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VOL. 10 | NO. 16 | Saturday, April 15, 2017

Tax Man Cometh

Commercial property owners brace for valuation increases

By Patrick Lantrip

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After years of lagging behind other parts of the county, Memphis’ real estate market is finally coming into its own. But with a strong market comes an increase in property values, which in turn leads to higher taxes.

And for commercial property owners in some of the city’s premier or up-and-coming neighborhoods that could be a difference of thousands or even millions of dollars.

When Shelby County Assessor of Property Cheyenne Johnson appeared on a recent episode of WKNO/Channel 10’s “Behind The Headlines,” she estimated that commercial property values in Shelby County could rise as much as 20 percent on average.

This significant jump, which takes into account sales over the last two to three years, comes after a rare drop in the last reappraisal in 2013 that reflected the worst national economic downturn since the Great Depression.

“The downfall in the real estate market actually started at the end of 2008,” Johnson said. “When we released the 2009 reappraisal notices, those numbers were really up in value. Therefore, in some cases, people were actually looking at reductions from 2009 that stayed there through the 2013 reappraisal.”

If Memphis residential real estate reappraisal figures, which are mailed prior to commercial notices and are up nearly 13 percent, are any indication, then April 20 will be a day that many commercial property owners in Shelby County will have circled on their calendar.

“There is a robust real estate market now compared to four years ago,” Charles Blow, director of appraisal operations for the Shelby County Assessor of Property, told The Daily News in March. “It’s a seller’s market and houses don’t stay on the market very long. In some neighborhoods there is a demand for property and that tends to cause a general increase in price.”

To add a bit of intrastate context on just how high some property values in a similarly sized city can jump, Metropolitan Nashville and Davidson County Property Assessor Vivian Wilhoite said commercial figures in her jurisdiction could be up as much as 42 percent on average from 2013.

“Nashville has been the destination location for many families and businesses, so there are a lot of cranes in the air here,” Wilhoite said.

Even for a booming city like Nashville, an increase of that magnitude and a 35 percent countywide average increase for all properties is a huge leap.

“To put it into perspective, in 2013 we had roughly a 7 percent county-wide increase from the 2009 reappraisal, with most of that increase coming from commercial properties,” Metropolitan Nashville and Davidson County Property Assessor chief deputy of operations Jimmy Clary said.

To help manage the roller coaster of property values, many property owners seek out a representative to help them optimize their efforts.

Which is where Gil Licudine, managing director and Midwest regional leader, property tax services at Cushman & Wakefield, comes in.

“We help our clients manage and minimize their property tax liability with both real estate and personal property,” he said.

Licudine said 2017 is really the first reappraisal where counties in Tennessee have the ability to take advantage of the rising real estate market, which is why it’s crucial for all taxpayers to scrutinize the notices when they come out.

“The county assessors, if they wanted to, do have the market evidence now to really increase values significantly, which really puts even more of a burden on the taxpayer and their representatives to make sure that they scrutinize every single one of their parcels,” he said.

When the 2017 figures come out, Cushman & Wakefield, which has the ability to perform the evaluation and appeals process in-house, will start by looking at a client’s parcel number to gather data on it, which includes a description of improvements, building size and building use, and then they calculate what the building is assessed at on a per-square-foot basis.

Much like the residential figures, property owners can appeal the process by either a formal or informal process.

Before deciding on whether or not to appeal, Licudine recommends every property owner have someone conduct an independent market analysis to help form their own opinion of what the property is worth and then compare it to the assessor’s mark.

“For commercial and industrial properties, the assessor is going to rely most on comparable sales or the income approach,” he said. “So we would use the data sources we have in-house to come up with our own ‘valuation’ as to what we think the property should be valued at. If it’s lower than what the assessor has it at, we go in there and talk with them and try and get it down.”

Licudine said they usually encourage clients to take advantage of the informal review process first.

“They actually do invite taxpayers and their representatives to come in and share information on their properties and come up with some sort of agreement before a formal appeal has to be filed.”

However, if that doesn’t work, the formal appeal must be filed with the Shelby County Board of Equalization by June 30.

Real estate information company Chandler Reports, chandlerreports.com, also can help commercial property owners appeal their appraisal. Its 2017 Tax Appeals Kit for commercial property provides detailed sales comps, a complete property assessor’s card on the property, GIS mapping of property lines and dimensions, and step-by-step instructions for appealing.

Licudine said this whole process is extremely important, especially in a reappraisal year, because whatever value is set for 2017 will likely hold until the property is reappraised again in 2021.

“So any assessment increase, no matter how small, is going to be compounded over the next three years,” Licudine said. “And any increase in the assessment is, all things being equal, going to translate into an increase in real estate taxes that are due.”

Chandler Reports is a division of The Daily News Publishing Co.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 57 280 1,209
MORTGAGES 55 244 916
FORECLOSURE NOTICES 8 52 151
BUILDING PERMITS 158 699 2,751
BANKRUPTCIES 37 157 618
BUSINESS LICENSES 12 77 276
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0