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From YouTube: Board of Equalization Meeting | August 22, 2023
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A
Good
morning
today
is
Tuesday
August
22nd
2023.
This
is
Arlington
County
Board
of
Equalization
hearing
we
have
five
members
present
Mr
penaranda
will
be
arriving
around
9
30
and
join
us.
Our
subsequent
cases
got
six
cases
on
the
agenda.
We're
going
to
start
with
the
first
one,
our
pc14053057
at
950,
North,
Glebe,
Road
and
Miss
Borman.
You
can
start
with
your
eight
minutes
and
tell
us
about
that
property.
Please.
B
B
The
building
probably
needs
two
large
single
tenants
or
it'd,
be
cost
prohibitive
to
build
out
the
18
to
24
foot
ceiling
floor
on
the
12th,
and
if
they
don't
get
somebody
one
tenant
for
the
second
and
third
floor,
they
will
have
to
close
off
that
stairwell
space,
which
is
going
to
cost
an
absolute
Fortune.
B
That
building
is
ownership,
is
converting
old
retail
of
7
600
square
feet
to
amenity
space
and
an
estimated
cost
of
eight
million
dollars,
and
that's
the
amenity
space
and
sprucing
it
up
a
little
bit
so
that
it
looks
rentable
paraton
was
trying
to
be
sublease
the
entire
10th
floor
and
they
have
actually
given
up,
but
they've
told
the
owner
that
they
would
be
open
to
a
buyout
offer.
B
The
grounds
on
appeal,
based
on
the
test,
capitalization
rate,
should
increase
by
200
basis
points
the
rent
on
vacant
space,
the
county
used
forty
dollars
versus
37.25
used
by
the
taxpayer.
The
vacancy
rate
should
be
increased
from
25
to
30
percent
operating
expenses
from
970
to
10
and
the
bill
that
deduction,
which
initially
was
a
hundred
and
fifteen
dollars.
It
was
reduced
to
ninety
dollars
in
the
test
and
the
taxpayer
asserts
that
it's
going
to
cost
140
dollars
per
square
foot
to
build
out.
B
We
also
believe
a
lease
up
term
of
one
year
of
two
years
versus
the
one
year
is
appropriate.
County
has
support
for
his
cap
rate
and
its
guidelines,
those
market
sales,
financial
markets,
public
sources,
poor
packs.
So
looking
at
the
market
sales,
these
are
the
sales.
The
first
two
are
sales
listed
in
the
county
guidelines,
the
sale
date
December
October
and
October,
the
first
sale
sold
for
10
million
six
hundred
thousand
dollars.
The
initial
assessment
was
21
million
dollars,
so
the
assessment
sale
ratio
was
201.
B
We
can't
tell
if
there's
additional,
far
assessed
on
this
property,
but
if
it
is
just
assessed
as
pure
office,
you
would
need
to
increase
the
capitalization
rate
used
in
the
guidelines
by
730
basis
points.
The
next
two
sales
are
just
office,
1776
Wilson,
and
we
for
sure
it
sold
in
October
for
59
million
dollars.
It
was
assessed
initially
of
68
million.
Four.
The
assessment
sale
ratio
was
115
percent.
B
The
property
was
82
percent
occupied
at
the
time
of
sale
and
in
order
to
get
to
the
sale
price,
you
would
need
to
increase
the
County's
guideline.
Cap
rate
by
100
basis
points
again
indicating
that
the
guideline
cap
rates
are
wrong.
The
third
sale
is
24.45
Army
Navy
Drive
it
sold
in
December
of
22.
sale,
price,
6
million
initial
23
assessment,
eight
million
four-
that
puts
you
at
140
percent.
B
The
assessment
is
40
greater
than
the
sale
price,
and
in
order
to
get
to
the
sale
price,
you
would
need
to
increase
the
County's
guideline
cap
rate
by
294
basis
points.
We
focus
on
the
last
two
sales
of
a
hundred
basis,
which
would
require
100
basis,
point
increased
and
at
294
basis,
point
increase,
and
we
believe
that
supports
our
request
for
a
200
basis.
Point
increase
as
well
other
information.
B
B
2022,
so
the
end
of
the
third
quarter
and
the
average
Reit
was
reduced
by
39
percent.
As
of
year
end,
the
average
rate
lost
42
percent
of
its
value.
Now
these
REITs
do
have
office
hotel
and
some
retail
in
some
apartment
and
I
would
say
to
you
that
that
only
helps
bolster
their
values,
because
those
asset
classes
are
doing
better
than
office.
So
we
can
see
that
the
market
has
price
for
office,
retail
Etc
and
at
least
a
reduction
of
40
percent
as
a
43
on
in
median.
B
As
of
the
end
of
the
year,
fed
funds,
you've
heard
it,
they
went
up
425
basis
points
by
the
end
of
the
year
clearly
impacts
the
cost
of
capital.
The
core
pack
study
was
completed
from
what
we
have
been
told
in
August
of
2022.
The
data
value
is
January
1.
The
cap
rate
in
four
pax's
study
is
5.5
again.
These
are
market
cap
rates
to
which
the
tax
rate
need
to
be
needs
to
be
added
to
7.76
percent.
You'll
note
to
the
right,
County's
calculate
range
is
below
the
low
end.
B
Four
taxes
range
5.4
versus
5.5
and
below
the
high
end
of
Mr
corpax's
range
of
7.76
percent.
The
top
end
of
the
County's
market
cap
rate
is
7.1
percent.
Corpak
says
he
must
use
Market
rent.
We
all
know
that
market
rent
is
lower
at
least
predominantly
lower
than
old
leases.
The
county
uses
old
leases
and
Market
rent
Mr
corpax
rates
state
that
you
shouldn't
are
based
on
not
including
real
estate
taxes
as
a
reimbursement
where
the
counties
are
Mr.
Corpax
further
states
that
cap
rates
bottomed
out
in
19
increased
2019-2022.
B
The
county
has
not
changed
its
cap
rate
since
2019.
further
states
that
rollover
risk
and
high
vacancy
increases
cap
rates
and
the
county
makes
no
adjustment
for
either
of
those
factors.
Separate
conclusion:
2.36
increase
in
the
10-year
T
Bill,
four
percent
increase
in
Sulfur.
The
sales
in
the
county
indicate
that
the
cap
rate
needs
to
be
increased
between
100
and
296
basis,
points
which
reaffirms
the
taxpayers
200
basis.
Point
increase
further
exercise
of
termination
options.
B
The
rate
return
to
work
that
never
materialized
in
2022
increased
vacancy
reduction
in
space
per
person,
lower
rental
rates,
shorter
lease
terms
and
increase
in
sessions
all
increase
the
risk
premium
on
buildings,
the
county
used
a
vacancy
rate
of
25
percent.
The
property
was
55
percent
vacant
at
year-end,
and
currently
there's
been
negative
absorption
in
the
market.
We
believe
that
an
additional
vacancy
tier
for
properties,
greater
than
a
vacancy
rate
of
25
should
be
used
or
a
premium
should
be
added
to
the
already
increased
cap
rate
of
more
than
200
basis
points.
C
Thank
you
just
to
reiterate
some
of
the
sales
that
the
county
reviewed
in
connection
with
our
guidelines
for
2022
sales,
excluding
the
National
Science
teachers,
sale,
which
is
slated
free
development
with
apartments
and
the
other
retail
that
was
included
with
the
sale,
we're
at
83
percent
sales
assessment
ratio
for
the
remainder
of
the
two
sales
in
2022.
in
2023.
The
average
assessment
of
sales
ratio
was
about
85
percent
sales
to
assess
assessment
to
sales
ratio.
C
So
when
we
looked
at
the
these
sales-
and
we
went
back
further
just
to
give
us
a
better
pool
of
sales,
we
didn't
opt
to
increase
the
cap
rates
for
their
office.
What
we
did
decide
to
do
is,
as
we've
done
every
year
is,
afford
more
deductions
for
the
market
rent.
As
you
see
in
this
case,
the
average
lease
in
the
building
is
fifty
dollars
and
fifty
six
cents
and
that's
the
average
of
all
the
leases
in
place
in
this.
C
In
this
property,
the
county
is
using
the
test,
forty
six
dollars
a
square
foot
for
the
office
lease
space
and
that's
deducting
the
10
concessions
that
the
county
has
found
when
reviewing
all
the
Ines.
In
the
county,
we
did
feel
that
10
percent
was
reasonable
to
give
concessions
to
lease
up
this
property.
C
In
addition
to
that,
what
I'd
like
to
point
out,
if,
if
the
the
board,
would
take
a
look
at
our
test
page
on
page
five
of
108.,
in
addition
to
that,
we're
reducing
all
the
rents
on
this
property,
the
office,
the
vacant
office,
the
retail
by
25
percent.
