Self Storage- Visit to the Tax Assessor

[Henry Clark]

We got a new valuation from the Tax Assessor last year.  $1.6mm up to $2.6mm.  Our property tax was already high, now it will almost double.  Wanted to understand what caused the increase.  She said Iowa uses Market valuations to adjust prices.  There have been several sales in the town.  One of which was us selling a 337-unit location for a very good price.  That is part of what triggered the valuation increase.  All Self Storage locations got hit.  That increase based on a 7 cap, will reduce our location value by $500,000.  I told her and she understood the valuation adjustment. But said Iowa relies on actual Sales to determine Market value, and she couldn't decrease our valuation by the $500,000.  Unless we sold the location.

Last year we reduced our advertising costs in preparation for the tax increase which will come this fall.  Will have to reduce more advertising/website spending to further offset the tax increase.  We are near maxing out occupancy. Starting the permitting process, loan, and ordering the next run of buildings.  Will build in the green grass area to the right of Daisy.  This will help leverage the land valuation part of the appraisal.

Explained to the Assessor this will actually start to keep people out as the taxes have gotten so high.

[G. Brian Davis]

Henry, that's a rough spot, your own sale becoming the comp that hikes your own taxes. I'd push back on the assessor with an income approach appeal rather than arguing the sales comp itself, since most states allow you to contest valuation using actual NOI and cap rate on the specific property. Get an independent appraisal built on your trailing twelve months income and file a formal protest before the fall bill hits. Building out that new lot to spread the land basis is smart too, just make sure the timing lines up with your protest window.