Shops At Nanuet

Property Tax Challenges From Shops At Nanuet To Be Heard On The Heels Of Palisades Center Tax Refund Litigation

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Falling Revenues At The Shops Of Nanuet Prompt Tax Challenges Dating Back To Pre-Pandemic Days; Simon Says Clarkstown Overstated Mall Value For Five Years

As the Town of Clarkstown battles it out in court with the owners of the Palisades Center over tens of millions of dollars the mall claims it overpaid in taxes, waiting in the wings, and before the same judge, is a series of other lawsuits filed by the owners of the Shops At Nanuet, also seeking millions in property tax refunds.

Three entities, all tied together through ownership of the Shops At Nanuet, have lawsuits pending in Rockland County Supreme Court, with each claiming the Town of Clarkstown has been over-assessing their properties dating back to 2015.

These suits, known as tax certiorari cases, enable property owners who have paid their property taxes to challenge the valuations the town assessor assigned their properties in years past. For commercial properties, these suits seek to establish over-valuation through a direct capitalization approach – which generally means multiplying the net income earned from the property by a capitalization rate to determine a fair market value. Capitalization rates are economic multipliers determined by a number of factors including interest rates, values of similar properties, economic risks, and demographic trends.

The Simon Property Group, which owns the Shops At Nanuet through an affiliated entity called the Retail Property Trust (RPT) has five lawsuits against the town dating back to 2019. In each of the suits, RPT claims the town assessor has over-assessed its property by more than $20.5 million each year, or a total over-assessment of $102.5 million. The Town assessed the property at $29.3 million each year. RPT asserts the assessment should have been $8.8 million, a difference of $20.5 million each year.

Assessments in New York are subject to an equalization rate that in Clarkstown ranged between 25 and 30 percent between 2019 and 2023 – meaning that the fair market value is determined by dividing the assessed value by the equalization rate. In the case of the Shops At Nanuet, the town asserts the fair market value of the property (based on the assessment) was between $97 million and $117 million in any given year. RPT asserts the fair market value was more akin to between $29 million and $35 million.

Unless the parties can settle the case before trial, it will be up to Supreme Court Justice Christie D’Alessio, the same judge hearing the Palisades Center tax challenge, to determine who is right.

In court filings, Michael Larson, Vice-President for Property Tax and Credits & Incentives for the Simon Property Group, demonstrated that revenues and net income from the Shops At Nanuet have fallen each year from 2018 through 2022, most significantly in 2020 (during the COVID-19 pandemic) and have never recovered. Revenue from 2018 to 2022 fell about 25 percent; net income fell in the same period about 70 percent. Despite annual requests to re-adjust its assessment, the town maintained the same assessment each year, regardless of economic realities on the ground.

The Shops At Nanuet litigation is also tied to and being tried with tax challenges dating back from 2015 through 2018 filed by Sears Roebuck, and 2019 through 2023 by its successor SPS Portfolio.  In those cases, the allegations of over-assessment for Sears were about $4 million per year in each of the four years. For SPS, the allegations of over-assessment were about $2 million per year in each of the five years. The Sears department store, a retail structure of about 222,000 square feet, sat empty for many of the years that encompass the tax assessment challenges.

All in all, as each year is essentially a separate case with fluctuating property values, Justice D’Alessio is looking at reconciling 14 different challenges.

If successful, RPT, Sears and SPS would be entitled to tax refunds and interest stemming from the re-assessment of its properties. The impacts would be in the millions of dollars and would affect both the Nanuet School District and the Town of Clarkstown.

The Palisades Center tax litigation, if its owner Eklecco is successful, could cost the Clarkstown Central School District and the Town of Clarkstown tens of millions of dollars with the lion’s share impacting the school district.

The outcome of the Shops At Nanuet case can affect future revenues for both the town and the Nanuet School District. New York law would preclude the town from re-assessing the property upward for three years going forward.

There is a pre-trial conference set for April 3rd before Justice D’Alessio. RPT is represented by Forchelli Deegan Terrana of Uniondale, New York.