Our Services

Real Property - Life Cycle and Phases of Ownership of an Asset

Acquisition Phase

Our services start from pre-acquisition/due diligence analysis. We assist on the best form of ownership for future tax minimization and transfers. We assist in verifying property tax assumptions in the pro-forma cash flow. We assist in setting the new base year value at or below the purchase price.

Reposition Phase

Asset repositioning strategy often requires major renovation or new construction projects. New construction and renovation are a “gray area” of the law that requires thorough understanding of the law and best market data to justify minimum increase in assessments and the correct correlation between cost and value. Not all construction costs in a renovation project are assessable by law.

Leasing Phase

In the very competitive leasing phase, we help owners estimate the tax component of the CAM (common area maintenance) charges. We produce evidence and support to justify tax pass-through even when the actual tax bill is not received. We warn against certain types of leases that may trigger a change in ownership and result in higher taxes. Finally, we suggest language in the property tax section of the lease to anticipate property tax law changes and how to minimize owner’s exposure.

Recapitalization Phase

Owners often reshuffle membership interests as certain members hold the property to the end of maturing period. Even if the property does not leave the current legal entity, a change in ownership can occur that has significant transfer and property tax consequences. Noncompliance of certain reporting requirements results in a penalty. Working with your property tax counsels, we recommend the correct way to recapitalize the ownership entity for members to exit without or minimizing transfer and property tax liabilities.

Disposition Phase

A sales price is enhanced if future property taxes can be minimized. A sales price is enhanced even more if the seller’s tax base can be preserved. We advise owners and recommend the best strategy for sales of the property to maximize the sales price, minimize future property and transfer taxes (more on this later).

Stabilized Assets

If the economic and market condition justifies, a stabilized asset can receive property tax reductions even if it performs well. This is because in California, the basis of assessment is fee simple market value and not leased fee value.

Business Personal Property

More often than not, assessees of business personal property (BPP) are tenants rather than landlords. BPP assessments relate to all asset purchases of the tenants. The top 75% of the BPP assessees in every county are audited mandatorily ever four years.

We help defend audits of major tenants who face escape assessments due to under reporting or other other reasons as determined by the auditor. Major tenants who make significant leasehold improvements should pay particular attention to potential double assessments of such improvements. We have the expertise in real and personal property assessment and can quickly discover such double assessments. At times, even when certain events happen to the real property, they can significantly affect the tenants’ tax liability.

Intangible Property

By law, the assessor can assume the presence of intangible property to put the real or personal property to its highest and best use. However, intangible property is not assessable in California. Intangible attributes are different from intangible property; intangible attributes are assessable.

We have experience and expertise in the area of identifying and quantifying intangible property in California. We do so by associating an identifiable income stream with an item of intangible property embedded in a property transaction. A prime example of this is the value of franchise, which is often part of the purchase price of a hotel asset.

Transfer Taxes

Transfer taxes are applicable to real estate asset sales and transfers of legal entity interests that own property in California that also constitutes a change in ownership. Intangible property is not subject to transfer taxes but it has to be identified and quantified before a sales transaction occurs.

The sales price of an operating hotel represents its business enterprise value of consisting of real, personal and intangible properties. By quantifying the value of the intangible property, i.e. value of a franchise, our proprietary valuation analysis helps the seller pay less transfer taxes and the buyer pay less in future property taxes.

Tax Certificates

Real estate developers often need to record a final map consisting “baby parcels” or re-aligning current parcel lines. The subdivision map of California allows the tax collector to pre-collect property taxes that have become a lien but not yet due. We work with the developers to report accurately construction in progress cost of all applicable lien dates for purposes of estimating taxes for the tax certificate process. We also assist in obtaining a subdivision tax surety bond to manage cash flow.