Councilwoman Natalia Rudiak is asking Mayor Bill Peduto to look into the sale of an apartment complex. She said how the sale happened could lead to a loss of tax revenue to the city.
The Cork Factory Lofts in the Strip District were recently sold to GMH Capital Partners for an undisclosed sum. But instead of buying the converted lofts outright, GMH purchased the two companies that previously owned the converted lofts and associated properties. The sale included three buildings.
Renovations to the lofts cost more than $78 million dollars and the buildings now house some of the highest rent apartments in the region, yet the sale price of the companies was reported to be just $20.5 million. Rudiak said observers place the value of the buildings at closer to $100 million.
In this kind of transaction, buyers submit a realty transfer tax declaration of acquisition and pay taxes based on the assessed value of property owned by the companies. That’s instead of paying a deed transfer tax, which would consider market value. In this case, the assessed value is significantly lower than the full market value. Available county assessment data says market value for two of the buildings would be around $35 million. But county assessed value only comes to about $11.9 million.
And Rudiak said the city isn’t just missing out on the higher deed transfer taxes payments, such transactions affect values of other buildings in the area by establishing inaccurate comparable sales.
“So you do see this domino effect of continuing to undervalue properties, which of course is not good for the city, and it continues to put the burden on the average homeowner rather than the corporation that owns these multi-million dollar properties,” Rudiak said.
She said she’s not sure how often this loophole is used but wants the mayor to evaluate that as well.