C
So
in
addition
to
producing
a
10
for
concessions,
reducing
another
25
on
top
of
that.
So
if
you
look
at
the
vacancy
dollar
for
the
first
first
line
item
office
or
we're
deducting
another
1.300
000
for
that
bacon
for
that
office,
lease
space,
we're
deducting
1.2
in
bacon
office
and
we're
deducting
another
35
000.
in
retail,
and
with
that
it's
a
total
about
2.5
million
that
we're
deducting
for
those
Market
grants
minus
the
10
concessions
and
that
that
equates
to
another
25
of
deductions
there.
C
So
when,
when
we
look
at
this,
we
are
again
just
to
read
just
to
repeat
myself:
we're
deducting
10
concessions,
we're
deducting
25.
On
top
of
that
and
that's
where
they
cap
rate,
you
know
our
cap
rate
wasn't
changed,
but
based
on
that,
we
did
make
adjustments
year
over.
D
C
As
the
the
board
remembers
in
in
the
past,
we've
deducted
six
percent
in
the
past,
we
deducted
10
this
year,
we're
also
deducting
the
parking
we're
actually
taking
actual
parking,
we're
taking
actual
pass-throughs.
If
this
property
were
to
stabilize
I
would
argue
that
the
pastors
would
increase,
as
in
this
case
pre-covet
for
the
pass-throughs
of
this
property.
C
We
see
that
in
the
collective
of
6A,
between
6A
and
6B,
you
see
all
the
pastors
listed
there
in
2019
column,
A,
and
then
you
compare
that
to
what
we
have
in
our
test
and
that's
almost
300
000
difference
in
real
estate
tax
and
Loan,
whereas
we're
only
capturing
87
300,
we're
only
capturing
a
fraction
of
that
figures
and
that's
pre-covered.
C
So
when
doing
this
test-
and
we
do
the
when
you
look
at
the
original
2022
ime
they're
only
projecting
that
they'll
make
that
amount
of
money
based
on
what
is
currently
there
on
the
property
and
that
is
excluding
131
585
square
feet
of
vacant
space
that
they're
not
projecting
forward
for
this
property.
Even
doing
so.
If
you
compare
column
e
to
column
f,
you
look
at
what
they're
projecting
noi
and
if
you
see
that
that
figure
there,
the
county,
is
right
on
the
money.
C
As
far
as
when
we
did
our
tests,
we
may
have
overshot
it
in
the
original
assessment,
but
in
our
tests,
we're
more
accurate
and
close
to
that
figure.
But
again,
I'd
like
to
stress
that
that
figure
in
column
e
is
an
noi.
That's
projecting
without
the
131
585
square
feet
of
vacant
space,
Andrea's,
test
in
column
F.
We
impute
that
income
and
also
the
the
Appellate
imputes
that
income
as
well.
C
So,
even
though
they're
not
projecting
that
they'll
make
more
money
in
that
vacant
space,
our
nois
are
in
line
with
what
they
have
as
a
current
state
of
the
property.
In
that
current
state,
as
Miss
boring
pointed
out,
is
that
vacancy
of
131
585
square
feet
now,
after
reviewing
their
rent
roll
and
going
through
the
inspection,
we
did
determine
that
only
124
445
square
feet
was
vacant
in
the
property
and
that's
a
difference
of
what
we
originally
did.
In
the
original
assessment.
C
We
actually
allotted
more
vacant
square
feet
for
the
property
we
had
about
144
408
square
feet,
bacon
and
that's
how
we
came
up
with
our
figure
for
the
original
assessment
and
in
just
in
in
them
adjusting
in
the
test.
We
do
see
that
there
is
a
lot
less,
not
a
lot
less,
but
maybe
20
000
square
feet
Less
in
the
in
the
property
that
is
faking
so.
E
E
F
C
F
And
the
other
easy
question
is,
in
your
account:
D
for
the
retail
space
lease
rate
per
square
foot
is
a
little
bit
lower
than
what
they
had
achieved.
Apparently
in
the
prior
years,
and
in
your
test,
though,
you
opted
significantly
almost
50
percent.
What's
that
about.
C
E
Only
the
Citizens
Bank
for
forty
four
dollars.
F
C
E
Yeah,
hey
Rob
between
D
and
F,
the
below
the
line
on
Earth
was
reduced
by
about
5
million.
Why
was
that
done
again.
C
So
the
square
footage
in
my
initially
eight
minutes,
I
commented
on.
We
had
over
an
allocated
vacant
square
footage
in
the
original
assessment
and
then
made
the
correction
in
our
test.
So
how
much?
How
much?
How
many
square
footage
was
that
correction
about
twenty
thousand.
E
C
Could
give
you
there's
twenty
thousand
meant
that
much
of
a
difference?
Well,
when
you
so
originally
it
was
115
or
TI's
and
then
a
virtue
of
our
guidelines.
Anything
under
forty
five
dollars
would
be
ninety
dollars.
A
square
foot
for
tis
yeah.
F
A
C
Thank
you
again,
I'd
like
to
say
that
in
our
original
assessment
we
overallocated
the
vacant
square
footage
by
19963
square
feet.
We
did
make
the
adjustment
based
on
that
in
our
test.
C
Like
to
stress
that
the
column
e
is
just
a
snapshot
of
what
it
currently
is
and
they're,
not
including
any
of
the
income
that
would
be
received
from
the
vacant
square
footage
the
Department's
column.
F
does
do
so,
and
we
do
believe
that,
if
is
probably
worth
stabilized,
the
password
income
would
increase.
The
real
estate
tax,
Pastor
would
increase
and
the
brand
in
place
for
this.
C
For
this
property,
the
contract
rent
would
increase
two
and
a
half
three
percent
and
that
we
know
for
sure,
based
on
the
contracts
and
the
the
increases
year
over
year.
So.
B
You
and
once
again,
this
property
is
55
vacant
and
has
a
Walt
of
2.6
years.
The
biggest
difference
is
the
cap
rate
I've
gone
through
that.
But
if
you
change
the
cap
rate,
the
base
cap
rate
would
go
from
5.5
to
7.5
and
the
loaded
rate
would
be
8.7
percent.
Mr
Peralta
keeps
talking
about
absorption.
The
net
absorption
over
the
past
three
years
has
been
minus
2.6
million
square
feet
and
over
the
last
15
years,
absorption
has
averaged
negative
175
000
square
feet.
B
The
as
of
year
end
2022.
There
was
eight
million
600,
almost
8
million
seven
hundred
thousand
square
feet
of
space
available.
The
biggest
year
of
absorption
in
the
county
was
2019,
based
at
a
million
square
feet
based
on
the
availability
at
year,
end
of
8.6
million
that's
over
eight
years
to
lease
up
the
vacant
office.
Space
in
the
county,
I
wouldn't
be
assuming.
B
A
D
G
Right,
I'm
I'm
High
vacancy
50
vacancy
buildings,
I'm
kind
of
trying
to
keep
it
simple
and
just
look
at
what
2022
income
was
and
I
think
it's
an
eight
eight
cap,
72
million.
G
And
and
I'm
thinking
back
to
some
of
the
cases
Web
building,
we
went
with
an
8.2,
it's
a
little
bit
older
I
think
the
spelling's
parent
located.
So
you
know
in
the
market
I
think
it
would
fare
a
little
bit
better,
especially
considering
recent
institutional
tenants
yeah.
You.
E
A
Yeah
that's
I,
agree,
I
mean
my
only
concern
is
I,
look
at
column,
F
and
I
like
it,
with
the
exception
of
as
Mr
Peralta
pointed
out.
You
know
it
almost
mirrors
Colony,
but
it
doesn't
account
for
that
vacant.
The
you
know:
potential
income
of
the
banking
space
which,
if
we're
going
to
do
the
deductions
below
the
line
that
should
be
in
there
so
normally
I,
would
agree
with
you.
G
G
They're,
probably
not
going
to
be
moving
forward
in
the
next
year
with
you
know:
16
17,
18
million
dollars
worth
of
Renovations
I.
Just
don't
see
the
market
there.
For
that,
there's
no
justification
unless
it
kind
of
came
along
and
said,
I
want
to
take
the
whole
building,
and
this
is
what
needs
to
be
done.
A
G
G
E
E
F
D
E
G
E
G
G
A
E
A
A
No
I'm
not
asking
why
you
did
it
I
said
what's
happening
or
what
analy
did
you
use?
Oh,
the
five.
Seven
sixty
three,
eight
two
in
column.
G
G
Like
you're
gonna
get,
you
want
to
get
an
office
loan
for
Value.
Add
to
make
these
improvements.
It's
going
to
be
nine
percent.
