Lowe's Home Centers, LLC v. Village of Plover

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
October 29, 2020
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2019AP974 Cir. Ct. Nos. 2016CV208
2017CV187
STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT IV

LOWE'S HOME CENTERS, LLC,

PLAINTIFF-APPELLANT,

V.

VILLAGE OF PLOVER,

DEFENDANT-RESPONDENT.

APPEAL from an order of the circuit court for Portage County:
THOMAS T. FLUGAUR, Judge. Affirmed.

Before Kloppenburg, Graham, and Nashold, JJ.

¶1 NASHOLD, J. Lowe’s Home Centers, LLC (Lowe’s), challenges
as excessive the 2016 and 2017 property tax assessments of its store in the Village
of Plover. Following a trial, the circuit court upheld the assessments and
dismissed the claims. We affirm.
No. 2019AP974

BACKGROUND

¶2 In 2005, Lowe’s completed construction of a big box store in a retail
area on the Village of Plover’s northeast side. The Village assessed the land and
improvements (the subject property) for the 2005 tax year at $7,356,600. The
Village did not modify the assessed value for any of the subsequent 12 years, and
Lowe’s never challenged the assessments in any year between 2005 and 2015.

¶3 On July 1, 2016, Lowe’s filed a complaint, pursuant to WIS. STAT.
§ 74.37(3)(d), contesting the January 1, 2016 assessment as excessive.1 Lowe’s
filed another complaint one year later challenging the January 1, 2017 assessment.
The cases were consolidated.

¶4 A four-day bench trial was held in January 2019. The circuit court
heard testimony from Village Assessor Debra Edwards; Lowe’s’ expert appraiser
Michael MaRous; the Village’s expert appraiser Dominic Landretti; and
Dr. Thomas Hamilton, retained by the Village to present expert testimony in
rebuttal to MaRous’s testimony and report. All three experts also submitted
reports that were entered into evidence. The parties submitted pre-trial and post-
trial briefs.

¶5 In April 2019, the circuit court issued a written decision, affirming
the Village’s assessments and dismissing both complaints. The court determined
that Lowe’s had not overcome the presumption of correctness afforded to
municipalities’ assessments pursuant to WIS. STAT. § 70.49(2). Specifically, the

1
All references to the Wisconsin Statutes are to the 2017-18 version unless otherwise
noted. We cite the current version for ease of reference. The statutory language that we apply
here has not changed.

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No. 2019AP974

court determined that the 2016 and 2017 assessments were the result of mass
appraisals and that Lowe’s failed to show that the mass appraisals did not comply
with Wisconsin law. The court then analyzed the assessments under the three-tier
hierarchy provided for in Wisconsin statute and case law, as well as in the 2016
Wisconsin Property Assessment Manual (Property Assessment Manual).2 See
WIS. STAT. § 70.32(1); State ex rel. Markarian v. City of Cudahy, 45 Wis. 2d
683, 685-86, 173 N.W.2d 627 (1970); see also Bonstores Realty One, LLC v. City
of Wauwatosa, 2013 WI App 131, ¶14, 351 Wis. 2d 439, 839 N.W.2d 893.

¶6 Because there was no recent arm’s-length sale of the property to
enable a Tier I analysis, the circuit court first addressed the parties’ analysis of the
Tier II comparable sales approach. See Markarian, 45 Wis. 2d at 686. The court
determined that there were no reasonably comparable sales to facilitate an analysis
under the Tier II approach, rejecting the proposed comparable sales offered by
Lowe’s’ expert, MaRous. The court found that all of MaRous’s proposed
properties differed from the subject property in that they “were either vacant stores
or stores in transition/distressed,” whereas the Lowe’s store had been in continual
operation since its construction in 2005. The court also found that MaRous’s
proposed comparable properties differed from the subject property in exposure to
the market and location.

¶7 The circuit court relied on the Tier III cost approach, crediting the
cost approach analysis of the Village’s expert, Landretti, over that conducted by
Lowe’s’ expert, MaRous. Using the cost approach, Landretti estimated that the

2
All references are to the 2016 edition of the Wisconsin Property Assessment Manual
unless otherwise noted.

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No. 2019AP974

subject property’s market value for 2016 was $8,500,000, after rounding from his
calculations of $8,539,000. He arrived at this amount by estimating the cost of a
replacement building to be $8,216,000, making a $2,347,000 deduction for
depreciation based on the building’s age and economic life—an approximately
29% deduction that included depreciation due to functional obsolescence—and
then adding $370,000 for the depreciated value of site improvements and
$2,300,000 for the value of the land. Using the same approach, Landretti
estimated a market value of $8,700,000 for 2017. Landretti’s report explained that
his “economic age-life” depreciation method accounted for “physical
deterioration, functional obsolescence, and external obsolescence.”

