STATE TAX COMMISSION OF MISSOURI
|IKEA PROPERTY, INC.,||)|
|)||Appeal No. 19-20030|
|Complainant,||)||Parcel No. 3918-04-0025-0|
|MICHAEL DAUPHIN, ASSESSOR,||)|
|CITY OF ST. LOUIS, MISSOURI,||)|
DECISION AND ORDER
Ikea Property, Inc., (Complainant) appeals the City of St. Louis Board of Equalization’s (BOE) decision finding the true value in money (TVM) of the subject property on January 1, 2019, was $75,700,000. Complainant asserts the TVM was $23,415,000. Respondent’s expert concluded the TVM was $62,500,000. In post-hearing briefing, Respondent asserts the BOE decision should be affirmed.
The BOE decision is set aside. The TVM of the subject property on January 1, 2019, was $62,500,000.
Complainant was represented by Peter Corsale. Respondent was represented by Abby Duncan. An evidentiary hearing was held via WebEx. Both parties filed an opening brief and a reply brief.
The subject property consists of an approximately 20-acre site improved with a 376,538 square-foot, multi-level building housing an IKEA retail store. The building’s size and configuration are unique in the St. Louis market. The lack of readily comparable properties presents a complex valuation problem.
Every expert who offered an opinion of value concluded the BOE value is excessive. The agreement stops there. Complainant’s experts assert sales of vacant big-box retail stores show the highest and best use of the subject property is demolition of the existing improvements and redevelopment of the site. Complainant’s proposed value of $23,415,000 is the land value less demolition costs. Respondent’s expert asserts the cost and income approaches demonstrate the existing improvements reflect the highest and best use as improved and indicate the TVM of the subject property was $62,500,000 as of January 1, 2019. The parties’ analyses and value estimates are diametrically opposed.
Complainant’s proposed value of $23,415,000 is unpersuasive because the underlying highest and best use conclusion is not based on substantial and persuasive evidence. Respondent’s evidence, though subject to legitimate critique, is the most persuasive evidence of value in the record. The substantial and persuasive evidence in the record indicates the TVM of the subject property as of January 1, 2019, was $62,500,000.
FINDINGS OF FACT
1. The Subject Property. The subject commercial property consists of an approximately 20.70 acre lot acre lot improved with a 376,538 square-foot, three-level retail building. The subject is located within the CORTEX district located in midtown St. Louis and near the Central West End neighborhood. CORTEX is a 200 acre “innovation hub and technology district” with approximately 415 companies employing 5,800 people. (Ex. 1 at 16; Ex. A at 22-23) “CORTEX will include approximately 4.5 million square feet of mixed-use buildings including research, office, laboratory, medical, residential, hotel, and retail space when it is fully developed in ten to fifteen years.” (Ex. A at 22) In addition to CORTEX, the subject’s proximity to large medical service providers employing 30,000 people provides “substantial support for the retail base.” (Ex. A at 24)
Complainant constructed the building in 2015 for use as an IKEA retail store. The building has always been owner-occupied and used as an IKEA retail store. The subject has good visibility and access from Interstate 64. The applicable zoning permits unrestricted industrial use with no minimum lot area requirement and a building height restriction of 200 feet.
The building includes 364,149 square feet of rentable area. There is approximately 174,791 square feet of retail space, 154,584 square feet of warehouse space, and 32,733 square feet of offices, restaurants, kitchens, and a children’s play area.
In addition to its large size, the building’s configuration is different than most large big-box retail buildings. The retail areas are on multiple levels. There is a greater proportion of warehouse space than in many other retail buildings. The ceilings in the warehouse space are 38 feet tall. Typical ceiling heights in large or “big box” retail buildings are 20 to 24 feet. The additional volume created by the high ceilings creates additional expenses for heating and cooling. The building is prominently decorated with distinctive IKEA signage and color schemes. There is no deferred maintenance.
2. Assessment and Valuation. The BOE determined the TVM of the subject property as of January 1, 2019, was $75,700,000.
3. Complainant’s Evidence. Complainant introduced Exhibits A through F, which are summarized below:
|Exhibit A||Appraisal report prepared by Thomas McReynolds, MAI. McReynolds concluded the highest and best use of the subject property is to demolish the existing improvements and redevelop the site for multiple office buildings. McReynolds concluded the subject’s fair market value as of January 1, 2019, was $23,415,000.|
|Exhibit B||McReynolds’ written direct testimony. McReynolds reiterated his highest and best use analysis. McReynolds testified the sales comparison approach was the only reliable approach to value and that the TVM of the subject property was $23,415,000 as of January 1, 2019.|
|Exhibit C||Appraisal report prepared by Russell Rench, MAI. Rench concluded the subject’s market value is the land value less demolition costs, estimated at $20,000,000 as of September 10, 2020.|
|Exhibit D||Review appraisal prepared by Anthony Uzemack, MAI. Uzemack concluded Respondent’s appraiser failed to provide appropriate and reasonable support for his value conclusions, rendering them unreliable.|
|Exhibit E||Uzemack’s written rebuttal testimony. Uzemack testified Respondent’s appraiser did not account for functional obsolescence and that his income estimates are unreliable.|
|Exhibit F||McReynolds’ written surrebuttal testimony. McReynolds testified the income and cost approaches utilized by Respondent’s appraiser are inappropriate for the subject property.|
McReynolds’ Appraisal and Testimony
McReynolds concluded the subject’s size and proximity to the CORTEX Innovation Center indicates the highest and best use as vacant is “for a large office building, or several smaller office buildings, in keeping with the other developments in the CORTEX Innovation Center.” (Ex. A at 61) McReynolds further concluded “[t]he existing retail / warehouse improvements at the subject property do not conform to the highest and best use of the land,” and that the highest and best use is “to demolish the existing improvements to make the site available for redevelopment in accordance with the land’s highest and best use, as if vacant.” (Id. at 61, 64) McReynolds’ highest and best use conclusion is based on value indications from 24 sales of smaller, older, and vacant retail buildings. (Id. at 63; Tr. 121:18-20; 125:18 – 128:16)
McReynolds’ highest and best use conclusion is based on two related factors. First, McReynolds asserts the multiple-level design, high ceilings, extensive office space, two large commercial kitchens, restaurants, and children’s play area create substantial functional obsolescence. (Id. at 62) However, several of the 24 sales McReynolds reviewed involved multi-level retail buildings. (Tr. 129:3-5) McReynolds also testified the fact “IKEA used zero money along with $32,000,000.00” in public subsidies to develop the subject property indicated the project was “functionally obsolete the day the last coat of paint was put on and they opened for business.” (Tr. 93: 10-20) Neither McReynolds’ appraisal report nor his testimony includes market data quantifying functional obsolescence.