In
a
in
a
debt
fund,
you're
gonna
get
a
mesliner
to
charge
you
12
for
that
money
for
construction,
you're
losing
right,
you're,
you're,
you're,
you're,
you're
negatively
leveraged
an
ideal.
So
you
just
you,
would
just
sit
there
and
you'd
wait.
You'd
take
the
5
million
this
year,
which
is
going
to
be
4
million
next
year.
G
It's
going
to
be
2
million
the
year
after,
and
you
hope
that
interest
rates
drop
back
down
in
that
time
period.
That's
the
gamble
somebody
makes
it
they'll
buy
it
from
whoever
the
owner
is
here
we'll
see.
I
haven't
really
seen
any
transactions
on
50
occupied
buildings.
G
Yeah
I
mean
we
talked
about
if
you're
15
vacancy,
you
kind
of,
say
all
right,
I'm
at
15,
maybe
I
could
get
one
or
two
leases
sign
in
the
next
year,
and
this
is
what
it's
going
to
cost
me.
If
you're
50
there's
just
it's
like
it's
hopeless,
it
really
is
it's
where
we're
at,
like
I
mean
I
can
get
on
board
with
Barnes,
because
I
do
know
that
this
is
a
much
nicer
building
than
some
other
ones
right.
It's
it's
institutional
grade!
It's
right
at
the
Gateway
yeah.
H
H
E
A
E
A
A
B
Thank
you,
madam
chairwoman.
This
property,
the
assessment,
is
113
million
dollars,
135
000
and
that's
100.
That's
a
revised
assessment.
The
building
was
built
in
1990,
the
cat
issues
on
appeal
or
the
cap
rate
5.695
base
rate
versus
the
7.695
base
rate.
In
this
case.
There's
an
unusual
wrinkle.
The
gray
eye
uses
both
future
income
and
termination
fee
on
the
same
space
which
I'll
get
into
later
vacancy
rate.
The
county
uses
is
25,
we
believe
a
30
vacancy
rate
is
appropriate.
Operating
expenses.
The
county
uses
8
30.
B
We
look
at
nine
dollars,
build
out
deduction.
The
county
uses
ninety
dollars,
we
used
115
and
they
said
we
used
a
two-year
period
kind
of
used
a
one-year
period.
So
what's
going
on
here
we
have
Arch
properties.
This
is
the
coke.
It's
Coke
they're
moving
into
Boston
Exchange
in
October
in
November
of
2022.
They
executed
the
termination
option
on
139
661
square
feet
or
38
of
the
building.
There
is
not
a
potential
purchaser
in
the
world
that
would
capitalize
Arch
properties
disappearing,
rent
into
perpetuity,
which
is
what
the
direct
capitalization
rate
does.
B
No
purchaser
would
impute
past
due
income
from
Arch
properties
into
perpetuity,
which
is
what
Drea
does,
and
the
assessment
compounds
is
issued
by
adding
a
termination
fee,
in
addition
to
capitalizing
disappearing,
rent
and
pass-through.
The
taxpayer
treats
this
occurrence
this
termination
as
a
market
participant,
does
we
use
Market
rent
on
vacant
space.
B
We
added
the
remaining
termination
payment
option
below
the
line
and
we
added
the
arch
rental
income,
which
is
in
excess
of
Market
rent
below
the
line
and
added
the
disappearing
pass-through
income,
also
below
the
line
vacancy
rate
County
uses
a
rate
of
25
percent
with
Arch
properties,
known
termination.
There
will
be
244
000
square
feet
available
or
a
vacancy
rate
of
68
of
the
building.
Given
the
negative
absorption
in
the
market
and
the
another
particular
challenge
facing
this
property
is
a
new
apartment.
B
B
Point
increase
and
I
can't
wait
this
premium
in
the
market
exercise,
determination,
options
case
in
point:
Arch
properties,
139,
000
square
feet,
the
failure
of
the
great
return
to
work
to
materialize,
reduction
on
Space
needed,
shorter,
lease
terms,
increased
concessions,
tightening
Capital
markets
and
lending
requirements.
Again
the
counties
range
below
corpax's
range,
5.5
or
5.3.
This
property
today
is
about
5.695
cap
rate
that
is
below
the
range
that
four
pack
Spanx
is
appropriate
for
875
North
Randolph,
in
which
you
used
a
six
percent
as
of
January
one.
B
This
is
a
property,
that's
going
to
have
a
huge
vacancy
and
may
never
again
reach
stabilization.
We
added
200
basis
points
to
come
up
with
a
cap
rate
of
8.85
percent.
Drake
uses
8,
30
and
operating
expenses.
The
last
time
this
property
was
stabilized
was
in
2019
at
866.,
a
rate
for
property
with
a
30
physical
vacancy,
a
minimum
of
nine
dollars
per
square
foot
should
be
used
and
higher
expenses.
If
a
25
vacancy
rate
is
used,
absorption
again.
B
In
conclusion,
Arch
property
space
was
double
counted
by
Drea
because
they
capitalize
a
disappearing
income
stream
and
add
the
lease
termination
fee.
Operating
expenses
and
used
in
the
test
are
too
low,
830
versus
nine
dollars.
The
vacancy
rate
is
too
low.
The
cap
rate
should
be
increased
by
200
basis
points
or
2
percent,
as
supported
by
the
10-year
T
Bill,
and
actually
adjustment
of
the
County
sales
to
100
of
purchase
price,
which
indicates
an
increase
in
their
guideline
rate
of
100
basis,
points
to
294
basis,
points
build
out.
B
A
C
Property
we
look
at
it
as
what
was
the
current
vacancy
as
of
1-1
23,
and
if
one
won
as
a
1-1
2023,
it
was
22
vacant.
C
C
So
in
our
test
we
did
take
in
consideration
that
they
would
lose
Arch
properties,
and
by
doing
so,
we
we
deducted
below
the
line.
So
when
you
look
at
our
page,
our
test
page
we're
actually
deducting
221
022
square
feet,
which
is
equivalent
to
61
percent
vacancy
on
the
property.
So
we
are
taking
account
what
the
what
the
tenant
situation
will
be
for
this
property
with
large
properties
leaving
and
we're
not
camping
out
the
termination
fee
which
they
will
pay
of
three
million
253
200..
C
So
we
did
as
the
appellant
has
done,
included
that
terminal
termination
fee
below
the
line,
but
we
are
capturing
what
they're
actually
getting
on
the
property
for
the
rest
of
this
remaining
year.
So
with
that,
you
know
this
is
how
we've
done
other
properties
in
the
county
that
experience
tenants,
leaving
in
so
many
years
after
the
initial
data
valuation.
C
You
know
I
I
have
to
argue
that
maybe
we
shouldn't,
because
what
that
does
is
keep
moving
the
ball
you
know
forward,
but
what
we
don't
receive
in
in
return
is
these
new
leases
that
come
into
play
within
that
time
frame
we're
uncertain
of
what
the
leases
are
and
you'll
see
in
in
the
next
few
weeks,
with
cases
that
come
before
you
that
there
are
leases
being
signed
in
the
county
and
there
are
leases
that
are
assigned
within
three
months
just
to
compare.
C
C
We
take
it
a
step
further
and
adjust
below
the
line
for
the
139
661
square
feet
that
will
be
vacant
at
the
end
of
this
year
and
by
doing
so,
we're
allotting
18
million
three
hundred
fifty
thousand
seven
hundred
below
the
line
to
account
for
those
increases
in
in
vacancy
for
this
property.
Now,
looking
at
our
original
assessment,
we
based
on
the
information
that
we
had
in
column
C
the
2021
INE,
our
noi,
goes
to
show
you
exactly
how
the
county
has
adjusted
our
rates.
They're.
C
Looking
you
know
in
2021
of
an
noi
in
row,
20
20c
of
that
figure
there
and
we're
2
million
below
that
figure.
2
million
500
000
below
that
figure,
and
in
the
operating
year
2022
they're
projecting
a
higher
net
operating
income
number
we
originally
had
and
we're
going
even
lower
in
the
test
in
column
F
to
project
a
lower
stabilized
income
for
this
property.
E
Yeah?
Why
is
the
termination
fee
below
the
line.
C
It's
a
capture
that
they're
they're
they're
going
to
receive
that
in
that
money
as
a
termination
fee
for
the
property.
So
if
a
future
purchaser
would
buy
this
property,
as
is
right
now
that
they'd
know
that
that
terminative
termination
fee
would
be
received
by
the
new
owners,
as
is
the
appellant
agrees.
This
is
the
second
half
of.
B
Mr
Lawson:
we
agree
that
the
termination
fee
should
be
included
below
the
line,
but
we
also,
but
we
think
that
you
should
either
get
the
termination
fee
or
the
rent.
If
you're
going
to
capitalize
that
rent
into
perpetuity,
which
is
what
the
county
does,
then
you
shouldn't
take
the
termination
fee
because
then
you're
double
dipping.
