Effective Advocacy During Pre-Roll Negotiation
Several substantial multi-use developments are currently planned or already underway in Winnipeg, spurred on by unprecedented levels of investment in the local real estate market. These developments provide many exciting new opportunities for investors, residents and commercial tenants as these initiatives are brought to fruition in what has historically been a conservative market.
These sophisticated investors recognize that proper management of these projects involves accurate budgeting and pro-active management of the property tax expenses associated with these new developments. Property taxes are a very significant expense for all commercial developments, and investors must actively manage this component in order to maximize returns and ensure that their new developments will be competitive in the marketplace.
Altus Group was approached by one such developer, and was given a mandate to provide comprehensive property tax management services in connection with one of the major multi-use developments in Winnipeg.
The developer initially required concise and accurate property tax estimates for the project in order to assist with its pre-leasing efforts. As the project proceeded, pre-roll negotiations were initiated with the Assessor concerning the assessments to be placed on the roll during the critical two-year period after the improvements became legally assessable. Flawless execution of the pre-roll negotiation strategy was required in order to align the initial realty assessments and taxes with the projections that were relied upon during the pre-leasing period.
The initial phase of the assignment involved the provision of a credible tax projection that the developer could rely upon in its pre-leasing activities. Altus Group completed an in-depth analysis of both market indicators and the Assessor’s valuation parameters for comparable properties in establishing this projection. This approach ensured that the resulting projections met the dual objectives of fairness (market value) and equity.
As the development progressed, the pre-roll negotiation process was initiated with the Assessor. Success in this second phase hinged upon several key factors, including:
- A complete understanding of market conditions and comparable assessments as of the valuation date;
- Open and frank dialogue, predicated on the reputation of Altus Group’s Winnipeg team conducting themselves with respect and integrity;
- A willingness by both parties to recognize the complexities of the development and to work, to the greatest extent possible, towards an end result that would satisfy the requirements of all stakeholders without the necessity of protracted appeals if that could be avoided.
The development involved several complex factors, including the extent to which the development would properly be considered “assessable property”, the valuation of shell space, and the appropriate market parameters to be applied to a variety of occupied areas. Throughout the pre-roll process, all parties remained committed to the goal of achieving consensus if possible, while fully recognizing that recourse to the appeal process would be had if an agreement was not reached.
The pre-roll consulting process was successfully concluded with an agreement concerning the various assessed values to be placed on the roll during the initial period after the improvements became assessable. Although the valuation methodology employed by the Assessor and Altus Group differed substantially, the parties were still able to agree upon the final values to be placed on the roll during this critical period. As a result, the property tax burden during this period fully aligned with expectations that were set forth in the tax projections that had been completed in phase one of the engagement.
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Last updated on July 29th, 2019 at 03:35 pm