Inland Western Kansas City LLC v Cox (Platte County)

State Tax Commission of Missouri

 

INLAND WESTERN KANSAS CITY LLC,	)
	)
Complainant,	)
	)
v.	)	Appeal Number 12-79017
	)
DAVID COX, ASSESSOR,	)
PLATTE COUNTY, MISSOURI,	)
	)
Respondent.	)

 

DECISION AND ORDER

HOLDING

 Decision of the Platte County Board of Equalization reducing the assessment

made by the Assessor is SET ASIDE.True
value in money for the subject property for tax year 2012 set at $11,021,130 assessed commercial value of $3,526,760.Complainant appeared by Counsel Richard Dvorak, Overland Park, Kansas.Respondent appeared by John R. Shank, Platte City, Missouri. Evidentiary hearing was conducted by Hearing Officer Maureen Monaghan.
Case decided by Hearing Officer Monaghan.

ISSUE

Complainant appeals, on the ground of overvaluation, the decision of the Platte County Board of Equalization.The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2011. The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

FINDINGS OF FACT

1.Jurisdiction.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the Platte County Board of Equalization.A hearing was conducted on November 13, 2013, at the Platte County Administration Building, Platte City, Missouri.Complainant filed a post hearing brief on February 21, 2014.Respondent filed a brief on March 25, 2014.Complainant replied on April 11, 2014.

2.Assessment.The Assessor appraised the property at $13,640,000, assessed commercial value of $4,364,800.The Board reduced the value to $12,750,000, assessed commercial value of $4,080,000.[1]

3.Subject Property.The subject property is located at 8600-8658 Boardwalk, Kansas City, Missouri.The property is identified by locator number 19-3.0-07-200-000-001-006.The site is approximately 11.15 acres
improved with a multi- retail tenant structure with approximately 115,197 square feet of gross leasable area.The
improvement was built in 2004 and includes parking, signage, landscaping and lighting.

4.Complainant’s Evidence.Complainant submitted the following exhibits which were received into evidence:

 

5.Respondent’s Evidence.Respondent submitted the following exhibits which were received into evidence:

 

Complainant objected to Respondent’s evidence on the grounds of lacking foundation and relevance.The appraisal set forth an opinion of value for January 1, 2012. The Respondent moved to file amended testimony which set forth that the appraiser’s opinion of value would not change if asked to value the property as of January 1, 2011, although there was a lack of supporting documentation for that conclusion.A value as of January 1, 2012, provides some evidence of value for the property on January 1, 2011, and therefore the argument of Complainant will go to the weight to be given to the opinion of value rather than its admissibility.

6.True Value.The true value of the property as of January 1, 2011, is $11,021,130.

CONCLUSIONS OF LAW AND DECISION

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious.The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.[2]

Presumption in Appeals

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[3]The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous and what the fair market value should have been placed on the property.[4]

Standard for Valuation

Section 137.115, RSMo, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so.[5]True value in money is defined in terms of
value in exchange and not value in use.[6]It is the fair market value of the subject property on the valuation date.[7]Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.

Implicit in this definition are the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:

1.Buyer and seller are typically motivated.

                  2.Both parties are well informed and well advised, and both acting in what they consider

their own best interests.

                3.A reasonable time is allowed for exposure in the open market.

                4.Payment is made in cash or its equivalent.

                 5.Financing, if any, is on terms generally available in the Community at the specified date

and typical for the property type in its locale.

                6.The price represents a normal consideration for the property sold unaffected by

special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.[8]

 

Methods of Valuation

Proper methods of valuation and assessment of property are delegated to the Commission.It is within the purview of the Hearing Officer to determine the method of valuation to be adopted in a given case.[9]Missouri courts have approved the comparable sales or market approach, the cost approach and the income approach as recognized methods of arriving at fair market value.[10]

Burden of Proof

Therefore, the Complainant bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.”[12]

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[13]Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact.The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief.[14]

Weight to be Given Evidence

The Hearing Officer is not bound by any single formula, rule or method in determining true value in money, but is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed
entitled.The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to
decide.[15]

The Hearing Officer as the trier of fact may consider the testimony of an expert witness and give it as much weight and credit as he may deem it entitled to when viewed in connection with all other circumstances.The Hearing Officer is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and accept it in part or reject it in part.[16]

Evidence

Both parties presented appraisal reports by certified appraisers.The subject property is a multi-tenant retail building.The Complainant’s appraiser developed the income approach as a potential buyer would be interested in the property based upon the income generated; the Respondent’s appraiser developed the income and the sales comparison approach.He relied primarily on the income approach and developed an opinion of value as of January
1, 2012.

