The Washtenaw county treasurer declared a moratorium on tax foreclosures for residential, occupied properties. Catherine McClary is amending the Financial Hardship Policy in an effort to assist small business owners, landlords, and homeowners. The moratorium will extend the tax foreclosure deadline to next year.
Briarwood Mall has 17 empty storefronts. Ann Arbor’s only mall has lost several businesses in the first quarter due to an increase in online shopping, high rents and the COVID-19 pandemic. City officials worry about the mall’s future and contemplate alternative uses for the large structure and parking lot. Multi-use ideas include entertainment venues like climbing gyms or laser tag, as well as a retirement community, office, and/or housing spaces that would guarantee consistent foot traffic.
The mall is dead. Actually, in my opinion, the mall has been dead for several years. But no one has bothered to tell the mall.
COVID-19 may have dealt the final blow to malls. But the downward spiral began, quietly, on July 5, 1994: The founding of Amazon.
Amazon provides a virtually limitless selection of consumer products in one location. Gone are the days of leisurely strolling from store to store to find the perfect item. That item is a few clicks away on Amazon. The introduction of Amazon Prime in 2005, with two-day shipping, has accelerated the demise of bricks-and-mortar retail.
In the past year, over 20 national retailers have filed for bankruptcy protection. The next 12 months will be worse. Paycheck Protection Program loans and landlord leniency have merely kicked the can down the road for most retailers. In Metro Detroit, both Partridge Creek and (especially) Fairlane are doomed to fail as currently constituted. Lakeside Mall has already been sold to an owner (for less than $18/sf). The new owner is planning reuse involving “dynamic mixed-use destinations.”
Even the once-untouchable Somerset Collection has been impacted by vacancies, as well as the recent bankruptcy of one anchor (Neiman Marcus), and the potential bankruptcy of a second anchor (Macy’s). Even Nordstrom is not immune to the impact of online retailing, closing 15% of its full-line stores in 2020.
So what is to become of these once-proud regional malls? Expect reuses involving a mix of alternate uses (mega-churches, fitness centers), multi-family residential, and other less desirable uses (waterparks, etc.). One potential user is the villain itself: Amazon. Amazon could be a prime user of anchor space for fulfillment, order pickup, and small-scale retail (4-Star stores). But Amazon will not be paying the rent, and will not be drawing the foot traffic, that malls need to survive as currently constituted.
The mall is dead.
Median prices for residential real estate sales increased in Charlevoix, Otsego, Cheboygan and Emmet counties. The number of residential transactions also increased in three of those counties. The quick rebound in sales once pandemic restrictions eased is due to low supply and high demand and buyers’ desires to relocate to smaller communities. This trend could cause issues if it continues as working-class families may find themselves priced out of the housing market in Northern Michigan.
With the passing of November’s Prop N, which approved the sale of $250 million bonds, demolishing and renovating is set to begin (again) in Detroit. The project starts with $175 million in bonds, and the city plans to sell another $75 million next year. 8,000 homes blighted homes will be destroyed, and another 8,000 salvageable homes will be renovated. The seven companies taking part in the project are headquartered in Detroit. Five of those companies are black-owned.
In a new report, Fitch Ratings estimates that home prices are 5.5% overvalued nationally. However, Michigan is one of the few states where housing is undervalued.
The demand for housing far exceeds the available inventory nationwide. This trend is due, in part, to homeowners’ reluctance to list homes during the pandemic. Metro areas around the United States are overvalued by more than 10%. Las Vegas (28%) and Dallas-Fort Worth (20.24%) are prime examples. Idaho (30-34%) is the highest overvalued state on the list, with Nevada coming in a close second.
Colliers International U.S. states it has commenced legal action against 10 former senior brokers who split from the company to form their own firm, Advantage Commercial Real Estate Services, alleging, among other things breach of fiduciary duty and use of confidential information. Several of the brokers were majority owners in a firm that Colliers acquired in 2016 in an effort to strengthen its presence in West Michigan. The proceedings provide a new slant on what was perceived as an amicable split in January.
Ann Arbor City Council and developers have debated over a 51-home subdivision for years. The original proposal called for the removal of 200 old growth oak trees, but was unanimously rejected by City Council in 2017. But now, a new alternative called “The Canopy” would preserve most of the old forest fragment at 2857 Packard Road, while erecting a 2-story apartment or condo building loaded with green features.
This week I want to highlight the upcoming tax appeal season.
Generally in the first weeks of February (sometimes later in Macomb County), property owners will receive a Notice of Assessment in the mail. If you have not received a Notice of Assessment when you expect it, you should immediately contact the assessor’s office in the municipality in which the property is located. Not receiving your Notice of Assessment does not extend any deadlines. It is the property owner’s responsibility to receive the Notice of Assessment.
Once the Notice of Assessment is received, it should be reviewed to confirm it is: (a) accurate; and (b) appropriate. I have an easy guide to reviewing your Notice of Assessment on my tax appeal blog, which can be accessed here.
Most property owners do not understand that, although the Taxable Value is what is used to calculate the tax bill, the Assessed Value/State Equalized Value is what is actually appealed in a tax appeal. In order to reduce an owner’s tax bill, the owner must demonstrate that the Assessed Value should be reduced to an amount less than the Taxable Value. Only then will the tax bill be reduced. The easy “back of the napkin” method for analyzing a tax appeal is to determine whether the property’s market value is less than twice the Taxable Value. In other words, if the Taxable Value is $100,000, the tax bill will only be reduced if an owner can demonstrate the market value is less than $200,000.
Notably, the date of value for a tax appeal is December 31, 2020. This may impact an appeal’s validity, as the impact of the COVID-19 pandemic may not be fully felt until later in 2021. Last year, I wrote a blog post about the impact of COVID-19 on tax appeals, which can be found here.
There are also deadlines that apply to tax appeals. First, for property classified as residential or agricultural, the owner must first appear before the March Board of Review. This is a mandatory requirement to pursue a tax appeal. After receiving the determination of the Board of Review, the owner must then file a Petition before the Michigan Tax Tribunal by July 31.
For property classified as commercial or industrial, the owner is not required to appear before the March Board of Review, although the owner is permitted to appear. The deadline for filing a Petition before the Michigan Tax Tribunal for these properties is May 31.
My law firm is happy to review properties to determine whether a tax appeal is appropriate. If you are interested in such a review, please email me at dnykanen@fnrplc.com.
The forthcoming flood of retail closures is starting. Godiva is closing 128 storefronts and cafes across North America by the end of March. Their chocolate will continue to be available online and in partnering retail and grocery stores. With the bulk of profits stemming from tourism, special occasion and impulse buying, the decrease for in-person shopping is to blame for the company’s shift. Chocolate sales have risen by 5% during the pandemic. In-store operations will continue in Europe, the Middle East and Greater China.
