Valuation and Litigation The Deloitte & Touche Real Estate Newsletter for Attorneys Published Spring, 2000 Considerations for Valuation and Litigation By Mark Pomykacz Perhaps today, litigating our differences has become a normal business venue. Certainly, experience indicates that even the best intentions and the most prudent management practices can offer no guarantee of avoiding litigation. Given that real estate is one of the most expensive business and personal activities, it is not surprising that subtle differences between parties lead to disputes over large dollar amounts. Disputed real estate valuations often range in the millions of dollars and sometimes in the $10’s of millions. Even leasing disputes can amount very large, disputed valuations. Over a seven-to-ten-year lease period, many aggregated lease payments will exceed the value (sale price) of the property. Furthermore, the complexity of real estate valuation unfortunately leaves room for dramatically different opinions of value, rent, and damages. The scale of real estate valuations and the complexity of such valuations require the use of real estate valuation experts. Some sample valuation for litigation issues include: Bankruptcy and Reorganization Issues Property Tax, Estate Tax, Transfer Tax, Other Tax Issues Contract Disputes, Contract of Sale Issues, Landlord-Tenant Issues Partnership Disputes, GP Mis-management, Partial Interest Issues Environmental Damages, past and future lost income, stigma and cost to correct Condemnation and Takings Insurance Claims Once a dispute over real estate valuation is recognized as possibly destined for court, our advice is to prepare earlier, prepare intensely, use the right professionals, and interact deeply with your litigation team. Presented below are basic considerations when working on litigation involving valuation issues. While some disputes are centered on a valuation, most are cases where valuation issues arise in the context of proving a contractual default and/or where once a default has been established, the dollar damages must be estimated. The term “valuation” herein is intended to also include income and yield analysis and estimation. Many of the biggest cases never require a value (sale price) estimate. Partnership disputes, insurance claims, poor management and the resultant poor yield, and lost income often involve disputes over expected income and yields, all of which real estate appraisers are suited to handle. Also discussed below are some of the more common mistakes made by clients, appraisers, and litigators. The considerations below are not arranged in order of either chronology or priority, except for the paramount consideration, which immediately follows. It is paramount to maintain the appraiser’s independence and objectivity. Even the perception of tainted objectivity could destroy their effectiveness as an expert witness. Identify and Clarify the Valuation Issue Unless a client and/or their attorney are experienced with the particular valuation issues at hand, the valuation experts should be consulted as early as possible. Also, unless the appraiser is experienced with the particular valuation concerns surrounding legal issues at hand, the attorney should be consulted as early as possible. Neither the appraiser nor the client and their attorney should make assumptions about the appraisal methodology, the scope of the problem, or the legal strategy without first consulting the other. ♦ The “Full Narrative, FIRREA” type report is often not appropriate for litigation purposes. Appraisals prepared for one purpose and use (or for one litigation case) are often not appropriate for (another) litigation. Appraisal methods and reporting formats vary dramatically and this is appropriate as appraisal issues vary dramatically from case to case. ♦ A preliminary analysis is often helpful for measuring the scope of the problem and testing valuation and legal strategy, but great care must be exercised to avoid the reality and perception of an expert with tainted objectivity. ♦ Different practical appraisal problems require different appraisal methodologies, procedures, and reporting formats. Often the supply of data to be analyzed in the appraisal, or lack thereof, drives the appraisal methodology. Thus, the expert appraiser and the attorney experienced in one type of case may not be able to predict the valuation needs of another case, at the outset. ♦ There must be a continual dialogue beginning in the earliest stages of the case, between the appraiser, the client, and their attorney to resolve and sharpen the legal strategy and appraisal methodology. Protect Client-Attorney Privilege Clients should not hire the appraiser directly and should limit their discussions until the attorneys have hired the appraiser. All working documents prepared by the appraiser for a case should be labeled “draft”, “confidential”, or “prepared for counsel in connection with litigation”. Select Valuation Experts that Meet the Needs of the Case and Round out the Team ♦ Is a designated (MAI) appraiser required? ♦ Is a state licensed appraiser required? Will the expert’s report need to be USPAP and/or FIRREA compliant? ♦ Will other types of experts be needed to support the valuation opinions, e.g.: accounting, environmental, engineering, architectural, zoning, financial or brokerage. Ensure that the Legal Strategy Matches the Most Defensible Valuation Methodology Some valuation