Second, McReynolds concluded “the value of the subject’s underlying land exceeds the value of the property as it is currently improved.” (Ex. A at 64) McReynolds determined the subject’s land value considering the following land sales:
Address Sale Date Sale Price Square Feet Price/SF
|1 IKEA Way||January 2015||$21,708,270||897,671||$24.18|
|Ballpark Village||January 2013||$15,300,000||422,576||$36.21|
|St. Louis City FC Stadium Site||February 2020||$23,841,867||1,097,121||$21.73|
|3301 Chouteau Avenue||August 2019||$5,497,904||344,776||$15.95|
(Ex. 1 at 76)
McReynolds adjusted the comparable land sales to account for market conditions, location, and physical characteristics. The adjusted land sale prices ranged from $26.96 to $27.43 per square foot, with a median of $27.21 per square foot. McReynolds concluded the land value was $27.20 per square foot, or $24,416,651 ($27.20 x 897,671 sf = $24,416,651). After deducting an estimated $1,000,000 in demolition costs, McReynolds “concluded that on January 1, 2019 the property had a value of $23,416,651, which we have rounded to $23,415,000.” (Ex. A at 79)
McReynolds’ highest and best use conclusion is based on a “comparison of the relative values of the subject land and the value of the property as it is currently improved.” (Ex. A at 62) McReynolds divided the estimated land value of $24,415,000 by the subject’s net rentable area, resulting in a value of $67.04 per square foot of net rentable area. (Tr. 74:10-23; Ex. A at 62) McReynolds compared this value indication to the range of per square foot sale prices indicated by 24 “recently sold large retail buildings … including four properties in the St. Louis metropolitan area that involved fee simple estates, as opposed to properties that were leased at the time they sold.” (Ex. A. at 62) The sale prices ranged from $6.45 to $65.07 per square foot of net rentable area, with a median of $25.06 per square foot. (Id. at 64) McReynolds concluded “just the land value for the subject property is substantially higher than” the values indicated by the 24 comparable sales. (Tr. 75:10-12) In other words, “the highest sale price per square foot of these twenty-four sales is below the price per square foot of rentable area represented by the inherent value of the subject’s land.” (Ex. A at 64) Based on this analysis, McReynolds concluded “the highest and best use of the subject property, as improved, is to demolish the existing improvements to make the site available for redevelopment in accordance with the land’s highest and best use, as if vacant.” (Id.; Ex. B at 26)
The improvements on the 24 listed properties are significantly older and smaller than the subject property, ranging from 110,065 to 248,114 square feet, with a median of 161,250 square feet. (Ex. A at 63) McReynolds testified “[v]irtually all” of the 24 properties were vacant at the time of sale either because the tenant did not renew a lease or because the owner “closed the store and then sold it.” (Tr. 128:5-15) McReynolds also acknowledged the comparable improvements “are single-story buildings, and have typical ceiling heights for this type of property” and would thus “require downward adjustments if we were to make individual comparisons between them and the subject property.” (Ex. A at 64) McReynolds made no adjustments accounting for location or physical differences between the subject and the 24 sales. McReynolds testified “it wasn’t a true comparison in a way that the normal sales comparison approach is done.” (Tr. 95:12-13) Instead, the 24 sales were used “to determine relative – the relationship between typical sale prices for … large retail buildings[.]” (Tr. 95:14-18)
In written testimony McReynolds testified “we researched sales of similar properties and valued the subject property by comparing it directly to similar properties that have sold recently, which provided the best and most reliable indication of the value of the subject property, all of which is detailed in my appraisal report.” (Ex. B at 29) McReynolds further testified “the only applicable approach to value the subject property was the Sales Comparison Approach” and that the TVM of the subject property on January 1, 2019, was $23,415,000. (Id. at 30-31)
In written surrebuttal testimony, McReynolds testified the cost approach was inapplicable because a “potential buyer would not consider the cost of the Subject Property in its valuation of the Subject Property.” (Ex. F at 6) McReynolds also testified the cost approach would be “wholly inapplicable when the feasibility of the construction is in question.” (Id.)
McReynolds testified the income approach was inapplicable to the subject because its application required hypothetical assumptions. Specifically, McReynolds testified the subject “is not an income producing property” and “is owner-occupied.” (Ex. F at 7) Additionally, McReynolds testified the “space as configured is incompatible with standard big box stores” and “you cannot simply assume that all of the rentable space would command retail rent” given the high proportion of warehouse space. (Id. at 11).
McReynolds testified the 24 sales he analyzed “show how sales retail space would garner less per square foot than if the Subject Property was vacant and available for redevelopment.” (Ex. F at 9) McReynolds concluded the 24 sales reflect the value of the fee simple retail space not as if it is “dark,” but “in accordance with reality.” (Id.)
Rench’s Appraisal and Testimony
Rench appraised the property for Complainant in 2020. Rench’s appraisal was not prepared for the underlying tax appeal. Rench concluded the fair market value of the subject property was $20,000,000 as of September 10, 2020.
Like McReynolds, Rench concluded the market value of the subject property is the land value less demolition costs because the land value exceeded the value as improved. (Ex. C at 46) This conclusion is based on two factors: (1) the improvements “do not appear to conform to the expectations of the market;” and (2) the lack of “any competing user which could fully utilize the property as currently configured.” (Id. at 45) Rench noted “[t]he most likely buyer would be an owner-user, or an investment partnership involving a major user.” (Id.)
Rench’s highest and best use conclusion is based on comparative value indications derived from sales of four smaller, older, single-story, vacant big-box retail buildings. (Ex. C at 45-47) One of the four buildings is located in Florissant, Missouri. The other three are in the Chicago metropolitan area. The sale prices ranged from $16.02 to $25.07 per square foot. (Id. at 46)
The four sales Rench considered are also included in McReynolds’ list of 24 sales. Like McReynolds, Rench made no adjustments accounting for the fact the sales involved buildings with different characteristics than the subject. Rench concluded he was “unaware of any competing user which could fully utilize the property as currently configured, (Ex. C at 45), and that he was unable to “find fee simple sales of large freestanding retail uses at prices supportive of the subject’s underlying land value.” (Id. at 46)
Like McReynolds, Rench did not use the income or cost approaches to test his comparable sales approach conclusion. On cross-examination, Rench acknowledged the income approach “adds credibility to the final value opinion.” (Tr. 41:12-13), and that he “did not perform a – a complete appraisal of the – a complete analysis.” (Tr. 52:3-4)
While Rench did not use the income approach as a check on this sales comparison analysis, Rench cited survey data indicating retail occupancy in the subject’s submarket remained steady between 92% and 95% from 2017 through the second quarter of 2020. (Ex. C at 30) The asking rent increased from $13.20 per square foot in the first quarter of 2017 to $18.82 in the second quarter of 2020. (Id. at 31) Rench noted the “average rental rate for the submarket is higher than the overall St. Louis market, the result of the population density and proximity to large employers.” (Id.)
