Quality Investment Properties KC Office I LLC v. David Cox, Assessor Platte County

November 13th, 2018

State Tax Commission of Missouri

QUALITY INVESTMENT PROPERTIES KC )    
OFFICE I, LLC, )    
              Complainant, )    
  ) Appeal No. 17-79064
v. )   17-79065
  )    
DAVID COX, ASSESSOR, )    
PLATTE COUNTY, MISSOURI, )    
               Respondent. )    

 

ORDER AFFIRMING

HEARING OFFICER DECISION UPON APPLICATION FOR REVIEW

 

HOLDING

            On November 13, 2018, Senior Hearing Officer John Treu (Hearing Officer) entered a Decision and Order (Decision) setting aside the decision of the Board of Equalization of Platte County (BOE).  David Cox, Assessor of Platte County (Respondent) subsequently filed an Application for Review of Hearing Officer’s Decision and Order.  Quality Investment Properties KC Office I, LLC (Complainant), filed a Response to the Application for Review.

We AFFIRM the Decision and Order of the Hearing Officer.  Segments of the Hearing Officer’s Decision may have been incorporated into our Decision without further reference.

FACTS AND PROCEDURAL HISTORY

            Subject property is two parcels of approximately 26.48 acres of land with two buildings of approximately 263,302 total square feet of which 231,706 square feet is net rentable.  The improvements were constructed in the mid-1990s as a call center.  The buildings are connected by a two story, climate controlled, atrium. Amenities include uninterruptible power supply, emergency generators, sprinkler coverage, cafeterias, conference rooms, private office space and dock area.  The property is also improved with parking of approximately 1,767 spaces.  The property suffers from deferred maintenance relating to the roof, fire panel and irrigation system.

The property was purchased by Complainant in December 2013 for $4,000,000.  Prior to the purchase, the property was vacant for three years.  In August of 2015, the property suffered from vacancy of 72%.

Respondent set a true value in money (TVM) of the subject property at $14,149,227.  Complainant appealed to the BOE, which reduced Respondent’s valuation to $10,018,297.  Complainant appealed to the State Tax Commission (STC) on the issue of overvaluation.

The issue of overvaluation was presented at an evidentiary hearing on July 9, 2018 in Platte County, Missouri.  The Hearing Officer found the TVM of the subject parcels on January 1, 2017 to be $5,490,000.

Evidence

            Complainant opined the TVM of the subject property was $2,950,000 as of January 1, 2017.  To support the opinion of value, Complainant offered the following exhibits:

Exhibit Description
A Written Direct Testimony of Bernie Shaner
B Appraisal Report of Bernie Shaner

 

Complainant presented the testimony and report of a general, certified appraiser Bernie Shaner (Shaner).  He has over 45 years of experience in appraisal of property.  Shaner developed the sales comparison approach and income approach to value.  He used four sales in his sales comparison analysis.  The sale prices of the comparable properties were adjusted to account for size, age, condition, and occupancy.  The resulting indication of value was $11.82 – $18.00 per square foot.  Shaner concluded on a square foot value of $18.00 for an indication of value for the subject property of $4,150,000 as if the property was repaired.  Shaner accounted for the deferred maintenance of the roof, fire panel and irrigation system by making an adjustment of $1,210,000.  Shaner’s as-is indication of TVM under the sales comparison approach was $2,950,000.

Shaner developed the income approach.  After a review of the market, he concluded on a rental rate and a vacancy/collection loss percentage.  His calculated stabilized net operating income was $1,034,566.  He applied a loaded capitalization rate of 12%.  The resulting indication of value was $8,600,000.  The appraiser then made adjustments for the deferred maintenance and lease up discounts necessary to achieve market occupancy.  The resulting indication of value as-is was $2,950,000.

