2017 Updates to "Revisiting Big Box Stores" > Fahey Schultz Burzych Rhodes
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2017 Updates to "Revisiting Big Box Stores"

January 2017

Since the 2016 presentation on Township Tax Problems and Solutions for Big Box Stores, there are a few additional details which may be of use when it comes to the issue.

There are still ways that you can successfully argue for higher valuations of big box stores in the Tax Tribunal. Consider some of these approaches:

  • Attack the comparability of any dark stores used in the petitioner’s appraisal. Dark stores have a different highest and best use and should not be used as comparables. In particular, show that the dark stores used in the petitioner’s appraisal are subject to deed restrictions that make them unusable for stores. This approach was successful in one recent Michigan case involving a big box store. Consider hiring a separate “review appraiser” to critique the petitioner’s appraisal.
  • In the township’s appraisal, always avoid characterizing the existing use as a “Home Depot” or a “Lowe’s.” It is a “big box home improvement store.”
  • Ask your appraiser to demonstrate a comparative value relationship between “sale-leaseback” transactions or “leased fee” sales and “fee simple” sales. This will allow your appraiser to use these higher-value sales as comparables in the sales comparison approach. Downward adjustments may need to be made to such comparables.
  • Similarly, ask your appraiser to demonstrate a comparative value relationship between market leases and build to suit leases. This will allow your appraiser to use build to suit leases in the income approach. Downward adjustments may need to be made to such leases to reflect the current market and the age of the building.
  • Always use the cost approach as one of your alternative valuations. Plentiful cost data is available and costs can be calculated relatively easily. In other cases, where there are inadequate sale and lease comparables, the MTT and the courts often use the cost approach.

To review the original presentation, please download the slide deck here.

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