Retail Property Tax Appeals for Malls, Shopping Centers and Retail Properties
Retail property owners, investors, landlords, and tenants can face significant property tax challenges as changing consumer behavior, online shopping, vacancies, rents, and operating expenses affect the performance and value of retail real estate.
Retail properties may also face increased assessments as local taxing jurisdictions seek to maintain or increase property tax revenues. A property tax assessment that does not accurately reflect a property’s current economic circumstances can increase operating costs and affect the long-term value of the asset.
Skoloff & Wolfe, P.C. represents owners, investors, landlords, and tenants involving a wide range of retail properties, including malls, power centers, strip centers, grocery-anchored shopping centers, fast-food properties, and single-tenant retail properties. The firm’s approach combines detailed valuation analysis and property-specific data to challenge assessments and pursue potential property tax reductions.
Property Tax Appeals for Retail Properties
Retail property tax appeals can involve properties with very different financial and physical characteristics. A high-performing Class A shopping center may present different valuation issues from a partially vacant or struggling retail property.
Property tax analysis may be particularly important for retail properties experiencing:
- Declining occupancy
- Vacancies
- Changes in rental income
- Tenant turnover
- Increased operating expenses
- Changing consumer shopping patterns
- Competition from online retail
- Redevelopment or repositioning
- Changes in market rents
A property’s assessment should be evaluated in light of the relevant economic and market evidence rather than relying solely on historical performance or generalized assumptions.
Retail Property Tax Appeals for Malls and Shopping Centers
Malls and shopping centers can present complex valuation issues because their value depends on factors such as tenant occupancy, rental income, tenant mix, operating expenses, physical characteristics, and market conditions. The appropriate valuation analysis depends on the individual property and the applicable jurisdiction.
Property Tax Appeals for Non-Stabilized Retail Properties
Retail properties that are experiencing vacancies, declining occupancy, or other financial challenges may require a different property tax strategy from stabilized assets.
For a non-stabilized shopping center, a property tax assessment based on assumptions that do not reflect actual market conditions can create additional financial pressure while the owner is attempting to attract new tenants or reposition the property.
A detailed assessment review can consider the property’s actual occupancy, rental income, vacancies, leasing conditions, and other relevant evidence when evaluating its taxable value.
Property Tax Appeals for Stabilized Retail Properties
Stabilized retail centers can also benefit from careful property tax assessment analysis. Property taxes are an important component of a retail property’s operating expenses and can affect the occupancy costs ultimately paid by tenants.
A reduction in property taxes may help owners manage operating expenses and may also affect the overall economics of leasing retail space.
For owners and landlords, the goal is to ensure that the property tax assessment reflects the property’s appropriate taxable value. For tenants responsible for property taxes, understanding the assessment can be important when evaluating their total occupancy costs.
Retail Tenant Property Tax Appeals
In New Jersey, certain retail tenants, including qualifying anchor tenants and single tenants, may have standing to appeal property tax assessments.
For tenants responsible for property taxes under their leases, an increase in the property’s assessment can result in higher occupancy costs. A property tax appeal may provide an opportunity to challenge an assessment when the available evidence supports a reduction.
The specific rights and procedures applicable to a tenant depend on the property, lease, jurisdiction, and applicable law.
Property Tax Due Diligence for Retail Acquisitions
Property tax due diligence is an important part of evaluating a retail property acquisition. A buyer relying solely on the seller’s current property tax expense may not have a complete picture of potential future tax liability.
Future taxes can be affected by factors such as:
- Municipal reassessments
- Changes in assessed value
- Property sales
- Local assessment practices
- Changes in market value
- Redevelopment or improvements
- Potential appeals
- Changes in the property’s use or condition
A detailed review before closing can help buyers and investment committees incorporate potential property tax exposure into their financial models and investment decisions.
Understanding Retail Property Reassessments
A planned municipal reassessment can materially affect the future property tax burden associated with a retail acquisition.
Before acquiring a retail property, investors may benefit from determining whether the municipality has scheduled or anticipated a reassessment and evaluating how that event could affect the property’s future taxes.
Understanding the timing and potential consequences of a reassessment can help investors make more informed acquisition decisions.
Reverse Property Tax Appeals After Retail Acquisitions
Retail property buyers should also consider the possibility of a municipality challenging or seeking to increase an assessment following an acquisition.
A transaction can attract additional scrutiny in certain jurisdictions, and investors should understand the applicable assessment procedures and potential exposure before finalizing a transaction.
Due diligence can help identify these risks and allow buyers to incorporate potential changes into their underwriting and investment analysis.
Property Tax Analysis for Retail Investment Portfolios
Property tax issues can affect both individual retail properties and larger investment portfolios.
An investment committee evaluating multiple retail assets may need to understand the potential tax exposure associated with each property rather than relying on a single generalized assumption across the portfolio.
Portfolio-level analysis can help investors:
- Identify properties with potentially excessive assessments
- Evaluate municipal reassessment risks
- Understand potential post-acquisition tax exposure
- Assess potential appeal opportunities
- Incorporate property tax assumptions into investment models
- Prioritize properties for further tax analysis
Experienced Retail Property Tax Appeal Counsel
Retail property owners, investors, landlords, and tenants need to understand how property taxes affect both property values and ongoing occupancy costs. For properties facing vacancies, changing rents, or changing market conditions, a careful assessment review can be an important part of managing the asset.
A property tax review can also help prospective buyers understand potential future tax exposure before committing to a transaction.
Skoloff & Wolfe, P.C. represents retail property owners, investors, landlords, and tenants in property tax matters and provides detailed property tax analysis and due diligence for retail acquisitions.
To discuss a retail property tax assessment or potential appeal, call 973.992.0900.
Retail Property Tax Frequently Asked Questions
Can retail property owners appeal their property tax assessments?
Yes. Retail property owners may have the right to challenge their property tax assessments, depending on the applicable jurisdiction, filing requirements, and deadlines. The specific appeal process varies by location.
Do stabilized retail properties also benefit from property tax reviews?
Yes. Stabilized properties can still have assessments that do not accurately reflect their appropriate taxable value. Property taxes are also an important component of occupancy costs and operating expenses, making assessment reviews relevant even for well-performing retail centers.
Should I review property taxes before buying a retail property?
Property tax due diligence can be an important part of a retail acquisition. Reviewing the existing assessment, local assessment practices, potential reassessment dates, and other factors can help buyers understand potential future tax exposure.
Can a retail property be reassessed after an acquisition?
Potentially. Assessment practices vary by jurisdiction, and a transaction may have implications for future assessments in some locations. Buyers should evaluate potential post-acquisition assessment exposure as part of their due diligence.
What is a reverse property tax appeal?
A reverse appeal generally refers to an action by a taxing jurisdiction seeking to increase a property’s assessment rather than reduce it. The possibility and procedures for such actions vary by jurisdiction.
Can property tax due diligence be performed for a retail portfolio?
Yes. Property tax due diligence can be performed across individual retail assets or larger portfolios. Portfolio-level analysis can help investment committees identify assessment issues and potential tax exposure across multiple properties.
How can a retail property tax assessment be challenged?
The process depends on the jurisdiction. Generally, the property owner or qualifying tenant must identify the applicable filing deadline, review the assessment, develop supporting valuation evidence, and file the appropriate appeal with the relevant taxing authority or tribunal.
