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California Franchise Tax Board


TITLE: California Property Tax Assessment Appeals-An Actual $8.4 million Case Study:

By: Jim Guffey, Vice President CPTA (

June 25, 2006 –Redlands CA: In September of 2001 at a time when most property owners were seeing appreciation of their property values, I prepared a case before the Assessment Appeals Board in a large Southern California county. The property was an $8.4 million assessed Assisted-Living Apartment Hotel. I had successfully won reductions of this property's value in years prior but the appraiser I was dealing with at the County Assessors Office refused to reduce the property's value any further, citing the rise in commercial property values as his reason. My company had performed property tax reduction work on several of this particular owners properties with great success and he asked us to work with this property as well.

After meeting and talking with the appraiser and finding that he refused to consider a reduction in the assessed value, we were forced to the next level of a formal Assessment Appeals hearing before a three-member Assessment Appeals Board. The county has up to two years following the filing of the appeal to hear the case and we were close to the deadline when we attended the hearing.

The following is the actual case study of an assisted-living apartment complex located in Southern California. The Assessment Appeal covered the year of 19992000 for the lien date of January 1999. Wherever possible the actual case is presented. Valuation numbers have been rounded to the nearest $100,000.

Property Location: Southern California
January 1999 Assessed Value $8,400,000
Case Won-New Value $6,500,000
Actual Client Savings (Two Years) $ 43,000


The subject property is located at XXXX. Known as the XXXX Retirement Hotel it is situated on just under 3 acres and was built in phases starting in 1985 and ending in 1991. Constructed of wood frame with stucco exterior, the six buildings range in height from two to four stories with three buildings featuring elevators. One building has subterranean parking and all the buildings are sprinklered.

The buildings house 187 units (78,201 sq.ft.) as well as the common areas, including dining room, administrative offices, lounges, recreational and activity rooms and hallway bathrooms (43,343 sq.ft.). All six buildings are connected, and all rooms have air conditioning via wall units. Most of the units have no kitchen facilities; 10 of the larger studios do. All units have emergency pull cords in the living area as well as the bathrooms.
The housing industry for the elderly can be classified by three major types of buyers: the active seniors, intermediate seniors, and the senior who needs constant care. The first group, active retirees, want recreational amenities with the housing they buy. Intermediate seniors want a congregate-type of lifestyle that allows them independence yet gives them the opportunity to take part in quiet activities with arranged transportation and supervision. And retirees who need constant care are concerned with medical assistance. The subject property is generally targeting the intermediate retiree.
From a real estate and financial perspective housing for the elderly is complex and difficult to analyze as it usually represents a combination of other businesses and very high expenses. The major types of homes for the elderly include:
1) Senior Apartments: Apartment units set aside for active seniors. Typically these are apartments with an age restriction on residents. Stairs to upstairs units, parking spaces for each resident, and very little common area improvements are the norm. No supervisory or support services are offered. These developments have expenses, vacancy and cap rates very similar to any other apartment complex.
2) Congregate Housing: Specially planned, designed and managed multi-unit rental housing with self contained apartments. Supportive services such as meals, housekeeping, transportation, social and recreational services are sometimes provided. In California these are not licensed and have moderately greater expenses due to the increased services. Cap Rates are generally higher than apartments as well.
3) Assisted Living: Group living arrangements that provide staff supervised meals in a dining room, daily maid service, Registered Nurse on site, personal care (assistance with bathing, medication, incontinence, etc.) and private and shared sleeping rooms. Amenities such as Beauty Shops, Guest Accommodations and Emergency Pull Chords are typical. These facilities are licensed and must meet designated operating standards including minimum staff requirements. Vacancy rates vary and expenses are high. Cap rates are high as well because of the risk of running a complicated business with so many different functions (medical, dining, entertainment, nursing, etc).
4) Care Facilities (skilled nursing): Skilled nursing facilities are commonly known as nursing or convalescent homes. Around the clock licensed nurses and aids provide medical care and are generally one step below a full acute care hospital.
The subject is a State Licensed Assisted Living Retirement Hotel (#3 above).
Entry is made into the subject by walking through a large lobby to a reception area. The large restaurant style dining room is located off this lobby and one of the numerous libraries is opposite the dining room. Throughout this complex are over 44,000 square feet of common area (1/3 of the total square footage), including dining rooms, TV rooms, family rooms, craft rooms, exercise rooms, laundry rooms and bathrooms. At any time of the day or night guests are free to use the rooms to exercise, read, participate in crafts or group functions, or just rest while walking from the dining area to their rooms. Guests wishing to visit the pool area must be accompanied by one of the many staff members required by law to be on site.
The hallways are similar to a hotel with elevators placed at strategic locations for guests’ convenience. A number of ramps are also located in the building. Inside each room there is a living area, closet space and bathroom. Emergency pull chords summon help from staff in an instant (a full time Registered Nurse is also on site). Several units have been combined to form one larger unit, and 10 have kitchen facilities.
All residents receive maid service daily as well as all meals and snacks served to them by staff in the dining room or at the 24-hour snack center. Exercise, crafts, and other activities are supervised and offered daily and there are numerous trips set up by Arcadia Gardens to various local sites. A full time RN is also available for medication assistance. 24 hour Security is provided. Subterranean parking is provided although few are able to drive (58 spaces for staff and up to 200 residents). Each of these services is included in the base room rate as well as all utilities except phone.
As can be seen by the above subject analysis there is no way to compare an Assisted Living Retirement Hotel with a property type that does not share the same overhead and risks. This business is set to explode as the baby boomers reach retirement age in the years to come (starting around the year 2010). But currently there are many players poised to take advantage of the coming boom and a current saturation in the marketplace. Few properties are changing hands, making it difficult to find comparable property sales.
At this point in the case we presented substantial information as to market rents and expenses as well as presenting and analyzing the subjects income statement’s over the past several years. We concluded with several approaches to value and reconciled the approaches into a request for a value of $6.25 million.
The day of the appeal I arrived at the hearing and informally spoke with the appraiser from the Assessor's Office. We notified the board that we were both present and ready to present our cases, at which time we went outside and informally discussed the information we were going to present to the board. Upon seeing my case presentation and the information contained therein, the appraiser and I mutually agreed to a value of $6.5 million which he agreed to carry for two years. Upon appearing before the board the appraiser notified them that there had been a stipulation agreed upon in the board formalized it, resulting in a savings to our client of over $43,000.
It is extremely important when considering a property tax reduction company to ensure that the agents representing the property owner actually understand the system, appear at the hearings and argue cases successfully. You should beware of companies who file papers and wait for results. These companies do little work for the money they earn and seldom achieve maximized results. As in the case presented above, the appraiser working for the Assessor's Office refused to lower the value until he saw the case I prepared and understood that we had done our homework and represented our client in a professional and efficient manner.
You can find out more about California Property Tax Associates by visiting their website at www.CaliforniaPropertyTaxAssociates.Com .
SUMMARY: An actual Property Tax Assessment Appeals Board case study of an $8.4 million Assisted-Living apartment complex in Southern California, the subsequent appeals hearing and the annual tax savings passed on to the client. www.CaliforniaPropertyTaxAssociates.Com
BIO: Jim Guffey is a real estate developer who owns commercial and residential properties in Southern California. In 1990 he started one of the first full-time property tax consulting companies in California. At a time very similar to today he built this property tax reduction Company into a successful venture representing property owners in assessment reductions informally and before the Board of Appeals throughout California. Jim is the ??? Vice President Of Strategic Oversight at California Property Tax Associates. www.CaliforniaPropertTaxAssociates.Com)