Board of Equalization Meeting   7/14/2023

Are you all here for the applicants?

I believe I have you here for four appeals, is that correct?

That is correct.

Again, this is application number 37, PID 29783, applicant is Brookdale Partners.

Thank you, sir.

We are the owner, the developer, the contractor, and the property manager on the project.

Any questions for the applicant at this time?

There's a 5%, 5% instead of, yeah.

So you gave it three quarters.

That's everything we have unless you have questions.

Yes, correct.

Yes.

Right.

Yes.

To account for the higher tax rate, the higher taxes you loaded it.

Exactly.

Yeah, I'm seeing 37.

Yeah.

Thank you.

Back to the applicant.

So again, that's where we're struggling right now is with the cap rate on this project.

Are you aware of any sales, and I'll ask the successor as well, I guess let's first see all of similar situated properties, either in the area or just generally in the region.

And that's why cap rates have not been compared to a property that's older in the extended use period.

And I don't know how, if you went and looked at our property in Parks Edge, you would see exactly what I'm saying as far as the rehab that would need to go on at a Parks Edge versus what we have in Brooklyn.

The same question to the assessor, do you all have any sales of something similar?

Parks was saying, because the compliance period doesn't allow us to look at sales because there aren't any.

And then the two, and you have that grid, that was graded as a 2A.

That was a 2A.

Because it was no longer, was it no longer capped?

I think they were at the end.

Of their, okay.

Yeah.

Yeah, like reuse next year.

Okay.

Any other questions from the board?

Do you have any issues with the grade?

I just don't put a whole lot of faith in, I shouldn't say faith, but I don't think it works for a tax traded property the way this is set up.

And we feel that that's half percent.

So you talk about in a compliance period, 15 year compliance period.

When you get out of the compliance period, it's still not easy, but it gets easier because you no longer have that compliance period where the tax credit investor has to stay in for that 15 years.

Post the compliance period, we certainly are because they're willing to accept the risk.

It was ending, okay.

Yes.

Right, it doesn't have to stay afford.

So it sends you that market rate deed.

How much in credits did we get on the project?

Yeah, good question.

So this is a funding stream for the construction of the property so that the developer has additional funds to actually build the property.

So you sell the tax credits, you put more equity, and it drives the debt down, then we're able to meet those AMI requirements and rent requirements in advance.

Anything further to you?

OK. Or African, anything else from that on this one?

And that means we're gonna have to figure out a way to pay for that because we can't raise rents.

Well, you know, it's going to be a little bit of the same, right?

I would say Trestale's probably a little bit more restrictive than Brookdale because of the AMI and the longer deed restriction for the rest in income.

Thank you, any questions from the board?

It's the exact same conversation about cap rates, but otherwise that's everything we have on this one.

Any questions for the assessor?

It would be a separate sheet.

Do you all have the new number?

No, the only thing I would say is if you guys visit any of these properties, I hope you would go out there and say, I can't tell the difference between this property and any market rate property, right?

That's the way we try to operate.

I'm just going to explain that to me.

Yeah, I'd like to understand that too.

Well, the neighbors, we're in this, we're in a high density area right there and then maybe we've got no complaints.

Thank you.

Okay, so next application is number 39, PID 15828, applicant's view, realty, partner, and LLC.

Please.

That's where I have an issue.

Thank you.

As Mr. Park said, we do not believe it affects the marketability of the property.

And make sure I'm not missing anything here.

were estimated based on their rent rolls at those times, but now, and actually we still are basing it on an estimate from the rent rolls.

So I think that's everything on this property.

I think you have a mathematical error there.

Okay, we corrected that also.

Like you had said, you loaded the cap rate in the second, but we did not here because we're using the estimated.

I will amend my statement.

Any questions from the board?

Any other rebuttal?

I just find that hard to believe.

We absolutely concede that interest rates have gone up before January 1, but all the sales that happened in 2022 that are the basis of our assessment did not indicate that that

But wait, I think we understand your point, okay.

We have one last application here, application number 40, PID 2278, owner name Lops and Meadow Creek LLC.

Thanks, Kristy.

And I think the same comments as far as cap rates and so forth.

and we are limited on increasing a certain percentage of the units in the rent to keep them affordable.

So it's a little more restrictive even than the DUVS.

So that's beyond those two other 20, so that's beyond the 40%?

So I'm fairly certain it's 10% of the units that are rent restricted.

And could that 10% be one of those 80 or 100 income level ones?

It typically falls that way because of they, yes, typically falls that way, but it's not always guaranteed.

Again, it's not as restrictive as a tax credit property, but it's restrictive.

Any questions for that?

We propose a change to $11,715,600.

But we feel we certainly are addressing the affordability or tax credit, not tax credit

So we feel that we are appropriately addressing this.

Any questions from the board?

I guess that should be all.