But
if
you
take
a
market
rent,
you
should
in
fact
add
the
termination
fee
below
the
line
and
you
should
add
the.
B
You
know
it's
a
good
question.
We
believe
that
the
you
know
it
doesn't
necessarily
run
with
the
land,
so
it
could
go
to
the
current
owners.
The
property
was
sold
on
January
1,
but
we
did
include
it
because
we
also
took
Market
rent
on
the
arch
property
space
and
added
the
delta
or
the
difference
between
the
market
rent
and
the
args
properties.
D
C
So
the
determination
fee
is
not
in
perpetuity.
It's
just
one
time
below
the
line
adjustment
just
to
account,
for
this
is
a
significant
amount
of
money
that
would
will
transpire
once
they
terminate
the
delays
in.
C
We're
we're
using
4225
for
the
the
leases
up
for
the
vacant
space
for
the
leases
in
place
and
38.25
for
the
vacant.
Space
38.25
is
similar
to
what
the
appellant
is
showing
there
in
our
test.
We
use
38.25
for
the
vacant
space
again
we're
accounting
for
a
large
sum
of
below
the
line,
adjustments
of
18
million
35700.
C
We
do
state
that
the
17
decrease
from
last
year.
We
do
see
that
the
noi
does
support
the
original
and
the
test
figures
and
we
asked
the
board
to
perform
this
case.
Thank
you.
B
B
in
excess
of
40
percent,
as
priced
on
a
daily
basis
through
reads
the
conclusion
I'm
just
going
to
go
through.
In
conclusion,
the
taxpayer
uses
a
more
realistic,
build
out
of
115
dollars
per
square
foot.
No
potential
purchaser
would
capitalize
the
arch
property
space
at
an
above
Market
range.
They
might,
they
might
impute
Market
Rank
and
then
add
the
additional
Delta
between
the
market
rent
and
the
arch
lease
below
the
line
operating
expenses
are
too
low.
The
cap
rate
is
way
too
low.
B
This
is
a
property
with
huge
upcoming
vacancy
and
the
cap
rate,
even
according
to
Mr
corpak
should
be
increased
for
for
role
in
high
vacancy.
We
increased
the
tax
cap
rate
by
two
basis
points.
Thank
you.
200.
F
Two
points
to
make
for
us:
one
is
I
I
support
because
I
run
into
it
all
the
time
support,
lower
TI
for
lower
rents.
It's
all
about
how
long
does
it
take
to
get
my
build
out
costs
back
now,
whether
it
should
be
45
or
44
I
mean.
D
F
E
F
F
Negative
absorbs
in
this
County
no
question
about
it,
but
there
are
winners
and
losers.
His
Department
said
there
are
leases
that
are
going
to
be
signed
by
somebody.
This
building-
maybe
maybe
not,
we
don't
know
we're,
not
Sears,
and
if
and
if
they
are
not
one
of
the
winners.
This
year,
then
by
God
next
year,
we're
going
to
have
another
Year's
write-off,
so
that
argument
never
did
and
as
far
as
I
can
tell
never
will
sway
me
and
that's
those
are
the
two
points
I
wanted
to
make.
A
H
Good
morning,
my
biggest
my
biggest
concern
is
the
amount
of
vacancy
I,
think
they're,
correct
and
below
the
line,
and
you
can
look
as
strong
as
I
thought.
It
would
be
the
fact
that
we're
looking
at
25
percent.
G
G
1,
it
goes
from
22
percent
of
vacant
building
those
66.
A
A
D
E
G
E
G
All
right,
if
they
agreed
to
I'll,
concur
with
my
conflicts.
A
A
A
B
I
was
having
technical
difficulties,
all
right,
so
I'm,
sorry,
I
will
start
now.
So
this
property
875
North
Randolph
sold
in
2019
for
151
million
two
hundred
thousand
dollars.
This
is
a
GSA
lease,
a
the
200
2022,
the
2022
assessment
was
151
million.
Five
hundred
thousand
the
2023
assessment
went
up
by
six
million
dollars
to
157
million
three
hundred
thousand
dollars
the
building
sold
and
here's
a
picture
of
the
building
when
it
sold.
It
was
99
lease
to
the
Office
of
Naval
Research.
B
There
was
eight
years
left
on
the
lease
in
as
of
January
1
2023.
It
was
still
at
least
to
the
Office
of
Naval
Research,
and
there
was
less
than
five
years
remaining
on
the
lease.
The
tenant
has
a
lease
prospectus
out
to
the
market
for
the
2027
lease
expiration
cap
rates
have
increased
since
the
time
of
sale,
and
so
we
would
ask
that
the
assessment
be
the
cap
rate.
That's
used,
be
increased,
the
grounds
for
appeal
are
operating.
Expenses
and
cap
rate
operating
expenses
in
2020
were
7.89
in
2021
715
2022
was
an
aberration.
B
With
operating
expenses,
at
only
5.89,
there
was
some
credits
given
for
a
management
contract
and
a
new
electric
provider
in
2022
in
2023.
The
property
is
on
Trend
to
have
operating
expenses
of
eight
dollars
and
one
cent
per
square
foot
and
the
2024
budget
includes
operating
expenses
of
8.39
per
square
foot.
The
grounds
for
appeal
include
the
cap
rate.
Again
we
had
a
10-year
T
Bill
increase
of
236
basis
points,
an
increase
in
the
sober
of
4.1
percent
and
the
guidelines.
B
B
Stock
rates
have
only
increased
since
2019
and
we
increased
the
cap
rate
on
this
property
by
75
basis
points
and
why
we
did.
That
is
because
the
owner
of
675
North
Randolph,
who
is
Boyd
Watterson
and
they
purchased
that
property,
which
is
in
some
ways
a
sister
building.
It's
that's
the
DARPA
building.
They
bought
that
building
in
a
6.14
cap
rate,
just
like
this
building,
which
was
bought
by
USAA,
and
they
said
that
in
their
opinion,
cap
rates
had
increased
between
75
and
100
basis
points
for
that
sale
as
of
January
1
2023..
B
The
Boyd
Waterson
fund
are
simply
that
funds
that
have
to
invest
money
that
have
money
that
have
cash
and
they
have
certain
investment
criteria
and
their
investment
and
they
compete
with
properties
with
each
other
a
lot
because
they
have
the
same
requirements.
Government
tenants
for
for
both
of
the
funds,
and
so
the
county
says.
As
of
the
data
sale
6.14,
there
was
eight
years
of
lease
term
left
now,
there's
less
than
five
years
lease
turn
left.
The
cost
of
capital
has
gone
up.
This
property
has
the
tenant
in
this
property?
B
Has
a
prospectus
out
seeking
bids
for
space
as
of
the
expiration
of
the
lease,
so
it's
clearly
riskier
than
it
was
with
three
years
less
lease
term
and
a
prospectus
out
in
the
market
and
the
increase
in
cap
rates.
So
we
believe
the
cap
rate
that's
appropriate
on
this
property
is
6.89
percent,
now
uniformity.
So
we
have
said
that
uniformity
is
to
be
preferred,
but
there
is
an
assessment
can't
be
made
in
excess
of
fair
market
value.
So
in
this
case
the
county
is
uniformity.
B
Guidelines
for
vacancy
and
just
like
any
appraiser,
would
look
at
the
property.
A
five
percent
vacancy
rate
is
appropriate
and
if
you
turn
to
the
taxpayers,
peace.
Excuse
me.
If
you
look
at
our
proforma,
it's
going
to
have
different
numbers
than
the
counties
and
test
page
and
our
performance
is
on
page
37
of
106.
B
and
what
you
see
there
is
an
noi
that
is
adjusted
for
a
five
percent
vacancy
rate.
So
what
we'd
ask
that
you
do
is
use
a
five
percent
vacancy
rate
on
this
property
statue
use
an
operating
expense
that
is
closer
to
eight
dollars,
a
square
foot,
because
the
that
is
what
is
trending
for
2023,
and
we
have
heard
time
and
time
again
we
are
prospective
looking,
not
backwards
looking
and
that
you
use
a
cap
rate
of
six,
a
market
cap
rate
of
6.89
percent.
B
Doing
that
gets
you
to
the
purchase
price
of
this
property
of
151
million
dollars.
Now
what
you
see
here
is
the
difference
between
the
cap
rate,
5.6
versus
6.89
and
again
I
remind
you
that
the
county
references,
the
sale
cap
rate
in
2019
of
6.14,
which
which
we
have
confirmed
at
the
tax
rate
for
the
sub
market
and
you
get
to
8.09
cap
rate,
the
sale
in
2019
and
151
million
dollars.
200
is
the
upper
end
of
value
that
is
appropriate
for
this
property.