Rench used the sales comparison approach to estimate land value. Rench compared the subject to six sales of vacant land in the City of St. Louis. The sites ranged from 4.12 acres to 25.19 acres. (Ex. C at 47) Rench adjusted the land sales for market conditions, location, and other physical characteristics to estimate adjusted sale prices ranging from $20.69 per square foot to $25.46 per square foot, with an average of $23.07 per square foot. (Id. at 50) Rench concluded the subject’s land value was $24.00 per square foot, or $21,544,104. (Id. at 51) Rench deducted $1,500,000 in estimated demolition costs to estimate the subject’s value on September 10, 2020, was $20,000,000. (Id. at 51-52)
Uzemack Appraisal Review and Testimony
Uzemack prepared a review appraisal concluding Respondent’s appraiser made several significant errors; namely, (1) overstating the value by not deducting for functional obsolescence; (2) not using all three approaches to value; (3) failing to recognize the building was not built to accommodate tenants; (4) estimating an excessive rent of $12 per square foot; (5) incorrectly stating the site’s zoning; and (6) not accounting for the bias indicated by the similarity in value conclusions from the income and cost approaches and the failure to use improved sales in the Addendum in a sales comparison approach. Uzemack summarized his review by asserting Respondent’s appraisal report lacks a full highest and best use analysis, overestimates market rent, and ignores market sales of comparable stores. (Ex. D at 8) While both McReynolds and Rench relied solely on comparable sales of vacant buildings, Uzemack testified using only two approaches to value “can seduce our minds in believing that we’re correct in making certain sets of assumptions based on the data observed.” (Tr. 276:10-12)
4. Respondent’s Evidence. Respondent introduced Exhibits 1, 2, 3 and 5. At the evidentiary hearing, Complainant objected to the admission of these exhibits and further testimony from Respondent’s expert. As explained in the Conclusions of Law, Section 2, Complainant’s objections are overruled. Respondent’s exhibits are admitted into evidence and are summarized as follows:
|Exhibit 1||Appraisal report prepared by Patrick White, MAI. White concluded the highest and best use of the subject property as improved is for continued retail use. White concluded the subject’s fair market value as of January 1, 2019, was $62,500,000.|
|Exhibit 2||White’s written direct testimony.|
|Exhibit 3||White’s written rebuttal testimony.|
|Exhibit 5||White’s written surrebuttal testimony.|
White’s Appraisal and Testimony
White used the cost approach and the income approach, with emphasis on the income approach. White concluded the fair market value of the subject property as of January 1, 2019, was $62,500,000. (Ex. 1 at 59)
White determined the physical configuration of the building by reviewing building plans in addition to an on-site inspection. (Tr. 200:5-18; 202:1-2) White testified the subject location is well-located for a large retail operation and that “[t]ypical big box retailers would be attracted to this site, as would other large retailers than draw from a large area, such as Bass Pro, Cabela’s etc.” (Ex. 3 at 13, 50-51)
White offered several reasons for not using the sales comparison approach. First, White concluded there were a “limited number of fee simple, non-distressed sales in the area that are comparable to the subject property in terms of building quality, size, age/condition, location, and access/exposure.” (Ex. 1 at 4) Second, “[t]he available fee simple sales would require such significant gross adjustments that the overall adjustments needed would suggest they are not suitable as comparables.” (Id.; see also Ex. 3 at 15-23) Third, because many vacant retail properties are ultimately converted to non-retail uses, White concluded those sales “should not be considered since they have different highest and best uses than the subject property.” (Ex. 3 at 24) Finally, vacant buildings are often vacant due to market changes negatively impacting the location or condition issues with the improvements. (Ex. 3 at 26-27; Tr. 164:4 – 165:8) In written rebuttal testimony, White explained a fee simple valuation does not presuppose valuing a “dark/vacant property” and that “market rent should be considered[.]” (Ex. 3 at 9)
White concluded the highest and best use of the subject property as improved is continued retail-related use because the improvements continue to contribute value to the property. (Ex. 1 at 41) White testified “[t]he indicated values from the cost and income capitalization approaches to value were far greater than the land value, much less the land value less the cost to raze the improvements.” (Ex. 3 at 6) The most likely buyer would be an owner-operator. (Ex. 1 at 41) White testified the subject’s location makes it attractive to other large retailers. (Ex. C at 13)
White estimated the land value with five sales, including the May 2014 sale of the subject property’s land for $16,396,970. (Ex. 1 at 42) The range of adjusted land sale prices ranged from $21.15 per square foot to $30.71 per square foot, with an average of $25.73 per square foot. White concluded the subject’s land value was $24.52 per square foot, or $22,200,000. (Id. at 44)
In his written surrebuttal testimony, White testified the fact the subject was built for Complainant does not mean it is functionally obsolescent. (Ex. 5 at 9) White testified the “layout and design are considered functional and would be attractive to other retailers.” (Id. at 10) White testified that while multi-level layouts are “not the most common configuration[,]” they are increasingly common. White identified four examples in the St. Louis market. (Id. at 11)
White also testified that he did not use the six sales in his capitalization rate analysis as rent comparables or for a sales comparison analysis because “[t]he overall capitalization rate, or ratio of NOI to sale price, was the key piece of data to be gleaned, and not the sale price per square foot, or the NOI square foot.” (Ex. 5 at 17) Using the leases associated with the sales as comparables “would result in a number of rentals being too old for consideration.” (Id. at 19)
White estimated the replacement cost new (RCN) with actual construction costs from City of St. Louis permit data. The original RCN was $74,420,318, adjusted to $80,153,727 to account for inflation in the interim between construction and the valuation date. (Ex. 1 at 45) White deducted incurable physical depreciation ($9,160,426) and external obsolescence ($28,200,000) from the RCN plus land value to estimate an indicated value of $65,000,000.
White estimated incurable physical depreciation according to the “estimated effective age of the subject and the projected economic [life] of the improvements.” (Id. at 46) The physical depreciation estimate is calculated by dividing the actual age of 4 years by the Marshall Valuation Service expected life of 35 years to estimate incurable physical depreciation of $9,160,426 ( [4/35] x $80,153,727 = $9,160,426). (Ex. 1 at 46)
White estimated external obsolescence based on the subject’s TIF financing. TIF financing enables the owner to recoup some development costs and may make a development financially feasible. (Ex. 1 at 47; Tr. 187:20 – 188:21) White used actual and projected TIF income over the term of the TIF and discounted that revenue to present value. The discounted value adjusted for inflation was $28,242,706, rounded to $28,200,000. (Id.) White made no deduction for functional obsolescence. Deducting incurable physical depreciation and external obsolescence from the RCN and adding the land value results in a final cost approach estimate of $65,000,000. (Ex. 1 at 46)
White estimated market rent based on five local big-box leases supplemented by leases of larger buildings in Minnesota, Wisconsin, Iowa, and Colorado. (Ex. 1 at 49-50) The local rent comparisons involved smaller, older buildings constructed between 1960 and 2003 ranging from 46,030 square feet to 200,915 square feet of rentable area. (Id. at 49) The regional rent comparisons involved newer, larger buildings constructed between 1984 and 2018 with 110,566 square feet to 292,058 square feet of leased space.