methodologies preferred by investors and owners, like the discounted cash flow (DCF), are commonly disbelieved by judges and juries. Conversely, sometimes legal precedents vary sufficiently from the circumstances in the case at hand to warrant another methodology. ♦ Valuation theory can be elaborate. Valuation models are sometimes highly complex and sensitive. Seemingly minor changes in methodology and modeling can dramatically change the conclusions. ♦ Ensure legal instructions are appropriate. Hypothetical assumptions are appropriate and acceptable in some situations, but not all. Maintain an attorney-expert relationship that’s conducive to the free exchange of ideas, questions, and concerns, since it is common that neither the attorney or the appraiser will fully understand initially the impact of their instructions to the other. ♦ Ensure that appraisal terms match the definitions in law and to the layman. If not, care must be exercised to keep communications clear to all, especially to the judge and jury. Give the Valuation Experts Enough Time and Resources For example, it takes 4 to 6 weeks to complete a “full analysis” appraisal on a single asset. Some require less, others a lot more. ♦ Remember that beyond the essential correct methodology, a valuation is dependent on market data, which takes time to collect when it must be gathered from third party sources. ♦ Also appraisers, if given the opportunity, can sometimes substantially increase their accuracy over that of nonlitigation appraisals by employing techniques that, due to their obscurity, complexity and/or cost, they are rarely asked to provide. These techniques should be considered early in the case for best results. Involve the Valuation Experts in Deposing and Crossing of the Opposition’s Experts and in Analyzing the Testimony of the Opposition’s Experts and in Analyzing the Opposition’s Valuation Strategy ♦ Recognize that most cases settle. Then employ the valuation experts in establishing the case’s probability of winning a valuation judgment or verdict and in setting appropriate settlement terms. ♦ Involve the appraiser in the search for, review of, and interpretation of valuation related documents. Research the Judge’s history on Valuation Issues Does the judge have experience with valuation issues? Does the judge dislike certain valuation techniques, such as the discounted cash flow or others?

Managing Commercial Real Estate Before and During Economic Recessions The United States economy and real estate markets have been healthy for an unprecedented period of time. Unfortunately, national economies and real estate markets are subject to economic cycles. Now, due to the unforeseen COVID-19 pandemic in combination with underlying market conditions, the chances of a significant economic recession are increasing. Best practices for effectively managing commercial real estate holdings in the next several years will be different than those for the last ten years. While it remains everyone’s goal to maximize profits and yields, sometimes the short-term goal is to minimize losses. Both before and during a recessionary downturn, best management practices require specialized knowledge and experience in order to minimize losses. In their decades of professional practice, senior management at Federal Appraisal LLC has lived through several significant recessionary periods. This market experience allows them to advise businesses and investors on how best to preserve profits and minimize losses during challenging economic times. Federal Appraisal provides the following appraisal and consulting services to assist their clients with preserving value during recessionary periods and economic downturns: Property tax appraisal and consulting services during economic downturnsreducing property taxesproperty tax assessment appeals litigation/expert testimony Identification of potential surplus property for pre-transactional or re-positioning due diligence Analysis of opportunities for investment in distressed properties Appraisal and consulting services for gift and estate tax planning and reporting purposes Feasibility studies for development, renovation, and/or changes in real estate highest and best use Marketability studies for the impact of recession on demand (for multifamily, office, retail, industrial properties, and more) Case Study One – Concrete Pipe Manufacturer Federal Appraisal advised a regional manufacturer on the value of its various real estate holdings, identifying surplus property to be sold and for how much, and what property was to be preserved and maintained to maximize value to the company. The process identified millions of dollars in untapped, idle value which could be redirected to core business activities. Case Study Two – Property Tax Appeals on Commercial Real Estate Investment Portfolio The senior management at Federal Appraisal reviewed the investor’s portfolio, identified the properties deserving property tax reductions, completed property tax appeals, negotiated tax reductions for some properties, and provided expert testimony in trials for tax reductions for others. The process saved the client more than $10,000,000 in property taxes. Case Study Three – Opportunity Investor Federal Appraisal provided pre-acquisition appraisals and due diligence support to an investor buying a portfolio of troubled power plants, earning the investor yields greater than 25%. Read more at Impairment Studies.

