Pre-Acquisition Due Diligence
When a commercial real estate owner looks to acquire additional properties, it is vital that they conduct pre-acquisition due diligence and property tax estimates, which forecasts a property’s real estate tax liability for 4-5 years following the acquisition.
Prior to purchasing a new property, a pre-acquisition due diligence estimate will allow a buyer to thoroughly review the tax liability of a property prior to assuming responsibility, and provides insight on potential issues including liabilities, litigation risks, intellectual property disputes, and more.
Having an experienced property tax professional embedded into your due diligence process is not just good practice, it is good business. It is crucial that your provider has expertise in the local marketplace, as there are several factors that need to be considered to get the most accurate estimate, such as:
- The local assessor’s approach to valuation in their jurisdiction
- Whether the sale price will affect market value or not
- The specific reassessment cycle and appeal procedures on a jurisdictional and state level
- Historical tax rates and local market trends
- Opportunities for assessment reductions, tax incentives, and/or abatements
Your Partner in Due Diligence
As a strategic partner in pre-acquisition due diligence, Paradigm’s dedicated team of tax professionals can develop a forecast that fits your needs. In order to best serve our clients, we have developed a unique and robust system consisting of three separate tiers of tax estimates:
Tier I
Macro estimate in a narrative format that focuses on client, deal, and market specific questions. Typically used during the preliminary phases of due diligence.
Tier II
Detailed 4-5 year forecast with salient facts, detailed tax calculation, and explanation of variables and assumptions. Typically used when Letter of Intent (LOI) is executed.
Tier III
Comprehensive tax analysis packet that includes 4-5 year forecast along with historical tax rates, equalization factors, an equity analysis, and a sales price assessment analysis. Typically used when client is awarded the deal and due diligence period begins.
Some of the questions Paradigm will review with you when determining the pre-acquisition due diligence estimate include:
- Is this a disclosure state?
- What is the discount to purchase price?
- What is the assessed value?
- What is the millage rate?
- What should we assume for tax rate growth going forward?
- Can we avoid a reassessment through an entity purchase?
In addition to these questions, our team will also review and provide insight on the following tax liability items as well:
(within Tier 2 & Tier 3)
- Sale Impact on Assessed Value
- Occurrence of Property Reassessment
- Tax Rate Assumptions
- Tax Bill Due Dates
- Disposition Values Effect on Future Value
- And Additional Considerations
Nationwide PresenceGet Started Today
Paradigm is one of the only property tax firms with a national footprint, operating over 20 offices throughout the United States and over 180 full-time property tax professionals. Paradigm’s team has an excellent track record and consistently displays the requisite mix of technical knowledge, understanding of local market nuances, and dedication it takes to get results for our clients.
If you are considering an acquisition and want to get started on a pre-acquisition due diligence review, contact the experts at Paradigm Tax Group today.