The Swartz Report: Across-the-board Property Value Increases Expected in Retail, Multi-family and Hospitality

Post written by Donald Swartz, President and Principal at Swartz + Associates, Inc. | Lover of Chiefs, Royals and golf | Avid “Cruiser” | Poker Enthusiast

Last December, I was invited by one of my clients to attend a meeting with the Jackson County Assessment Department concerning the upcoming 2017 reassessment of commercial property in Kansas City and the surrounding area.

The purpose of the meeting was to bring together owners/operators of commercial real estate with Jackson County staff and the county’s independent consultant, John Q Ebert and Associates Consulting (E & A Consulting).

E & A Consulting has been hired by the county over the past two years to re-evaluate all real estate parcels. This year commercial property owners will see the results of this effort and we’re anticipating significant increases in values for certain sectors in the community.

We’re anticipating across-the-board increases in the retail, multi-family and hospitality industries.

These are all properties that rely on an income stream as support for the value of their properties. E & A Consulting has been gathering financial data during this time in an effort to value property based on the “Income Approach”. In a nutshell, an income approach is based upon a properties’ ability to receive gross income; subtracting operating expenses for the property leaving a net operating income to the owner/investor. This net income is divided by a capitalization rate to establish a property’s value.

For example, if a property has gross income of $200,000 annually and operating expenses of $120,000, the net operating income is $80,000. I’ve discussed this in previous posts but if an investor expects a return on the investment at 8%, this particular property should be worth approximately $1,000,000 ($80,000 NOI / 8%).

It’s our belief and understanding that the county will be implementing this methodology to determine 2017 values for hotels, apartments, retail centers, etc. While this makes sense, previously Jackson County hasn’t collected significant data in prior years to use the Income Approach effectively. We believe change is coming and taxpayers need to be aware of the valuation process as well as steps that may be taken to ensure they’re only paying their fair share.

In our opinion, the county hasn’t previously had a consistent model (or historical financial data) to derive a valuation based upon income. We believe the hiring of E & A Consulting will dramatically affect the 2017 valuations and increases are to be expected.

Additionally, there are other midwestern states going through a
re-assessment of property in 2017 including Iowa and Colorado.

It’s important to be aware of these deadlines because a missed opportunity to timely file an appeal could prevent a taxpayer from receiving an accurate value until the next re-appraisal period in 2019.

Don’t sit around and wait for your tax bill to be mailed in the Fall/Winter time period. Generally, once a tax bill is received, the appeals process has ceased with little or no opportunity to prevail.

With multiple states under re-assessment, we believe there will be opportunities for a taxpayer to meet with the county or go before a Board to ensure only the fair share of taxes is being paid. The following is a timeframe to review and appeal (if warranted) the value assigned to your property:

Iowa – April 28^th

Colorado – June 1st

Missouri – informal meetings in May; formal appeal deadline to the Jackson County Board of Equalization is July 17^th.

The next 30-90 days are crucial for property owners and managers and this is one of your only opportunities to minimize your annual property tax liability. If you would like a no obligation consultation on any commercial/industrial properties, please contact me directly as I would be more than happy to discuss your options.

Thank you very much!  Happy Appeal Season!

Don

(913) 766-8761 (direct)