The
operating
expenses
using
the
test
are
too
low.
B
The
County's
guidelines
are
not
supported
by
the
sales
of
the
national
markets
or
their
own
expert
taxpayer
increase
purchase
cap
rate
by
75
basis
points
from
six
one
four
to
six,
eight
nine,
and
that
is
based
upon
the
estimate
of
675
North
Randall
owners.
Thank
you
very
much.
B
A
C
Thank
you
for
this
property.
We
do
feel
that
this
property
is
stabilized
Liberty
Center,
as.
G
B
E
C
E
E
C
B
E
C
What
they
reported
in
their
income
for
those
previous
years,
the
county
does
afford
the
five
percent
vacancy.
Although
this
property
is
100
vacant
and
it's
interesting
to
see
the
shift
in
you
know
what
would
agree
to
the
guidelines
for.
E
C
Vacancy
part,
but
we
don't
agree
to
the
cap
rate,
you
know
those
those
figures
are
all
done
simultaneously.
We
do
take
a
look
at
all
of
those
combined
at
the
end
of
the
year
and
that's
what
we
use
to
derive
our
assessments
for
the
coming
years.
So
with
this
case,
we
do
feel
that
it
is
stabilized.
We
have
another
four
years,
the
lease
ends
for
the
GSA
in
August
30th
2027..
So
that's
another
four
years
of
income
that
this
property
owner
can
count
on.
H
I
mean
you
said,
the
expenses
or
an
aberration,
all
right,
I
hear
why
that
is
I
either
heard
that
they
changed
the
electrical
and
things
like
that
which
to
me
says
it
will
still
be
going
down.
B
B
If
you
can
tell
me
if
I'm
wrong,
the
electric
went
down
by
about
two
hundred
thousand
dollars,
so
it
what
you
can
you
know
we
always
look
at
Trends
right.
So
in
looking
at
the
Trends
on
this
property,
the
2022
was
just
as
I
said
in
aberration
and
those
are
the
reasons
it
was
management
fee
credit.
It
was
a
change
in
electric,
but
they
are
on
track
this
year
for
eight
dollars
and
one
cents.
B
F
Okay,
thanks
for
the
Department,
all
the
columns
show
square
footage
of
the
building,
319
000
Plus
on
the
tops
left.
The
nla
is
318,
000
plus,
which
is
the
right
number.
It's.
E
F
Specifically
was
and
I'm
glad
the
question
and
answer
we
got
just
before
I
thought.
The
the
proposed
operating
expenses
was
in
column
in
the
test
column.
App
is
probably
too
low,
but
now
that
I
understand
the
situation,
it's
not
as
egregiously
too
low,
as
I
had
thought.
B
B
C
Thank
you
again
for
this
property,
the
the
history
of
this
property
and
going
forward
for
the
next
four
years.
E
C
C
B
In
2021
you
know
this
is
building
just
like
every
other
building
in
the
county
with
it,
while
it
was
occupied,
it
was
not
occupied
as
densely
as
historically
in
2022
a
the
expenses
are
in
operation.
If
you
look
at
the
three
years,
the
prior
2022,
there
was
a
credit
because
of
signing
on
with
a
new
electrical
contractor
and
new
management
company.
So
the
expenses
this
year
are
expected
to
go
back
up
with
the
building
being
fully
utilized
and
any
credits
gone
to
801.
B
All
of
the
income
was
known
as
of
the
date
of
purchase
and
what
we
see
in
the
the
fact
that
the
County's
income
is
that
back
at
the
County's
income
is
lower,
is
that
the
cap
rate
is
wrong.
Clearly,
the
purchaser
knew
what
the
income
would
be
when
they
bought
the
property.
B
A
C
A
21
20
22.,
so
you
know
it's
because
the
egi
is
lower.
You
know
if
that
was
higher
and
then
you
could
increase
the
expense
it
should
come
out
with
the
same
number
anyway.
So
I'm
fine
with
the
assessment
I'm,
not
sure.
Also
why
we're
even
hearing
this
I
mean
we
didn't
have
issues
with
something
that
had
one
year
left
to
pay
the
sauce
four
years
left
to
pay.
So
I
think
this
is
premature.
Coming
to
the
party
yeah.
H
G
H
H
F
Excuse
me:
yeah
I
mean
you
can't
do
better,
but
I
did
look
at
operating
expenses
and
I
thought,
and
this
is
maybe
negligible,
but
but
maybe
appropriate,
more
think
about
it,
because
it's
a
projected
four
percent
increase
I,
don't
think
the
federal
government's
paying
a
four
percent
increase
in
rent
from
22
to
23.,
and
so
I
I
took
the
the
appellants
number
and
rounded
it
off
to
six
dollars
a
square
foot
another
in
other
words,
25
cents,
more
per
square
foot
and
said:
well,
that's
operating
expense
is
more
1.174
million,
plus
so
I
kept
that
out
and
reduced
the
the
final
result.
F
Then
I,
I'm,
sorry,
I'm,
sorry,
the
operating
expenses
are
79,
000,
plus
I
capped
it
out
and
made
the
assessment.
1.1
million
plus
and
therefore
reduced
it
to
156
million
153.
300.,
which
gets
it
to
the
three
percent
range
I'm
sure
the
government's
probably
paying
two
and
a
half
percent.
F
F
A
A
D
A
E
A
H
One
157
million
three
hundred
and
ten
thousand
three
hundred.
H
A
J
Yes,
thank
you,
madam
chairwoman,
members
of
the
board
members
of
the
Drea
good
morning.
This
is
the
gables
point:
14
apartment
building
and
Courthouse.
It
faces
Highway
50
at
the
bottom
of
the
hill.
This
property
has
370
total
units
with
39
of
those
units
committed,
affordable.
It
was
built
in
2019..
J
The
2023
assessment
represents
a
21
increase
over
the
2022
assessment.
The
issues
on
appeal
are
the
vacancy
and
collection
rate.
The
operating
expenses
and
the
cap
rate
to
start
I
want
to
mention
that
I'll
be
discussing
the
market
in
affordable
units
combined,
since
that
is
how
the
owner
operates.
The
property,
the
applicable
columns
for
this
analysis
on
the
test
page,
are
the
totals
that
appear
in
between
the
Drea
columns,
f
and
g
and
column
H,
which
is
the
properties
2022
actual
income
and
expenses.
J
over
these
two
years
of
being
stabilized,
the
property
has
had
vacancy
and
collection
loss
that
average
12
percent
and
again
was
over
seven
percent
last
year.
Clearly
this
is
an
issue
at
this
property.
The
property
last
year
saw
217
move
outs
or
60
percent
of
the
total
units.
The
owner
for
2023
anticipates
move
outs
to
be
even
greater,
projecting
271
move
outs,
which
is
nearly
75
percent.
The
total
units.
J
J
Next,
the
assessment
projects
operating
expenses
to
decrease
in
2023
from
2022.
This
is
despite
the
CPI
having
increased
by
6.5
percent
per
the
Arlington
economic
developments.
Q3
2022
report,
this
property
was
again
built
in
2019,
with
this
new
properties.
Typically
do
have
lower
expenses
in
their
first
few
years,
due
to
the
materials
being
covered
by
warranties.
J
Projecting
operating
expenses
to
decrease
is
simply
not
supported
by
either
the
CPI
or
the
agent
ability.
Now.
Finally,
the
capitalization
rate,
the
assessment
imputes
two
cap
rates,
one
for
the
market
units
another
for
the
affordable.
What
is
shown
on
the
Drea
test
page
as
Capri
actually
consists
of
two
numbers.
What's
shown
there
is
the
market
cap
rate
plus
the
tax
rate,
removing
the
tax
rate.
We
see
that
the
market
units
are
assessed
at
a
market
cap
rate
of
only
4.12
percent.
J
The
affordable
units
are
slightly
higher
at
4.87
percent.
These
are
the
lowest
cap
rate
supplied
by
the
Drea
in
any
of
the
past
15
years
and
remain
unchanged
from
2020
when
they
were
lowered
to
their
current
levels.
This
simply
misses
the
mark
for
Capri
for
three
reasons.
First,
interest
rates
climbed
significantly
over
2022,
increasing
by
425
basis
points.
J
Now
think
about
that.
For
a
second
one
of
the
safest
investments
in
the
world
was
paying
3.88,
while
the
Drea
Capri
for
the
market
units
at
this
property
is
only
4.12
percent.
The
spread
between
the
10-year
t-bill
and
the
cap
rate
is
less
than
25
basis
points.
That
means
profit
and
risk
for
purchasing
and
operating
a
multi-family
building
is
less
than
0.25
percent.
Over
the
risk-free
rate
we
know
increase
cap
increased
interest
rates,
especially
when
the
increase
is
the
greatest
of
any
of
the
past
50
years
as
occurred
in
2022.
