cole schotz cole, schotz, meisel, forman & leonard, p.a. a professional corporation found money...
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COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
FOUND MONEY IN HARD TIMESWhy a Real Estate Tax Appeal
May be in Order
Cole, Schotz, Meisel, Forman & Leonard, P.A.
Wendy M. Berger, Esq.Carl A. Rizzo, Esq.
Integra Realty Resources, Inc.
Raymond T. Cirz, MAI Matthew S. Krauser, CRE
January 13, 2009
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
INTRODUCTION(Carl A. Rizzo, Esq.)
• Economic Troubles Abound(recent headlines)
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
• Opportunity Knocks(client story)
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
Wendy M. Berger, Esq.- To discuss nuts and bolts of tax assessment process and the anatomy of and basis for tax appeals.
Raymond T. Cirz and Matthew Krauser- To provide overview of market conditions and specific marketplace sector data.- Discussion of recognized methods of real property valuation.- Offer overall opinion on values
Carl A. Rizzo, Esq. -To discuss how to prevail before the Tax Court or the County Tax Board.
Outline of Today’s Itinerary
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
THE ANATOMY OF A TAX APPEAL Why file a tax appeal?
(Wendy M. Berger, Esq.)
• Good Management Practices Dictate an Annual Review of Real Property Tax Assessments.
• Enhance Value of Property and Increase Viability for Sale/Rental
• Opportunity for Real Tax Savings
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
IS A TAX APPEAL WARRANTED?
• Preliminary Determination of Property Value
• Tax Nuts and Bolts(tax assessments, bills, rates and average ratios)
• Compare Assessed Value to True Value(“AV” = “TV” x “AR”)
• Chapter 123(common level range, a safe harbor for municipalities)
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
As Of: October 1, 2008__________________________________________________________________________
CHAPTER 123 ANALYSIS
ASSESSED VALUE: $2,550,200TRUE VALUE: $1,959,000
Ratio Assessed Value =130%True Value
The above ratio exceeds the upper limit of 93.67% therefore, Chapter 123 applies:
True Value - $1,959,000Municipal Tax Ratio - 81.45%Taxable Value - $1,595,605
- say -$1,595,600
BREAKDOWN
Land - $ 481,300Buildings - $1,114,300Total - $1,595.600
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
FILING A TAX APPEAL?
• Time for Filing Appeal (April 1, 2009)
• Prerequisite for Filing Appeals
- payment of taxes and municipal charges, jurisdictional prerequisite
- compliance with Chapter 91 requests (must produce income and expense information to assessor)
- payment of filing fees ($5-150 County Board of Taxation) ($200 State Tax Court)
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
• Where to File Appeal- if assessment is $750,000.00 or greater, choice of either County Tax Board or State Tax Court
- if assessment is less than $750,000.00 must file at County Board of Taxation initially
- if dissatisfied with decision of County Board, may file appeal to State Tax Court or to Appellate Division if initial filing was with Tax Court
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
• Judgments/Settlements
- Freeze Act (N.J.S.A. 54:51A-8)
(“Where a judgment not subject to further appealhas been rendered by the Tax Court involvingreal property, the judgment shall be conclusiveand binding upon the municipal assessor andthe taxing district, parties to the proceedings,for the assessment year and for the two assessmentyears succeeding the assessment year by the finaljudgment, except as to changes in the valueof the property occurring after the assessmentdate.”)
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
- Tax Refunds (N.J.S.A. 54:3-27.2)
• Entitled to interest at rate of 5% per annum on any excess taxes paid and calculated from the date of payment of the excess taxes
• Municipality obligated to make refund within 60 days of entry of judgment
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
MARKETPLACE CONDITIONS FAVOR THE FILING OF AN APPEAL
(By Raymond T. Cirz and Matthew S. Krauser)
• Introduction to Integra Realty Resources, Inc.
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
Integra Realty Resources, Inc.
Local Expertise…Nationally.
Integra Realty Resources The Nation's Largest Commercial
Real Estate Valuation and Counseling Firm
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
- Nation’s largest commercial real estate valuation and counseling firm
- Providing services in the following area:
• Condemnation
• Litigation Support
• Market studies
• Estate Tax and Estate Planning
• Due Diligence
• Damage Studies
• Tax Appeals
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
• What’s happening in the Commercial Market?