Respondent opined the TVM of the subject property was $6,500,000 as of January 1, 2017.  To support the opinion of value, Respondent offered the following exhibits:

  Exhibit Description Ruling
1 Appraisal of Timothy Keller Admitted
2 Certified Copy of Deed 7/18/2016 Admitted
3 Certified Copy of Deed 9/27/2016 Admitted
4 Platte County Assessor Records Admitted
5 CoStar Report Admitted
6 -No Exhibit-  
7 -No Exhibit-  
8 -No Exhibit-  
9 1/1/2015 Appraisal of Shaner of Subject Property Excluded
10 1/1/2017 Appraisal of Shaner of Subject Property Admitted
11 Document Produced by Complaint to Respondent Admitted
12 Database Information Admitted
13 Appeal to BOE Not Regarding Subject Property Excluded

 

Respondent presented the testimony and appraisal report of certified, general appraiser Timothy Keller (Keller).  He has over twenty-nine years of experience.  Keller developed the sales comparison approach and income approach to value.  He used five sales in his sales comparison analysis.  The sale prices of the comparable properties were adjusted to account for size, age, condition, quality, location and occupancy.  The resulting indication of value was $20.83 – $31.61 per square foot.  Keller concluded on a square foot value of $25.00 for an indication of value for the subject property of $6,700,000.  Keller opined that the sale properties were in similar condition as the subject and therefore deemed a deferred maintenance adjustment was unnecessary.

Keller developed the income approach.  After a review of the market, he concluded on a rental rate and a vacancy/collection loss percentage.  His calculated stabilized net operating income was $1,651,550.  He applied a loaded capitalization rate of 11.26%.  The resulting indication of value was $14,043,792.  The appraiser then made adjustments for the deferred maintenance and lease up costs necessary to achieve market occupancy.  The resulting indication of value as-is was $6,400,000.

Keller reconciled his valuations to $6,500,000.

CONCLUSIONS OF LAW

Respondent’s Points on Review

            Respondent alleged that the Hearing Officer’s Decision is erroneous in that the Hearing Officer improperly handled the deferred maintenance when he adjusted Respondent’s indication of value from the sales comparison approach ($6,700,000) by $1,210,000 to address the deferred maintenance.  Respondent alleges the adjustment was unnecessary as Respondent’s appraiser accounted for the deferred maintenance in his indication of value of $6,700,000.

STC’s Ruling

            For the reasons that follow, the STC finds Respondent’s arguments to be unpersuasive.  The STC, having thoroughly reviewed the whole record and having considered the Hearing Officer’s Decision, the Application for Review of Respondent and Complainant’s response opposing the Application for Review, affirms the Hearing Officer’s decision.

 

Standard of Review

            A party to a Decision and Order of a Hearing Officer with the State Tax Commission (STC) may file an application requesting the case be reviewed by the STC.  Section 138.432 RSMo Cum. Supp. 2015 The STC may then summarily allow or deny the request.  Section 138.432.  The STC may affirm, modify, reverse, set aside, deny or remand to the Hearing Officer the Decision and Order of the Hearing Officer on the basis of the evidence previously submitted or based on additional evidence taken before the STC.  Section 138.432.

Weight to be Given Evidence

            The Hearing Officer is not bound by any single formula, rule or method in determining true value in money and is free to consider all pertinent facts and estimates and give them such weight as reasonable 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.  St. Louis County v. Sercurity Bohomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).

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 deemed necessary when viewed in connection with all other circumstances.  Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. W.D. 1991). The Hearing Officer, as the trier of fact, is not bound by the opinions of experts but may believe all or none of the expert’s testimony or accept it in part or reject it in part.  Exchange Bank of Missouri v. Gerlt, 367 S.W.3d 132, 135-36 (Mo. App. W.D. 2012)

 

Discussion

            Respondent contends that the Hearing Officer erred in deducting the cost to cure deferred maintenance from the indication of value because Respondent’s expert considered the deferred maintenance in the selection of his comparable properties.  Respondent’s expert opined that his comparables, with the exception of sale 4, all sold with similar condition issues as the subject property.   Therefore, the deferred maintenance was reflected in Respondent’s expert’s opinion of TVM of $6,700,000.

Complainant counters that the Hearing Officer reviewed all the evidence to conclude a TVM for the subject property. Complainant also contends that the Respondent’s expert erred in not considering prior decisions of the STC[1] when opining TVM. Complainant cross-examined Respondent’s expert who testified that he was not aware of prior appeals of the property and did not consider any prior findings when opining a TVM.  The expert testified that there was no change in the market, the subject’s vacancy, or the building itself from January 1, 2015.   Section 137.076 requires the assessor to consider prior decisions of the STC as to the value of the subject parcel.  In addition, Section 137.345 requires, in every instance the taxpayer appealed their assessment and the appeal was successful, then the next following years, the determination made in the appeal must be the basis of assessment in subsequent years.

