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DALLAS-If commercial building owners didn’t appeal proposed 2002 assessments by the Dallas Central Appraisal District, they should have. At least, that’s what most pros are telling

This year’s proposed valuations jumped on the average of 10.23% from 2001, ignoring the devastating blows of the economy on the state of the real estate market, says Raymond Gray, partner in Austin-based Popp & Ikard, the Texas member for the American Property Tax Counsel. He confides the Dallas appraisal district has received 88,000 protests, primarily from residential owners, but is expecting the final count to reach 100,000. A percentage of appeals surely will be won, but the county still stands to be the big winner because the majority of property owners don’t bother to challenge.

Gray reports Dallas’ commercial property owners filed more appeals than last year, but just slightly more–and the deadline has now passed. “In my opinion, it’s just complacency on the part of the property owners,” he says. “They ought to have taken advantage of the market conditions.” An adjustment for a down market is a valid claim and most often winnable, he says.

Dallas’ seasoned veterans say Republic Center’s sale for under $10 per sf was an anomaly to the market. No one can recall such a low ticket for decades. Still, the selling price is a far cry from the 2002 proposed assessment of $37.8 million, up $3.8 million from 2001. Gray confirms the appraisal district is going to accept the selling price of the 1.1-million-sf CBD high-rise as its assessed valuation for 2002 and close out litigation filed over last year’s assessment.

Holliday Fenoglio Fowler LP’s senior director Andrew Levy says he hasn’t heard any complaints about the 2002 proposed valuations. Admittedly, the market is tough for class B and C product like Republic Center, but the city is looking at mid-90% occupancy for its class AA product. “It’s not a watershed event,” he says.

Tax talk always breeds disagreement. Integra Realty Resources’ Charles Bissell, the managing director in Dallas, is hearing lots of complaints. “You will definitely find in some cases that the increases were not justified, especially if you look at an office building,” he says. Rent has dropped 20% to 25% in the last two years and the heftiest cut came about in the last three months, he reports. Generally, the per sf rate was dropping 25 cents, maybe 50 cents, every quarter. As Q2 comes to a close, he believes the quarter will show rates plunged $1 per sf on the average.

Republic Center’s markdown won’t affect its neighbors. Bissell, Levy, Gray and Colliers International’s Dallas president John Aldrich agree the low selling price was justified for several reasons. Just to keep the doors open costs at least $3.8 million a year, they calculate.

Aldrich, a tenant rep, says the pass-through to his clients often prevents building owners from appealing. But come January when it’s too late to act, tenants will get their bills and call Aldrich screaming about the hikes. “There’s no excuse for a landlord not to be down there if they think the appraisal is outrageous,” he says. “The value of those buildings is nil when you have them about half empty. It’s a real crisis in this town.”

The Dallas appraisal district has a three-year rotation on the geographical area reviewed to set the rate. This year, Dallas’ southern corridor, where selling prices were slightly higher than in years past, determined the percentage for the across-the-board hike, says Gray.

So what’s happening down the road in Fort Worth? Well, it’s quiet on the western front, says Integra’s Ben Loughry, managing director in the sister city. Occupancy is up and rent is stable, unlike the neighboring metropolis. Assessments too are up. Still, Loughry says “there’s quite a bit of optimism over here. I won’t say we have everything we want, but when we look across the country, we’re pretty fortunate.

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