October 7, 2018
Often in retail, tenants will be required to pay their share of taxes using the square footage of the tax parcel of which they are apart. In other cases, they will be required to pay based upon the leasable area of the shopping center excluding separately assessed premises. Sometimes, just looking at the tax map or the graphical information system (GIS) data for a shopping center will allow you to “see” that adjustments may exist.
The three most common types of adjustments that we are able to “see” from this information are:
- A tax parcel is a building footprint only. Sometimes a department store, supermarket or outparcel occupies a tax parcel that includes only the land under the building. A 4,000 sf building sits on a 4,000 sf tax parcel. In those cases, we can “see” that the tenant’s parcel does not include any common areas or any supporting parking areas. In those cases, there may be an opportunity to bill additional land taxes.
- There are numerous parcels for one shopping center. In many leases, the lease will allow (“at landlord’s option”) the tenant to be billed based upon the square footage of the parcel on which the tenant resides. Often, there can be a wide range of rates per square foot when looking parcel to parcel. This past week, we worked on two centers where the rates per square foot varied by nearly 400% from the main parcel to a multi-tenant outparcel ($1.50/sf on the main parcel to $6.00/sf on one of the multi-tenant outparcels). Carefully considering the landlord’s lease required/allowed billing options can greatly affect a tenant’s rate per square foot.
- Occasionally, we will see that there are just a couple of tax parcels for a center, but as we dig into the municipality’s records, there is detail of the assessment for a single parcel BY BUILDING. In those cases, while it may initially appear that there are not separate assessments, there truly are, creating the opportunity addressed in #2.
You may not fully understand all of the information that you are looking at when you pull up the tax maps or the GIS data for a property, but, odds are, you may recognize when an issue exists – enough to ask the right questions. Those questions may lead to additional value!