The Decision and Order reflects that the comparable sales approach developed by each expert was considered. The Hearing Officer found Respondent’s sales comparison approach to be the most persuasive.  Respondent’s expert comparable sales included a sale that was a call center space.  The net adjustment range in Respondent’s sales grid was 4.99% to 14.98% while in Complainant’s sales grid it was 0% to 80% which indicated Respondent’s sale properties may have been more comparable.  The Decision and Order also set out flaws in the approaches presented.

The subject property suffers from deferred maintenance which includes the roof, fire panel and irrigation system. Both experts recognize the deferred maintenance of the subject property.  The experts addressed the issue differently.  Complainant’s expert opined a value after making an adjustment of $1,210,000 to cure the deferred maintenance.  Respondent’s expert opined that since there was no report of major renovations in the broker listing for the comparable sale properties, the comparable properties were suffering from the same or similar issues of deferred maintenance making an adjustment for such condition unnecessary.

The relative weight to be accorded any relevant factor, including the expert’s report, approaches to value, estimates and other pertinent facts is for the trier of fact.  One may consider the testimony of an expert witness and give it as much weight and credit as deemed necessary when viewed in connection with all other circumstances and may believe all or none of the expert’s testimony or accept it in part or reject it in part.

After a review of all the evidence, the Respondent’s expert’s approach was deemed persuasive except as to the issue of deferred maintenance.  The evidence as to an adjustment of $1,210,000 was found to be persuasive as a buyer would demand the conditions be remediated prior to purchase or consider the cost to cure when purchasing the property.   “A knowledgable buyer considers expenditures that will have to be made upon purchase of a property because these costs affect the price the buyer agrees to pay.  Such expenditures may include…. [c]osts to cure deferred maintenance…”  Appraisal of Real Estate p. 331.

Summary and Conclusion

            STC finds that a reasonable mind could have conscientiously reached the same result as the Hearing Officer based on a review of the entire record.  Hermel, Inc. v. STC, 564 S.W.2d 288 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998).

 

ORDER

            The Decision of the Hearing Officer is AFFIRMED.  The Decision and Order of the Hearing Officer, including the findings of fact and conclusions of law therein, is incorporated by reference, as if set out in full, in this final decision of the STC.

Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140 RSMo within thirty days of the mailing date set forth in the Certificate of Service for this Order.

If judicial review of this decision is made, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the courts unless disbursed pursuant to Section 139.031.8 RSMo.

If no judicial review is made within thirty days, this decision and order is deemed final and the Collector of Platte County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal.

SO ORDERED this 30th day of April, 2019

STATE TAX COMMISSION OF MISSOURI

 

Bruce E. Davis, Chairman

 

Victor Callahan, Commissioner

 

Will Kraus, Commissioner

Certificate of Service

I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 30th day of April, 2019, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.

 

Jacklyn Wood

Legal Coordinator

 

[1] Appeals were filed in 2014 and 2015.  The Decisions included additional parcels.  In Appeals 14-79031, 14-79032, 14-79033, and 14-79035 decided on July 19, 2016, the TVM for all four parcels was set at $8,521,500.  15-79004, 15-79005, 15-79007, 15-79008 and 15-79009 decided on October 31, 2017, the TVM was set at $5,727,163.

 

STATE TAX COMMISSION OF MISSOURI

QUALITY INVESTMENT PROPERTIES KC )
OFFICE I, LLC, )
)
                      Complainant, )
)
v. ) Appeal No. 17-79064 & 17-79065
)
DAVID COX, ASSESSOR )
PLATTE COUNTY, MISSOURI, )
)
                      Respondent. )

 

DECISION AND ORDER

HOLDING

 

Decisions of the Platte County Board of Equalization (BOE) are SET ASIDE.  The parties presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE. True value in money (TVM) for the subject properties combined for tax years 2017 and 2018 is set at $5,490,000.

Quality Investment Properties KC Office I, LLC (Complainant) appeared by counsel Richard Dvorak.

David Cox, Assessor of Platte County (Respondent) appeared in person and by counsels Robert Shaw and Stephen Magers.

Cases heard and decided by Senior Hearing Officer (Hearing Officer) John Treu.