J
Steve
Gilbert,
director
of
Applied
modeling
and
analytics
for
JP
Morgan,
Investment
Banking,
stated
also
in
November
that
cap
rate
levels
are
generally
a
reflection
of
other
larger
economic
factors,
including
rapidly
Rising
interest
rates.
Add
to
this
the
fact
that
it
was
known
that
the
FED
would
continue
to
raise
interest
rates
in
2023..
It
is
simply
not
plausible
that
cap
rates
did
not
change
from
2022
to
2023.
J
J
We
have
conservatively
imputed
only
a
75
basis
point
increase
year
over
year
to
provide
some
context
on
just
how
large
the
10-year
t-bill
increase
in
2022
was
the
average
change
over
the
past
15
years.
Excluding
2022
is
75
basis
points.
Sometimes
the
10-year
T
Bill
increases
some
other
times
it
decreases,
but
the
average
movement
over
any
one
year
is
less
than
a
third
of
what
2022
experience.
J
Next.
This
property
has
greater
risk
than
other
properties
in
the
county
because
of
its
vacancy
and
collection
loss
issues.
If
the
Drea
is
telling
us
the
market,
vacancy
and
collection
loss
rate
is
5.8
percent
and
this
property
is
consistently
above
that
rate,
then
it
is
riskier
than
other
properties.
J
Finally,
with
the
cap
rates,
the
rent
increases
achieved
by
the
multi-family
Market
over
the
past
two
years
began
to
Plateau.
As
of
the
end
of
2022.,
the
underlying
assumptions
that
may
have
supported
the
Drea's
cap
rates,
the
past
few
years
have
changed
and
it
was
known
as
of
the
data
value,
that
rent
increases
were
returning
to
a
lower
stable
rate.
In
summary,
the
assessment
again
represents
a
21
year-over-year
increase.
J
A
Thank
you.
The
shuttle's
work
for
the.
I
County
please
good
morning,
everyone
so
for
this
case
and
some
of
my
other
case
that
I
will
be
presenting
today,
it
seems
that
the
cap
rate
is
the
biggest
contention,
so
we
still
did
our
due
diligence.
We
analyzed
actual
rentals
provided
as
of
January
1
2023,
and
we
have
also
analyzed
the
INE
surveys.
We
believe
that
the
income
reported
for
2022
is
stabilized.
I
I
I
I
H
I
You
no
okay,
no
I
heard
some
background
dialogue.
So
in
our
test
column,
f
and
g,
we
separated
the
market
units
from
the
calf
units
based
on
that
the
actual
rental
provided
by
the
appellants.
We
increase
the
apartment
income
and
based
on
the
conversation
with
the
property
manager,
doing
on-site
inspection.
We
increased
the
proper,
the
parking
yeah.
We
increased
the
parking
income
which
is
still
below
the
parking
income
stated
in
the
balance,
2023
performer,
also
in
our
test,
columns,
f
and
g.
I
Our
Opex
is
at
26.15,
which
is
above
the
Opex
ratio
reported
by
the
appellants
in
2022.
The
noi
produced
in
our
test,
column,
f
and
g
is
below
the
total
noi
reported
by
the
appellants
in
2022.
It
is
also
below
the
noi
projected
by
the
appellants
in
2023..
The
appellants
use
the
corporate
of
5.92
in
their
2023
performer
per
hour.
2023
guidelines
to
use
5.15
cooperate
for
the
market
units
and
5.90
cap
rate
for
the
affordable
units
and
I
also
wanted
to
talk
a
little
bit
about
the
argument.
I
The
corporate
argument,
the
the
appellants
argue
our
cooperates
based
on
10-year
treasury
note,
as
of
December
31st,
the
10-year
treasury
not
was
at
3.88
percent
and
as
of
January,
was
at
below.
1.7
percent
I
wanted
to
talk
a
little
bit
about
the
guidelines
we
used
in
our
Mass
appraisal
process.
We
use
several
metrics
in
our
assessment
and
tenure.
Note
is
not
one
of
them.
We
use
sales
to
assessment
ratios.
These
ratios
were
below
100.
As
you
could
see.
In
our
guideline
book,
we
presented
the
sales
that
we
used
in
our
assessment.
I
We
we
determined
based
on
hundreds
of
ionies,
we
analyze.
We
determine
whether
the
cap
rate
needs
to
be
moved
or
we
might
decide
that
we
move
Opex
ratio
or
vacancy
and
collections,
and
it
doesn't
have
to
be
always
cap
rate.
We
also
are
very,
we
use.
I
We
have
very
strict
timeline
guidelines
we
need
to,
for
which
we
need
to
follow
in
our
cut-off
date
is
January
1,
which
I
wanted
to
remind
the
board
of
now,
when
looking
at
our
summary
sheet,
as
you
can
see,
we
are
more
than
fair
in
our
test:
columns,
f
and
g,
our
egi.
Actually
is
only
two
hundred
thousand:
it's
almost
200
000
below
of
the
egi
they
reported
for
2022..
We
significantly
increased
our
operating
expenses,
as
you
can
see,
and
effectively
noi
in
our
test,
column
FNG
is
still
below
the
noi
they
reported
for
222..
I
With
that
being
said,
I
wanted
to
conclude
and
I'm
open
for
questions.
Thank
you.
F
Have
two
for
the
Department
very
close
to
the
same
question
operating
expenses
report
in
2022
was.
F
I
F
Just
what
I
was
developing
the
income,
you
show
it
as
a
vacancy
and
concessions
you
showed
is
going
down
percentage-wise
a
good
bit
from
the
from
what
was
achieved
in
2022
in
your
test.
F
It
was
eight
eight
23,
000
and
you've
got
projected
Blended,
which
I
appreciate
to
641
what
what
is
the
case
for
that
I
mean
that
significant
percentage
decrease
over
20
percent.
Could
you
explain
that
how
you
made
that
determination.
I
Yes,
so
when
you
look
at
our
mixed
use,
worksheet
you
can
see
we
separated
Market
units
from
caffeine.
That's
and
we
use
different
guidelines
so
for
Market
units
is
six
percent
vacancy
and
four
affordable
units.
It's
three
percent,
basically,.
I
J
Yes,
thank
you.
I
want
to
first
look
at
the
apartment
sales
that
they
referenced
in
the
guidelines,
so
the
first
sale,
the
RCA
building
in
Roslyn
that
was
sold
as
a
Redevelopment
site.
The
next
sale,
Patrick
Henry
Apartments,
has
committed
affordable
apartments
down
Wilson
the
next
four
sales
were
Cortland
purchases.
These
are
all
q1
deals.
We
spoke
with
that
owner.
They
said
that
the
price
they
paid
in
q1
of
2022
is
not
reflective
of
the
as
of
January
1
2023.
J
The
next
sale
they
have
is
coded
on
their
website
is
not
a
mark,
multiple
rpcs,
not
a
coded
sale,
so
that
takes
us
back
to
the
beginning
of
the
year.
Before
most
of
the
interest
rate,
increases
had
begun
to
take
effect.
As
of
the
end
of
the
year,
those
interest
rates
had
increased
by
425
basis,
points
on
the
sofa
and
236
basis
points
on
the
10-year
t-bill.
Thank
you.
A
E
Going
to
share
some
thoughts,
I
think
this
was
a
cat
break
case
either
either
it's
adjusted
or
not.
E
I
did
a
little
bit
of
research
and
preparation
for
this
morning
and
according
to
the
National
cap
rate
or
multi-united
residential
for
the
last
quarter
of
2022,
is
4.49
I
then
looked
at
what's
going
on
with
rent
in
Arlington
and
the
average
increase
per
unit
per
month,
rent
is
87,
so
last
year
it
went
up
by
an
average
all
over.
You
know
two
bedroom
three
bedroom,
one
bedroom
87.
now
I
do
know
that
interest
rates
have
risen
and
so
I
guess.
The
question
is:
does
that
rise
in
interest
rates?
E
For
a
fact,
with
new
projects,
it
is
impacting
whether
it's
impacting
with
something
already
done.
I,
don't
know
most
what
I've
been
reading
lately
in
Wall,
Street,
Journal
and
others
is
that
this
has
been
the
safe
haven.
This
is
where
you
know
this
was
the
safety
investment
I'm
reading.
Now
that,
as
loans
come
due,
people
are
having
to
put
more
money
in
or
they're
having
to
pay
more.
E
So
when
I
look
at
what
the
county
say
and
what
the
applicants
say,
the
5.9
suggested
by
the
by
the
applicant
is
that
one
and
a
half
added
to
the
4.49
County.
B
E
F
H
One
of
his
closing
arguments
with
the
the
properties
that
were
purchased
previously,
his
last
statement
was,
they
all
said
they
wouldn't
pay
the
same
thing
in.
