Realty Associates Fund V v. Zimmerman (SLCO)

July 31st, 2012

State Tax Commission of Missouri






v.                                                                             ) Appeal Number 09-12754












Decision of the St. Louis County Board of Equalization reducing the assessment made by the Assessor is SET ASIDE.The true value for the subject property is set at $6,230,660, commercial assessed value of $1,993,810.

Complainant is represented by Counsel, Thomas Rynard, Jefferson City, Missouri.

Respondent is represented by Associate County Counselor Robert Fox.

Decision rendered by Hearing Officer Maureen Monaghan.


Complainant appeals, on the ground of overvaluation, the Hearing Officer enters the following Decision and Order.


Complainant submitted the following exhibits and the exhibits were admitted into evidence:




CV of Douglas Zink


Appraisal Report – $5,360,000


Written Direct Testimony Douglas Zink


County Ordinance 22,343 (2005)


Deed Search


BOE Order


BOE/Work file


Cushman Wakefield Paper


BOE – Sale #3


Pages 505-507 Appraisal of Real Estate 13th Edition


Page 501 Appraisal of Real Estate 13th Edition


Comparable Sales Work File


Respondent submitted the following exhibits and the exhibits 1 & 2 were admitted into evidence:




Appraiser Report – $9,110,000


Written Direct Testimony of Albert Lincoln





1.Jurisdiction.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the St. Louis County Board of Equalization.

2.Assessment.Assessor determined a true value for the property of $11,556,300, commercial classification.The Board of Equalization reduced the true value to $7,153,500.

3.Subject Property.The subject property is a 12.380 acre site improved with 219,542 square foot warehouse.A 129,497 square foot improvement was constructed in 1980.An additional 90,045 square foot addition was added in 2006.Office space is approximately 10,507 square feetor 7.5% of the space.

4.There was no evidence of new construction and improvement from January 1, 2009, to January 1, 2010, therefore the assessed value for 2009 remains the assessed value for 2010.[1]

5.The evidence was substantial and persuasive to rebut the presumption of correct assessment by the Board and conclude the true value of the property to be $6,230,660, commercially assessed.



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]

Presumptions In Appeals

There is a presumption of validity, good faith and correctness of assessment by the CountyBoardof 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]

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, 2009.[5]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.”[6]

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[7]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.[8]

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.[9]True value in money is defined in terms of value in exchange and not value in use.[10]It is the fair market value of the subject property on the valuation date.[11]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.[12]


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.[13]

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.[14]

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.[15]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.[16]

Cost Approach Not Appropriate for Present Appraisal Problem

The valuation of property under the cost approach is based on the estimated reproduction cost of the improvements less depreciation.The approach works best for new improvements and where sales and income data is limited.The subject property is not new and the appraisers provided income data for similar commercial properties and sales for valuation purposes therefore the cost approach is not appropriate for valuing this property.

Sales Approach Appropriate to Substantiate Value

The sales comparison approach is appropriate when a number of properties that are similar to the subject have been sold and the sale date is close in time to the valuation date. The sales comparison approach utilizes sales of properties and adjusts for differences to determine a value for the subject property.Adjustments to the comparable properties sale prices are made using units of comparison.The amount of adjustment is determined after reviewing market data.The sales comparison approach is only as reliable as there are sufficient sales during a relative time period and location and as there is sufficient market data for accurate adjustments.

In general, more than language stating what the adjustment in the sales grid is should be provided in the appraisal.Stating that “downward market conditions [time] adjustment of -15% reflects the declining market conditions since the date of sale” or “[t]he location of Sales #5 is rated inferior….[t]herefore, an upward adjustment for location has been made to this sale” provides nothing more than what can be concluded from the sales grid for positive or negative adjustments.

As example, both appraisers used sales at 3780 Rider Trail South(August 2008) and 20 Corporate Woods (June 2008).The Complainant’s appraiser made a -15% adjustment for time and additional -30% adjustment for location, access, and lease terms to 3780 Rider Trail South.He made a -15% adjustment for time and additional -40% adjustment for location, access, and lease terms to 20 Corporate Woods.The Respondent’s appraiser, however, made a net adjustment of 5% to the sale price of 3780 Rider Trail South and a net adjustment of -6% to the sale price of 20 Corporate Woods.The adjustments were made for land/building ratio, size, office area, and ceiling height.

There is no explanation as to how either appraiser arrived at his per unit adjustment.Neither appraiser provided reference to studies, a generally accepted and validated standard or methodology for this type of appraisal, reference sources, or if the appraiser simply picked the amount for the adjustment out of thin air.

For appraisals to be substantial and persuasive for hearings determining true value, an explanation should be provided as to why negative adjustments of 15% or positive adjustments of 5% were chosen and the basis behind that selection.When an appraiser puts an adjustment into his sales grid, an explanation of how the appraiser arrived at the adjustment and the data, methodology or basis that underlies the adjustment should be included for evidentiary purposes.“Where the basis for a test as to the reliability of the testimony is not supported by a statement of facts on which it is based, or the basis of fact does not appear to be sufficient, the testimony should be rejected.”[17]The reliability of adjustments made in a sales comparison grid are to be supported by an appropriate foundation derived from market data, an accepted methodology for concluding the adjustment, or a basis providing a sound rational.Failure to do so brings into question the validity of the value concluded by an appraiser.

The sales comparison approaches presented lack the market data necessary to determine if the resulting value is rational.Given that the appraisers used the same two sales but concluded on adjusted sales prices of $26.42 to $45.32 for the sale at Rider Trail South and adjusted sale prices of $28.79 to $47.41 for the sale at 20 Corporate Woods, and neither party provided data to validate their procedures, the sales comparison approach provides little evidentiary value.