ISSUE

            Complainant appeals, on the ground of overvaluation, the decisions of the BOE of two parcels.  The State Tax Commission (STC) takes Complainant’s appeals to determine the TVM for the subject properties on January 1, 2017.  The values as of January 1 of the odd numbered year remains the values as of January 1 of the following even numbered year unless there is new construction and improvement to the property.  Section 137.115.1 RSMo

The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

EVIDENCE

Complainant’s Evidence.  Complainant opined that the TVM of the subject properties combined was $2,950,000 as of January 1, 2017.  To support the opinion of value, Complainant requested admission of the following exhibits:

Exhibit Description Ruling
A Written Direct Testimony of Bernie Shaner Admitted
B Appraisal Report of Bernie Shaner Admitted

 

Complainant also presented the testimony of Certified General Real Estate Appraiser Bernie Shaner (Shaner).  Shaner is a Member of the Appraisal Institute (MAI). Shaner is a former President of the Kansas City Chapter of the Appraisal Institute. He has over forty-five years of experience in appraising residential, commercial and other property.

The subject properties in Appeals 17-79064 and 17-79065 consist of two parcels of approximately 26.4 acres of land with improvements of twin buildings with approximately 263,302 total square feet of gross building area and 231,706 square feet of net rentable area.[1]  The properties were constructed in the mid-1990s as a call center operation for Citibank.  The buildings are connected by a two-story atrium, which is climate controlled. The amenities include uninterruptible power supply, emergency generators, sprinkler coverage, cafeterias, conference rooms, some private offices and dock area. There are approximately 1,767 parking spaces on these parcels.

Complainant purchased the properties in December 2013 for $4,000,000 although there was no public asking price and bids were submitted as non-binding letters of intent.  The properties were vacant for almost three years.  In August of 2015, TriWest Healthcare Alliance leased 64,195 square feet or 28% of the net rentable area.  The subject’s market area suffers from a vacancy rate of 22.1%.

Shaner reviewed five sales occurring in Kansas City, Missouri, and Gladstone, Missouri, from June 2015 to January 2017.  Only four sales were utilized in Shaner’s analysis, as he believed the four sales to be the most comparable.  Shaner stated the fifth sale was located in a slightly superior submarket, was stabilized, and was on the high end of the market. The four comparable sales prices utilized ranged from $6.34 to $24.88 per square foot of net rentable area.  Sale 5 was $99.60 per square foot of net rentable area.  The four comparable sale properties utilized ranged in size from 67,500 to 152,917 square feet of net rentable area.  Sale 5 was 52,539 square feet of net rentable area.  Adjustments were made for size, age/condition, and occupancy.  Comparable 1 was adjusted for size (-10%), condition (20%) and occupancy (15%).  Comparable 2 was adjusted for size (-10%), condition (75%) and occupancy (15%).  The 75% positive adjustment to Comparable 2 for age/condition was for deferred maintenance relating to its HVAC system.  Comparable 3 was adjusted for size (-5%), condition (10%) and occupancy (-33%). Comparable 4 was adjusted for size (-10%), and condition (10%).

The resulting range of sales prices, after adjustment, was $11.42 and $18.00 per square foot of net rentable area.

Shaner placed most weight on Comparable 4 due to its similar age and occupancy to the subject property thereby requiring the least adjustments.  He concluded on $18 per square foot or $4,150,000 as if the property was repaired. He concluded that deferred maintenance existed as of January 1, 2017, which included roof, fire panel, and irrigation system replacement.   He made an adjustment for deferred maintenance of $1,210,000.  Therefore, Shaner concluded an “as is” value of $2,950,000 under the sales comparison approach.

Shaner also developed the income approach for the subject properties.  The appraiser considered four rent comparables with dollar per full service square foot between $11.98 and $14.88.  He made adjustments for tenant space size and design/functional utility.  His adjusted dollar per square foot range was $12.58 to $15.62.  He utilized a vacancy/collection loss rate of 25% after his market analysis.   Shaner calculated a stabilized net operating income of $1,034,566.

Shaner then conducted an analysis to determine an appropriate capitalization rate.  He found a stabilized market range of 9% to 9.5%, an investor survey range of 9% to 10%, and developed a rate of 9.03% utilizing the Band of Investment technique.  He concluded on a rate of 9.25%.  He then utilized an “estimated mill levy of .0860000, which represents a slight incline from the 2016 actual mill levy.”  He then multiplied this number by the assessment ratio of 32%, resulting in a 2.75% load factor and added it to the unloaded capitalization rate to conclude a loaded overall capitalization rate of 12%.  The appraiser’s resulting indication of value was $8,600,000 as if the property were repaired.

