Acquisition Due Diligence Analysis Saves the Deal
Real Property Tax Advisors (RPTA) is a leader in the commercial property tax industry and the largest woman-owned property tax consulting company in the United States. We strategically partner with our clients, helping them develop proactive commercial tax risk management plans. Through our comprehensive knowledge of the commercial property industry which includes real estate, machinery and equipment, as well as our proven track record of delivering tax savings, we produce consistent and innovative value for our commercial clients.
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Solving the Problem
RPTA provided property tax due diligence to deliver underwriting support for the mortgage lender as well as forecasting future tax liabilities for the client. Due diligence involves a thorough, comprehensive assessment and evaluation of all aspects of both real and personal property from the day of acquisition forward.
In this instance, even though the properties were spread across four different Florida counties, each jurisdiction had a slightly different approach to determine the impact of the sale on the taxable value for the first year of ownership. Each property was evaluated individually using income, sales and cost analysis and compared to the taxing authority’s practice of using the sales price, a true analysis of the fair market value or equalizing the property with other sales.
In addition, RPTA provided three post acquisition market value and tax liability scenarios to ensure the client had all the information in terms of a best case, worst case, and most probable case going forward. The due diligence process also uncovered properties that were overvalued and never appealed by the seller, providing additional points of negotiation. In the end, the buyer was able to budget a monthly accrual for each property to best reflect the assessment after sale and avoid the cannon ball effect of an unanticipated high tax bill.
RPTA also participated in a conference call with the lender to explain the analysis as they had budgeted an arbitrary number that was too high and literally about to kill the deal. After they understood RPTA’s analysis, they revised their underwriting and closed the loan. A study after the sale showed that RPTA’s projections were on target and very close to the new assessments
A private owner of student housing and senior living facilities needed a third-party real estate tax due diligence analysis to help underwrite the acquisition for the lender. The company was planning to acquire six new senior living facilities in four different Florida counties, all which applied state law to local assessments in a slightly different way to determine fair market value after an acquisition.
For companies that own properties across multiple states, and even across counties within a state, keeping up with all of the valuation methodologies and local nuances of every jurisdiction is a major challenge. It is not enough for companies to be familiar with state law; they also need to know the local application of the law.
Navigating Property Value Methodology Variations across Florida Counties
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RPTA’s due diligence affected the lender, the buyer and the seller. This analysis let the lender revise their underwriting to close the loan, gave the buyer the base to build an accurate budget to manage cash flow over the first few years and closed the deal for the buyer and the lender