Income Approach Appropriate for Present Appraisal Problem

The strongest and most compelling approach to value for the subject property is the income approach. The income approach is based on the theory that an investor will pay no more for a property than what income may be received from an investment with similar income and risks.

The first step in this approach is to establish the potential gross income of the subject property.Both appraisers reviewed leases in the market.The Complainant’s appraiser reviewed four leases dated from November 2007 to August 2008.The lease rates ranged from $3.34 to $4.15 per square foot.The appraiser adjusted the rates for time, location/access, age, height and lease term.The adjusted rates range from $2.38 to $3.35 per square foot.Respondent’s appraiser reviewed five leases dated from August 1999 to July 2006 with rates ranging from $3.95 to $6.00 per square foot.The appraiser included pass throughs to adjust the rates to $4.50 to $6.76 per square foot.The appraiser did not make individual adjustments for differences but reviewed those rates and reviewed the Cushman & Wakefield report for the 4th quarter of 2008[18] which, according to the appraiser, reported a North County average rental rate of $6.02.The attorney for Complainant clarified on cross-examination that the rate of $6.02 was for retail space and warehouse space is report as $4.50.

Like in the sales comparison approach, there is no explanation as to how the Complainant’s appraiser arrived at his per unit adjustment.There was no reference to studies, a generally accepted and validated standard or methodology for this type of appraisal, reference sources, or if the appraiser simply picked the amount for the adjustment out of thin air.In reviewing the lease rates provided by the appraisers, the Complainant’s ranging from $3.34 to $4.15 per square foot and the Respondent’s ranging from $4.50 to $6.67 per square foot, and comparing those to an industry publication relied upon by appraisers indicating that rental rates for the market area were $4.50 per square foot, a rent of $4.50 per square foot will be used.

The next step is to determine vacancy and collection losses and expenses. Both parties report similar rates and so a rate of 8.5% will be used.The Respondent’s appraiser provided no information as to expenses other than he used 15% in his calculations.The Complainant’s appraiser reviewed the subject’s expense history as well as the market expense information.After reviewing the information, the Complainant’s appraiser concluded on an operating expense ratio of 21.33% which is appropriate.

The final step is to develop a capitalization rate.The capitalization rate will convert the income into a value indication.Since the hearing is for ad valorem purposes, the real estate taxes were not included as an expense but loaded into the capitalization rate.The 2008 tax rate was 11.652 and the assessment ratio for commercial property is 32% making the load factor .03729 (.11652 x .32).The Complainant’s appraiser concluded on an overall rate of 10% while the Respondent’s appraiser concluded on an overall rate of 11.5%.The Respondent’s appraiser reviewed publications for retail rates and referenced an in-office survey which did not exist.The Complainant’s appraiser reviewed sales in the area and published investor surveys.The rates from the sales ranged from 7.03% to 8.54% with an average of 7.75%.The Complainant’s appraiser reports that due to economic uncertainties the rates should increase 100 to 150 basis points.The publications Complainant’s appraiser refers to report average ranges of 6.73% to 9.4%.The appraiser concluded on a capitalization rate of 9.75%.

An overall capitalization rate of 11.5% is deemed appropriate.

Potential Gross Income

$4.50 for 220,000 sq ft.


Vacancy & Credit



Effective Gross Income






Net Operating Income



Cap Rate



Value Indicated





The strongest and most compelling approach to value for the subject property is the income approach. The income approach is based on the theory that an investor will pay no more for a property than what income may be received from an investment with similar income and risks.


The assessed valuation for the subject property as determined by the Board of Equalization for the St. Louis County for the subject tax day is SET ASIDE.

The assessed value for the subject property for tax years 2009 and 2010 is set at $1,993,810.

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, MO65102-0146, 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. [19]

Disputed Taxes

The Collector of the St. Louis 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 July 31, 2012.



Maureen Monaghan

Hearing Officer

Certificate of Service


I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 31stday of July, 2012, to:Thomas Rynard, 308 E. High Street, Suite 301, Jefferson City, MO 65101, Attorney for Complainant; Robert Fox, Associate County Counselor, Attorney for Respondent, 41 South Central Avenue, Clayton, MO 63105; Jake Zimmerman, Assessor, 41 South Central Avenue, Clayton, MO 63105; John Friganza, Collector, County Government Center, 41 South Central Avenue, Clayton, MO 63105.


Barbara Heller

Legal Coordinator

Contact Information for State Tax Commission:

Missouri State Tax Commission

301 W. High Street, Room 840

P.O. Box 146

Jefferson City, MO 65102-0146


573-751-1341 Fax

[1] Section 137.115.1, RSMo.


[2] Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.


[3] 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).


[4] Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).


[5] Hermel, supra.


[6] 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).


[7] See, Cupples-Hesse, supra.


[8] Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).


[9] 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); See Also, Exhibit A, p. 8 – Definition of True Value in Money.


[10] 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); citing, Stephen & Stephen Properties, Inc. v. STC, 499 S.W.2d 798, 801-803 (Mo. 1973).


[11] Hermel, supra.


[12] 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; Exhibit 1, p. 8.


[13] St. Louis County v. Security Bonhomme, 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).


[14] St. Louis 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).


[15] 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).


[16] 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); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. Div. 2 1974).


[17] Carmel Energy at 783.


[18] Exhibit 8


[19] Section 138.432, RSMo.