Commercial properties also hit hard by latest assessments
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Just like many of their residential counterparts, the owners of some of Downtown's tallest and most distinctive buildings are facing huge increases in the taxable value of their properties as a result of the Allegheny County reassessment.
Highwoods Properties, the Raleigh, N.C.-based real estate investment trust that purchased PPG Place for $179.4 million in September, saw the assessed value of the glass castle-like complex leap from $185 million to $237.7 million.
The new value not only is significantly higher than the purchase price, but also is larger than the $214.1 million that Highwoods said represented its total investment in the property.
PMC Property Group, a Philadelphia developer, is facing a 71.6 percent increase in the assessment on the former Verizon Building on Stanwix Street after paying $4.4 million for it in December 2010. The county now values it at $7.5 million.
Likewise, the assessment on the Regional Enterprise Tower, which sold at sheriff sale last year and has lost numerous tenants, has more than tripled, going from $10.1 million to $38.1 million, based on the new commercial numbers released on the county's real estate website Wednesday.
The new owner of U.S. Steel Tower, Downtown's largest skyscraper, seemed to fare a little better than some others. While the assessment on the building jumped from $175 million to $233.2 million, it's still lower than the reported $250 million the ownership group led by New York real estate investor Mark Karasick paid for the property.
That deal was completed through a so-called "89-11" transaction that shielded the property from millions of dollars in deed transfer taxes. The purchase price has never been recorded, leaving assessors without formal documentation of the sale.
On the other end of the spectrum, the Oliver Building, which sold for roughly $10 million last fall through a deed in lieu of foreclosure, nonetheless saw its assessment shoot up from $20 million to $47.9 million. That's despite a vacancy rate of nearly 70 percent.
Jonathan Kamin, a Downtown real estate attorney who is representing a number of commercial property owners, said the numbers just don't add up.
"There seems to be no rhyme or reason why the commercial numbers have increased in the manner that they have," he said.
"It certainly is not based on the income generated by the properties nor does it appear to be based on comparable sales. It looks like a concerted effort to punish the commercial properties to raise additional revenue."
Commercial properties typically are assessed based on comparable sales, the income they generate, or the cost of the construction.
Mr. Kamin said the assessment on the historical Frick Building, where his offices are located, soared by 119.2 percent, from $17 million to $37.3 million.
"I think it's ridiculous," he said. "It's a landmark building but it didn't more than double overnight."
Mr. Kamin said that in many instances any tax increases generated by big assessment hikes to commercial properties are passed on to those who rent space in the buildings.
"This is a huge negative incentive for any business to relocate into the city of Pittsburgh because their rents will increase by $3 to $5 a foot," he said.
Terry Stevens, chief financial officer for Highwoods Properties, said it was too early to say whether the trust would appeal the assessment on PPG Place. He said Highwoods has specialists who will look at the number to determine whether or not it should be challenged.
Residential assessed values within the city have increased by 46 percent, on average. If the commercial numbers end up being comparable, it means that those property owners whose values went up by less than 46 percent could be in line for a property tax cut. The total assessed value for commercial properties in the city was not available Wednesday.
Under state law, the city and the school district must lower their millage rates to prevent revenue windfalls from the reassessment.
Nonetheless, that proved to be little solace to Mr. Kamin. "With this type of uncertainty in this type of market, there's no reason to do business in Allegheny County," he said.
As far as other notable properties, Oxford Centre saw its assessment jump from $115 million to $166.9 million. The value on BNY Mellon Center jumped from $190 million to $242.4 million. At the old Westinghouse building at 11 Stanwix St., the assessment soared from $28 million to $67.7 million. The building sold for $66.6 million in June.
One that wasn't lucky in the reassessment was the Rivers Casino. It is still fighting in court to lower the $199.5 million assessment the county placed on the property in 2010.
But that didn't stop the county from raising it again this time around, to $242 million.
First Published January 5, 2012 12:00 am