NORWALK, Conn. – Norwalk is set to hire specialists to appraise The SoNo Collection.
“Because of the complexity of the new mall… we have hired an expert appraiser who appraises malls, in an effort to obtain fair value on the mall and also to put the city in a good position in case they need to defend that,” Westport Tax Assessor Paul Friia, who is assisting Norwalk, said Thursday to the Common Council Finance Committee.
The Council is likely to vote on a $60,000 contract with American Valuation Group, Inc. and a $75,000 contract with Safeground Organic Analytics on Nov. 26, as the Committee moved the proposal forward.
It’s been estimated that the mall will contribute about $2.5 million annually to Norwalk in property taxes in its first seven years, half of what it would pay due to an Enterprise Zone tax abatement.
The assessment will be based on The SoNo Collection being classified as a Class A mall, because that was what was written into the Land Disposition Agreement during the mall’s approval process, Council member Doug Hempstead (R-District D) reminded everyone.
“Real Estate Investment Trusts generally take a very aggressive position challenging their taxes,” Corporation Counsel Mario Coppola said, reviewing his involvement in getting Class A written into the LDA. He had told mall developer GGP that if they were confident they’d have high quality tenants then they should agree to that in writing.
A Grade A or A plus affects the determination of capitalization rate, which affects the value, he said. “And to their credit, they agreed to it, they agreed to those designations for this property for purposes of tax appeals, I think for 10 years.”
The transfer of 80 percent of the mall’s ownership last week was no surprise, according to Coppola, who recounted that he’d predicted the “REIT at some point is going to divest its interest in the property.”
“Generally my understanding is that if they’re bankrolling this without financing, which is what they did here, they’ll eventually divest themselves of their equity,” he said.
Last week’s transfer wasn’t a “sale;” first, Brookfield Properties Partners bought GGP and then Brookfield divested a portion of its ownership interest in The SoNo Collection, he explained. “Which is typical what these REITs do when they develop a mall, only holding it for certain period of time. For example, Westfield divested itself by 50 percent equity in the Trumbull mall within the last 10 years.”
In terms of the mall’s valuation, “the reality is that the assessor (is) going to work with a national consultant, someone who has experience with valuing malls around the country to determine what is an appropriate income to attribute to the mall, expenses in capitalization rate based on all the information that we receive,” Coppola said. “To the credit of Brookfield, we put together a list of all the information that we like to see prior to valuing the mall and we’ve already met with them. They are going to be working with us to provide, you know, certain information and documentation to assist us with getting them the proper value of mall.”
The information provided so far shows that the preliminary estimates were right on target, Coppola said.
Friia, who was brought on after Norwalk Tax Assessor Michael Stewart and Assistant Tax Assessor William O’Brien resigned in August, said he’d sent staff members to the mall at about Oct. 1, so they could document the percentage of completion because values are set on that day.