Dixie & War & Peace

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One of Dixie Phair’s many duties is to attend appeal hearings, which often more closely resemble war instead of peace. Read on to learn about Dixie’s latest experience as Commercial Real Property Analyst representing the Any Municipality County Assessor in an appeal hearing.

The appellant summarized his position:  

I bought a former doctors’ clinic, intend to reposition it as retail, and demand you reduce my taxes! The building suffers from all manner of obsolescence (the “ick” factor aside) with the most diminution arising from intensive interior partitioning. The building interior is a maze of corridors flanked by tiny consultation rooms emblematic of the former use. No retail site value is appropriate because the improvements (as constructed) are simply in the way. The improvements do not contribute to the current retail highest and best use. 

In response, Dixie replied:

Well, wait a minute. We appraise to highest & best use, so the site should carry a retail assessment, especially considering the the current development project underway regarding the improvements. Since the building is being repurposed, at least the shell and parking should contribute to value as they are sized and site oriented reasonably commensurate with local retail market standard. But it may not be all that different on a currently contributive basis:

Property As Medical Use As Retail H&B Use
10,000SF Building $500,000@$50/SF $200,000@$20/SF shell
60,000SF Site $600,000@$10/SF $900,000@$15/SF
40,000SF Parking $80,000@$2/SF $80,000@$2/SF
Assessment $1,180,000 $1,180,000

Dixie diffused the contentious situation by first assuming the construction will take a year. She then discounted the value of the contributing improvements at a typical return expectation for that period: building shell and parking at $280,000 discounted at 8% for 1 year = $22,400 subtracted from the assessed value of $1,180,000 = $1,157,600. 

Dixie was successful, and it didn’t take a lot of words. While “peaceful” may not accurately describe the experience for all involved, war was avoided and equity prevailed.