The local rent comparisons range from $7.50 to $15.00 per square foot. White selected a rental rate of $7.50 to $9.00 per square foot based on the smaller size of the comparable buildings and the fact the buildings are inferior to and substantially older than the subject. (Ex. 1 at 50)
The regional rent comparisons range from $11.23 to $13.50 per square foot. White concluded leases six and nine, with rental rates of $12.42 and $11.38 per square foot, are most similar to the age and condition of the subject but are inferior in terms of building quality. White concluded the market rent of the subject was $12.00 per square foot, resulting in potential rental income of $4,369,908. (Ex. 1 at 51) The estimated $12.00 per square foot is consistent with surveyed rental rates in the subject’s submarket which, in 2017 and 2018, ranged from $11.83 to $13.05 per square foot on a triple net basis. (Id. at 36)
White estimated vacancy loss of 5% ($218,495) and credit loss of 0.5% ($21,850). (Ex. 1 at 52) The 5% vacancy estimate is based on trends in the St. Louis area retail market and the subject’s submarket. (Id. at 36) White relied on survey data indicating that during 2017 and 2018, occupancy levels in the St. Louis area market held steady near 95% while the subject’s submarket has ranged from 94.7% to 96.7%. (Id.) The market occupancy is 95%, and the credit loss is 0.5%.
White assumed a tenant would reimburse the owner for common area maintenance, insurance, and management fees at rate of $1.62 per square foot, or $588,124. (Ex. 1 at 52) Deducting the vacancy loss ($218,495), credit loss ($21,850) and adding expense reimbursement ($588,154) yields an effective gross income of $4,717,717. (Id. at 53)
White estimated pre-tax operating expenses based on four local expense comparables and the subject’s expenses. White concluded the subject’s expenses of $1.96 per square foot ($713,425) are “in line with” local comparables and market expenses. (Ex. 1 at 54) Subtracting expenses from the effective gross income results in an estimated net operating income of $4,004,292 ($4,717,717 – $713,425 = $4,004,292). (Ex. 1 at 55) The market-based net operating income (NOI) of the subject is $4,004,292.
Finally, White estimated a pre-tax capitalization rate of 6.25% based on six sales of occupied retail buildings, surveyed rates, the band of investment method, and the debt coverage ratio. (Ex. 1 at 57) White used the sales as another data point indicating “the relationship between income and value.” (Tr. 174:18-19; see also Ex. 5 at 17) White added the effective tax rate to calculate a loaded capitalization rate of 6.407%. Dividing the net operating income by the loaded capitalization rate yields an estimated value of $62,498,707, rounded to $62,500,000. (Ex. 1. at 58)
5. Value. The TVM of the subject property on January 1, 2019, was $62,500,000.
CONCLUSIONS OF LAW
1. Assessment and Valuation. Commercial real property is assessed at 32% of its TVM as of January 1 of each odd-numbered year. Section 137.115.5(1)(c). “True value in money is the fair market value of the property on the valuation date, and is a function of its highest and best use, which is the use of the property which will produce the greatest return in the reasonably near future.” Snider v. Casino Aztar/Aztar Mo. Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005) (internal quotation omitted). The fair market value is “the price which the property would bring from a willing buyer when offered for sale by a willing seller.” Mo. Baptist Children’s Home v. State Tax Comm’n, 867 S.W.2d 510, 512 (Mo. banc 1993). “True value in money is defined in terms of value in exchange not value in use.” Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 7 (Mo. App. S.D. 2020) (internal quotation omitted). “Determining the true value in money is an issue of fact for the STC.” Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider, 156 S.W.3d at 346. The three generally accepted approaches are the cost approach, the income approach, and the comparable sales approach. Id. at 346-48. The STC has wide discretion in selecting the appropriate valuation method but “cannot base its decision on opinion evidence that fails to consider information that should have been considered under a particular valuation approach.” Id. at 348.
2. Evidence. “Although technical rules of evidence are not controlling in administrative hearings, fundamental rules of evidence are applicable.” Mo. Church of Scientology v. State Tax Comm’n, 560 S.W.2d 837, 839 (Mo. banc 1977). The finder of fact in an administrative hearing determines the credibility and weight of expert testimony. Hornbeck v. Spectra Painting, Inc., 370 S.W.3d 624, 632 (Mo. banc 2012).
At the evidentiary hearing, Complainant’s counsel objected to the admission of White’s appraisal report and written testimony, labeled as Respondent’s Exhibits 1, 2, 3, and 5. (Tr. 191:18 – 193:10) Specifically, counsel asserted there are “procedural aspects to discovery” and “[w]e were never asked about a property inspection.” (Tr. 191:21-22) Counsel asserted White’s appraisal report included photos of areas “that aren’t customer forward facing areas[,]” (Tr. 191:24-25), and there are “rules of discovery, civil procedure, right on point to inspect a property during the course of litigation.” (Tr. 192:3-5). Counsel then asserted “that’s my objection to his report and his testimony now that this was gained through improper means.” (Tr. 192:7-9) Counsel again specified the grounds of the objection by asserting “we’re not following the rules of discovery.” (Tr. at 193:10) Complainant’s objection was taken with case.
Rule 58.01(a)(2) authorizes a party to request “entry upon designated land or other property in the possession or control of the party upon whom the request is served for the purpose of inspection and measuring, surveying, and photographing, testing, or sampling the property or any designated object or operation thereon, within the scope of Rule 56.01(b).” There is no evidence Respondent made an inspection request. Nonetheless, there is no persuasive basis for the wholesale exclusion of Respondent’s evidence as requested by Complainant.
White testified he inspected the building from publicly accessible areas during business hours and photographed the loading dock through a window in a door. Complainant asserts this is impossible because there is “no door with a clear window from which to take the picture” and White could not have taken the photos “through an opaque window[.]” (Compl. Br. at 13) Complainant asserts the fact “[t]here are no true windows on the large steel overhead doors” is demonstrated by Exhibit A attached to Complainant’s primary brief. (Id.)