Well, I think it goes back to your list, the way you have this segregated into a 2T or two, whatever.

I do have one final question.

And it looks like Treesdale is like, what, 10 years, close to 10 years old?

Okay.

Okay.

Good question.

Thank you.

to reflect their actual income in the analysis.

Whenever possible.

Yes, when we have that.

When we have that information.

It's what we can defend as a value of right now.

Exactly.

I'd just like to say thank you.

And you got to drop me now.

Thank you all.

Appreciate it.

It was nice meeting you.

Nice working with you all.

I believe it helps student matters, so maybe address those real quick.

So we'll add that to it, and then you can vote on it based on that.

Yes.

Yes.

Canterbury.

Yes.

I just want to make sure that we...

We talked about minutes and apartment.

But let's, if you don't mind, let's do those two real quick and then we'll

That would be great.

Okay, so that's that one.

No, because the only required documentation is the minutes.

Okay.

Okay.

We will leave our documents here to be disclosed.

Okay.

All right, so that's those two.

They wanted an hour and a half versus 30 minutes.

I've spent five days in trial with him and he's talked five days.

It is a very complex property.

Unless we come down to one of the ones, I think we have one or two.

No additional days needed or anything like that?

We have August 1st, as I said, completely filled with Shane Smith's 15 properties.

And has he indicated that he's still moving forward with the border vehicles or is he still reviewing?

Now if one or two drop off, I don't think it really matters.

That is the number 315.

They have appeared before us before, but only because we were remote at the time.

They don't want to service somebody.

You know, a couple of them have said, you know, like like the C2 land LP, please just consider what we've given you, but be actually.

So the first one on application number 37 is the Brookdale Park.

Right.

So, what actual effect does it have on value?

I was waiting to hear him suggest a cap ring.

But they don't have them because there aren't any.

Well, he indirectly did by saying it should be a great

I don't know if 50 captures it.

Plus the actual income and expenses.

There's no incentive here to, and it's a new building too, but there's no incentive.

They send it to the developer because they get the tax credit.

Right, but there's no incentive to upgrade or like someone to a buyer to go in there and buy this, you're getting this income stream, but you're not going to get a better like you're not going to get some of these are, there's value adds, they're adding, they're trying to get to a point where they can get a higher income, which Hollymead shows supposedly with their the performer versus what they have, the four point whatever they bought, but I mean, I thought they made a good point about your

And so, you know, every time that risk is somewhat mitigated, but, you know, at the beginning of the 15 years, you know, you're facing even greater risk.

Well, I guess what they're saying that the risk, I don't know how the, I lost the word.

Oh, well, I guess you can go back.

Or the flip side of that is in year one, you ain't have time to screw up yet.

So that shows up in their expenses.

It would have been nice if we had at least one sale somewhere, even regionally, where none of the regional sales are income restricted.

They wouldn't be during this period.

Because as they fall out, they can either be bought by someone else and then go back through the program.

They can use that.

It's a 15-year compliance period, and they typically take it in the first 10.

That's right.

Yeah.

If they owed 11 million taxes, they went off suddenly.

Yeah, OK. My understanding of these properties was that the developers sold those tax credits to investors, and they were not with the property.

Right, so that would go with the property, right?

I don't know if it's the same way with these or not.

Yeah.

But this one, I don't know which one is.

You know, on these particular properties, especially the ones that are in the compliance period, should there be adjusted slightly because of that greater risk?

But I don't know if there is, I was kind of looking up here and see if there was an insurance that affected that.

I'm not aware of an insurance, but there was a

They don't have, under taxes and insurance, they don't have anything spelled out like that.

Even though that is a possibility, and she actually experienced one out of the thousands of these projects.

I imagine there's some clients, like I don't know if you screw up once,

and I'm assuming maybe it's not insurance insurance, but maybe it's the auditors are taking responsibility for that.

Right.

so well also they're getting a return yeah i mean well property well even market properties will sell when they're brand new right they generally have a holding period of 10 to 15 years so um you know people get don't get into these necessarily to sell them initially they get into them for the return they're going to get on the cash flow they go into it at the beginning knowing that they're going to hold this for

Yeah, the application is very extensive.

that's where the balance has to be just because there aren't sales doesn't mean there aren't there isn't value to this yeah now they're getting the benefit of that million eleven million dollars there's a benefit to it that's it they're just looking at it in terms means they don't have to come up with capital right for this project right they're they're getting instead of a down payment they're getting somebody else to make their down payment for them and then they're getting financing on top of that and like you said if that brings down their their ratio

But whoever's buying it, that's not another complication.

Yeah, exactly.

But that's a complication too, that within the 15 years, if a buyer comes and buys this, are they, and if they're going to get the tax credits for the rest of it, is that just offset with the lower rents or was that, that's just kind of this thing, additional complication, but.

In the compliance period.