Resource Library Federal Appraisal has assembled various online resources for our appraisal clients. Weight Cap Rates Valuation and Litigation Tax Saving Ideas Reducing Property Taxes in a Rising Market Published February, 1998 “Real Estate Tax Trends” (PDF) Power Asset Taxes High Value Assets Business Improvement Ideas Dictionary FAQs Fallacies & Mistakes AI-GIRS ASA MRICS COVID Statement

Weighted Cap Rates In this ever more complicated and competitive consulting environment, it is always helpful for the consultant to have yet another skill to offer their clients. This article presents a new technical, but easy to use, cost effective analysis that will reduce property taxes. It can be applied to all leased properties, including most office buildings, retail malls, and many industrial buildings, which the traditional tax assessment analysis cannot analyze. When real estate taxes change, real estate tax recoveries also change. Changes in real estate tax recoveries change the property’s value. Traditional value and tax analyses can solve for value when only two items, taxes, and value, are unknown. This article presents a generalized analysis that works on up to three unknowns, value, taxes, and recoveries, and that can be used on all types of property, gross or net leased, single or multi-tenanted. Additionally, this article presents practical steps for employing the analysis. Traditionally, analysts have employed a weighted (loaded) capitalization rate formula to analyze property values when the appropriate real estate tax expense was unknown. The first step is to estimate net operating income before real estate taxes In Archive May 2021 July 2020 June 2020 April 2020 March 2020 August 2017 August 2014 April 2014 (NOIbpt). Then, the effective tax rate is added to the capitalization rate to calculate the weighted capitalization rate (weighted cap rate). Next, the weighted cap rate is applied to the NOIbpt to determine the market value. Finally, the appropriate taxes can be calculated by applying the effective tax rate to the estimated market value. This article will show that is the traditional analysis is only accurate for prefect gross leased properties. The traditional weighted cap rate analysis cannot accurately indicate value or taxes, for any net leased or partially gross (or partially net) leased property. Furthermore, if any tenant, space, or unit at a gross leased property, regardless of whether the property is single or multi-tenanted, should be or should become at any time over the analysis holding period, a net lease, or a partially net lease with respect to real estate taxes, then the traditional weighted cap rate analysis would not be accurate[MP1] . Real Estate Taxes Real estate taxes are also known as ad valorem taxes. Ad valorem is Latin for “according to the value”. Real estate taxes are based on the property’s value, technically the property’s market value. When given the market value, the assessed value to market value ratio, and actual tax rate, the actual taxes can be calculated as follows: Calculation of Real Estate Taxes Market Value$6,090,000Assessed Value to Market Value Ratio50.0%Assessed Value$3,045,000Actual Tax Rate6.0%Real Estate Taxes $182,700 The assessed value to market value ratio is also known as the equalization ratio. The actual effective tax rate is 3.0%, (6.0% x 50.0%). When assessors and property owners dispute real estate taxes, the fundamental issue is determination of the property’s market value. Market Value Market value is determined by appraisal. There are three types of appraisal analyses used to determine market value: cost analysis, sales comparison analysis, and income analysis. The first two types of analysis present no problem for properties that have real estate tax recoveries in that they intrinsically reflect the impact of taxes and tax recoveries. If the analyses accurately, intrinsically reflect the taxes and recoveries, then the analyses will indicate an accurate value; however, the last type - the income analysis - presents significant problems, when used to simultaneously estimate the market value of, and hence the real estate taxes on a property, that has real estate tax recoveries. Income Producing Properties Of the three appraisal analyses, the income analysis is most important for income producing properties. There are two types of income analysis: the income capitalization analysis and the discounted cash flow analysis. This article focuses on the first type; however, the concepts in this article about real estate taxes and tax recoveries apply to both income analysis types. Basic Income Capitalization Analysis Total Gross Income$1,125,000Total Expenses$550,000Net Operating Income$575,000Capitalization Rate10.0%Indicated Market Value$5,750,000 Real Estate Tax Recoveries Real estate tax recoveries are defined as rental payments made by the tenant that reimburse the landlord for real estate tax expenses. Real estate tax recoveries are also known as passthrough rental incomes or passthroughs. Real estate tax recoveries