I wanted to share a quick follow up to my last legislative update, shared to me by my friend Michael G Reed at Porter Wright.
I’ll summarize the case and the ruling to the best of my ability below. If you would like a copy of the ruling, please let me know and I’ll be happy to provide you a copy.
The Ohio Supreme Court has ruled that entity transfers can be used as evidence of the value of the property being conveyed by the entity transfer.
Here’s what transpired. A subject property, Palmer House, was valued for tax year 2015 at $16,000,000. The Columbus City School board pulled a newly recorded mortgage of $25,536,000 and extrapolated a value of $34,000,000 by applying a loan-to-value ratio.
The Franklin County Board of Revision rejected the School Board’s appeal, as did the property owner, citing that the sale of an entity was not equivalent to the sale of the real estate.
The School Board then presented evidence:
So, what does this mean for you? As a buyer, it levels the playing field a bit. Instead of winning the bid because you are the most aggressive on how you underwrite property taxes, now, perhaps, buyers can be selected on the merits of their offer and their ability to manage the asset they’re targeting to buy.
As a seller, it puts a dent in the value that can be achieved at sale because most buyers will take this ruling into account and underwrite property taxes to 100% of the purchase price – per the results above.
The good news is, though, that the Federal Reserve is likely to keep interest rates at historic lows and may even lower them still further if they see a need to do so.
If, as a seller, you would like to take advantage of these still historically high prices being paid and would like us to value an asset for you, we’d be happy to do so.
I’ll summarize the case and the ruling to the best of my ability below. If you would like a copy of the ruling, please let me know and I’ll be happy to provide you a copy.
The Ohio Supreme Court has ruled that entity transfers can be used as evidence of the value of the property being conveyed by the entity transfer.
Here’s what transpired. A subject property, Palmer House, was valued for tax year 2015 at $16,000,000. The Columbus City School board pulled a newly recorded mortgage of $25,536,000 and extrapolated a value of $34,000,000 by applying a loan-to-value ratio.
The Franklin County Board of Revision rejected the School Board’s appeal, as did the property owner, citing that the sale of an entity was not equivalent to the sale of the real estate.
The School Board then presented evidence:
- The conveyance of the real estate, as represented by a deed executed conveying the real property underlying from one LLC to a new LLC.
- A loan secured by a mortgage on the real estate as represented by a notarized mortgage instrument recorded on the subject property.
- The sale of the apartment complex – including both real estate and appurtenant personal property – as represented by a Purchase and Sales Agreement, with language granting the buyer the right to perform the transaction as a “Drop Down LLC sale” as well as the final settlement statement.
- The real estate appraisals, the School Board had obtained a copy of the appraisal prepared in connection with the mortgage loan and offered the testimony of the appraiser.
So, what does this mean for you? As a buyer, it levels the playing field a bit. Instead of winning the bid because you are the most aggressive on how you underwrite property taxes, now, perhaps, buyers can be selected on the merits of their offer and their ability to manage the asset they’re targeting to buy.
As a seller, it puts a dent in the value that can be achieved at sale because most buyers will take this ruling into account and underwrite property taxes to 100% of the purchase price – per the results above.
The good news is, though, that the Federal Reserve is likely to keep interest rates at historic lows and may even lower them still further if they see a need to do so.
If, as a seller, you would like to take advantage of these still historically high prices being paid and would like us to value an asset for you, we’d be happy to do so.