All Entries Tagged With: "property tax"

Urgent Message-California Property Tax Relief

Tax Help

May, 2010. The market appears to be bottoming out.  At least, so say the gurus.  But don’t you bank on it.  CAPTA believes we are currently in the eye of the storm, with the 2nd half approaching rapidly.  It is precisely at this time you need a professional tax reduction company to guide you through the coming, actually the continuing commercial real estate recession.

California is in a real estate crisis and indeed, an economic crisis the likes of which have never been seen in history.  Major California commercial property tenants such as Mervyns, Hollywood Video, Levitz, Sharper Image, Performance Team Freight, Linens n Things and Circuit City have recently filed for Bankruptcy.  It was only a few short months ago that one of the safest bets in Real Property Investment was a NNN tenant such as Circuit City.  Today, owners of such leases are scrambling to sell their vacant big box space to nonexistent buyers.  So goes conventional wisdom.

You are at this site because you realize that now more than ever before, commercial property owners and managers must streamline their expenses and prepare for a commercial property value decline that is just now becoming evident.  Read the paragraph below from “CoStar Group, #1 Commercial Real Estate Information Company” written in May of 2009:

Retail Space Availability Reaches All-Time High

The nation’s retail market posted negative quarterly net absorption for the first time, along with the highest vacancy and availability rates, since CoStar Group began tracking retail trends in 2000, according to the Bethesda, MD-based company’s first-quarter 2009 retail review and forecast.

CoStar’s research shows that the average days a retail space is listed on the market as “available for lease” has continued to rise — from 174 days in first-quarter 2006 to 370 days in first-quarter 2009…Unfortunately, CoStar is forecasting that the retail vacancy rate will continue to climb…Spivey showed that the average sale price per square foot has dropped from $235 to $125 since the recession started, while the average time a property spends on the market has increased from about 255 to 334 days.

CoStar forecasts that sometime in the next two to three years, the average retail cap rate could hit a level that is 400 basis points higher than where it was at the start of the recession. If that happens, the average cap rate would be around 11% (a high not seen since 1994), which would create better margins for buyers and should fuel transaction activity. Additionally, CoStar forecasts that the average sale price per square foot could go as low as 70% off pre-recession pricing and sales volume could end up as much as 90% off pre-recession activity, sometime in the next two to three years.

Okay, things are bad nationally but what about California?  Here it is:

Spivey identified Los Angeles and Atlanta as having more excess retail inventory than any other markets…The markets with the largest first quarter increase in the average retail vacancy rate: Las Vegas (+154bps), South Bay / San Jose (+113bps), Baltimore (112bps), Inland Empire CA (+111bps), Southwest FL (+98bps), Phoenix (+94bps), Atlanta (+94bps), Sacramento (+89bps), Oklahoma City (+82bps), and Orange County CA (+82bps)…During first quarter, the markets that saw the largest net amount of retail space become vacant, as a percentage of total retail rentable building area (RBA), in order, were: South Bay / San Jose, Las Vegas, Inland Empire CA, Sacramento, Pittsburgh, Baltimore, San Diego, Phoenix, Oklahoma City, and Nashville.

That is the nature of the future of  retail.  But maybe you own apartments or industrial or office buildings.  Then you know that as goes residential so goes retail so goes the rest of the commercial market.  It’s one big game of follow the leader.  While there has been relatively good news in the commercial sector until last year, the tide is currently changing.

Make no mistake; there is a problem, a big problem in the commercial real estate market similar to what just happened and is currently happening in the SFR market.  Obviously you understand the need to be proactive in the face of this problem.  The question we need to answer for you is why use California Property Tax Associates to assist you with this problem.  What sets us apart from our competitors?