What’s Happening in the Commercial Market?
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
- Decline in deal volumes
Decline in deal volume driving pricing down, cap rates up
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
- Decline in value?
Decline in Value?
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
- Adjustment to “safest” investment class
Adjustment to “Safest” Investment Class
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
- Wall Street job losses
Wall Street Job Losses Twelve Months to June 2008
Citigroup 3,000Bear Stearns 7,000UBS 1,000Lehman Brothers 2,000Merrill Lynch 2,000Morgan Stanley 2,000J.P. Morgan Chase 1,500Bank of America 1,000Goldman Sachs 500Wachovia 1,000Credit Suisse 750Deutsche Bank 250
Total 22,000
*Source: Bloomberg, Crain's research, June 2008
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
SPECIFIC MARKETPLACE SECTORS
• Office Sector
- General and specific submarket example
Office Sector
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
SPECIFIC MARKETPLACE SECTORS(Continued)
• Industrial Sector
- General and specific submarket example
Industrial Sector
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
SPECIFIC MARKETPLACE SECTORS(Continued)
• Retail Sector
- General and specific submarket example
Retail Sector• a
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
• Summary of Current Values in Main Market Sectors
- office
- retail
- industrial
- multi-family
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
REAL ESTATE VALUATION METHODOLOGIES
• Sales Comparison Approach- like-kind buildings
• Cost Approach- land value plus depreciated replacement cost
• Income Approach- Market rent (not contract rent)- Less vacancy (stabilized)- Less expenses = Net Operating Income (NOI)- Convert to value by applying capitalization rate (derived from market)
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
HOW TO PREVAIL BEFORE THE TAX COURT?(by Carl A. Rizzo, Esq.)
• Standard of Review- municipal assessments afforded “presumption of
correctness”
• Overcoming the Presumption of Correctness with Sufficient Evidence of Property’s True Value
“must present evidence of true value of property
sufficient to demonstrate that the appeal is based
upon sound appraisal theory and objective data
and not mere wishful thinking.”
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
• Tax Court/County Board will Focus on the Strengths of the Analysis Presented and Application of Appropriate Recognized Valuation Methods. (“Battle of the Experts”)
• Determining “Highest and Best Use” (Compare Apples to Apples
- legally permissible- physically possible- financially feasible; and- maximally productive (presumption in favor of existing use)
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
• Sales Approach (“comparability”)- location/access- Condition/construction- Physical/legal constraints (slopes, property configurations, environmental restrictions, wetlands, highlands regulations)- Size (economies of scale)- Timing of sales (market appreciation/ depreciation)
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
• Income Approach
(Stabilized-hypothetical approach)- actual rent vs. market rent
- vacancy factor
(typically utilizing 10%)
- capitalization rate
(risk factors, investor expectation)
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
• Cost Approach (obsolescence considerations)- physical obsolescence
(age/remaining life)- functional obsolescence
(efficiencies/conditions: inadequate parking, ceiling heights; building configuration)
- economic obsolescence(marketplace conditions whichundermine viability of improvement)(automobile manufacturing plants)
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
• Treatment of Property as Taxable Real Property/Fixtures vs. as Non-Taxable Personal Property
- legal test (“a and b” part tests)- (Material Injury Test and “Ordinary” treatment of improvement)- (Business Apparatus and Machinery used
in production process and which is not a fixture itself)
Examples:- Processing machinery and equipment.- Refrigeration equipment- Piping for bottling plants and dairies
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
THE NEXT STEP IN DECIDING WHETHER TO PROCEED
WITH AN APPEAL
Complete Confidential Property Tax
Information Sheet and schedule an
appointment for a consultation
COLE SCHOTZ
Cole, Schotz, Meisel, Forman & Leonard, P.A.A Professional Corporation
THANK YOU
Wendy M. Berger, Esq.Cole, Schotz, Meisel,
Forman & Leonard, P.A.(201) [email protected]
Carl A. Rizzo, Esq.Cole, Schotz, Meisel,
Forman & Leonard, P.A.(201) [email protected]
Raymond T. Cirz, MAI, CRE, FRICS
Integra Realty Resources, Inc.(973) 538-3188, ext. [email protected]
Matthew S. Krauser, CREIntegra Realty Resources, Inc.(973) 538-3188, ext. [email protected]