Parks = $$

So the WSJ has an article today out of some research out of New York City on the value of being located near a park:  Parks Elevate Office Rentsh/t @otiswhite for catching that.

So just a shout out to a former student who looked at something similar here and quantified the  $$ impact on residential land values resulting from the Nine Mile Run Redevelopment. In the most recent PEQ if you didn’t read it (starting on bottom of page 1):  Brownfield, Greenfield: A Hedonic Estimation of the Remediation and Redevelopmentof the Slag Heap at Nine Mile Run

What is a great book topic someday would be to try and measure how the value gradient for being located near a river in the region has changed over the last couple decades.

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The UK under the loop – Safe Haven for How Much Longer?

One of the extraordinary effects of the euro zone debt crisis has been the manner in which the market and media have taken the notion of safe haven investment to heart. Consider for example the fact that the situation we are currently in largely comes down to too much debt tied to real estate, mortgages, and property development.  Consider then Denmark with the largest ratio of mortgage and private household debt to income in the world and you wonder why international money is pouring into the Danist mortgage backed securities to such an extent that interest rates are now negative. I mean, wasn’t this the very products that got us here in the first place?

The same reverse logic can be applied to the UK where yields on Gilts are heading for new lows even as we learn from the most recent McKinsey study on global deleveraging that the UK is now the most indebted economy in the world even surpassing Japan.

Ben Davies and his team at Hinde Capital have also been wondering about the UK and the result is a timely and very detailed report on the UK economy, its challenges and how to solve them. The report has been published in two parts, with the first part coming out earlier this week causing a flurry of debate as it was picked up by Izabella over at FT Alphaville.

You can get part 1 here and part 2 here.

It is well worth reading, preferebly before you stuff yourself with more Gilts.

City Living

So an overly curious mind has me wondering what the state of the Downtown condo market is of late. Just thinking because I first saw this note of a refinancing of Piatt Place, aka the former Lazarus, aka once the center of all dire talk on the future of Downtown. News said it was able to get a refinancing for $33 million and I just wanted to see how that compared to its new assessment value. That got a bit too complicated to do quickly since I can’t tell what exactly was being refinanced. It is a condo unit so I presume the refinancing is for that part of the building Millcraft or related entities own.

But it got me poking back at this PG article from 3 years ago: Downtown condo sales are going well in some spots, not so well in others. Specifically it said at the time that “About a block away, at the former Lazarus-Macy’s store, 34 of 60 luxury condos priced from $300,000 have been sold. Only six of those sales have come since August.”.  There is a later quote that says “…. Downtown is the hottest market in Pittsburgh.”  Pretty declarative statements.

Since the new assessment data is out I was curious what those units have all sold for. Since it implies 57% of the units were already sold 3 years ago, it must be mostly sold by now I thought. I dunno. In the assessment records I count 66 residential condo units with a property address of 301 Fifth Ave in Downtown Pittsburgh. Of those 66 units, 28 have listed as their owner “Piatt Place Downtown Pittsburgh Residential LP”. At first blush it implies 28 units are unsold as yet. Spot checking those 28 units find no transaction history in the assessment records.

So I leave it as a question whether those units, or more generally how many Downtown condos built over the last decade, are sold as yet. A question that comes up on occassion is related to all that. For the units that are sold, are they all permanent residents here. There is a sense many are not the primary residences of the owners. Plenty of rich diasporans out there who might want a stake in the hometown is a theory. Nothing wrong with that all, but it does get to the question of what the impact is on population. I presume some unsold condo’s could be rented out though I am not privy to what the condo bylaws allow.  No doubt there are new people living Downtown over the last decade, I am just wondering how many and whether the fairly significant investment in the new Downtown condo-collective has sparked a sustaining (i.e. non-subsidized) private sector market there yet.

So just some questions… or stories to follow up on.