We Are Property Owners and Developers

At California Property Tax Associates we understand the problems of commercial property owners, managers and developers because our partners are commercial property owners, managers and developers.  In addition to starting to work in the area of property tax appeals and reassessments in 1989, our associates have various past and current experience building residential development and commercial properties, as well as leasing experience as landlord and manager in the California property market.  You will not be turning your property tax issues over to ‘form filers’ as many companies are, but to a group of people led by commercial property owners and managers experienced in owning and managing commercial properties.  We understand this business from the inside.

And one more very important thing.  Again to quote Andrew Florance, President and CEO of CoStar Group, “When the market is moving this rapidly you have to switch gears and look at it from a different angle.”  He was talking about the fact that the Office Vacancy rate is not showing the real situation in the Office space sector.  But his statement is much more far reaching.

Think Outside The Box

We hate to use this worn out expression but it is exactly what is called for in our current California Property Tax Assessment / Reassessment situation.  The tried and true, follow the book procedures of the past need to be reinvented with each case.  Can you get a loan like you could 2 years ago?  Can you count on real estate appreciation like you could 3 years ago?  Can you count on Chevrolet, Chrysler or Ford like you could a few months ago?  The answer is a resounding NO!  Neither can you approach a Property Tax Assessment Appeal case like you would have just a few years ago.

In the last year there have been many changes in the Assessment Appeals arena.  Appraisal methods used for the past 14 years are being replaced with ’shoot from the hip’ thinking.  To prepare for an Assessment Appeal in California Counties is in many ways like an unscripted debate, where common sense and proving ones case in real life are becoming more important than following ‘the rules’.  That’s what Mr. Florance is saying above:   “When the market is moving this rapidly you have to switch gears and look at it from a different angle.”  And that’s what we do at California Property Tax Associates.

Experience, Knowledge and Common Sense

Our experience started in the last serious downturn in the market back in the early 1990’s.  We worked within our knowledge of the Revenue and Taxation Code, the Assessor’s Handbooks and California Assessment Appeal procedures, and, based upon our extensive experience representing thousands of Clients and working Statewide, we developed strategies to maximize our Clients Property Tax Savings, Credits and Refunds.

The result?  California Property Tax Associates is on the cutting edge ready to put our experience buying, building and managing real estate to work for you.  We will represent you to reduce your property tax liability by using our experience and knowledge of the Property Tax Assessment Appeals system in California.  And the best part to you?  If you do not receive a property tax savings, credit or refund, you owe us nothing.  No Savings; No Fee!

Contact us at (909) 867-5000 immediately with any questions or go to our Frequently Asked Questions page.  Or if you’d rather, just click here to CONTACT US by email and we will call you.  But don’t put this decision off; deadlines are rapidly approaching.

Apartments Show Higher Vacancy, Lower Rents

Apartment Values-Moody

The accompanying chart shows the state of the market relative to apartment prices in the United States. Rest assured there is also a similar chart showing Southern California in a similar trend. To quote MIT who made the chart:

The RCA Database

The commercial property index is based on the RCA database which attempts to collect, on a timely basis, price information for every commercial property transaction in the U.S. over $2,500,000 in value. This represents one of the most extensive and intensively documented national databases of commercial property prices ever developed in the U.S.

The Associates At California Property Tax have known that apartment prices were soft for some time. Still, many of our clients are doing very well with their larger complexes. In spite of their success according to their financials, and using market information as opposed to specific financial information from the subject properties, The Associates were able to find substantial reductions as shown in the chart below:

Just to simplify the reductions, that’s $100 million worth of property, reduced $38,940,208 for an annual tax savings of $412,108! Our clients will save this amount of money each year until the market turns around! Could you use a 39% reduction in your property’s value?

An even more incredible thing is that when we spoke to the client in Property 2 above, he told us he thought the properties were worth maybe a total of $32 million from their assessed value of $36 million. When we analyzed the financial statements we felt that his property was well worth the $36 million should he place the property for sale on the market. But we took the case anyway and began negotiating with the appraiser in the assessor’s office. We approached the value for assessment purposes on the market instead of the subject, with a great deal of success. This “outside the box” thinking saves our clients far more than they expect.

