Property Assessment Armageddon
Commercial Observer
Connecting and informing industry leaders of trends and individuals defining the global commercial real estate landscape
A looming wave of property assessment appeals — as owners dispute municipal valuations of their struggling properties post-pandemic — could end up swamping city services nationwide. Some cities might lose hundreds of millions of dollars in annual revenue. Read about the potential crisis along with statistics showing just how many commercial real estate collateralized loan obligations are in special servicing.
— Tom Acitelli, Deputy Editor
Flood of Property Assessment Appeals Could Wallop U.S. Cities
For big city landlords and office owners, seeking to shave a few dollars off tax bills might as well be muscle memory. On March 1 of this year, there was a line down the block in front of the Municipal Building in Lower Manhattan to file property tax appeals. “In New York City, 99 percent of owners appeal,” said Steve Thompson, a commercial property tax expert at tax consulting firm Ryan. “Most commercial owners are acutely aware that this is their largest annual operating expense, and it becomes like spraying for pests. If you don’t do it every year, it can snowball and become a huge problem.” This year, the appeals came with a lot more angst. Amid steeply declining office values and open questions about the future of this sector of commercial real estate, tax appeals and efforts to reduce tax burdens have become more frenzied. Thompson’s clients, which include Fortune 1000 firms and large real estate investment trusts, have petitioned for significantly lower tax assessments: 40 percent to 50 percent in New York City and San Francisco, and even 75 percent in Washington, D.C. In his two decades of work, he’s never seen owners dig in their heels and be so combative.
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Nearly 40% of CRE CLO Loans on Servicer Watchlist
CRED iQ’s research team has fielded multiple requests to explore the commercial real estate collateralized loan obligations (CRE CLO) ecosystem from a wide array of perspectives. This week we decided to extend the horizon a bit as the marketplace approaches a milestone in the watchlist category to see what we can draw from the latest data and trends. We subdivided the CRE CLO market from two perspectives: with loans that have been added to the servicer watchlist and the triggers that caused this designation. CRED iQ’s latest loan-level analysis as of April 30 indicated that 37.7 percent of CRE CLO loans are currently on the servicer’s watchlist. This is in addition to CRED iQ’s overall distress rate of 8.6 percent for CRE CLO loans that are either delinquent or with the special servicer. Combining these two figures, CRED iQ calculates 46.3 percent of these loans are in some level of trouble.
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