The appraiser made adjustments for the deferred maintenance ($1,210,000) and lease up discount ($4,440,000) to achieve occupancy.   Shaner’s resulting “as is” indication of value under the income approach was $2,950,000.

Although the indications of value of the property as-is under the sales comparison and income approach were identical ($2,950,000),   Shaner placed most weight on the sales comparison approach. His reconciled TVM for both parcels combined was $2,950,000.

Respondent’s Evidence.  Respondent opined that the TVM of the subject properties combined, was $6,500,000 as of January 1, 2017.  To support the opinion of value, Respondent requested admission of the following exhibits:

  Exhibit Description Ruling
1 Appraisal of Timothy Keller Admitted
2 Certified Copy of Deed 7/18/2016 Admitted
3 Certified Copy of Deed 9/27/2016 Admitted
4 Platte County Assessor Records Admitted
5 CoStar Report Admitted
6 -No Exhibit-
7 -No Exhibit-
8 -No Exhibit-
9 1/1/2015 Appraisal of Shaner of Subject Property Excluded
10 1/1/2017 Appraisal of Shaner of Subject Property Admitted
11 Document Produced by Complaint to Respondent Admitted
12 Database Information Admitted
13 Appeal to BOE Not Regarding Subject Property Excluded

 

Respondent also presented the testimony and appraisal report of Certified, General Real Estate Appraiser Timothy Keller (Keller).  Keller is a Member of the Appraisal Institute (MAI).  Keller is a former Chairman of the Kansas Real Estate Appraisal Board.  He is a former Chairman and former President of the Kansas City Chapter of the Appraisal Institute. He has over twenty-nine years of experience in appraising residential, commercial and other property in Missouri.

Keller reviewed five sales occurring in Kansas City and Gladstone, Missouri, from November 2012 to June 2015.  Keller stated that “while overall, the market has improved in this time period, the office market in the Northland has been stable.  Available market data does not indicate any significant change in prices of comparable properties during this period, and no adjustments for market conditions were required.”  The comparable sales prices ranged from $23.14 to $35.12 per square foot of gross building area.  The comparables ranged from 40,486 to 314,578 square feet of net rentable area.    Sales Comparables 1, 2, 3, and 5 consist of traditional office space, while Sale 4 consists predominately of call center space.  Adjustments were made for occupancy, size, condition, age, quality and location.  After adjustments, the comparables had a range of adjusted sales prices between $20.83 and $31.61 per square foot of gross building area.  Keller noted that if the high and low indication are removed, the range tightens to $22.48 to $28.67.

Keller considered Comparable 4 to have a superior location, with Comparables 2, 3, and 5 superior in terms of size.  Although Keller noted that the subject has significant deferred maintenance stemming from needing a new roof, he considered all other comparables to be in similar condition with the exception of Comparable 4, whose condition he deemed to be superior.  Due to the similar condition of Comparables 1, 2, 3, and 5 to the subject, he determined a deferred maintenance deduction was unnecessary.   Keller concluded on $25 per square foot TVM or $6,700,000.

Keller also developed the income approach for the subject properties.  The appraiser considered four rent comparables with effective dollar per full service square foot between $14.30 and $14.89.  He made adjustments for location/access, quality, and age.  His adjusted dollar per square foot range was $14.89 to $16.68.  The appraiser estimated income by reviewing market data.  Keller considered five expense comparables. He utilized a vacancy/collection loss rate of 25% of effective gross income (or 20% of potential gross income).  Keller calculated a net operating income of $1,651,550.

Keller then conducted an analysis utilizing direct capitalization to determine an appropriate capitalization rate.  Based upon comparable sales he determined a rate range of 8.3% to 9.44% with four of the five comparables having a rate range of 8.3% to 8.93%.   He concluded on a rate of 8.5%.  He then calculated an effective tax rate based upon the assessment ratio and the mill levy, resulting in load factor of 2.76%.  Keller added this to the unloaded capitalization rate to conclude a loaded overall capitalization rate of 11.26%.  The resulting indication of value was $14,043,792.  The appraiser then made adjustments for the deferred maintenance ($1,700,000) and lease up costs ($5,900,000) to achieve occupancy.   Keller’s indication of value under the income approach was $6,400,000.

Keller placed more weight on the sales comparison approach due to the nature of the subject properties.  Keller’s reconciled TVM for both parcels combined was $6,500,000.