What's the appropriate cap rate?

You guys have already changed the cap rate a little bit.

50 basis points.

We changed the cap rate only to reflect the tax difference.

That's fair.

Yeah, you went up 8%.

Even though it shows rounded, it would have been exactly the texture.

The reason you went from a 5.75 down to a 5.5 is because you had an error in it.

Yes, it was incorrectly graded and we corrected the error.

Did we affirm the assessment?

Fair enough, I think five days.

Because of that risk factor, don't have insurance, don't have whatever.

I don't know if someone's going to come in and pay 5.5.

So I don't think we should split the baby on every one of these, but we could on this one.

What we're doing is a half percent.

This would be a 2 if it wasn't a 2T.

The half percent?

I'm not questioning the fact that this is a grade two apartment, it's just whether or not the income restriction on this one with the age and the fact that it is, it's just that half percent captures that.

I mean, your high range is six and a half.

That's so hard.

and then you've got the park's edge, five and a quarter, town compliance, so that would tell me, you know, is it that five and a quarter, it's a little bit low.

This was 5.5.

Yeah.

Newer.

It's, oh, which one?

This is a 2B, so it's a little bit better grade.

It's old.

It's a 2B, but that one's a 2C.

Yeah.

Location-wise, where's Park's Edge?

Well, I can speak for- Park's Edge is over off of- I can speak for what it is because- You go down, yeah.

We sold it.

Oh, you did?

That was 8, yeah.

Oh, right, yeah.

Yeah, and it was, I don't know what I was gonna say, but-

I mean, really, it just wasn't properly run.

Because of the demand for this property title.

What was it?

$11.7 million.

So that was the second sale of Parks Edge, actually.

The most kind.

I think it's kind of paying attention.

So what about just like a quarter of a point?

Yeah, I think I'm fine with that.

But of course, somebody else made the point that it's more risky towards the end of the compliance period if we have had issues with compliance.

At the end, there's less risk of screwing up in the next couple of years.

you know every five-year period over a 15-year compliance period but you know I can see that there's kind of a you know double-edged sword.

You saw the 30 years as well which is.

Well you've got 30 years for the income restriction but that's going to show up in the income.

Right.

You know you've only got this 15-year compliance period so.

I think the quarter is appropriate especially seeing that there's sale I feel like there should be some adjustment for it that risk but doesn't have to be huge because the park

even though it's out of compliance.

It's almost out of the, it's still in conference strictly though.

Well, that's just like the beginning.

So what would, yeah, where does that take us?

And then loading your cat, right?

Okay.

Okay, I believe I got this right.

Oh, eight point, yeah, that does seem...

It goes up, you've picked up the .854.

Yeah, that needs to stay in there, but am I...

I think you're missing the JT.

Okay, there we go.

6.85?

Okay.

Plus the tax rate, right?

Now the new number would be 14464800.

And that would just go to I mean, I guess the

Correct.

Yeah, the land wouldn't change based on any of this.

Oh, but the total value, so it's just going to be applied to the building.

Correct.

No, no, 14,464,800.

Do we have a second?

So you have to reduce the building value

All right, so next one, application number 38 is the Treesdale Apartments.

This is a little bit of an older, this is 2013, so the compliance, there's five more years in the compliance.

Sure.

Interestingly,

To reduce the assessment on application number 38 to $8,226,700 Do we have a second?

I second All in favor?

Aye

The only limitation here, this is a 20% and 80% AMI.

The reduction, okay, it's 27.

They didn't make any arguments regarding the lease up issue.

So, location, I guess.

So any, any thoughts on this one?

This is very similar to every other apartment.

Any other comments?

I mean, it doesn't have the tax issue.

This is the same.

It doesn't have the issue, but the, you know.

Yeah.

Now, you know, in this case, we just made that change, so we're actually proposing for you to make.

There's again 27,720.

Do we have a second?

This is 20% or 80%, 20% or 100%, which you all have at 120%.

Oh, I think I read it off of the documentation.

It's not that some of the units are.

You guys have already made a suggestion on 1176.

Yeah.

Second.

I believe we did.

This is application number 45.

The applicant is not present and asked that we review this without their presence.

Does everybody have a copy of this?

Yes.

So it appears that

Why are we not using special purpose property?

Well, they're mostly owner occupied properties by vets for long periods of time.

Okay.

The, okay, so that's, anybody have any questions about, that we should use the income approach on this one?

What's when or not this is arms length, right?

Okay, we would question that also, yes.

Police has been in place since 2009.

Well, there is an arms length, please.

The operator of the veterinary clinic is the owner.

why we would never use that rent, that somebody pays themself for a property to determine an income tax unless it happened to in an income analysis or rent analysis match what we would find as a market rent.

What does the assessor have to say about that?

So those are the primary differences between their approach and our approach.