Truly Something

Didn’t get to this with the population/migration data released yesterday, but clearly related to those trends.  New data from Trulia on regional real estate markets has some ever more remarkable numbers for Pittsburgh and a reported 9+% annual increase in the asking prices of real estate here.  Not the highest in the nation, but close. I’m not so clear on how much research has been done on real estate asking prices vs. actual sales prices, but they are claiming asking prices are a leading indicator of real estate markets.  Whether that bears out  or not it still is a curious time for local real estate.  In real (i.e. inflation adjusted) prices, there just has not been a period of such rapid real estate appreciation here in a very very long time.  Certainly elsewhere there have been periods when real estate jumped like this, but just not here in any relevant recent history.  If you really want to quibble, it all seems to be supported by what the local real estate folks are saying (via the West Penn Multi-list folks) about the current state of the Pittsburgh real estate market.

You can see how  much we stand out in their national map. If you want to compare us to parts of Florida which appear to be appreciating like we are, you really have to consider than in their case it is barely beginning to recoup what they lost in recent years.  Forida real estate markets have plummeted from previous bubble levels, whereas our gains our on top of pretty stable prices over the same period.  Just means I don’t think the trends in the two regions are all that comparable in their ‘green-ness’ in this map.

But is a bit more remarkable when you look at the just the greater Cleveburgh area.  Sort of what we saw with the pattern of foreclosures.  It’s like poles on a magnet (to connect it all to the migration data of yesterday):

Henry George is Kaput

So if you read the latest on property assessments in the PG today : 10 percent appealing assessments, there was an interesting obituary for Henry George there between the lines.

There was this quote reported direct from Judge Wettick:

Separate land values were “really confusing people” and many appeared to “make no sense,” Judge Wettick told Mr. Graham.

Suffice it to say that if the judge at this point does not pay much heed to the land values, I am pretty sure the other 99.9% of the county thinks less about it.  No memory at all in the region that the city of Pittsburgh was once the largest implementation of Henry George’s Land Tax concept in the United States.  There was once a time when some thought the   Henry George Club ran Pittsburgh. All just history.

Well, others still do care though. It turns out the folks at the Lincoln Insitute have a metro by metro index of how real estate values break down between land and structure value. At the risk of further confusing everyone, the methodologies are probably differnt enough that you should not compare directly to the values you are looking at in your Allegheny County assessment value.  Still worth looking at and their most recent data looks like this:

Too big a topic for the day to get into what Pittsburgh’s ranking there means.  But even post bubble… lots of place in other regions.

Location, location location.  Reminds me a bit of the great Pittsburgh Hipster quote that Toland snagged out there.

Wait a minute....

So remember when the headlines about property assessments in Allegheny County were near apogee not very long ago?  I thought the clear message was that all the local real estate deals were being canceled because the owners didn’t like their assessment values. The end is nigh was the talking point all around.  Remember specifically when the headline was the assessments were so egregious that the planned sale of the former former Alcoa Building was not going to go through?  Trib on Jan 2012: Regional Enterprise Tower deal canceled.  The clear message was in this quote:

That will hinder a sale of the building, Allegheny County Executive Rich Fitzgerald said this week.

“You can’t give it away because no one wants to buy it and face the higher assessment on it as well as the major improvements the building needs,” he said.

Yet, miraculously the Trib over this last weekend: Building conversion to uproot agencies from Downtown.  That article says:

Novick said PMC will close its purchase of the Regional Enterprise Tower at 425 Sixth Ave. on Friday. His company, which specializes in restoring older commercial buildings for residential use, will convert the tower into a combination of half office space and half residential, he said.”

So the deal was not canceled for long. Not even any mention that there was angst over this not much more than a month ago.  It was slated to happen early in the year, and it happened by mid-March.  Was the deal even delayed?  Any other non-cancellations of Downtown real estate deals out there?

Anyway.  Given the headline last week that still has me in a bit of cognitive dissonance with all past reporting on the subject of assessments (see the  PG last week: “Higher assessment could mean lower bill for many“),  I thought the angst level over all the assessment news had subsided.

But where did that headline come from?  I mean, what was January all about?? Nothing at all has changed in how the assessment will impact property owners from the first release of numbers in December??   Nothing has changed in the process and that headline could have been dropped in December for all we have learned since then. Has anything really changed since January?

In fact, legally speaking, the actual assessment process looks to be about as contentious as ever at least.   For example, Judge Wettick has a proposed ruling in the case that has some awfully curious language.  I will leave it to the leagle beagles whether this is normal verbiage in court orders, not that there is anything normal in the case, but parse the wording of the following proposed ruling he will be holding hearings on.  So this is not from January, this is recent:

and again, what does the assessment mean to me?

