Many states have tax relief programs that golf courses can usually qualify for that allows the land to be taxed based on value in use (as a golf course) versus the legal mandate of fair market value (value in exchange). These programs essentially create a win-win situation by lowering the real estate tax burden on golf courses, allowing them to continue in use as a golf course. For the jurisdiction the benefit is keeping a large area of well-maintained open, green space.
In a desperate effort to de-value their own property and lower their taxes, representatives of Memphis, Tennessee’s biggest mall and major hospital picked apart their own facilities. According to The Commercial Appeal in its March 15 article, “Board of Equalization Rebuffs Wolfchase Mall’s Request for $30M Appraisal Cut” the BOE lowered Wolfchase’s 2010 appraisal from $154.6M to $150M. This figure is between the $168.5M that the tax assessor’s office pushed for and the $124.5M sought by Wolfchase owner Simon Property Group. The BOE also reappraised St. Francis Hospital to $105.6M, between the $134.9M suggested by the tax assessor’s appraiser and the $79.5M sought after by the hospitals owner, Tenet Health Corporation.
The Nashville, Tennessee hospitality industry is reeling from one of its worst years ever as statistics show 2009 as a year for hoteliers to forget. The Nashville Business Journal in its March 15 article, “Occupancy Hit Record Lows in 2009 at Nashville Hotels” reports that occupancy fell 9.1% to 54.6%, the lowest level on record. The average daily rate fell 5.8% to $90.18, the lowest since 2006. And revenue per available room fell 14.4% to $49.26, the lowest since 2005.
The largest problem facing the industry and preventing a comeback is room rates that have been slashed to attract guests that cannot be quickly restored to previous levels. With everyone cutting their rates, customers are shopping by rate first, then location.
While the year was historically bad for the city of Nashville, compared to other markets they came out smelling like a rose. Room rates in Nashville only dropped by 6% compared to the overall US rate of nearly 9% and the top 25 market rates on nearly 12%. Declines in revenue per room were also less severe compared to the nation and the top 25 markets.
Full service hotels, in general, have lost 50% of their value since the peak in 2006. Las Vegas has been one of the hardest hit areas. Paradigm Tax Group’s Hospitality Practice recently had the opportunity to assist a lender that foreclosed on a 349-room luxury hotel. The previous service provider had achieved a 41.80% reduction in value for the 2009 tax year – reducing the assessed value from $118,830,496 to $69,153,609. Nevada places caps on taxes (not value) each year and in order for the client to receive lower taxes, the assessed value had to be reduced below the previous year’s final value.
The number of commercial real-estate sales rose sharply in December, triggering fresh debate about whether the sector has reached bottom. Property sales rose 75% in December from the previous month which is a significant increase even when taking into account that the end of the year traditionally sees increases in volume.
The performance of loans bundled in commercial mortgage-backed securities fell sharply in February, raising fears that the coming wave of distressed loans may be much higher than expected. 30-day delinquencies surged to 6.93% from 6.4% in January, according to Barclays Capital. With the normal level being much lower at 1%, this is a key indicator of future rises in delinquencies with forecasts of them peaking between 10% and 15% later this year.
Which Is More Critical To Optimal Property Tax Representation For Hotel and Resort Owners?
Historically, property taxes have been approached as a fixed expense that needs to be managed by an outside consultant. But are all consultants created equal?
Hospitality assets are arguably the most sophisticated operating real estate investment in the marketplace. Only those with intimate knowledge of the assets invest directly. Yet when it comes time to hire an outside consultant to handle your property taxes, are you missing the boat by relying on consultants with local assessor relationships and only general knowledge of your assets?
Yes, these are local taxes and having someone with experience in the locality is important but the difference between a hospitality specialist and a generalist means leaving about 20% on the table on average.
Consultants that want to sell their local relationships with assessors are essentially telling you that their relationship with the assessor is the most important thing to them. If local relationships are their main asset, can they really fight for your interests? This is a classic agency issue.