Respondent also offered Exhibits 2 and 3.  The exhibits are deeds relating to property located at 11020 North Ambassador Drive, Kansas City, Missouri 64153 (across the street from the subject). The exhibit was used in cross-examination of Complainant’s appraiser.  The property is Comparable 2 in Complainant’s appraiser’s sales approach. Although the property was used in the sales comparison approach, the sale in the approach was from July 2016 and Complainant’s appraiser failed to recognize a sale of this property approximately two months later.  The deed was recorded in the Recorder of Deeds’ office on September 29, 2016.  The sale transpired in advance of both the effective date of the appraisal – January 1st, 2017 – and the date that Complainant’s expert, Mr. Shaner, completed his expert report – March 28th, 2018.

FINDINGS OF FACT

  1. Jurisdiction. Jurisdiction over these appeals is proper.  Complainant timely appealed to the State Tax Commission from the decisions of the BOE.
  2. Evidentiary Hearing. Evidentiary Hearing in this appeal occurred on July 9, 2018.
  3. Identification of Subject Property. The subject properties are identified by map parcel numbers:
Appeal Parcel Number
17-79064 17-7.0-25-000-000-008.000
17-79065 17-7.0-26-000-000-014.000

 

The properties are located at 7920-7930 NW 110th Street, Kansas City, Platte County, Missouri.

  1. Description of Subject Property. The subject properties in Appeals 17-79064 and 17-79065 consist of two parcels of approximately 26.48 acres of land with improvements of twin buildings with approximately 263,302 total square feet of gross building area and 231,706 square feet of net rentable area.  The properties were constructed in the mid-1990s as a call center operation for Citibank.  The buildings are connected by a two-story atrium, which is climate controlled. The amenities include uninterruptible power supply, emergency generators, sprinkler coverage, cafeterias, conference rooms, some private offices and dock area. There are approximately 1,767 parking spaces on these parcels.  Deferred maintenance exists relating to the roof, fire panel, and irrigation system.

Complainant purchased the properties in December 2013 for $4,000,000 although there was no public asking price and bids were submitted as non-binding letters of intent.  The properties were vacant for almost three years.  In August of 2015, only 28% of the total area of the subject properties was leased.

  1. Assessment.  The Assessor valued the properties and classified them as commercial, as follows:
Appeal Parcel Number TVM
17-79064 17-7.0-25-000-000-008.000 $607,673
17-79065 17-7.0-26-000-000-014.000 $13,541,554
Total $14,149,227

 

  1. BOE. The BOE valued the properties and classified them as commercial, as follows:
Appeal Parcel Number TV M
17-79064 17-7.0-25-000-000-008.000 $668,297
17-79065 17-7.0-26-000-000-014.000 $9,350,000
Total $10,018,297

 

  1. Prior Valuation. Complainant appealed the 2015 assessment of the subject properties, in addition to one other parcel.  On October 31, 2017, the State Tax Commission issued an Order Affirming Decision of the Hearing Officer upon Application for Review and set a TVM of the two subject properties of $5,628,660.
Appeal Parcel Number TV M
15-79005 17-7.0-25-000-000-008.000 $176,400
17-79007 17-7.0-26-000-000-014.000 $5,452,260
Total $5,628,660

 

  1. No Evidence of New Construction & Improvement. There was no evidence of new construction and improvement from January 1, 2017 to January 1, 2018 therefore the assessed value for 2017 remains the assessed value for 2018.  Section 137.115.1, RSMo.
  2. Presumption of Correct Assessment Rebutted.  The evidence presented was substantial and persuasive to rebut the presumption of correct assessments by the BOE for the subject properties.  Evidence presented established the TVM as of January 1, 2017, at $5,490,000.

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 BOE, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.  Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo. 

Basis of Assessment

            The Constitution mandates that real property and tangible personal property be assessed at its value or such percentage of its value as may be fixed by law for each class and for each subclass.  Article X, Sections 4(a) and 4(b), Mo. Const. of 1945.   The constitutional mandate is to find the true value in money for the property under appeal.  By statute real and tangible personal property are assessed at set percentages of true value in money. Section 137.115.5, RSMo – residential property at 19% of true value in money; commercial property at 32% of true value in money and agricultural property at 12% of true value in money.