D
H
G
And
and
if
you
hope,
you're
already
financed
it,
yeah
yeah,
I'm
alone,
right
right,
and
so
what
we
haven't
seen
yet
is
a
casting
cascading
group
of
sales
under
distress,
I'm
a
multi-family
where
we've
kind
of
started
to
see
this
in
office
yeah,
and
so
that
tells
me
that
Gables
or-
and
you
know,
Mill
Creek
and
all
these
companies
are
holding
on
to
these
properties
versus
selling
them.
So
we
really
don't
have
a
a
situation
like
with
office
where
it's
I'll
take
any
number
for
this
office
building.
B
G
Okay,
with
the
assessment
I
mean,
the
only
thing
is
it's
minor
I
wouldn't
even
really
worry
about
it.
In
this
case
the
appellant's
not
arguing
it,
but
we.
G
Repellent
where
they
it
committed,
affordable
portion,
they
said
I
think
they
testified.
It
was
like
40
to
60
percent
collection
losses
and
to
use
three
percent
is
probably
a
little
low
and
I'm
sure
it
depends
on
how
the
building
is
set
up.
You
know
what
am
I
level
and
and
how
they
operate
and
manage
it,
but
that
was
pretty
shocking
to
me.
So
it's
only
39
units
of
the
time.
If
it
was
a
bigger
proportion,
I'd
worry
about
it
usually
get
three
percent
collection.
Awesome.
F
Instruments
completely
different,
take
on
it.
The
proposed
increase
for
very
to
me
pre-stabilized,
the
property
is
20
increase.
Now
that
seems
to
match
what
the
the
assessment
was
from
2022.
F
E
F
D
I
I
agree
with
it.
Everything
was
there
and
I
appreciate
what
you
hey.
My
friend,
Barnes
I
think
it's
useful
information
yeah
my
only
test
the
only
test
that
I
did.
It
comes
up
with
a
higher
number
than
request
anyway,.
E
That
check
with
president
for
others,
oppressing
for
others,
has
passed
by
his
his
family
continues
on
and
I
have
a
relationship
their
interesting
all
over.
A
Okay,
bringing
us
back
to
this,
but
no
further
discussion,
I'll
go
ahead
and
move
to
confirm
the
county
for
a
second.
E
A
A
J
J
Three-Year
historic
noi
has
averaged
just
over
seven
million
dollars
on
page
44
of
the
board
pack,
you
can
see
the
2022
INE,
which
shows
January
1
2023
vacancy
at
nine
percent.
The
average
vacancy
over
2022
was
just
under
5
percent.
The
issue
on
appeal
is
the
cap
group.
You
can
see
on
the
test
page.
The
assessment
shows
a
cap
rate
of
5.293
percent.
I
want
to
emphasize
this.
This
is
actually
two
different
numbers
combined
into
one.
This
is
the
market
cap
rate
plus
the
tax
rate.
J
This
is
the
same
rate.
This
property
has
been
assessed
at
for
each
of
the
past
four
years
and
the
lowest
rate
it's
been
assessed
at
for
the
past
15
years
by
not
changing
the
cap
rate
from
2022
to
2023.
The
assessment
completely
misses
the
effects
of
interest
rates,
increasing
dramatically
over
the
course
of
2022..
J
J
Our
goal
here
is
fair
market
value,
which
has
been
defined
by
the
Supreme
Court
of
Virginia
as
the
price
the
property
will
bring
when
offered
for
sale
by
a
seller
who
desires
but
is
not
obliged
to
sell
and
bought
by
a
buyer
under
no
necessity
of
purchasing
now
I
want
to
delve
into
the
relationship
between
the
10-year
TV
and
the
cap
rate.
A
little
more
I
know.
You've
heard
us
all
talk
about
this
236
basis.
J
Point
increase
every
case
we've
presented
this
year,
so
I
want
to
look
at
this
relationship
and
why
it's
important,
when
an
investor
is
evaluating
an
investment,
they
first
must
develop
a
required
rate
of
return.
A
required
rate
of
return
is
the
minimum
profit.
The
investment
must
generate
Chief.
Among
the
considerations
when
calculating
a
required
rate
of
return
are
the
opportunity
costs
for
the
opportunity
cost.
The
10-year
t-bill
is
widely
used
as
the
Benchmark,
due
to
its
term
and
stability.
J
J
Keep
in
mind.
These
Investments
are
not
risk-free.
You
incur
Risk
by
the
assumptions
you
make
to
underwrite
the
deal.
If
the
market,
income
or
expenses
differ
from
the
assumptions
you
use
to
underwrite
the
investment,
you
could
easily
not
achieve
the
returns
you
projected
if
inflation
is
rampant
or
if,
as
we
saw
in
the
second
half
of
2022,
rent
increases,
slow
or
even
projected
to
decrease
your
investment
returns
will
be
less
than
projected.
This
is
risk
so
that
0.34
spread
the
assessment
applies,
has
a
lot
of
work
to
do
for
context.
J
The
spread
one
year
earlier
in
2022
was
2.6
percent.
This
spread
has
averaged
2.2
percent
over
the
prior
15
years.
Again,
it's
only
0.34
percent
this
year
now
I
was
curious.
Also
what
the
spread
in
the
market
has
historically
been
the
most
recent
info
I
can
find
for
a
spread
between
just
general
apartment
cap
rates
and
the
10-year
t-bill
was
info,
that's
outdated.
It
was
q1
2022.
It
was
a
report
by
the
National
Association
of
Realtors.
J
J
J
J
Now
you've
heard
me
quote:
Market
participants
in
the
last
case
stating
that
this
relationship
exists,
higher
yields
on
Treasury
bonds
equals
higher
cap
rates.
We
also
see
this
in
a
survey
of
DC
area
investors
and
developers
which
estimates
Class,
A
high-rise
properties
to
trade
at
a
cap
rate
of
5.11,
which,
of
course
you
would
have
to
add
the
tax
rate
to
to
get
a
comparable
cap
rate
to
what
the
Drea
has
shown
on
their
test
page.
This
increase
represents
a
93
basis
point
year
increase
year
over
year.
J
J
So
I
also
want
to
speak
to
the
sofa,
which
is,
of
course,
the
secured
overnight
funding
rate.
This
is
the
measure
of
the
cost
of
borrowing
cash
overnight.
This
rate
took
the
place
of
Libor
several
years
ago.
The
sofa
represents
the
interest
rate
Banks
use
to
price
loans.
A
commercial
loan
will
be
at
a
rate
of
so
far,
plus
sulfur,
plus
a
spread
for
profit
and
risk,
so
the
sofa
was
at
4.3
percent.
As
of
December
30th
2022.,
this
property's
cap
rate
is
only
4.22
percent.
J
J
This
brings
the
spread
between
the
cap
rate
and
the
10-year
t-bill
to
only
109
basis,
points
which
again
is
below
the
historical
averages
and
below
the
spread
last
year
of
100
or
I'm.
Sorry,
2.6
now
I
also
want
to
speak
to
the
Courtland
sales.
We
did
ask
that
owner
what
the
cap
rate
they
would
pay
as
of
January
1st
2023
would
be,
and
they
said
that
had
gone
up
quite
a
bit,
so
I
I
apologize
if
I
misspoke
in
the
prior
case
and
said
Q3
2023.
That
is
not
what
we
asked
that
owner.
I
A
I
Thank
you
so
again.
The
biggest
contention
here
is
the
cap
rate,
which
is
based
on
10-year
treasury.
Note
argument:
the
owner's
representative
contest
the
copyright
based
on
the
10-year
note,
not
10-year
bill,
I,
guess
they're
getting
a
little
bit
confused.
I
The
10-year
treasury
note
is
used
by
the
investors
as
a
benchmark
to
decide
whether
it's
worth
for
them
to
take
on
a
risk
care
investment.
We
understand
that,
but
we
are
mass
appraisers.
We
again
we
use
different
metrics.
We
do
not
use
tenure.
Note
we
never
have
as
one
of
those
metrics
we
use
sales
to
assessment
ratios.
We
review
hundreds
of
Ines
provided
to
us
to
determine
the
trends
in
income
vacancy
and
concessions
and
operating
expenses.
I
If
we
conclude
that
the,
if
we
conclude
excuse
me,
I'm
sorry,
I'm
hearing
voices
so
going
back,
if
we
consider
if
we
conclude
that
the
SAR
ratios
are
trending
above
hundreds
percent
and
we
see
consistent
downward
Trends
in
income,
the
properties
generate,
we
act
on
it
and
we
decide
whether
or
not
capitals
need
to
be
adjusted.
We
also
consider
the
adjustments
for
Market
rents,
vacancy
and
concessions
or
operating
expense
ratios
when
needed.