The record does not support Complainant’s request to exclude White’s testimony and report. At most, the record indicates White may have inadvertently taken a picture of a loading dock and an employee area from non-public areas. Moreover, the relevance of the photographs is limited. Neither party disputes the existence, location, or configuration of the loading dock or employee areas. The photos do not affect the sales, income, expense, and capitalization rate data and analysis forming the basis of White’s opinion of value. Under these circumstances, the remedy, if any, would be to exclude the photographs and testimony about the photographs. The wholesale exclusion of White’s report and testimony as requested by Complainant is unwarranted. On this record, Rule 58 does not provide a basis for the wholesale exclusion of White’s report and testimony.
In post-hearing briefing, Complainant expands the scope of the objection lodged at the evidentiary hearing. Complainant asserts White’s inspection violated constitutional and statutory provisions and culminated in criminal conduct; namely, perjury and trespassing. Specifically, Complainant asserts White’s inspection violated the Fourth Amendment of the United States Constitution, article I, section 15 of the Missouri Constitution, and Section 137.130.
Complainant asserts White’s inspection violated the Fourth Amendment and that his testimony and appraisal report are analogous to the “fruit of the poisonous tree.” (Comp. Br. at 15). The “fruit of the poisonous tree” is a reference to the exclusionary rule, which applies in criminal cases to exclude evidence seized in violation of the Fourth Amendment. See State v. Norfolk, 366 S.W.3d 528, 531 (Mo. banc 2012). The exclusionary rule does not apply to civil proceedings. State ex inf. Peach v. Boykins, 779 S.W.2d 236, 237 (Mo. banc 1989); In re Littleton, 719 S.W.2d 772, 775 n. 2 (Mo. banc 1986).
Complainant also asserts White’s report and testimony should be excluded because White inspected the property in violation of Section 137.130. In pertinent part, Section 137.130 provides:
Whenever there shall be any taxable personal property in any county, and from any cause no list thereof shall be given to the assessor in proper time and manner, or whenever the assessor has insufficient information to assess any real property, the assessor or an employee of the assessor shall assess the property based upon a physical inspection or on the best information the assessor can obtain; and for that purpose the assessor or an employee of the assessor shall have lawful right to enter into any lands and make any examination and search which may be necessary to assess such real property only when the assessor is entering because the assessor has insufficient information to assess such real property or to assess such personal property only when the assessor is entering because no list of taxable personal property has been given, and may examine any person upon oath touching the same. The assessor or an employee of the assessor shall not enter the interior of any structure on any real property as part of the inspection to assess such property without permission.
The “primary rule of statutory interpretation is to give effect to legislative intent as reflected in the plain language of the statute at issue.” S.M.H. v. Schmitt, 618 S.W.3d 531, 534 (Mo. banc 2021). The plain language of Section 137.130 shows the condition precedent to the inspection provision is that the assessor “has insufficient information to assess” the subject “real property.” The statute prohibits the “assessor or an employee” from entering the interior of a structure without permission to complete “the inspection” necessary to gather the necessary information to assess the real property. White’s inspection of the property – undertaken as part of Respondent’s defense of an assessment already completed – does not implicate the pre-assessment inspection provisions in Section 137.130. Section 137.130 does not apply.
Complainant’s objections are overruled. Respondent’s Exhibits 1, 2, 3, and 5 are admitted into evidence.
3. Complainant’s Burden of Proof. The taxpayer bears the burden of proof and must show by a preponderance of the evidence that the property was misclassified or overvalued. Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161 (Mo. App. E.D. 2003). The BOE’s valuation is presumptively correct. Tibbs, 599 S.W.3d at 7. The “taxpayer may rebut this presumption by presenting substantial and persuasive evidence that the valuation is erroneous.” Id. (internal quotation omitted). The taxpayer also must prove “the value that should have been placed on the property.” Id. “Substantial evidence is that evidence which, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide the case on the fact issues.” Savage v. State Tax Comm’n, 722 S.W.2d 72, 77 (Mo. banc 1986) (internal quotation omitted). Evidence is persuasive when it has “sufficient weight and probative value to convince the trier of fact.” Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. E.D. 2002); see also White v. Dir. of Revenue, 321 S.W.3d 298, 305 (Mo. banc 2010) (noting the burden of persuasion is the “party’s duty to convince the fact-finder to view the facts in a way that favors that party”).
4. Complainant Did Not Produce Substantial and Persuasive Evidence of Overvaluation. The TVM of a property “must be determined by valuing the property at its highest and best use[.]” Snider, 156 S.W.3d at 349. The TVM of a property is a “is a function of its highest and best use,” and all approaches to value are “applied with reference to” the highest and best use. Id. 346. It follows that an unpersuasive highest and best use conclusion will yield an unpersuasive value estimate.
Complainant’s proposed value of $23,415,000 is based on the conclusion the subject property’s improvements are functionally obsolescent and the highest and best use is to demolish the improvements and redevelop the site. (Compl. Br. at 20-22, 32) Complainant did not produce substantial and persuasive evidence supporting this highest and best use conclusion and, by extension, its proposed value.
The assertion the subject’s improvements are functionally obsolescent is not supported by substantial and persuasive evidence. For instance, Complainant’s appraisers testified the building’s large size, atypical configuration, and the project’s receipt of public subsidy via TIF financing indicate the improvements are functionally obsolescent. But no market-based support or quantification of this alleged obsolescence is provided. Moreover, McReynolds testified nearly every major development in the City of St. Louis over the last few decades has been supported by a subsidy or tax abatement. (Tr. 103:7-21) This observation is consistent with his testimony it is difficult to determine whether a project is financially feasible when a TIF is involved because when a developer considers a project, “most of the time it’s the first thing they do is they go try to get a tax abatement and before they even start to build on – build a project.” (Tr. 107:3-5) Critically, McReynolds also testified that once a project is built with a TIF subsidy, the subsidy does not diminish the value of the completed project. (Tr. 107:15-22) Thus, Complainant’s evidence indicates the fact a real estate development receives a subsidy does not necessarily mean it is financially infeasible, obsolete, or that its TVM is necessarily diminished.
Complainant also asserts functional obsolescence results from the relatively large proportion of warehouse space relative to retail space, but offers no specific, supporting market data. While an appraiser can offer a persuasive opinion based on his or her general knowledge rather than specific market data, the lack of specific market data supporting this opinion undermines its persuasiveness, particularly given that the functional obsolescence issue is central to Complainant’s assertion that a fully-functioning building constructed in 2015 is functionally obsolescent and worth less than the land. Moreover, Complainant’s review appraiser, Uzemack, though testifying the improvements were obsolete, also testified that “attacking these stores” due to the ratio of warehouse to retail space “doesn’t work quite well, because they’re all kind of different.” (Tr. 283:13-15) Complainant’s evidence does not persuasively show the subject’s improvements are functionally obsolescent.
