E ve rything Yo u Ne e d to K no w Ab o ut Pro pe rty T a xe s - PowerPoint PPT Presentation

E ve rything Yo u Ne e d to K no w Ab o ut Pro pe rty T a xe s Pre se nte d b y

2017 RE VI E W KE L L I MORRISON

Value Increases Values were up significantly for the 3 rd year in a row 2015 FINAL % 2016 FINAL % 2017 NOTICED 2017 FINAL % Property Type Increase Increase % Increase Increase Office 28.66% 20.99% 19.67% 13.15% Retail 30.70% 22.90% 25.20% 13.70% Apartments 11.44% 12.13% 16.31% 9.38% Industrial 39.90% 21.50% 14.34% 9.03%

Number of Protests Filed – 2015 - 2017 2015 2016 2017 Total Protests Total Protests Total Protests 109,141 116,655 126,301 Filed Filed Filed Portfolio % of Total Portfolio % of Total Portfolio % of Total Residential 83.29% Residential 83.13% Residential 85.78% Commercial 11.73% Commercial 12.28% Commercial 11.28% Personal 4.98% Personal 4.59% Personal 2.94%

Commercial Litigation Stats – 2015 - 2017 2015 2016 2017 Overall Filed Overall Filed Overall Filed 503 723 881 Lawsuits Lawsuits Lawsuits Portfolio % of Total Portfolio % of Total Portfolio % of Total Hotels Hotels 6.47% Hotels 4.70% 3.86% Industrial Industrial 10.92% Industrial 12.13% 13.87% Land Land 18.84% Land 12.34% 11.72% Misc. Misc. 0.97% Misc. 1.05% 1.14% Multifamily Multifamily 19.23% Multifamily 25.11% 22.67% Office Office 17.00% Office 16.20% 16.78% Office Condo Office Condo 0.68% Office Condo 0.35% 1.01% Retail Retail 25.89% Retail 28.12% 28.94%

TCAD Sources of Data Costar, Austin Investor Interests, TREPP, Real Capital  Analytics, Austin Business Journal, Austin American Statesman, CBRE, PWC, Fannie Mae, Freddie Mac, REIS, Korpacz, Capital Market Research, Weitzman, Brokerage Office Publications, RERC, JLL, SEC Reports, Internet, Owner Surveys, etc. In 2017, TCAD had 95 appraisals commissioned over all  commercial property types TCAD performs annual inspections of many properties  Attendance at local real estate conferences 

2018 PRE VI E W KE L L I MORRISON

2018 is a Ratio Study Year: What is a Ratio Study?  Every other year, the State Comptroller performs a study on the assessed values of properties compared to its estimates of market value  Appraisal District’s assessed value must be within +/-5% of the market value to pass the study  If the Appraisal District fails the study, the State can withhold funding from the impacted school district(s)

2018 is a Ratio Study Year: What does this mean for values?  The Appraisal District will likely argue for 100% of purchase prices for any recently-sold properties through the administrative appeal (ARB) level  The Appraisal District will be under more pressure to be aggressive with its valuations and less willing to make changes

“Top-lining”  A process of “agreeing to disagree” to a value, while preserving your right to further appeal (litigation or arbitration)  Avoids the risk of going before the ARB, where the value could be sustained or increased.  ARB members often do not understand the complexity of commercial appraisal, which puts the taxpayer at a disadvantage  Has become a common practice

Binding Arbitration  Lower-cost alternative to filing a lawsuit in District Court  Intended for owners with lower-valued properties where filing a lawsuit may not be cost-effective  Must be filed no later than 45 days after receipt of the ARB Final Determination of Value  Agent/Owner, Appraisal District representative, and Arbitrator meet via teleconference or in-person meeting  The value threshold for arbitration increased from $3 million to $5 million, effective September 2017  The filing fee ranges from $500 - $1,550, with all but $50 refunded (if successful)

How can you help us be the most effective in 2018?  Client Meetings - we want to know everything--the good, the bad, and the ugly  Information Request - there is never too much information you can give us - in addition to our information request if there are any appraisals or purchase offers, or if you are planning to take your property to market - we need to know!  Open line of communication - if you ever have any questions, comments, concerns - CALL US!

OF F I CE ST E VE L AAS

Office Portfolio – Travis County  TCAD OFFICE PROPERTY TYPES  USE CODE 50 – HI-RISE OFFICE > 6 Stories  USE CODE 51 – LARGE OFFICE > 35,000 SF  USE CODE 52 – MEDIUM OFFICE 10,000 SF – 35,000 SF

Office Portfolio – Travis County How TCAD sees your office building:

Office Portfolio – Travis County How we portray your office building:

Office Portfolio – Travis County Reality:

