When to consolidate...
Last month we talked about whether owners of real estate should consider a division (dividing one parcel into many) in an effort to keep real estate tax as low as possible. We concluded that it was not always to the taxpayer's advantage to divide. Knowing that an assessor usually views a parcel that has mixed-use "as all one kettle of soup" the economies of scale can be favorable. Income, expenses and most important occupancy percentages from differing sources (retail and office) could support one another in a lower assessment and a lower tax.
In assessment parlance joining many parcels into one is known as a "consolidation". But, despite what we just said in last months article it is not always to the taxpayer's advantage to consolidate.
Property with separate office and retail parcels can determine more accurately for their tenants the contribution of office versus retail to common area maintenance, real estate tax and other expenses.
Negotiating leases for a particular space is made easier also knowing what to expect from the Assessor.
Because office and retail tenants draw from different markets, their income, expense and occupancy summaries differ. Overall income, expense and vacancies percentages are easily separated to determine a net operating income upon which a reasonable capitalization rate can be applied in determining a market value. Keeping office from retail separate allows the Assessor to apply different industry standards to carry their assessments.
To divide or consolidate turns out to be a coin with two heads seeking similar results but having different considerations along the way. Seeking the most reliable path to a lower tax bill should always be traveled, and whether you have one PIN or several, the main focus should be on reducing the overall market value to achieve the lowest overall tax possible.
Let us help you determine the most advantageous means of lowering your assessment. Give us a call.