Highest and Best Use
Complainant’s highest and best use conclusion is based primarily on McReynolds’ review of 24 sales of vacant big-box retail buildings. McReynolds concluded:
As you can see from the preceding table, these comparable properties range between 110,065 and 248,114 square feet, average 165,268 square feet, and have a median size of 161,250 square feet. Similarly, the total sale prices range between $1,250,000 and $9,135,000, average slightly less than $4,300,000, and have a median sale price of $3,425,000. They also range between $6.45 and $65.07 per square foot of net rentable area, average $26.00 per square foot, and have a median price of $25.06 per square foot.
Most of these buildings are a good deal older than the subject improvements, which would typically require upward adjustments. However, they are all much smaller than the subject property, are single-story buildings, and have typical ceiling heights for this type of property. All of these characteristics would require downward adjustments if we were to make individual comparisons between them and the subject property.
It is notable that the highest sale price per square foot of these twenty-four sales is below the price per square foot of rentable area represented by the inherent value of the subject’s land.
Based on this discussion, we have concluded that the value of the subject’s underlying land exceeds the value of the property as it is currently improved. Thus, the highest and best use of the subject property, as improved, is to demolish the existing improvements to make the site available for redevelopment in accordance with the land’s highest and best use, as if vacant.
(Ex. A at 63-64)
McReynolds’ highest and best conclusion is based on comparing the subject property to the unadjusted sales of 24 smaller, older, single-story, and vacant big-box retail buildings. McReynolds notes the differences between the subject property and the 24 listed properties and asserts adjustments would be required “if we were to make individual comparisons between them and the subject property.” (Ex. A at 64) The appraisal report thus acknowledges differences requiring adjustments while sidestepping the necessity of making those adjustments because no “individual comparisons” were made. This rationale is unpersuasive.
McReynolds testified his highest and best use conclusion was not based on “a true comparison in a way that the normal sales comparison approach is done.” (Tr. 95: 12-13) However, McReynolds’ written testimony states “we researched sales of similar properties and valued the subject property by comparing it directly to similar properties that have sold recently, which provided the best and most reliable indication of the value of the subject property, all of which is detailed in my appraisal report.” (Ex. B at 29) The sales comparison approach requires adjustments. Snider, 156 S.W.3d at 347-48. None were made.
Whether McReynolds’ analysis of the 24 sales is a “true sales comparison” or not, adjustments are necessary because the relevance of those sales depends on a comparison with the subject property. McReynolds essentially acknowledged this point by testifying the 24 comparable sales were used “to determine relative – the relationship between typical sale prices for … large retail buildings[.]” (Tr. 95:14-18) The relevance of any comparison between the subject and another property to determine “typical sale prices” is a function of the degree of similarity between the properties and adjustments accounting for significant differences. The substantial and persuasive evidence in the record demonstrates the 24 listed properties are improved with older, smaller, and mostly vacant buildings. McReynolds’ analysis shows no consideration of the differences between the 24 listed sales and the subject property in terms of in building size, age, condition, or location. There is no analysis of distinct and localized market forces that may have caused the 24 properties to become mostly vacant. Without adjustments accounting for acknowledged differences between the subject and the 24 sales of smaller, older, mostly vacant buildings, a true comparison cannot be made, and the subject’s improvements will not be valued accurately.
Complainant asserts sales of vacant properties are particularly relevant because they strip away business value and show the fee simple value. Because ad valorem taxation is based on the value of the real property rather than intangible business value, the sale of a vacant property could be used to estimate the value of comparable occupied real property. However, it is also true that the same market forces creating a vacancy may render the vacant property so dissimilar to an occupied subject property that fails to provide a persuasive inference of value. (Ex. 3 at 26-27; Tr. 164:4 – 165:8) Moreover, the market forces creating the vacancy also call into question whether the vacant property continues to share the same highest and best use as the subject. (Ex. 3 at 24) Without adjustments and confirmation the subject and the 24 sale properties share the same highest and best use, the relevance of the 24 sales is limited. To the extent the 24 sales could support Complainant’s highest and best use conclusion and opinion of value, the lack of adjustments undermines highest and best use conclusion and renders the opinion of value unpersuasive.
Rench’s highest and best conclusion is unpersuasive for the same reasons. Rench utilized four retail buildings included on McReynolds’ list of 24 properties. Like McReynolds, Rench’s highest and best use conclusion rests on a comparison of the unadjusted sales of smaller, older, single-story, vacant retail buildings to the subject. Rench testified he “did not perform a – a complete appraisal of the – a complete analysis” and that the four sales he used were for “highest and best use demonstration purposes only.” (Tr. 52:3-12) Like McReynolds’ analysis, Rench’s analysis is unpersuasive because it does not account for the differences between the four sale properties and the subject. The lack of adjustments presupposes the smaller, older, vacant properties collectively serve as a market proxy for the subject. They are not.
Unlike the smaller, older, single-story, vacant buildings properties identified by Complainant’s appraisers, the subject property consists of a three-story, 376,538 square-foot, fully occupied building constructed in 2015 and located on 21 acres within the CORTEX district in midtown St. Louis. By basing the analysis on sales of smaller, older, vacant buildings, Complainant’s highest and best use conclusion necessarily assumes the contributory value of the subject’s improvements is influenced by similar factors that resulted in 24 sales of mostly vacant buildings. The subject property shares none of those attributes. The resulting highest and best use conclusion is unpersuasive. The unadjusted sales of demonstrably different properties do not persuasively demonstrate the subject’s four-year-old improvements lack significant contributory value and should be demolished.
Complainant’s highest and best use conclusion and proposed value are not supported by substantial and persuasive evidence. Complainant did not meet its burden of producing substantial and persuasive evidence of overvaluation and “the value that should have been placed on the property.” Tibbs, 599 S.W.3d at 7.
5. Respondent Produced Substantial and Persuasive Evidence of Value.
The STC is statutorily obligated to determine the TVM of property based on the evidence in the record. Respondent’s evidence is both substantial and persuasive. It shows the TVM of the subject property was $62,500,000 as of January 1, 2019.
Unlike Complainant’s appraisers, White concluded the lack of comparable sales precluded reliance on the comparable sales to determine the subject’s highest and best use. (Ex. 3 at 42-45) White concluded the highest and best use of the subject as improved was continued retail use. (Ex. 1 at 41) White concluded “[t]he indicated values from the cost and income capitalization approaches to value were far greater than the land value, much less the land value less the cost to raze the improvements.” (Ex. 3 at 6) White’s highest and best use conclusion is persuasive.