Presumption In Appeal

            There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.  Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958). The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the BOE’s valuation is erroneous and what the fair market value should have been placed on the property. Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

The parties presented substantial and persuasive evidence to establish the BOE’s valuations were erroneous as to subject properties.  The evidence presented by both parties established the valuation of the properties.

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.  St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993).    True value in money is defined in terms of value in exchange and not value in use.  Daly v. P. D. George Company, et al, 77 S.W.3d 645, 649 (Mo. App E.D. 2002), citing, Equitable Life Assurance Society v. STC, 852 S.W.2d 376, 380 (Mo. App. 1993.   It is the fair market value of the subject property on the valuation date. Hermel, supra.  Market value is the most probable price in terms of money which a property should bring in a 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.

 

  1. Both parties are well informed and well advised, and both acting in what they consider their own best interests.

 

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

 

  1. Payment is made in cash or its equivalent.

 

  1. Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.

 

  1. 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. Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; See also, Real Estate Valuation in Litigation, J. D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary.

 

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.   See, Nance v. STC, 18 S.W.3d 611, at 615 (Mo. App. W.D. 2000); Hermel, supra; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975).  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.   St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987).

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.  Platte County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); Platte County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).

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.  Platte County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).

Complainant’s Burden of Proof

 

In order to prevail, Complainant must present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2017.  Hermel, supra.   There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a Commission appeal still bears the burden of proof.  The taxpayer is the moving party seeking affirmative relief.   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.”  See, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003); Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).  A valuation which does not reflect the fair market value (true value in money) of the property under appeal is an unlawful, unfair and improper assessment.

Evidence of Value

The evidence presented by both parties established that the BOE’s valuations were incorrect.  The following represent the opinion of TVM of the BOE, Respondent, and Complainant:

Opinion of TVM
BOE $10,018,297
Keller for Respondent $6,500,000 (Sales Comparison) $6,400,000 (Income Approach)
Shaner for Complainant $2,950,000 (Sales Comparison) $2,950,000 (Income Approach)

The evidence presented by both parties allowed the Hearing Officer to establish the valuation of the properties.  Both parties presented the testimony of certified, general appraisers with significant experience.  Both Shaner and Keller valued the properties combined using the sales comparison and the income approaches.   Both placed most weight on the sales comparison approach.  After considering all the evidence, the Hearing Officer concludes the sales approach was the most persuasive method for valuing the subject properties, consistent with the weight given to the approach by both appraisers.

The Hearing Officer found Keller’s sales approach value to be the most persuasive, in that (1) the comparables utilized by Keller included Comparable number 4 which consisted predominately of call center space, (2) Keller’s net adjustment range in his sales comparison grid was 4.99% to 14.98% while Shaner’s was 0% to 80%, and (3) Keller’s gross adjustment range in his sales comparison grid was 24.98% to 40.02% while Shaner’s was 20% to 100%.  The Hearing Officer also found Shaner’s report less persuasive as one of the sales Shaner utilized in his report (Comparable 2) was located across the street from the subject property, at 11020 North Ambassador Drive, Kansas City, Missouri 64153.  Shaner utilized the sale, which occurred in July 2016. However, Shaner failed to recognize a sale of that same property which was recorded in the Recorder of Deeds’ office on September 29, 2016, well in advance of the preparation of Shaner’s appraisal report dated March 28, 2018.

The TVM of the subject property is $6,700,000.  The subject property does have deferred maintenance, which would be recognized by the market, and it is not reflected in the TVM of $6,700,000.  The estimate to cure the deferred maintenance is $1,210,000.  Therefore the TVM of the property “as-is” on January 1, 2017 is $5,490,000 ($6,700,000 – $1,210,000).

ORDER

The assessed valuations for the subject properties as determined by the BOE for Platte County for the subject tax day are SET ASIDE.

The assessed value for the subject properties combine for tax years 2017 and 2018 is set at $1,756,800 ($5,490,000 TVM).

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 specific facts or law upon which the application for review is based will result in summary denial. Section 138.432, RSMo

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 this November 13, 2018.

STATE TAX COMMISSION OF MISSOURI

John Treu

Senior Hearing Officer

 

Certificate of Service

 

I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 13th day of November, 2018, to: Complainants(s) counsel and/or Complainant, the county Assessor and/or Counsel for Respondent and county Collector.

 

Jacklyn Wood

Legal Coordinator

 

[1] Exhibit 11 reflects 258,796 square feet of gross building area and 253,682 square feet of net rentable area.