So folks in the north and west of Allegheny County getting their new assessment values in the mail.  Like most everyone else in the county there is likely a lot of confusion by what the letter is telling them since it says so little.  All it has are new and old assessment values and likely some verbiage that this is all not their fault, that the whole assessment is ‘court ordered’.

Per the Allentown Morning Call, here is what Lehigh County in NW Pennsylvania is sending out right now… and remember, they started Lehigh County started their assessment process years after Allegheny County started… so it isn’t the case Allegheny County has not had time.  Anyway, per the MC:

The assessment letter should tell you that your taxes are projected to increase or decrease. For estimates based on current tax rates, you should go to mylehighcountyproperty.com and enter the control ID listed in the upper right corner of the letter. You can also call the assessment office and provide your control ID. While they won’t tell you over the phone, they will mail a tax estimate to you.

and so.. if you want Allegheny county do do the same for you, maybe you want to contact your county council representative. It would be a fairly simple thing for the county to do here.  No reason they still can’t do it.

For the City of Pittsburgh my colleagues made the map below showing the valuation changes per parcel for the city of Pittsburgh. You can get a high resolution version of that via this post or access an interactive map to zoom in ever further via this post.  Note the map is not showing tax changes, but just the changes in property values.  No adjustment is made for the millage changes which will be mandatory.

Assessment angst around?

So am I misperceiving things, or is angst over reassessments pretty quiet?  A decade ago the surge against assessments was virtually nonstop for over a year.

Anyway. In the news today is a note that a Downtown office building, Penn Avenue Place. sold for $54 million.   It’s current assessed value: $35.9 million.   It’s 2012 assessed value: $50.9 million.

Just saying is all.

Actually what is kind of remarkable is that the news item, albeit a short real estate note, does not mention even in passing that the property is that which was once Horne’s Department Store.   Memories.

apologies: Sam caught this days ago, and of course connected the dots with Hornes.

Assessment cycle anew

News accounts say that Allegheny County has today posted online its new assessment values for southern municipalities.  For all those folks, and everyone else in the county, my colleagues have made up a useful interactive map with all recent real estate transactions across Allegheny county.  It might be helpful for example for those looking to appeal their assessments and are looking for the comparable values near their home.

You know what is even stranger than the fact that Lehigh County in NE PA is also completing their mass reassessment a lot faster and cheaper (by far) than here.. they are also finishing it all with far less news about the whole process along the way.  Strange.  But here is a story of their process up there from a few days ago and an unfortunate property owner only now discovering he has been overpaying property taxes for a decade.

Best and Highest Value Use

So this is interesting and no, this isn’t really about assessments. I mean, it is about assessments, but there are so many bigger issues rolled into this new legal development.

In the new litigant a week merry-go-round in Judge Wettick’s courtroom (it really must be getting crowded), the latest is the (collective) property owner of one R.J. Casey Industrial Park who has a slew of issues.

One of many points is a contention that it is against Pennsylvania’s uniformity clause to assess commercial property differently than residential property which is indeed how it is done here and most everywhere else. Problem with that is that commercial properties across the state have been assessed different than residential properties for decades. So I will let the attorneys fight over that one, it is just one of the issues.

Then they seem to point out the dearth of information on the assessment. Here are points 16 and 17 in their filing:

16. Regarding commercial properties, the Property Record Cards available for purchase on the Third Floor of the County Office Building, do not contain any information on the New Assessments.

17. Accordingly, unlike residential property owners, commercial property owners evaluating their New Assessments have no access to any information that the County used to determine the New Assessments.

Lots of capitals in that, but to be sure I feel their pain. Though I do get a chuckle of someone really digging up (and dusting off) a property record card and expecting to find much relating to the latest machinations written down in ink. Are those things still written in cursive? For the record, the online information is just a small part of what what went into determining new residential values.  I see no reduced form from any of the many regressions that were used.  ‘Comps’ are at most part of the equation and many overinterpret their role in the assessment I am pretty sure.  There is a funny story back from when the original 2001 Sabre numbers came out which didn’t really used comps the same way CLT did.  The county web site did not list any ‘comps’ for a property, but people so expected to see them that eventually the web site was altered to show a few comparable properties that were picked ex post… though the properties listed really had no specific input into setting a particular property value becuase of the way the Sabre Systems algorithms worked. (that is a very short version of a very very long story.. but I digress).