These
are
the
Matrix
used
by
Arlington,
County
and
other
surrounding
counties.
I
I
I
One
number
does
not
make
a
statistical
sample,
and
mass
appraisal
relies
strictly
on
statistical
approach
regarding
the
increased
cost
of
borrowing
we're
not
arguing
the
fact
that
suffer
and
live
live
rates
have
gone
up.
I
I
E
I
got
a
philosophical
question
for
you:
George
I
hear
what
you're
saying
about
offense
cap
rates
and
I.
Don't
necessarily
disagree.
However.
You're
talking
about
buying
team
Bills
versus
buying
an
apartment
in
Arlington.
Is
it
possible
that
the
increase
in
value
the
appreciation
of
this
apartment
asset
in
Arlington
could
be
buying
team
Bills?
Could
that
make
it
more
attractive
to
an
investor,
thus
justifying
the
county
Kaepernick?
Is
it
possible.
J
Yes,
that's
fair
it.
The
question
is
how
much
more
profitable
right
now
the
cap
rate
applied,
says
it's
point.
Zero
says
it's
0.34
percent
more!
You
know
you
would
have
to
get
more
entrepreneurial
profit
than
0.34.
Above
that's
in
your
T
Bill.
J
G
G
And
just
to
kind
of
put
a
nail
on
Barnes
Point,
Real,
Estate
Investors
have
very
long
memories
and
historical
perspectives,
especially
when
you're
talking
about
buying
apartment
buildings
that
are
worth
hundreds
of
millions
of
dollars,
and
you
know
if
I
can
ask
one
for
the
question
you
know.
Would
you
rather
have
a
10-year
German
Government
Bond
in
1920,
at
five
percent
yield
or
Coal
Mine
in
Germany
that
you
own
at
20
times
earnings
one
is
extremely
risky.
G
A
I
I
So
there
will
be
a
slight
decrease
to
the
2023
assessment,
and
so
we
asked
the
board
to
revise
the
2023
assessment
from
139
million
410
700
to
139
million
three
hundred
thirty
one
thousand
seven
hundred
dollars.
Thank
you
so
much.
J
J
G
J
G
E
This
this
project
has
no
low
mod
housing.
Due
to
the
fact
it
was
the
residential
density
of
site
plan
approved,
then
the
overall
Pentagon
City
approval,
and
so
then,
when,
when
this
project
came
about,
they
were
just
using
already
approved
residential
and
the
increase
per.
B
A
G
All
right,
ambushing
that
confirm
the
County's
revised
assessment
at
139,
331
700.
A
Second,
third
Mr
Lawson,
okay
motions
in
a
second
all
in
favor,
I,
I,
post
counties,
revised
assessment
of
139
331
700
is
confirmed.
Thank
you.
Thank
you.
Welcome
to
the
final
case,
rpc2400204a
at
319,
South
Wayne,
Street,
Mr
Harmon.
You
can
start
with
your
eight
minutes
and
tell
us
about
this.
One.
J
Yes,
thank
you.
So
this
property
is
32
units
spread
across
four
buildings.
The
assessment
imputes
a
two
percent
increase
in
noi,
while
this
property
has
consistently
achieved
noi
of
right
at
390
thousand
dollars.
The
issue
on
appeal
is
the
cap
rate.
Again,
you
can
see
once
we
back
out
the
tax
rate.
This
is
a
market
cap
rate
of
only
4.97
percent.
Now
this
property
is
unique
from
the
other
properties.
We've
spoken
to
it's
it's
older.
It
was
built
in
1940.
It
has
been
updated
throughout
the
years,
but
it's
still
older.
J
D
J
I
want
to
also
speak
to
amenities,
the
the
Drea
write-up
states
that
this
property
has
amenities,
fitness
center
and
whatnot.
Those
are
actually
down
the
street
at
another
apartment
building,
so
those
aren't
on
site.
Those
are
I
want
to
say
two
or
three
blocks
down
the
road.
So
it's
not
well
monetized.
It
is
limited
in
the
amount
of
rent
growth
that
it
can
achieve
due
to
the
market
it
serves,
and
the
cap
rate
is
only
at
4.97.
This
is
below
what
class
A
high-rise
Apartments
were
surveyed
to
be
at
last
year.
J
At
the
end
of
last
year,
a
local
market
survey
came
in
at
5.11
per
class,
A
high-rise
apartment
cap
rates.
The
same
survey
showed
Suburban
Class,
B
Apartments,
getting
closer
to
what
these
Pro.
This
property
actually
is
at
a
cap
rate
of
only
5.63
percent.
Again,
this
property
is
once
we
back
out.
The
tax
rate
is
at
a
cap
rate
below
five
5.63
from
the
survey
for
Suburban
Class
B
is
right
where
we're
at
on
our
appeal.
Thank.
I
I
It
has
effective
age
of
2000
and
again,
the
property
features
include
fitness
center
resident,
Lounge
Clubhouse,
which
is
across
the
street.
As
Mr
Harmon
stated,
an
interior
exterior
inspection
was
conducted
on
June
26th,
an
informal
hearing
was
held
on
June
22nd
and
the
appellants
are
contesting
PGI
Opex
and
the
cap
rate.
We
have
reviewed
the
submitted
INE
service
for
2019
through
2022
in
2020,
I'm,
sorry
in
2020
and
2021.
The
subject
property
was
experiencing
the
decline
in
GPI
and
I
know
why,
which
was
probably
triggered
by
covet
19.
I
in
2022,
the
GPI
noted
at
4.4
percent
growth,
I'm,
sorry,
4.04
growth.
However,
the
Opex
per
unit
has
increased
by
over
six
percent.
We
do
recognize
that
the
2022
noi
increased
by
only
0.32
percent
when
compared
to
the
2021
noi
and
it
hasn't
reached
the
pre-pandemic
level.
We
also
acknowledge
that
maintenance
and
repair
cost
increased
by
41
due
to
Plumbing
issues
and
water
intrusion
caused
by
the
roof
leak.
We
did
not
excluded,
but
we
do
recognize
that
this
is
not
an
ordinary
expense.
I
Therefore,
the
total
Opex
that
you
see
are
reported
on
the
2022
iron
irony
is
slightly
overstated
in
the
2023
performer,
the
appliances,
the
cap
rate
of
6.75
percent
and
per
2023
guidelines
supported
by
the
market
data
and
high
volume
of
iron,
is
provided
to
us.
We
applied
a
six
percent
cap
rate
in
day,
2023
performer.
The
balance
used
the
cap
rate
of
6.75
percent.
Yes,.
I
Andrea
was
very
conservative
with
the
rental
income
used
in
column
f.
As
you
can
see,
these
rents
are
well
supported
by
the
actual
rental
provided
to
us.
As
of
January
1
2023.,
with
the
above
with
the
above
proposed
revision,
we
recommending
reduction
from
seven
million
one
hundred
eighteen
thousand
to
six
million
641
100
dollars
and
after
the
application
of
rehab
partial
exemption
of
647
00,
the
subjects
2023
assessment
will
be
further
reduced
to
five
million
993
thousand
four
hundred
dollars.
Thank
you.
A
A
D
I
Now
the
only
one
thing
that
I
wanted
to
stress
is
that
the
operating
expenses
reported
in
2023
is
slightly
overstated
because
of
that
unusual
leak,
emergency
they
had
to
deal
with
and
I,
don't
know
if
I
can
tell
the
dollar
amount
of
the
repairs,
but
that's
that's
about
it.
Thank
you.
So
much.
Okay.
J
Thank
you,
I
just
want
to
address.
We've
heard
the
Drea
account
they.
They
say.
The
cap
rates
are
supported
by
the
Ines.
They
receive
the
Ines,
don't
request
to
cap
rate.
They
don't
have
a
section
for
a
capri.
So
that's
you
know,
I
I,
believe
that's
a
misstatement
by
the
Drea.
Now
they
don't
also
don't
have
sales
to
support
it
as
I
went
through
their
sales.
Their
first
sale
listed
most
recent
to
the
close
closest
to
the
data
value
was
a
Redevelopment
project.
J
C
E
See
if
anyone
agrees
with
my
thinking,
I
think
on
the
radiation,
it's
just
a
little
bit
aggressive
on
apartment
rental,
so
I
reduced
it
I
just
felt
like
a
appropriate
figure,
was
15
000.
when
I
did
that
and
you
go
through.
B
E
I
ended
up
at
six
million
391.,
so
51.00.
What
number
did
I
reduce
the
the
apartment
for
15
hours
and.
E
B
G
A
D
We
revised
assessment,
so
I'm
gonna
do
983
400.
A
A
All
in
favor
bye
yeah,
including
the
professional
rehab
tax
extension
gb,
5
million
993
400..
Thank
you
that
completes
the
agenda
any
other
business
before
us.