In the city’s eyes, Google’s New York City headquarters at 111 Eighth Avenue saw the greatest jump in so-called market value for the upcoming tax year, according to The Real Deal’s analysis of Department of Finance tax assessments.
City assessors valued the 2.9 million-square-foot building at $827.5 million, a year-over-year increase of $198.8 million, or 31.6 percent.
To be sure, city-assigned market values — which are one of the metrics used by the finance department to calculate an owner’s annual property tax bill — are generally only a fraction of what the building would sell for on the open market.
The Real Deal looked at the city’s figures for Manhattan residential and commercial properties, released late last month, excluding under-construction buildings — such as Extell Development’s One 57, which more than quadrupled its market value — as well as any properties owned by city entities. (See chart for full list above)
Indeed, in December 2010, the search engine behemoth paid $1.77 billion for the Chelsea property, previously owned by Taconic Partners, Jamestown Properties and the New York State Common Retirement Fund.
In cases like the Google building, the buyer may put a premium on the property that isn’t necessarily reflected in the city’s assessment, said Robert Von Ancken, chairman of Newmark Grubb Knight Frank’s Landauer valuation and advisory division. “The user may overpay for the building for its own use,” he said.
The Durst Organization’s One Bryant Park also saw a large spike in city-assigned market value, jumping $186.3 million — or 18.1 percent — to $1.22 billion. Other buildings to appreciate in market value were the SL Green Realty-owned Viacom Building at 1515 Broadway — where the media giant leased 1.6 million square feet in April 2012 — and the General Motors Building at 767 Fifth Avenue. This year, the city pegged the market value at $1.4 billion. After the sale of a 40 percent interest earlier this month, the actual market value of the tower was pegged at $3.4 billion, making it the country’s most valuable office property.
The largest drop in city-assigned market value of any Manhattan property this year was seen at Stuyvesant Town- Peter Cooper Village, which fell $176.9 million, or 14.6 percent, to $1.04 billion, the data show.
The sprawling 11,200-apartment complex has been at the epicenter of the city’s rent-regulation debate. In April, market appraisers valued the property at between $3.25 billion to $4 billion. CWCapital Asset Management, the special servicer that controls the complex, is looking to boost rental income before a potential sale.
“It’s just not that valuable, and there are enormous expenses” associated with the property, Von Ancken said.
The largest drop in value at a Manhattan office building was at the Goldman Sachs headquarters in Battery Park City, which fell $176 million, or 26.7 percent, to $511.7 million, as The Real Deal reported.
The fall in value at Goldman’s 200 West Street was not due to damage from Hurricane Sandy — as was the case with several buildings in Lower Manhattan such as 1 Liberty Plaza — but rather a result of the city using a new comparison set, or comps.
City assessors also marked down the Time Warner Center by $80.2 million, or 15.9 percent, to $425.5 million. Eastdil Secured’s Doug Harmon and Adam Spies are marketing the 1.1 million-square-foot tower at Columbus Circle, and top bids were hovering around the $1.3 billion mark as of the beginning of June.
“Large swings in year-to-year value can arise from a variety of causes,” said Owen Stone, a spokesperson for the finance department.
However, the “primary driver” in calculating year-to-year changes in market value is net operating income — that is, how much money an owner makes after paying taxes and operating expenses, also known as NOI — reported to the department, he said.
Landlords are required to file these reports, known as real property income and expense (RPIE) statements, for all income-producing properties with an actual assessed value of more than $40,000. The 2013/2014 fiscal year’s assessment takes into account net operating income from 2011.
But since RPIE statements are not public, Stone said he could not comment on specific properties.
Though the finance department considers current and prospective occupancy when assessing a building’s value, the actual calculations they use to arrive at the number are a “bit of a black box,” according to Steven Kurtz, a principal of valuation advisory services at Avison Young.
Swings in market value are “tempered by law which slows down the changes using the transitional assessment system,” spreading changes out over a period of five years, Kurtz added.
An RPIE statement allows a landlord to indicate not only dollar amounts, but also additional information about leases, which is factored into city appraisers’ assessments, NGKF’s Von Ancken said. Landlords can file updated financial information with the tax commission if they choose to protest their assessments, which happens frequently, he added.
The real estate industry is putting the city’s methodology under greater scrutiny, said Bob Knakal, principal at Massey Knakal Realty Services. “We’ve gone through several different iterations of what that assessed value is going to be,” he said.
The jumps in city-assigned value correlate with the actual market strength of Manhattan. Commercial property prices in the borough increased 38 percent year-over-year, according to data provided to The Real Deal by Real Capital Analytics. Manhattan was the second-biggest gainer in prices, after the Dallas-Houston-Austin market.
As long as real market value is not affected, a lower city-assigned value is welcome news for a landlord, as the building’s tax burden becomes easier to bear.
But city-assessed market values have not a sliver of influence on a property’s real market value, Knakal added, though real market value may play into the city’s calculations.
The assessed market value “has never come up in a conversation with investors,” Knakal said, except for the fact that a higher tax bill affects net income on a property. “All the owner cares about is: ‘What am I writing the check for?’”
Additional reporting by Adam Pincus