More than 1,350 owners of what the District of Columbia has deemed vacant or blighted property are about to receive a shock in the mail in the form of their property taxes. According to the Washington Business Journal, the District's tax office is mailing second half 2011 tax bills this week, and 1,115 properties will be billed at the Class 3 vacant rate of $5 per $100 of assessed value, up from only 444 Class 3 properties in the first half of the year. An additional 243 properties are being billed in the Class 4 blighted rate of $10 per $100 of assessed value.
Projections for significant growth in the commercial real estate market made earlier this year have now been moderated due to weaker than expected economic growth and job creation. Despite the slower than projected growth, modest improvements are expected over the coming year. According to Business Journal Daily, commercial vacancy rates from Q3 of 2011 to Q3 of 2012 are forecasted to decline 0.3% in the office sector, 0.6% in the industrial sector and 0.7% in the retail sector. There is no forecasted change in the multi-family sector as it is currently experiencing low vacancies.
A Kansas property tax appeals panel unanimously voted to double many fees it charges business owners who apply for an appeal on their properties. According to the Kansas Reporter, these higher fees, which businesses must pay to settle any tax dispute involving more than $10,000, are the second such hikes since November. The increases are in an attempt to offset reduced legislative funding for the panel and could end up providing $1 million of the court's budget this year.
The phasing out of the personal property tax on Michigan businesses is leaving city officials in fear of even more cuts to their already shrunken revenues. According to The Detroit News, Michigan municipalities typically get about 11% of their property tax revenue from the tax on equipment such as machinery, computers and office furniture, but the impact of a repeal on some cities and townships would be much more severe. Detroit alone stands to lose roughly $51 million if the tax is repealed and not replaced.
In light of recent news coming out of Allegheny County regarding possible tax increases, as well as the appeal deadline for some Pennsylvania Counties coming next week on September 1st and the Philadelphia deadline fast approaching on October 3rd, we at Paradigm Tax Group wanted to take this opportunity to summarize some important new information pertaining to real estate assessments in Pennsylvania.
The decision by the Pima County, Arizona Assessor's Office in February to raise commercial property valuation in 12 of 14 categories was met with much negative reaction as many thought it did not reflect economic reality. According to Inside Tucson Business, excluding multi-family properties, 3,267 owners challenged the assessments of their commercial property, a 21% increase from last year's number of 2,691. The first level of the Assessor's Office meetings saw reductions for 1,619 property values, with the most common reason being the property was over-valued based on comparables.
The U.S. hotel industry reported the largest number of rooms sold during a calendar month in July 2011, with a 3.6% increase over July 2010. According to data from STR, the industry sold over 105 million roomnights in July, only the second time the industry has sold more than 100 million roomnights in any given month, with the last time being July 2010. The overall U.S. hotel industry July occupancy increased 2.9% to 69.9%, average daily rate ended the month up 3.9% to $103.09, and revenue per available room rose 6.9% to $72.07.
Have you considered a simultaneous review of your Florida real and personal property valuations for 2011? Paradigm Tax Group has a unique approach to valuing hotels/resorts, golf, and assisted living properties in Florida through combining our knowledge and expertise in real and personal property to achieve the lowest possible values of behalf of our clients. Whether you're unsatisfied with your current representation, or simply interested in a second opinion, Paradigm Tax Group has you covered through our local experts in real estate and personal property in Florida, combined with the industry expertise of our hospitality veteran expert, Sharif Mitchell.
Present and future property tax implications are a major factor for companies that are deciding to expand or relocate, as they represent the largest tax burden amongst businesses. According to the IPT August 2011 Tax Report, property taxes on business property increased 1% in the past year, totaling $249.5 billion, or about 40.3% of total state and local business taxes. With the declining values of residential properties, additional property taxes are now more than ever being shifted toward businesses.
Los Angeles, California Mayor Antonio Villaraigosa has proposed the dismantling of the state's Proposition 13 in favor of a "grand bargain" that would boost levies on business property. According to Bloomberg, Villaraigosa urged the removal of Proposition 13's limits on commercial property assessments while retaining its cap from homes. The tax revenue could be boosted by up to $36 billion a year and in turn promote budget stability and restore public-school funds.
As commercial real estate recovers, primary markets like Washington, D.C. and New York City have attracted the most capital due to their high barriers of entry, lack of construction and transparent valuation levels. This popularity, however, has caused investors to bid up prices on trophy assets to pre-recession levels. According to the National Real Estate Investor, given the intense competition for multi-tenant assets in primary markets, many investors are instead purchasing single-tenant, triple-net-leased properties where the tenant manages the property and pays for maintenance, insurance and taxes.