White’s income approach analysis persuasively demonstrates the BOE overvalued the subject property and that the TVM of the subject property as of January 1, 2019, was $62,500,000. White estimated market rent based on five local big-box leases supplemented by leases of larger buildings in Minnesota, Wisconsin, Iowa, and Colorado. (Ex. 1 at 49-50) White concluded the market rent of the subject was $12.00 per square foot, resulting in potential rental income of $4,369,908. (Ex. 1 at 51) The estimated market rent of $12.00 per square foot is consistent with surveyed rental rates in the subject’s submarket which, in 2017 and 2018, ranged from $11.83 to $13.05 per square foot on a triple net basis. (Id. at 36)
White’s market rent conclusions reflect the potential income that could be generated by the subject’s real estate. The fact the subject’s estimated market occupancy was 95%, considered in conjunction with the fact it was fully occupied as of January 1, 2019, indicates the subject’s location and physical attributes make it suitable for and marketable as a large-scale retail property. These attributes of the real property enable income generation and, by extension, create market value for the real property apart from the business that occupies it.
Finally, White estimated market vacancy and operating expenses to estimate a net operating income of $4,004,292. These estimates are supported by market-based data. Although there is evidence that the atypical configuration of the building, particularly the higher ceilings, may result in atypical expenses, White’s analysis is the best and only evidence in the record establishing market-based income and expenses that could be generated by the subject property. Applying the market-based capitalization rate of 6.25% resulted in an estimated value of $62,500,000. (Ex. 1. at 58) White’s analysis is supported by market data and, on this record, provides the most persuasive estimate of the TVM of the subject property as of January 1, 2019.
Complainant’s Critique of White’s Approach
Complainant asserts White’s analysis is deficient in several respects. Complainant’s critiques are unpersuasive.
First, Complainant asserts White’s income approach is not viable because it is premised on a hypothetical sale by Complainant to Complainant due to the lack of a market for the subject property as improved. (Compl. Br. at 23; Compl. Reply Br. at 7) White testified an owner occupant is the most likely purchaser and that Complainant “is one example I just gave.” (Tr. 216:24) White specifically testified “I’m not making any assumptions about tenancy other than it’s occupied.” (Tr. 216:18-19) White further clarified his position in response to questioning by Complainant’s counsel:
Q: Can you identify – I’m not – don’t put IKEA in this bucket but can you identify anyone other than the current occupant who would use a layout like this?
A: There are other retailers that would use this space, yeah.”
(Tr. 229:18-23) (emphasis added). White’s testimony makes it clear his income approach is not predicated on a hypothetical assumption Complainant would purchase the property from itself. Complainant’s argument that White’s income approach is based on an unrealistic hypothetical transaction is not supported by the record.
Likewise, Complainant’s assertion there is no market for the subject property as improved is also not supported by substantial and persuasive evidence. While McReynolds testified he could think of no purchaser for the subject property, Rench testified “the buyer of the property would – would be somebody who would use it for themselves.” (Tr. 23:20-22) Although Rench did not identify a specific purchaser, he testified “I’m sure they exist.” (Tr. 32:19) Rench also testified an investor could purchase the property, but the lease-up costs would be high. (Tr. 23:22-24; 24:1-6) Similarly, in response to a question as to whether Respondent’s appraiser correctly identified an owner-occupant as the “most likely buyer,” Complainant’s review appraiser, Uzemack, testified that was “probably correct” while also acknowledging “there aren’t a lot of people that have wallets thick enough to make the monthly rent on a space that large.” (Tr. 293:21-25; 294:1-6) Finally, Respondent’s appraiser, White, testified retailers like Bass Pro and Cabela’s “among others” could occupy the space. (Tr. 207:24-25; 208:1-2; see also Tr. 159:10-15) The market may be limited to relatively few purchasers, but a specialized market is still a market. There is no substantial and persuasive evidence indicating the lack of any market for the subject property as improved.
Second, Complainant’s experts assert the income approach should not be used because the subject is an owner-occupied property that does not generate rental income. The fact the subject is not presently an income producing property does not necessarily mean it cannot produce income and cannot be valued with the income approach. “Any property that has the potential to generate income can be valued under the income capitalization approach.” Appraisal Institute, The Appraisal of Real Estate 441 (14th ed. 2013). Like the sales comparison and cost approach, the income approach is market-based and is aimed at estimating “the property’s true value in money.” Snider, 156 S.W.3d at 347; see also The Appraisal of Real Estate at 36 n.1 (noting “all three approaches to value are ‘market’ approaches in that they rely on market data”).
The concept of “fair market value is a hypothetical metric that asks what price an informed buyer and an informed seller would agree on when neither must act, but both are willing.” Robinson v. Langenbach, 599 S.W.3d 167, 183 (Mo. banc 2020). One way to estimate fair market value is with an income approach capitalizing the income the real property could generate. Snider, 156 S.W.3d at 347. White’s income approach did just that by superimposing a market-based NOI and capitalization rate on the subject’s real estate to estimate the TVM. As White testified, “[w]hat we’re talking about … is the real estate’s ability to generate rental income, period.” (Tr. 242:8-10)
This does not mean the income approach is always preferable or applicable. The income approach “can be particularly unreliable” in a market “where owner-occupants outbid investors.” The Appraisal of Real Estate at 45. In a market dominated by owner-occupants, such as the single family home market, income data is scarce and the sales comparison approach is preferable. Id. at 645. Here, some caution is warranted because the record indicates the subject would most likely be purchased by an owner-occupant rather than investor. However, as White determined, there is sufficient market-based income data for retail properties to estimate the potential NOI of the subject property and utilize the income approach. Moreover, the record also indicates a lack of comparable sales. This leaves the income and cost approaches as the only options. Of course, the subject’s unique attributes interject uncertainty into relationship between value and income. But those uncertainties are less acute in White’s income approach than in Complainant’s reliance on unadjusted sales of smaller, older, vacant properties. And, unlike Complainant’s exclusive reliance on sales of dissimilar properties, White mitigated some of that uncertainty by using the cost approach as a check on the income approach. On this record, Complainant’s assertion the income approach is inapplicable is not persuasive.
Third, Complainant asserts that even if White’s income approach is viable, it is unreliable because it overstates the subject’s NOI. (Compl. Br. at 24) Specifically, Complainant asserts White failed to account for the subject’s extensive warehouse space, large size, and extra expenses while relying on out-of-market comparables and not accounting for tenant improvement allowances (TI). (Id. at 24-27) The record does not support this argument.
White estimated market rent based on five local big-box leases supplemented by leases of larger buildings in Minnesota, Wisconsin, Iowa, and Colorado. (Ex. 1 at 49-50) White’s decision to gather market rent data from a broader region to supplement the local data is reasonable given that every expert acknowledged the subject property is unique in the St. Louis market. Complainant’s appraiser – McReynolds – relies more heavily than did White on market data from outside the St. Louis market. Twenty out of McReynolds’ 24 properties are located outside the St. Louis market. (Ex. A. at 62) Complainant’s reliance on broader regional data to support its highest and best use conclusion undercuts the critique of White’s reference to five properties in other states. White’s estimated market rent of $12.00 per square foot is based on market data and, on this record, represents a persuasive estimate of the subject’s market rent.
