Archive for March, 2010

Golf Course Tax Relief

Wednesday, March 24th, 2010

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.

The programs are labeled differently in the states. For example, Pennsylvania has a “Clean and Green” program. Maryland has a state mandated “preferred land” status upon approval of the application. All but two jurisdictions in Virginia allow use value under an “open space” designation.

These benefits can be significant and can be in perpetuity. Recently one course in Virginia applied for and was granted use value and the assessed value of the land went from $1,486,200 to $417,246. Golf course owners should consider taking advantage of these tax relief programs.

Posted in Golf Courses, Hospitality, Real Property | No Comments »

Board of Equalization Rebuffs Wolfchase Mall’s Request for $30M Appraisal Cut

Tuesday, March 16th, 2010

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.

Claims for the de-valuation of Wolfchase Mall include sales being off and expenses for the tenants rising. Sales per square foot have fallen 11% since 2005 and tenants operation costs as a percentage of sales are 18.1% compared to the national average of 13%.

St. Francis Hospital claims it is becoming more and more obsolete citing low ceilings and narrow halls. According to the hospitals tax representative, attorney Andy Raines, modern day hospitals are shorter and more user friendly than the high-rise layout of St. Francis.

Read the full article from The Commercial Appeal here.

Posted in Hospitality, Malls, Mid America, Real Property, Retail | No Comments »

Occupancy Hit Record Lows in 2009 at Nashville Hotels

Monday, March 15th, 2010

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. (more…)

Posted in Hospitality, Hotels, Mid America, Real Property | No Comments »

Hospitality Industry – Hotel Case Study

Monday, March 8th, 2010

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.

We worked closely with the lender to understand all the nuances of the local market and how they were affecting this majorly flagged property. We gathered all relevant data to support our opinion that the value of the real estate was approaching its intrinsic value–meaning without the business. While the appeal was in progress the decision was made by the new owners to shut the business down effective May 1, 2010, and the press release was very timely to support our contentions.

We were successful in achieving an assessor recommendation lowering the value to $49,954,739.

Posted in Hospitality, Hotels, Real Property | No Comments »

Commercial Sales Jump

Wednesday, March 3rd, 2010

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 Moody’s/REAL All Commercial Property Price Indices measured a 4.1% increase in values in December which followed a 1% increase in November. This marked the first time there was consecutive month increases since 2007. Still, it remains a bold statement to say we are going straight up from this point forward.

Sales activity has been low for months because of bad financing and sellers’ unwillingness to put property on the block when prices are down sharply from a few years ago. This means competition can be fierce when prime buildings are put up for sale.

These conflicting market signals come at a time when the commercial real-estate sector faces significant challenges. Office rents are likely to continue falling while vacancies continue to rise. Apartment rents are also low, driven down by record low home prices and increased supply from investors stuck with unsold properties who have put them on the rental market. The sector continues to perform badly but is doing better than people thought it would. This is causing real-estate assets to be undervalued and driving prices up.

Posted in Apartments, Office, Real Property | No Comments »

Commercial Mortgages Ailing in February

Wednesday, March 3rd, 2010

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.

Loans moved into special servicing have risen by $2.2 billion in February. Loans are moved into special servicing when property owners are still current on their mortgage payments but are unable to refinance maturing loans or indicate they wouldn’t be able to keep up with future payments.

Commercial mortgages have been pegged as the last stage of the credit crisis. The combination of low retail sales, shrinking offices, and lack of financing for new loans and refinancing of existing loans have contributed to the sectors bleak outlook. With available liquidity remaining limited it is more difficult to refinance large loans. This causes more loans to approach maturity with no refinancing option or extension. The problem is likely to linger as special servicers struggle to keep up.

Posted in Financial Services, Special Services | No Comments »

Local Assessor Relationships vs Industry Expertise

Monday, March 1st, 2010

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. (more…)

Posted in Hospitality, Real Property | No Comments »