The Law

Tenants Detoured by Ron Davis Savings of thousands of dollars has resulted from the struggles of a Minnesota shopping center owner to reduce his property taxes for recent years. The shopping center is Creekview Retail Center in the Minneapolis-St. Paul suburban city of Blaine. And the contest over the tax issue has pitted the center’s owner against a local certified assessor. Local government officials had hired that assessor to place a value on the shopping center for tax years starting in 2008. The assessor’s job was difficult. That’s because bridge construction on roads east of the shopping center had closed the main road leading to the property. That closure resulted in traffic detours, limited access to the shopping center, and reduced nearby traffic. Two of the seven center tenants consequently vacated the premises. Rents therefore declined from $17,369 to $8,696 per month. The center’s owner later estimated the property’s value had declined to $800,000. The county’s assessor, however, calculated the center’s value at $1,264,600. Under Minnesota law, a property owner has the burden of proving that a government’s property estimate is excessive. In this case, the center’s owner noted that he is an experienced buyer and seller of real estate. He is not, however, experienced or licensed in appraisal techniques or valuation methods. The center’s owner also noted that a licensed appraiser had provided a letter that explicitly backs the owner’s argument. But when the dispute required the courts to settle the matter, the county judge noted that the letter is not recognized as an official appraisal. And because the letter is not an appraisal (and because the appraiser did not testify in court), the judge rejected its claims. Furthermore, the center’s owner failed to provide evidence of when the vacancies at the center occurred. So the judge found it impossible to determine the exact amount of the losses incurred by the center’s owner. The judge did, however, note how important location is for commercial properties. He pointed out that the nearby bridge construction hampered the attraction and retention of tenants. He added that the center could now be accessed only from a side street. Moreover, the judge said the bridge construction further reduced access by restricting traffic and causing detours in the surrounding area. (The center’s owner had previously testified that tenants either pulled out of their leases or negotiated lower rents once they received notice of the bridge construction.) The court decided that based on the evidence that the losses incurred from the bridge construction “warrant a 35 percent downward adjustment to the market rents for each rent comparable.” The court therefore set the value of the shopping center at $1 million. (Creekview Center, Inc. v. County of Anoka, 2012 WL 1414938 [Minn. Tax Regular Div.]) Decision: May 2012 Published: May 2012