are based, in some way, on the real estate taxes. Commonly leases prescribe the tenant’s payments as a percentage share of the property’s total taxes. Often when real estate taxes increase or decrease, the tenants’ payments to the landlord also increase or decrease. Some leases call for minimums and maximums (bases and caps) for either the landlord or the tenant. Some tenants pay their share of the taxes directly to the tax collector; however, the landlord, as property owner, is ultimately responsible for the taxes. Sometimes the taxes and the tenant’s recovery payments are not listed in the property’s operating statements. In properties with all perfect gross leases (e.g., most apartment buildings), the landlord usually pays 100% of the taxes (landlord’s contribution: 100%) and the tenant pays no recoveries. In properties with all net leases (e.g., some warehouse buildings), the landlord’s tax contribution is usually 0.0% and the tenant pays 100% of the taxes; however, in net leased properties (or properties that are typically net leased) where the tenant usually pays 100% of the taxes, the landlord must pay the taxes during vacancy and credit loss periods. Readers are asked to define real estate tax recoveries in the broadest sense, since the issues discussed within apply to many properties that do not at first glance appear to be relevant. Property Value/Real Estate Tax Assessment Dilemma Market value determines the real estate taxes. An appraisal determines the market value. On an income producing property, the income analysis is the most important part of the appraisal. The income analysis is based on net operating income. But real estate taxes effect net operating income. In fact, real estate taxes effect both the gross income (through real estate tax recoveries) and the operating expenses (obviously through real estate tax expenses). Hence, taxes effect the market value. The dilemma is that there is a circular analysis process for income producing properties. Market value determines the tax, but tax effects the market value. If either the market value or the taxes are given incorrectly, then the basic income analysis will yield incorrect taxes or market value, respectively. On the next page is an example of a basic income capitalization analysis that assumes an incorrect real estate tax expense. An Example of An Incorrect Tax Assumption Total Gross Income$1,125,000Actual Real Estate Taxes250,000All Other Expenses300,000Total Expenses$550,000Net Operating Income$575,000Capitalization Rate10.0%Indicated Market Value$5,750,000Actual Effective Tax Rate3.0%Indicated Real Estate Taxes$172,500 Note that the actual taxes do not match the indicated taxes. Obviously, a tax appeal is needed. But what should the taxes be? On what market value should the taxes be based? Basic Value & Tax Assessment Analysis Analysts long ago figured out a basic algebraic formula that, for certain types of properties, solves for both the market value and taxes, when neither the market value nor the taxes are known. The formula avoids the difficulties of the iteration mathematics and has become a standard within the real estate analysis community. Presented on the next page is an example of a basic value and tax analysis. Basic Value & Tax Assessment Analysis Total Gross Income$1,125,000Actual Real Estate TaxesNAAll Other Expenses300,000Total Expenses$300,000Net Operating Income$825,000Actual Effective Tax Rate3.0%Capitalization Rate10.0%Tax Adjusted Capitalization Rate13.0%Indicated Market Value, Rounded$6,350,000Actual Effective Tax Rate3.0%First Indicated Real Estate Taxes$190,500 If we cross-check the above basic income capitalization analysis but use the indicated taxes instead of the actual taxes, we find seemingly consistent results. Presented on the next page is a proof that the indicated results a basic value and tax analysis appear to be accurate[MP2] . Cross-Check Proof Total Gross Income$1,125,000Indicated Real Estate Taxes190,500All Other Expenses300,000Total Expenses$490,500Net Operating Income$634,500Capitalization Rate10.0%Indicated Market Value, Rounded$6,350,000Actual Effective Tax Rate3.0%Second Indicated Real Estate Taxes$190,500 Seemingly Consistent? The indicated value and taxes in this analysis would be correct, if all the other income and expense data were correct; however, as shown on the next pages in the Inconsistency Proof, this is, in fact, not correct for many important types of properties. The problem arises when gross income is affected by real estate taxes. When a property has real estate tax recoveries, the level of tax expense directly effects the gross income. For the sake of the presentation, assume that the actual lease (and market lease terms) calls for the tenant to pay 50% of the real estate taxes. Actual Taxes and Tax Recoveries Actual Real Estate Tax Recoveries$125,000All Other Rents, Income and Recoveries1,000,000Total Gross Income$1,125,000Actual Real Estate Taxes$250,000All Other Expenses300,000Total Expenses$550,000Net Operating Income$575,000 In this case, real