Office Portfolio – Travis County 2013 2014 2015 2016 2017 Total NRA 52,230,616 52,425,410 52,453,941 53,277,376 53,717,025 Value $7,004,316,780 $8,029,479,436 $10,336,527,888 $12,702,746,410 $14,491,264,951 # of Buildings 665 672 680 691 696 Value/SF $134.10 $153.16 $197.06 $238.43 $269.77 % Δ 14.21% 28.66% 20.99% 13.15% Class A NRA 27,982,713 28,177,507 28,206,038 29,029,473 29,441,335 Class A Value $4,469,652,315 $5,198,491,689 $6,870,997,151 $8,770,072,929 $10,101,165,543 Class A Buildings 192 200 206 214 219 Class A Value/SF $159.73 $184.49 $243.60 $302.11 $343.09 % Δ 15.50% 32.04% 24.02% 13.57% Class B NRA 22,786,736 22,786,736 22,786,736 22,786,736 22,786,736 Class B Value $2,450,594,604 $2,717,878,665 $3,337,905,584 $3,791,941,055 $4,264,832,587 Class B Buildings 425 425 426 426 429 Class B Value/SF $107.54 $119.27 $146.48 $166.41 $187.16 % Δ 10.91% 22.81% 13.60% 12.47% Class C NRA 1,055,259 1,055,259 1,055,259 1,055,259 1,055,259 Class C Value $66,051,879 $70,950,661 $80,488,433 $82,553,427 $90,742,037 Class C Buildings 34 34 34 34 34 Class C Value/SF $62.59 $67.24 $76.27 $78.23 $85.99 % Δ 7.42% 13.44% 2.57% 9.92%

Office Summary by Class $11,000,000,000 15.1% $10,000,000,000 26.9% $9,000,000,000 $8,000,000,000 38.6% $7,000,000,000 $6,000,000,000 13.5% $5,000,000,000 7.6% 12.4% 18.1% $4,000,000,000 24.4% $3,000,000,000 7.6% 3.6% $2,000,000,000 $1,000,000,000 11.1% 21.5% 11.8% 2.8% 20.6% $0 2013 2014 2015 2016 2017 Class A Class B Class C

Office Portfolio – Travis County 2018 Projection

Office Portfolio – Travis County 2018 Projection 5% to 15% increases; depending on submarket and building class

Office Portfolio – Travis County Why are Values so High?? - Notable Office Transactions  5 th & Colorado, 179,351 SF, built in 2016 $119,000,000 ($663.50/SF)   100 Congress, 411,536 SF, built in 1987 $245,000,000 ($595.33/SF)   Domain 7, 221,973 SF, built in 2015 $98,907,284 ($445.58/SF)   Capital Ridge, 216,511, built in 2015 $96,000,000 ($443.40/SF)  Note: TCAD will time trend the sales

Office Portfolio – Travis County Why are Values so High?? - Notable Office Appraisals  1001 Congress, 24,737 SF, built in 2002 $10,000,000 ($404.25/SF)   823 Congress, 181,351 SF, built in 1970 $62,000,000 ($341.88/SF)   Terrace 7, 192,214 SF, built in 2002 $61,900,000 ($322.04/SF)   Midtown Medical, 82,000, built in 2003 $32,500,000 ($396.34/SF)  Note: TCAD will time trend the sales

Office Portfolio – Travis County TCAD Sources of Data Costar, Real Capital Analytics, TREPP, Real Estate Alert, Austin Investor Interests, Austin Business Journal, Austin American Statesman, Korpacz, Capital Market Research, CBRE, Weitzman, Local Business Conferences, PWC, Brokerage Office Publications, RERC, JLL, Fannie Mae, Freddie Mac, SEC reports, Internet, Owners replying to Surveys, …

Office Portfolio – Travis County HOW CAN YOU HELP US??  Income and expense statements, rent rolls (as of 1.1.18), capital improvement budgets, lease proposals for leases that were not accepted, etc.  Details are important (lease summaries – help us determine market rent)  Client Interview – helps us better understand your property.  Recent appraisals, purchase offers or listings

Office Portfolio – Travis County Income Valuation Model (CBD & SWE)

APART ME NT S JASON L E E

TCAD’s Apartment Use Codes  08 – Apartment with 50+ Units (but labeled as apartment with 100+ Units)  06 – Apartment with 26 to 49 units  05 – Apartment with 5 to 25 units  Neighborhood Code then added to distinguish general location Examples: 08FNW; 08NE; 08SW; 05CEN; 06EAS; etc.

All Apartments – Travis County 46% 42% 543 Apts 486 Apts 12% 143 Apts 08 (50+ Units) 06 (26-49 Units) 05 (5-25 Units)

Large Apartments (08) Travis County 486 Total 9.5% 32.7% 57.8% Class A Class B Class C

Where we’ve been Large Apartment Values 2013-2017 $14,000,000,000 +7.60% $12,000,000,000 +9.96% +9.81% $10,000,000,000 +10.55% $8,000,000,000 +8.73% $6,000,000,000 $4,000,000,000 +13.98% +17.16% +14.97% +18.08% +16.49% $2,000,000,000 +18.32% +26.14% +17.98% +25.95% +7.30% $0 2013 2014 2015 2016 2017 Class A Class B Class C

Where we’ve been Medium Apartments (06 Apts – 26 to 49 Units) $500,000,000 +24.61 $450,000,000 $400,000,000 +26.44% $350,000,000 +16.16% $300,000,000 +13.92% $250,000,000 +9.6% $200,000,000 $150,000,000 $100,000,000 $50,000,000 $0 2013 2014 2015 2016 2017 06 Apts (26-49 Units)