The Swartz Report: Goals for 2020
As we bid good-bye to 2019, I wanted to identify a few of the major events of the year and goals for the 2020 year.
Jackson County, MO Reassessment
This year, taxpayers saw valuations on their residential and commercial real estate values increase between 20% and 400%. Truly amazing as the county received over 25,000 protests to their increased valuations. Currently, we have only heard a handful of appeals (mostly residential) and have hundreds of commercial appeals awaiting hearings before the Board of Equalization.
It is estimated the hearings will take place sometime between January and June of 2020. Taxpayers who are granted any reductions in value achieved after December 31, 2019 will receive a refund of their taxes based upon the reduced amount. Additionally, if you missed the opportunity to appeal your valuation in 2019, you may appeal the 2020 valuation in the spring of 2020. We will keep everyone updated as hearings progress.
Sale – Leaseback transactions
Many of the properties we review for commercial real estate are situations where we represent the lessee of a property where they are the sole tenant. We have found the counties are extremely interested in the long term leases in place without regard to the credit worthiness of the tenant. Outside investors are interested in the “name” of the tenant fulfilling the lease and the rate of return an investor receives varies based upon the tenant in place.
Most states assess real estate as “fee simple” (market rates) and not “leased fee” or the lease currently in place. This creates the potential for properties being over stated by the counties as the lease reviewed is more than a value of the real estate but reflects a valuation associated with the business currently leasing the property. This continues to be a major point of contention in several states and we have many appeals outstanding where this is an issue.
Valuation of Corporate Headquarters
We continue to represent properties which are owner occupied and are considered to be corporate headquarters for companies. In many situations, the taxpayer has either constructed new headquarters or remodeled/refurbished existing property for the benefit of their employees. The increase in open space; a movement away from “traditional” office space, where individual offices and doors are no longer necessary; shared space among employees and art designs within a building are creating potential issues of functional obsolescence in older buildings and higher replacement cost calculations which do not necessarily equate to higher market values.
Additionally, we have clients that have relocated corporate headquarters to a new jurisdiction, leaving the former HQ vacant (or having minimal employees are the old location) and difficulty selling the property or leasing the space to another business due to issues described above. We are awaiting decisions from State Court in multiple states on these issues and anticipate the appeals will not be resolved until 2020 or 2021.
And most importantly – THANK YOU!
As I continue recover from the accident earlier this summer, I cannot thank you enough for the continued love and support received from family, friends, clients and especially, my staff.
This has been the most challenging year of my professional life and in many ways, the most successful. Success is truly not measured only by monetary gain. The ability to keep both companies running throughout the second half of the year is a complete credit to the staff that make things happen. This is how I choose to measure success and will continue to guide me as we move forward in 2020. I thank you for your patience and understanding. Physically, I am almost back to the level of pre-accident activity and mentally, I am prepared for all challenges in front of us.
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