estate taxes are recovered at a rate of 50% ($125,000 / $250,000). The tenant’s tax contribution is the total real estate tax expense paid by the tenant. This means the landlord’s tax contribution is 50% (100%-50% tenant contribution). The landlord’s tax contribution is the difference between the total real estate tax expense and total real estate tax recoveries divided by the total real estate tax expense. The calculations below show the inconsistencies with the basic tax assessment analysis. Given the indicated taxes of $190,500 and the landlord’s tax contribution of 50%, we calculate the total indicated real estate tax recoveries to be $95,250. Because the indicated real estate tax recoveries are different from the actual amount, the indicated market value and its resultant indicated taxes are inconsistent. Inconsistency Proof Indicated Real Estate Tax Recoveries$95,250All Other Rents, Income and Recoveries$1,000,000Total Gross Income$1,095,250Indicated Real Estate Taxes190,500All Other Expenses300,000Total Expenses$490,500Net Operating Income$604,750Capitalization Rate10.0%Indicated Market Value, Rounded$6,050,000Actual Effective Tax Rate3.0%Indicated Real Estate Taxes$181,500 Generalized Value and Tax Assessment Analysis The problem with the basic value and tax assessment analysis is that it cannot solve for three co-dependent variables: market value, taxes, and tax recoveries. If taxes are not appropriately assessed, then any real estate tax recoveries based on these taxes will not be appropriate either. Such real estate tax recoveries should not be used in the calculation of gross or net income; however, the property still has the value created by the potential for real estate tax recoveries. To capture this value, the capitalization rate must be adjusted for the potential real estate tax recoveries. The capitalization rate can be adjusted for the potential real estate tax recoveries by adjusting the effective tax rate for the landlord’s tax contribution. The effective tax rate is adjusted by multiplying the effective tax rate by the landlord’s tax contribution and is thereby converted into the landlord’s effective tax rate. By adding the landlord’s effective tax rate, instead of the full tax rate, the adjusted capitalization rate truly reflects the landlord’s equity interest (the fee estate or leased fee estate) in the property. Generalized Value and Tax Assessment Analysis Actual Real Estate Tax RecoveriesNAAll Other Rents, Income and Recoveries$1,000,000Total Gross Income$1,000,000Actual Real Estate TaxesNAAll Other Expenses300,000Total Expenses$300,000Net Operating Income$700,000Actual Effective Tax Rate3.0%Real Estate Taxes Not Recovered50.0%Landlord’s Tax Contribution1.5%Capitalization Rate10.0%Tax Adjusted Capitalization Rate11.5%Indicated Market Value, Rounded$6,090,000Actual Effective Tax Rate3.0%Indicated Real Estate Taxes$182,700Real Estate Tax Recovery Rate50.0%Indicated Real Estate Tax Recoveries$91,350 Consistency Proof Indicated Real Estate Tax Recoveries$91,350All Other Rents, Income and Recoveries$1,000,000Total Gross Income$1,091,350Indicated Real Estate Taxes$182,700All Other Expenses300,000Total Expenses$482,700Net Operating Income$608,650Capitalization Rate10.0%Indicated Market Value, Rounded$6,090,000Actual Effective Tax Rate3.0%Indicated Real Estate Taxes$182,700Real Estate Tax Recovery Rate50.0%Indicated Real Estate Tax Recoveries$91,350 The proof indicates consistency for all three variables: market value, taxes, and tax recoveries. The generalized formula works! Estimating Landlord’s Tax Contribution The analyst has two methods of estimating the landlord’s tax contribution and its inverse, the percentage of real estate taxes recovered by the landlord: a trend-based projection method and a lease-by-lease analysis method. Trend-Based Projection A trend-based projection is an analysis of the property’s historical experience and/or an analysis of market-wide experiences. When estimating real estate tax recoveries, the analyst must be aware of the usual pitfalls encountered when estimating and forecasting income and expenses, such as above or below market experiences at the subject property, unusually variable income or expense item experiences at the subject property, the incomparability of market data. Example of a Trend-Based Projection Analysis  1 Years Ago2 Years AgoLast YearProjectionSubject Property60%55%50%50%Market Comparables60%60%50%  Lease-by-Lease Analysis A lease-by-lease analysis is an analysis of every lease for its real estate tax recoveries potential. The percentage of taxes to be paid by each tenant should be tallied to ascertain the landlord’s contribution for taxes for the entire property. Any percentage estimated using the actual leases must be adjusted for expectations of stabilized vacancy and credit loss, and for rollover to market lease terms, and local assessment procedures. Example of Lease-by-Lease Analysis  Landlord’s TaxContributionSquare FeetSq.Ft Weighted ContributionRemaining Lease TermMarket LeaseTerms?Lease #160%20,00012,0003 