Should cap rates be lowered by the Louisiana Tax Commision on tax credit apartments part two?

Dear Commissioners:


Please accept this letter as my rebuttal of testimony present by the Louisiana Assessors Association (LAA) on or about February 12, 2009.


I would like to restate that facts noted in my first letter (Exhibit A).  Notably that LIHTC properties lack liquidity, the use is restricted, operating expenses run higher that conventional multi-family expenses and income is regulated.  I suggest that it is undisputed that these factors adversely affect the capitalization rates for these types of properties.

In the conventional multi-family markets Marcus & Millichap recently reported  During the past 12 months, Class A assets in primary markets have traded with average cap rate increases of 25 basis points to 50 basis points and 75 basis points in secondary markets. Class B/C assets have sold with average cap rate increases of 100 to 150 basis.  No one disputes that LIHTC properties do not trade.  However, if one was to argue hypothetically that they do trade, then I would argue that trends we are seeing conventional properties would be greater in would be greater in LIHTC properties.


Finally, if the LAA wishes to propose capitalization rates for LIHTC properties, one would expect to see generally excepted appraisal techniques utilized.  In proposing the use of capitalization rates of conventional properties on LIHTC properties with no adjustments relating to the differences in characteristics, is in my opinion does not comply with Uniform Standards of Professional Appraisal Practice (USPAP).

Thank you in advance to consideration of my comments.