So it's really, so they're saying they used effective year versus you're having, so you're having a 989 or 2000?

Yeah, 82 in the actual, but they did put the addition on the back in 88, so it's kind of like that.

And then the, I'm sorry, I didn't realize I wasn't sharing, or I wasn't showing the screen when I saw.

Is this the same road as the other one?

Is that Westfield as well?

So there's no zero left.

Okay, so turn it there.

They could do a roof in 2023, I believe.

After the disaster.

Yeah.

The land rate is equalized in that area at $40 a square foot and made a 25% adjustment for location, an increase of 10% for its small size, and a decrease of 10% for the C1 zone.

That's what she just described.

So that's the one point, what was the numbers there, was it 0.75?

I don't know what it was.

1.1.

1.1 and 0.90.

So they were at points, is there a reason why this is 0.75 versus 0.7 across the street?

This was the sail of the ski place.

The freestyle.

And we have that same adjustment on this one, on the two next to each other.

Is that correct?

This is the location.

This is the location.

We do have a size adjustment.

Yeah.

C2 Land is right here, I'll give it to you.

Yeah.

Gotcha.

Gotcha.

Yeah.

Two separate steps.

This is 30 on both.

Thanks for getting me straight.

Edith, do you want to go?

So that's a real estate value.

And they look like they're using the same cap rate.

You know, it's just a difference in that she was using an average of two years of expenses and she was also using 2022 where we had to stick with the 2021.

Do we have a motion?

Do we have a second?

So I have a proposal for the board to consider if we have time to take a few minutes.

I don't think there would be a lot of documents on every case, but in some cases, it could be helpful.

So, and I don't think

Let me read the code section here.

So again, maybe want an attorney's opinion on this, but to me, that would be fairly broad authority to gather the documents.

And my gut feeling is that we shouldn't have to subpoena it.

And our guess normally is that the income, if they gave it to us, would result in a higher value, which is why they don't want to give it to us.

or M.A.

Exercises or something like that.

That's something that I got obviously for next year.

then you know when you start pursuing it should not be i should not apply to residences yeah i mean well i wouldn't apply to residents anyways but yeah yeah you know what i'm saying so we have that right and it's in the code i mean do we need to inform the property owners of that right i just don't know as an example you know they're not getting the interior photographs right assuringly

I certainly don't want to try and discourage people from appealing for fear that their private documents are going to be sought, but they might, I mean, I think it's better for them to have the knowledge that it could happen because once you issue this subpoena, compliance is sort of compelled.

If someone hasn't brought, if it's not compelling, they haven't met their burden, then okay.

But you also have the very clear restriction that you can't change a commercial property, you can't increase a commercial property without a third party appraisal, which means you would have to hire a third party appraiser and we're not willing to, I mean, it hasn't been a problem that we think we should be doing, going through that process and expense for that, right?

to facilitate their work, it just strikes me as violating that firewall of independence.

It's good to be aware of it.

It's good to be aware of it.

Yeah, it's good that you brought it up.

Yeah, if you can decide on a case-by-case basis, I think that would make perfect sense.

Yeah, and probably the most important thing is that Peter's office, when there's something that's missing, that would be really helpful that they noted in this document so that there's time to issue this opinion in advance of the hearing, et cetera, if we decide that it's important, which I think they generally do, but maybe not, I don't know.

Do we have any applicants here for our next hearing?

And I just realized we have the apartment wants to also go back to it somewhere, but we have that opening of the afternoon.

I mean, before it was turned in by somebody so that you can see what the wording of the application says for next year and vote on and approve that you agree that it's appropriate.

Good to see you again.

Good to see you guys.

Let me just go through my field real quick.

Good morning and welcome.

So just be aware of that.

Hit the high point, I try.

Please proceed.

the fact that the most recent data that's still prior to the date of value is showing a lower rental income through 2024 and the cap rate that is too low because cap rates shouldn't be going down simply because of interest rates alone but even then the costar cap rate is at 8.7% and we're only asking for 8% and that is our opinion.

Any questions from the board at this time?

So we do believe that the cap rate of 7% is well supported.

Other than Inject, which is of course owned by the federal government, there is no danger of this property going dark or losing tenants or having any problems.

Any questions from the board for this answer at this time?

So that sale is what it is back a long time ago, but those days were long ago.

Any questions from the board?

Can you tell me why that income decreased so significantly between 2021 and 2022?

There's gonna be some vacancy and then we'd be making that deduction, but we're not in this case.

Is there a breakdown of leases in here?

There's a rental.

And you can see the annual amount right there.

I've highlighted it on your sheet if you've got a highlighted version.

Why was there a reduction in 22 from 21?

So whatever they've given in rent, they've given back and not having a deduction for vacancy in collection loans.

I see a 22 for the CPI indicator, but I don't see any change in the lease.

And if they thought they could make more, they would.