Still not convinced? Why not read our frequently asked questions?  or, simply call us at (909) 867-5000.

California Commercial Property Tax Industrial

Below is an actual case from an Industrial Property Appeal that was won in Hayward, California:

APPEAL #1997

January 25, 1999

APN:               475-xxxxx

USE:                Industrial

LOCATION:   Hayward

AREA:             44,000 Square Feet

The subject property is located in Hayward.  Situated on 1.88 acres the property was built in 1992 of concrete tilt up construction and has 44,000 square feet.

MARKET APPROACH TO VALUE

Six comparable property sales were located in Hayward occurring between December of ‘95 and March of ‘97.  Because of the diversity of several of these properties, care was taken to adjust the sales price to match the subject.  A detail of the characteristics of the comparable properties is located on the next page with comparable number 1 being the most recent and comparable number 6 being the oldest.

COMP #1

Located two blocks from the subject this property was built in 1987 and consists of concrete tilt-up construction.  Sold in…..

COMP #2

Located approximately 7 miles North of the subject this comparable was built in 1981 and is also concrete tilt-up construction.  The property has….

COMP #3

Located approximately 2 blocks from the subject this comparable was built in 1986 of concrete tilt-up construction.  This comparable has…

COMP #4

Located 7 miles North of the subject this property was built in 1975 of concrete tilt-up construction.  This comp has….

COMP #5

Located 2 blocks from the subject this property was built in 1974 of concrete tilt-up construction.  Located on a ….

COMP #6

Located 4 blocks from the subject this property was built in 1987 of concrete tilt-up construction.  This comp has….

ADJUSTMENTS

Using these comparables we have adjusted sales prices from $34 to $42 per square foot.  We have chosen the average of $37.50 per square foot as fair market value for the 1997 lien date.

3/97 FAIR MARKET VALUE VIA THE MARKET APPROACH

$37.50 X         44,000 SQ.FT.            =          $1,650,000

1997 FAIR MARKET VALUE VIA

THE MARKET APPROACH        $1,650,000

INCOME APPROACH TO VALUE

Rents for industrial property in the area are shown on the comparable detail on page 2…. The Comp on 4001 Whipple was new construction and the owner was offering a $3.50/sq.ft. Tenant Improvement allowance.  As is shown above, rents were in the range of .30 to .39 per square foot Net.  For the purpose of our value determination we have used $ .36/sq.ft. as economic rent.

44,000 sq.ft.     X         .36       = $15,840        X         12        =$190,080

$190,080

VACANCY     5%       9,504

180,576

EXPENSES     5%       9,029

NET INCOME      $171,547

CAP RATE      10.2

$171,547 \ 10.2           =          $1,681,835

3/97 FAIR MARKET VALUE VIA THE

INCOME APPROACH         $1,681,835

RECONCILIATION

MARKET APPROACH $1,650,000

INCOME APPROACH $1,681,835

FULL CASH VALUE $1,665,000

Commercial Property Values Decline

Down 49%

If you own real property in the state of California then you know commercial property values are falling. Further, you know your California property tax  value has not.  This was a headline in late September relating to the commercial property market:

Moody’s: US commercial real estate prices resume steep declines in July

New York, September 21, 2009 — Commercial real estate prices as measured by Moody’s/REAL Commercial Property Price Indices (CPPI) renewed its steep declines and low transaction volume in July, Moody’s Investors Service reports. The CPPI was down 5.1% from June after having declined by only 1% the prior month. It is now 30.8% below what it was a year earlier and 38.7% below the peak measured in October of 2007.

We suspect that you are well aware of these factors and, in fact are here because of them. No one knows the direction of the market for the future but one thing we know for sure: property tax values in California for commercial real property is high while values are dropping. Take a look at some of the recent reductions we have achieved on different kinds of real property in the commercial California property tax market:

That is $412,108 in annual property tax savings for our Clients in the 2009 tax year. That’s $412,108 that the California state government will not get. And that is $412,108 that will go to the bottom-line for our commercial property Clients. It should be noted that several of these Clients told us when we took these properties last year that there was nothing there relative to a decrease in the assessed value. But we know that the assessed value that we work with and the fair market value that our clients know are two different things.