To be fair I should go back to point 15 in the filing which is clearer and shows they did start out digitial:

15. Regarding Commercial Properties, the county provides no information online regarding the comparable sales used to determine New Assessments or even the gross square footage of an improvement on a commercial property. The County does provide this information online for residential properties.

Well, some information at least. Otherwise ditto.
Nonetheless, the motivation in the end must be to get a lower assessment and a lower tax bill.  First off realize that for commercial property across the nation the standard for property assessment is not market valuation that it commonly is for residential values but “Highest and Best Use of the real property”. For a lot of properties that distinction may not be such a big deal, but for some in certain unique locations it could be a big deal.

So here the property owner is upset having seen their assessment for 6 properties jump from $2.7 million to $11.3 million. A scary 340% increase in nominal value. Even with our notional revenue neutrality it works out to a potential tax increase of 280%, so more than enough to be upset. So.. is the increased assessment some gross error on the part of the assessors, or is something else going on?  Could it be the highest and best use for the property has changed?

Again, like the Mt. Washington parking space, we may have found the most exceptional case out there. Is there anything unique about this property?
So where is this property?  All of the properties at issue in the filing are located in the otherwise depopulated Chateau neighborhood (why we still call it a neighborhood is another issue since literally no more than 10 people live there.. likely a lot less.. unless you count folks sleeping under the slots machines I guess). The properties in question are all along the riverfront a helf mile from the edge of a property recently redeveloped and otherwise known as 777 Casino Dr. Nice new bike trail cuts through the properties in question and there are some nice marinas there it looks like.

So lets ponder the ‘old’ assessment values which everyone likes to refer to as 2011 values which they really are not. They are, again, base year assessments based on what circumtance were in 2002, if not prior.  Yes, the 2002 base year assessment really means that the ‘old’ values were based on what the market would bear for a property in 2002. Back then the idea of a casino was not yet really formed, and even if it was there was no thought the casino would be placed over on the North Shore there where the Rivers Casino wound up. Remember Don Barden really came in with a somewhat unexpected bid and was clearly not expected to beat out the Penguins backed project slated for the Lower Hill District, nor the Station Square locations that everyone was focusing on. The location on the North Shore and the big empty plot of land on the North Shore there was fallow and without anyone really expecting much to be made of it anytime soon. I am pretty sure that was a big drag on all nearby real estate. Even the North Shore Connector was so far from completion, and opposition so loud, that it would not have been reasonable for it to have had any impact on real estate values at the time. Now it is on the verge of opening. Could it not have some positive impact on land values anywhere near it.

So now, 10 years later.. it is not to say there is any vast demand for land over there and I am unclear was nearby development the casino has wrought… but would it really be reasonable to think there has not been any impact on nearby property which. In this case the 5 properties in question are add up to either 5 or 10 acres (I am confued because the itemized parce 22-J-67 is listed as being owned by the URA?? even though there is no mention of the URA in the filing??)  of land all effectively riverfront parcels though I am not sure if they own all the way to the river itself.

Someday when we ever really see data out of all this I will work up a map of the value per acre along all of Pittsburgh’s rivers before and after the reassessment.  It might be interesting to see how the price gradient moving away from the river has changed over time. It would be an interesting factoid at least to see if any of the vast efforts to redevelop our riverfronts have had any meaningful impact capitalized into real estate values of real estate close to the riverfront. Just imagine the counterfactual if they did not and what that would mean?

So there is a bit of Henry Georgism in the highest and best use construct. It is certainly true that the parcels might not currently be ‘worth’ the new higher assessments placed on them.. but if assessments stay low, and taxes stay low, there will that much less incentive to ever fully develop those properties to the “highest value” use.  There is only so much riverfront property near the Casino (and the stadia and the science center) to be had. I think that is the core reason commercial properties are assessed differently to begin with.

I’m thinking there is a future casino-annex hotel latent in the geography there. Best and highest value use?