yrsYesLease #260%25,00015,0004 yrsYesLease #x55%30,00016,5003 yrsYesVacant Unit #155%20,00011,0005 yrsYesVacant Unit #x55%30,00016,5005 yrsYesTotal 125,00071,000   If property was 100% occupied, the tenants would pay 57% (71,000/125,000) of the taxes. The landlord’s building wide tax contribution, at 100% occupancy, is estimated at 43% (100%-57%); however, market expectations call for a vacancy and credit loss rate of 7%. Therefore, the landlord’s building wide tax contribution, at stabilized vacancy and credit loss, is estimated at 50% (43% + 7%). Net Leased Properties and Average Vacancy & Credit Loss Unless properties are net leased for very long terms, say more than 20 years to high credit rated tenants, the basic value and tax assessment analysis will not work, and the generalized value and tax assessment analysis must be used. Over a typical holding period, most properties are expected to experience some vacancy and credit loss. If a property has some vacancy and credit loss over a holding period, then its average or stabilized vacancy and credit loss represent the percentage of real estate taxes not recovered by the landlord. A generalized analysis can be constructed as follows. No tax recovery income and no taxes should be included in the net income estimate. The stabilized vacancy and credit loss should continue to be deducted from all other potential rents, income, and recoveries. No vacancy and credit loss are taken against the potential tax recovery income. The taxes, the tax recovery income, and its vacancy and credit loss should only be reflected in the adjustment to the capitalization rate. Benefits to Property Owner & Consultant The generalized tax assessment analysis for a net leased property shown on the next page yields additional savings over the basic tax assessment analysis of $4,200. It may take the consultant one hour to complete the analysis and one hour to explain the procedure. On a 25% contingency fee basis, the consultant would earn a healthy $1,050 fee. Generalized Value and Tax Assessment Analysis for a Net Leased Property  Basic Value And Tax AnalysisGeneralized Value and Tax AnalysisHolding Period10 Years10 YearsAverage/Stabilized Vacancy & Credit Loss:  On All Other Rents, Income and Recoveries7%7%On Real Estate Tax RecoveriesNA7%Potential Real Estate Tax RecoveriesNANAVacancy & Credit Loss Real Estate Tax RecoveriesNANAEffective Gross Real Estate Tax RecoveriesNANAPotential All Other Rents, Income and Recoveries$1,075,269$1,075,269Vacancy & Credit Loss All Other Income and Recoveries7%7%Effective Gross All Other Income and Recoveries$1,000,000$1,000,000Real Estate Tax RecoveriesNANAAll Other Rents, Income and Recoveries$1,000,000$1,000,000Total Gross Income$1,000,000$1,000,000Real Estate TaxesNANAAll Other Expenses300,000300,000Total Expenses$300,000$300,000Net Operating Income$700,000$700,000Actual Effective Tax Rate3.0%3.0%Real Estate Taxes Not Recovered0.0%7.0%Landlord’s Tax Contribution0.0%0.2%Capitalization Rate10.0%10.0%Tax Adjusted Capitalization Rate10.0%10.2%Indicated Market Value, Rounded$7,000,000$6,860,000Actual Effective Tax Rate3.0%3.0%Indicated Real Estate Taxes$210,000$205,800Real Estate Tax Recovery Rate100.0%93.0%Indicated Real Estate Tax Recoveries$210,000$191,394 Discounted Cash Flow Analyses The principle of not using tax recovery income that is based on inappropriately assessed taxes is equally applicable to discounted cash flows (DCF’s); however, the generalized capitalization rate adjustment procedure described above cannot be applied to the discount rate in a DCF. Analysts must use an iteration process (the generalized cap rate adjustment procedure can be applied to the reversionary capitalization rate in a DCF). Depending on the DCF software used, various iteration techniques can be used instead of the algebraic formula discussed above. In certain software packages, the analyst sets up the tax recoveries as dependent upon the data entered in the taxes cash flow. When the time comes for the analyst to calculate the property value, the analyst enters a guess estimate of the taxes and calculates the first value. This first value is analyzed to find the indicated taxes. If the indicated taxes do not match the guess estimate, then the analyst must make a second guess estimate, recalculate the property value, and reanalyze the second property value for its second indicated taxes. If the second indicated taxes do not match the second guess estimate, then the analyst must repeat the above steps until they match. Conclusion In conclusion, the basic tax assessment analysis is not valid for many important types of properties, including most office buildings, retail malls, and many industrial buildings. For such properties, the generalized analysis must be employed. The basic analysis remains valid for properties with only gross leases, such as residential apartment buildings, but the generalized analysis can be used for all properties. This easy-to-use analysis will save property owners tax dollars and earn fees for tax consultants.