Likewise, White relied on market data to estimate the subject’s market expenses. Although the subject’s atypical size may generate atypical expenses, the improvements are also relatively new. White testified newer buildings generally incur lower expenses than older buildings. (Tr. 257:3-11) White’s expenses estimates are market-based and reasonable.
Regarding tenant improvements the record shows White was aware of the tenant improvement provisions in the comparable leases. (Tr. 237:12 – 245:20) White testified tenant improvement allowances are often a capital item and the benefits accrue to the real estate. In other words:
“[S]ome of that TI really is going to the benefit of the building itself and so it can be really dangerous when you look at TIs to assume that it solely benefits the tenant. Quite often it’s – you’ll find owners will try to make the TI package look as large as possible even though they’re doing things like well, I’m going to fix the roof for you. Well, you’ve got to fix the roof no matter what so they’ll include it with their TI package.
(Tr. 245:1-9) White’s treatment of tenant improvements is reasonable.
Fourth, Complainant asserts the cost approach is inapplicable because the improvements do not reflect the highest and best use of the property. (Compl. Br. at 27-30) This critique is premised on the assumption Complainant’s highest and best use conclusion – demolishing the four-year-old improvements and redeveloping the site – is supported by substantial and persuasive evidence. As established, Complainant’s highest and best use conclusion is not based on evidence that is both substantial and persuasive.
Complainant’s critique of White’s cost approach is also unpersuasive because White emphasized the income approach, not the cost approach. Unlike Complainant’s appraisers, White’s use of the income and cost approaches utilized the “checks and balances provided by using more than one approach to value.” The Appraisal of Real Estate at 387. Complainant’s review appraiser, Uzemack, acknowledged this very point, testifying that not utilizing other approaches to value “can seduce our minds in believing that we’re correct in making certain sets of assumptions based on the data observed.” (Tr. 276:10-12) Further, because the subject property is unique, “the cost approach is particularly appropriate” as an alternate approach to value. Snider, 156 S.W.3d at 347. Complainant’s reliance on sales of older, smaller, vacant buildings, and the absence of any cost or income approach analysis, undermines the persuasiveness of Complainant’s opinion of value relative to White’s conclusion the TVM of the subject was $62,500,000 as of January 1, 2019.
Finally, Complainant asserts White should have performed a sales comparison with the six sales used to estimate the capitalization rate. (Comp. Br. at 30-31) The six sales were likely sale leaseback transactions. (Ex. A, Addendum F; Tr. 296:7-13; 315:13-15) Sale leasebacks are often utilized to raise capital. Thus, Complainant’s appraiser, McReynolds, testified sale leasebacks are “not a – a market driven transaction.” (Tr. 85:8-9) Similarly, White testified there are situations in which sale leasebacks are considered valid sales, but he also testified “[r]etailers could have reason to make the lease back rate artificially low to keep future operating expenses low.” (Tr. 206:21-23) The substantial and persuasive evidence in the record shows the six sales White utilized were likely not good candidates for a comparable sales approach analysis.
Complainant’s evidence and arguments do not undermine the persuasiveness of White’s opinion of value.
CONCLUSION AND ORDER
The BOE’s decision finding the TVM of subject properties on January 1, 2019, was $75,700,000 is set aside. The TVM of the subject property on January 1, 2019, was $62,500,000.
Application for Review
A party may file an application for review of this decision within 30 days of the mailing date set forth in the certificate of service for this decision. The application “shall contain specific detailed grounds upon which it is claimed the decision is erroneous.” Section 138.432. The application must be in writing, and may be mailed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, or emailed to Legal@stc.mo.gov. A copy of the application must be sent to each person listed below in the certificate of service. Failure to state specific facts or law upon which the application for review is based will result in summary denial. Section 138.432.
The Collector of the City of St. Louis, and the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an application for review, unless the disputed taxes have been disbursed pursuant to a court order under the provisions of section 139.031.
SO ORDERED May 6, 2022.
Eric S. Peterson
Senior Hearing Officer
State Tax Commission
Certificate of Service
I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on May 6, 2022, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.
Amy S. Westermann
 Complainant timely filed a complaint for review of assessment. The State Tax Commission (STC) has authority to hear and decide Complainant’s appeals. Mo. Const. art. X, sec. 14; Section 138.430.1, RSMo 2000. All statutory citations are to RSMo 2000, as amended.
 Both parties submitted a transcription of the evidentiary hearing. For consistency, all transcript references are to the transcript provided by Complainant. There is no material difference between the transcripts with respect to any cited material.
 All citations to written testimony refer to the numbered question and answer.
 Complainant cites State ex rel. Jackson Cty. Prosecuting Att’y v. Prokes, 363 S.W.3d 71 (Mo. App. W.D. 2011). Prokes is inapposite. In Prokes, the court held sanctions were warranted because the State violated a detailed discovery order requiring disclosure of “fifteen specific categories of documents and/or information” to the defense. Id. at 74. Unlike Prokes, this is an administrative tax appeal in which no discovery order was issued and, therefore, no discovery order was violated. Unlike Prokes, where the State withheld information it was ordered to produce, Complainant does not assert White’s inspection during normal business hours uncovered information not equally available to Complainant as the owner of the subject property. Further, at the evidentiary hearing, Complainant’s cross-examination sought to establish White’s inspection was deficient because it did not, for instance, include the warehouse areas. (Tr. 194:21 – 202:17) Issues pertaining to alleged incomplete data gathering and analysis are best addressed, as they were in this case, through cross-examination rather than wholesale exclusion of evidence. Revis v. Bassman, 604 S.W.3d 644, 655 (Mo. App. W.D. 2020); see also State ex rel. State Highway Comm’n v. Carlson, 463 S.W.2d 74, 78 (Mo. App. K.C. 1970) (noting facts regarding the trustworthiness of an expert appraiser’s testimony can “be developed on cross-examination and [may] weaken or destroy the value of the opinion”).
 In an administrative hearing, as in circuit court, an objection must be both timely and specific. Ruffin v. City of Clinton, 849 S.W.2d 108, 113 (Mo. App. W.D. 1993). The purpose of this rule is to make the basis of the objection “reasonably apparent to the hearing body to allow it to take corrective action.” Ruffin, 849 S.W.2d at 113. Complainant’s objections were taken with the case and not finally resolved at the hearing. The post-hearing briefing makes the full scope of Complainant’s objection apparent while allowing for corrective action. Complainant’s objections will be considered on the merits.
 Section 137.115.1 requires assessors to value real property at its TVM. Section 138.430.1, in turn, authorizes the STC to hear and decide appeals “concerning all questions and disputes involving the assessment against such property” including “the correct valuation to be placed on such property[.]” The statutory obligation to determine “the correct valuation” includes consideration of Respondent’s evidence indicating the BOE overvalued the subject property.