The subject property was a 630,355 square foot distribution warehouse with 64,695 square feet of office space and 45,087 square feet of manufacturing space. It contained 65 dock doors and a weighted average clear height of 33’7”. It was originally built in 1995 with an addition in 2007 and had a weighted chronological age of 15 years. The subject property was in average condition with no deferred maintenance issues and was fully operational.
The subject property was purchased along with the business during the Great Recession of 2008/09. In order to buy the business and real estate, the buyer needed to free up additional capital by completing a sale/lease-back transaction on the subject property with a national REIT. The sale price and resultant lease terms were executed at above-market terms due to the extraneous factors that were involved in the sale of the business whereby the sale/lease-back transaction was used as a type of unconventional financing instrument. The county auditor placed the value of the real estate at a number that closely mirrored the above-market sale/lease-back transfer price. The tenant in the property was not concerned with the excessive valuation until the county tax abatement was close to expiring – that’s when they called Peak 5 Advisors.
Peak 5 Advisors was able to prove that the subject property was unfairly valued based on an above-market transfer that did not properly reflect market conditions if the property were to sell for its innate fee-simple interest. Peak 5 Advisors was able to further show that such large properties set up for single occupancy with large office components were hardly ever leased and were almost always owner-occupied, which further negated the above-market lease and income approach to value. After wrapping up the appeal, Peak 5 Advisors was able to effectively extend the tax abatement for the property owner indefinitely by knocking approximately $160,000 off of the tax bill annually in connection with the reduced assessment.
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