The Michigan legislature did not include the personal property tax repeal in recent budget discussions, but is expected to revisit the issue in September. In prior discussions, one of the stumbling blocks with the repeal has been how to replace the revenue generated by the personal property tax for school districts and local government. However, in a paper presented at the Michigan Assessor's Association Annual Conference on August 8, 2011, Phillip O. Mastin III, Wayne County Director of Equalization, explains how the repeal of the personal property tax would have a potential negative effect on real property tax revenues as well.
With the reality being that more Americans are choosing to rent over buying a home, combined with a growing population, good opportunities are present in apartment REITs. According to Registered Rep., there are 13 publicly-traded apartment REITs that operate in the U.S., all of which are experiencing strong occupancy rates and above-average rental rate growth. As of mid-July of this year, apartment REITs posted a year-to-date total return of 18.32% compared to just 12.51% for all other equity REITs, 5.86% for the S&P and 7.9% for the Dow Jones Industrial. On top of that, apartment REITs five-year total return is an extraordinary 48.33%.
In a new measure, Florida Legislators are looking to cap annual increases in the taxable value of commercial property to 5%. According to the Orlando Sentinel, this smaller cap, lowered from 10%, would create a much greater distortion in tax bills. It causes new property owners to have to pay much more in property taxes than established ones, given the current state of the economy, as property taxes in the state of Florida can be based on income generated by the property.
The S&P decision to downgrade the U.S. debt rating is, by itself, unlikely to affect commercial real estate investors directly, but economists remain divided over the implications on the industry. However, according to the National Real Estate Investor, if investor panic continues to affect the stock market, it could cause a wide-scale pullback by businesses and consumers causing property fundamentals and investors to inevitably suffer.
While the value of San Francisco, California commercial real estate is not directly tied to Wall Street and its issues, the financial turmoil is having an impact on the CMBS market. According to the San Francisco Business Times, some of the positive momentum that had been reviving the CMBS market, which is an important source of capital for downtown San Francisco investors, has hit a snag. The trend has reversed from the past six months of tightening spreads, increases in new issuances and dropping of delinquencies.
A Kansas panel is proposing charging property owners much higher fees in order to file property tax appeals. According to the Kansas Reporter, the new rules would require commercial property owners to pay as much as $1,000 per application to apply for certain economic development or industrial revenue bond tax exemptions appraisers didn't initially recognize and between $100 and $500 for each of many other tax adjustments businesses frequently claim. The proposed fees are as much as two times what businesses currently pay, but far less than the initial proposal which could have been anywhere from $4,000 to $7,000 for the most expensive fees.
As the economy still struggles, with no positive trends in sight, the real estate industry is likely to continue to feel an impact due to lagging fundamentals. According to GlobeSt.com, unemployment measures are looking dismal as US companies only added 114,000 workers in July, following a revised 145,000 in June. The continued high unemployment rate is having an expected impact on REIT returns, specifically with office REITs.
By now, all Utah counties have issued their 2011 value notices. The deadline to appeal your property's assessed value is September 15th (the "Assessed Value" on the notice is the one that will be up for appeal, not the "Market Value").
After receding in May and June, the delinquency rate for CMBS loans 30 days or more past due climbed 51 basis points to reach 9.88% in July. According to the National Real Estate Investor, the rate is the highest in the history of the CMBS market. The increase can greatly be attributed to new reporting standards by some special servicers. For example, if a special servicer is considering a loan modification, it is now standard practice for them to also initiate the foreclosure process to expedite matters in case that modification doesn't occur. This drives up the delinquency rate.
After years of an approximate 32% common level ratio in Philadelphia, the State Tax Equalization Board in Pennsylvania recently set the common level ratio at 18.1%. The substantial drop in the ratio from last year means the overall actual market value of properties in the data provided to the state board was considerably higher than last year. Assuming this significant change stands, there will be major implications regarding assessment appeals in the city.
Hard-hit local governments are increasing property taxes all over the Metro Atlanta, Georgia area. According to 11alive.com, counties like Clayton, Cobb, DeKalb, Fulton and Gwinnett are telling their taxpayers that they have cut government services about all they can and the property tax hike is the most viable scenario left. All of these counties are hurting from the shrinking tax base caused by shuttered businesses, layoffs, empty new store fronts, and home mortgage foreclosures.