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Defying the Commercial Real Estate Downturn: The AOPTA Advantage

As a leading property tax appeal firm, AOPTA The Property Tax Experts is acutely aware of the looming threats to the commercial real estate market. An estimated $1.5 trillion in commercial mortgage debt is due by 2025, and current economic conditions—including rising borrowing costs, tighter credit, and declining property values due to increased remote work—are elevating the risk of default.

Fitch Ratings and CMBS Loan Refinance Activity - AOPTA
Fitch Ratings and CMBS Loan Refinance Activity - AOPTA

Fitch Ratings has projected that 35% or approximately $5.8 billion of pooled securities commercial mortgages that are due between April and December 2023 may not be refinanced. The reality of the situation has even been acknowledged by notable figures such as Tesla CEO Elon Musk who recently stated, "Commercial real estate is melting down fast. Home values next."

This situation could lead to a dramatic decrease in office and retail property valuations, with predictions indicating a potential drop of as much as 40% from peak to trough this year. This is largely due to higher interest rates that impede investors' ability to refinance the massive upcoming debt.

At AOPTA, we stay informed and ahead of these economic conditions, maintaining a deep understanding of the property values against these economic conditions. Our team, which includes appraisers, residential and commercial brokers, real estate attorneys, and CPAs, is prepared to assist our clients navigate these challenging times.

AOPTA 50% of 2.9 Trillion Loans in Commercial Real Estate

More than 50% of the $2.9 trillion in commercial mortgages will need to be renegotiated in the next 24 months when new lending rates are likely to be up by 350 to 450 basis points. This situation is further complicated by the fact that small and regional banks—holding about 80% of the sector's outstanding debt—are the biggest source of credit to the $20 trillion commercial real estate market. These banks were recently at the heart of financial sector upheaval, and there are concerns that the turmoil could lead to more restrictive lending standards.

AOPTA recognizes the challenges property owners and investors face in this economic climate. Our focus is on reducing property taxes for our clients and solving problems that can burden property owners. We have a proven track record, with 22 years of residential and commercial valuation experience and a success rate of over 95% for our clients. We handle all aspects of your property tax appeal, work for a reduced tax burden, and assist with pre-action analysis during property acquisition or pre-development.

The commercial real estate market is indeed facing a number of challenges. High interest rates and declining demand for office space, largely due to increased remote work, are prominent issues. As Treasury Secretary Janet Yellen pointed out in a recent interview, "I do think there will be issues with commercial real estate." However, she also suggested that banks should be able to handle the strains ahead.

While the current challenges in the commercial real estate market may seem daunting, they can actually serve as a catalyst for lowering your property taxes. In a market characterized by lower lease rates, higher vacancies, and increased capitalization rates, property owners are uniquely positioned to argue for reduced property valuations and consequently lower property taxes.

AOPTA - Trifecta formula for property tax reductions

This is where AOPTA's expertise comes into play. With our in-depth understanding of the real estate market and property taxation, we can utilize these market conditions to your advantage. Whether it's leveraging lower lease rates, addressing the impact of higher vacancies, or accounting for higher cap rates, our team is equipped to handle all aspects of your property tax appeal. We work diligently to ensure you're not overpaying on your property taxes, even in these challenging times

Despite these challenges, some industry experts hold a less pessimistic view of the future of the commercial real estate market. UBS Global Wealth Management's Solita Marcelli recently noted that the headlines regarding office space "are worse than reality." She does not anticipate a repeat of the 2008 liquidity crisis, largely because the health of the overall banking system and market liquidity conditions are substantially better now than they were during the Great Financial Crisis.

The Federal Reserve's decision to raise interest rates 10 times over the past year from near zero to around 5% presents a new challenge. The possibility of another rate hike this year amid signs of underlying inflationary pressures adds another layer of complexity for property owners and investors. However, our expert team at AOPTA is ready to help navigate these challenges and maximize property tax savings for all types of properties.

Even as the commercial real estate market grapples with these issues, we at AOPTA are equipped to provide property owners with the necessary tools and advice to manage their property taxes effectively.

Anthony O'Connor AOPTA Every property tax payer deserves expert representation

In these challenging times, who you work with truly matters. At AOPTA, we are committed to delivering results-driven, tailored services to our clients. We take pride in fostering a team-oriented, family-like atmosphere among our experienced specialists, all dedicated to achieving the desired results for our clients. If you're facing real property tax issues and overwhelming burdens, we're here to help


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