Valuation Viewpoint Volume 21, Number 1 May 2016 , Summary This issue of Valuation Viewpoint covers several topics including Real estate taxes: Calculation methodology and trends, Pipelines and hostage tenants, Market Trends and Indicators, the 4th quarter 2015 economic and real estate recap, Market transaction: RSM Plaza, and Market transaction: Marriott International. Real estate taxes: Calculation methodology and trends explains that real estate taxes are driven by tax levies of the taxing district, a property’s market value and its taxable market value, and the property’s use. Market value is defined as the probable price assuming informed parties with no duress. There is no direct relationship between estimated market value and property tax liability; taxable market value determines property tax due. Factors such as governmental spending, voter-approved referenda, local government aid, and TIF districts also affect taxes. The article reviews Minneapolis taxable market values (2008–2016) and effective tax rates for commercial properties. Pipelines and hostage tenants describes legacy pipeline license agreements on railroad land. These licenses are often cancelable, undefined in location or width, non-exclusive, and lack rent-dispute processes, creating forced sale or hostage tenant situations when landlords demand steep rent increases. Options for tenants, pay, move pipelines at great cost, or litigate for an easement, are explored. The article warns appraisers to consider these legacy agreements when evaluating market transactions. Market Trends and Indicators and the 4th quarter 2015 economic and real estate recap summarize national and regional indicators: new housing starts, productivity, consumer confidence, unemployment, and CRE fundamentals. Construction, business investment, and consumer spending drove growth while oil/gas and manufacturing weighed on performance. Apartment, industrial, office, and retail fundamentals generally improved; asking rents and investment activity rose. Market transaction: RSM Plaza reports the December 18, 2015 sale of RSM (McGladrey) Plaza and Ramp in Minneapolis for $78.35 million ($188.42/sf) after renegotiation of a long ground lease. Market transaction: Marriott International describes Marriott’s announced Nov 2015 acquisition of Starwood for $12.2 billion, expanding global scale and expected synergies. The issue also includes Rates of Return and Risk Hierarchy, P/E ratio data updates, and commentary on walkable communities and CRE investment trends.
Newletter, newsletters