In California, in the commercial real property market the times are tough.  We believe they are going to get tougher.  Never in our experience has there been a greater need to reduce the expenses in the bottom line of every company in California.  California Property Tax Associates can definitely help. But only if you act.

Act now and call us at (888) 678-9TAX.

Los Angeles County Assessor Report Card

The Los Angeles County assessor’s offices, of which there are many dispersed throughout the county have the responsibility to annually assess each property, both real and personal for the purpose of property tax assessment. How do they do? Let’s see. But first we will make it clear that there are elements of the assessors job that he does very well. Our intent is to simply point out there are many deficiencies in LA County relative to assessment practices.

We present the following from the Los Angeles County Assessment Practices Survey accomplished by the State Board of Equalization dated May, 2008 (the most recent audit): Audit of Los Angeles County Assessor’s Office by the California State Board of Equalization May, 2008

EXECUTIVE SUMMARY (These are the comments from the actual audit by the State Board of Equalization)

…As stated in the Introduction, this report emphasizes problem areas we found in the operations of the assessor’s office…Areas within other programs, however, need improvement…

…However, we found that uncertified staff are processing business property statements; there are no estimates or assessments made for supplies when taxpayers fail to report supplies on their business property statements; and historical aircraft exemptions are being incorrectly granted…

…Moreover, the processing of changes in ownership of certain types of manufactured housing needs improvement, and there are minor problems with the assessment of vessels and animals…

…However, we found that the assessor does not maintain uniformity in document processing… In addition, we found that another district office does not have access to vital records, which are valuable tools for confirming information on deaths, marriages, and births. Instead, the ownership staff contacts the downtown office for such information. This inevitably interferes with production and may lead to incorrect document processing…The assessor should ensure that his staff knows and understands the proper procedure for processing change in ownership documents. The assessor also should provide the proper resources to all district offices so that the staff will be able to operate efficiently and effectively…

We found that the assessor does not determine the fair market value of construction in progress on each lien date as required by section 71. Instead, the assessor’s computer system automatically applies the annual inflation factor to the prior roll value of construction in progress. Upon completion of the construction project, the assessor issues roll corrections for the years in which the construction was still in progress. Section 71 provides that new construction in progress shall be enrolled on each lien date at its full value until the date of completion. Upon completion, the entire portion of the property that was newly constructed shall be reappraised at its full value. Thereafter, the entire assessment shall be subject to the annual inflation factor. It is improper to apply the inflation factor to construction in progress. Taxable government-owned properties misdirected to district offices often are not identified as such…

…Further, appraisers in district offices may not be aware of the special assessment procedures regarding the valuation of taxable government-owned properties. Thus, the misdirection of taxable government-owned properties to district offices often results in assessment errors. For example, many taxable government-owned properties are issued supplemental assessments because they were not identified correctly. By properly directing taxable government-owned properties to the appraiser specialist, improper assessments could be avoided...

We found that the assessor does not issue supplemental assessments for all changes in ownership of taxable possessory interests...

==============End of Report=================================

Again, our intent is not to slander the work of the Los Angeles County Assessor’s Office. Overall, we believe they do a good job for the limited employees they have. But in our 20 years of experience we have discovered many errors and fought many hard fights on behalf of our clients, winning most of them.

If you would like to read the 64 page report from which the excerpts were taken above please click here.

Click Here for Los Angeles County Assessors Office Information

If you own property in Los Angeles County and are considering an assessment appeal, you owe it to yourself to have an experienced knowledgeable company represent you. Don’t get caught up in the rhetoric; the County assessor oftentimes does not represent your best interests. Please call us at (909) 867-5000 directly.