The income approach determines the value by estimating the present worth of what an owner will likely receive in the future as income from the property. The income approach is “based on an evaluation of what a willing buying would pay to realize the income stream that could be obtained from the property when devoted to its highest and best use….” [17]
The approach is most appropriate in valuing investment type properties and is reliable when rental income, operating expenses and capitalization rates can reasonable be estimated from existing market conditions.The appraisers use
of the income approach for the determination of true value of the subject property was appropriate.

The subject property was constructed in 2004.It is improved with 115,197 square feet of leasable retail space.As of January 1, 2011, 99,204 square feet was leased with lease rates ranging from $9.53 to $30.60 per square foot (average of $17.81).The anchor tenant occupied 19,000 square feet and would be vacating the space within the year.Many tenants had co-tenancy agreements based upon the anchor tenant.Leases signed after January 2009 ranged from $9.53 to $29.00 per square foot, or an average of $15.48 per square foot.Market rental
rates in 2010 and 2011 indicated a range of $11 to $24.84 per square foot or an average of $15.48.Both appraisers used the Johnson County Cap Rate Study as an authoritative source.

The Complainant’s calculations of potential gross income ($1,534,474), reimbursements ($431,989), vacancy and collection ($294,969), expenses ($630,761) were reasonable and based upon appropriate information and sources. The appraiser reviewed historical and market rents and reviewed the impact of loss of an anchor tenant and leases requiring co-tenancy. Using the information relied upon, the Complainant’s appraiser calculated a
net operating income of $1,040,732.To calculate a capitalization rate, Complainant reviewed sales, the Johnson County Cap Rate Study for 2011 and the PWC survey for 2010.The appraiser’s overall rate of 9.44% was applied
to the net operating income of $1,040,732 for a valuation determination of $11,021,126.

The Complainant’s appraiser reliance upon the subject’s historic and current lease terms and expenses as well his reliance on the market and investor surveys to support his conclusion were appropriate and the type of information relied upon by experts to conclude a value opinion for the date of valuation specified.

The Respondent’s appraisal is not substantial and persuasive due the appraiser valuing the property one year
after the effective date of the appraisal problem and the lack of supporting data for his conclusion.The appraiser
relied on rental information relevant to 2012 and his sources of information were promotional materials and a rental analysis contained in an appraisal that was submitted to the County Board of Equalization.The author of the rental analysis is unknown and the supporting information contained within an appraisal was not provided.Promotional
materials provided about leasable space provides an appraiser with some information regarding the market, but an appraiser needs to verify data and determine specific terms prior to using the information.Further, the promotional materials were from a retail area anchored by Wal-Mart and Lowes and there was no information that the anchors or other tenants with co-tenancy provisions would be vacating the property.Lastly, the appraiser does not provide the Hearing Officer with a clear explanation of his conclusion as to the capitalization rate.Information contained within his report included portions of the RERC Winter 2012 report, 2012 Cap Rate Study by Daniel Craig and Lynn Michaelson and the PWC third quarter 2011 survey.The appraiser did not provide an explanation of how he analyzed the data, his reliance on 2012 information, or why the market did not change from 2011 to 2012.

“The facts upon which an expert’s opinion is based, like the facts sufficient to support a verdict, must measure up to the legal requirements of substantiality and probative force; the question of whether such opinion is based on and supported by sufficient facts or evidence to sustain the same is a question of law for the court.”[18]An expert’s opinion must be founded upon substantial information, not mere conjecture or speculation, and there must be
a rational basis for the opinion.[19]

The Complainant’s evidence was substantial and persuasive and based upon sufficient facts and
evidence.The appraiser’s basis of opinion was founded upon substantial information. 

ORDER

The assessed valuation for the subject property as determined by the
Assessor and sustained by the Board of Equalization for Platte County for the
subject tax day is SET ASIDE

The assessed value for the subject property for tax years 2012 is set at $3,526,760,
classified as commercial property.

 Application for Review

A party may file with the Commission an application for review of this  decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision.The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous.Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service. Failure to state specificfacts or law upon which the appeal is based will result in summary denial. [20]

Disputed Taxes

The Collector of Platte County, as well as 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 said taxes
have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed.Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED April 25, 2014.

STATE TAX COMMISSION OF MISSOURI

 Maureen Monaghan

Hearing Officer