Property Appraiser's Office. "I've heard lots of reasons why taxes have to be lower due to e-commerce."
Property-tax bills are some shopping center owners' biggest expense, outpacing salaries and rents. "There's a lot of activity in the appeals space. There's a lot of value in doing that," said Tim Trifilo, a partner in the tax practice of CohnReznick LLP, an accounting, tax and advisory firm.
Some landlords appealing their assessments point to the declining amount of sales taxes being generated by their stores. Others cite market conditions in the region, such as sales prices of vacated stores.
Some battles over tax assessment focus on what is known as the "dark store" method of analyzing value. According to this method, even if a shopping center has solid tenancy and cash flow, its value is affected by low vacancy and store closings in the surrounding area.
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Monday, August 28, 2017

Your property may be losing value due to community improvements.

Do you or your tenants have to drive on a dirt road to get to your property?  Are you maneuvering around backhoes and/or orange cones?  Has the County or City told you how your property will be better off once the new infrastructure is in place?

If so, you should be able to get some property tax relief.  While once completed your property value should go up, the property does not currently have that value.  In fact it has been devalued.  In some cases, significantly devalued. 

The County reassesses the property as of January first of the tax year.  Even the plans for the redevelopment could act at the trigger for the property being devalued.  The tax year is the key, while construction may be two months or five years, it is irrelevant.  How much of a problem will occur for the property during that time frame?  If you wanted to sell the property, how much of a discount would you have to put on it due to the construction or would anyone want to buy it?

Flagler Street (Miami Herald story) is currently being beautified and it will be a much needed improvement.  The problem is the building owners and tenants that are trying to operate.  The project is a year and a half into construction and there is no end in sight. 

Customers do not want to deal with the inconvenience of visiting these businesses.  Property owners are left with the option or evicting the tenants or giving a rental discount.  Regardless of the final decision, the property has been devalued. 

We feel for everyone affected by these issues and wish them the best.  While you are suffering through these issues, we will do all we can to help you get a reduction in your property taxes.  Please contact us at