¶8 The circuit court noted that MaRous’s analysis under the Tier III
cost approach most deviated from Landretti’s in its inclusion of a 50% deduction
for functional obsolescence of the building. Under MaRous’s cost approach,
which included the 50% deduction for functional obsolescence, MaRous estimated
the market value of the subject property to be $4,620,000 for 2016, after rounding
from his calculations of $4,616,340. MaRous arrived at this amount by estimating
the cost of a replacement building to be $7,865,361, making a total 75% deduction
for physical, functional, and external depreciation, and then adding $650,000 for
the depreciated value of site improvements and $2,000,000 for the value of the
land. Using this same approach, MaRous estimated a value of $4,500,000 for
2017. The court determined that MaRous’s functional-obsolescence deduction
was unfounded, as MaRous had determined the highest and best use of the subject
property was continued use as a big box retailer,3 yet he made a substantial
3
MaRous specifically concluded that the highest and best use for the subject property
was continued use as an operating Lowe’s. Landretti likewise concluded that the highest and best
use was its existing use as a big box retail store.

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No. 2019AP974

functional-obsolescence deduction because the property was single-tenant instead
of multi-tenant. The court found that Landretti’s estimate under the Tier III cost
approach was the “most credible,” and “provide[d] the best estimate of the fee
simple value of the property,” “the fairest value of the property,” and the “least
amount of speculation.”

¶9 The court affirmed the Village’s assessments, and dismissed both of
Lowe’s’ claims. Lowe’s appeals.

¶10 In addition to the parties’ briefs, amicus briefs were filed by the
League of Wisconsin Municipalities and Wisconsin Manufacturers & Commerce.

DISCUSSION

¶11 This is a review of the circuit court’s decision rejecting Lowe’s’
claims of excessive tax assessments under WIS. STAT. § 74.37. “The question on
appeal in a Wis. Stat. § 74.37 action is not whether the initial assessment was
incorrect, but whether it was excessive.” Metropolitan Assocs. v. City of
Milwaukee, 2018 WI 4, ¶40, 379 Wis. 2d 141, 905 N.W.2d 784.

¶12 Pursuant to WIS. STAT. § 70.32(1), “[r]eal property shall be valued
by the assessor in the manner specified in the Wisconsin property assessment
manual.” A municipality’s assessment is presumed correct upon entry of the
assessed value into the assessment roll and submission of the assessor’s affidavit:

The value of all real and personal property entered
into the assessment roll to which such affidavit is attached
by the assessor shall, in all actions and proceedings
involving such values, be presumptive evidence that all
such properties have been justly and equitably assessed in
proper relationship to each other.

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No. 2019AP974

WIS. STAT. § 70.49(2). Here, it is undisputed that the subject property was
assessed at $7,356,600 in the challenged tax years. Thus, the assessments are
“entitled to a presumption that [they were] ‘justly and equitably’ made, giving rise
to a presumption of correctness.” Metropolitan Assocs., 379 Wis. 2d 141, ¶50;
see also Bonstores, 351 Wis. 2d 439, ¶10 (“Because both parties agreed that the
property was assessed at $25,593,300, the City has met its burden of establishing
the presumptive fair market value of the property.”).

¶13 “The presumption can be overcome if the challenging party presents
significant contrary evidence,” Metropolitan Associates, 379 Wis. 2d 141, ¶50, or
shows that the assessment does not comply with Wisconsin law or the Property
Assessment Manual, see Regency West Apartments LLC v. City of Racine,
2016 WI 99, ¶¶3-4, 22, 71, 73, 372 Wis. 2d 282, 888 N.W.2d 611; see also
Bonstores, 351 Wis. 2d 439, ¶5.4

¶14 “Whether a city has erroneously failed to follow statutory
requirements in making an assessment is a question of law that we review de
novo.” Walgreen Co. v. City of Madison, 2008 WI 80, ¶17, 311 Wis. 2d 158,

4
We acknowledge that our appellate courts have also expressed the rule regarding when
the presumption attaches in a slightly different way—for example, that “‘[n]o presumption of
correctness may be accorded to an assessment that does not apply the principles in the Property
Assessment Manual.’” Walgreen Co. v. City of Madison, 2008 WI 80, ¶17, 311 Wis. 2d 158,
752 N.W.2d 687 (quoted source omitted). The precise language on this point may be of little
practical consequence but, consistent with WIS. STAT. § 70.49(2) and other precedent from our
appellate courts, we employ the language indicating that the presumption exists upon the
assessment being entered into the assessment roll, and that the taxpayer may overcome the
presumption by showing significant contrary evidence or that the assessment does not comply
with Wisconsin law or the Wisconsin Property Assessment Manual. See, e.g., Metropolitan
Assocs. v. City of Milwaukee, 2018 WI 4, ¶50, 379 Wis. 2d 141, 905 N.W.2d 784; Regency West
Apartments LLC v. City of Racine, 2016 WI 99, ¶¶3-4, 22, 71, 73, 372 Wis. 2d 282, 888 N.W.2d
611; Bonstores Realty One, LLC v. City of Wauwatosa, 2013 WI App 131, ¶¶5, 10, 351 Wis. 2d
439, 839 N.W.2d 893.

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No. 2019AP974

752 N.W.2d 687; see also Bonstores, 351 Wis. 2d 439, ¶6 (“[W]e independently
review whether a valuation complied with the statutes and the Wisconsin Property
Assessment Manual.”). However, “we defer to the circuit court’s findings of fact
when resolving conflicting evidence. We will not upset the court’s factual
findings, including findings involving the credibility of witnesses, unless they are
clearly erroneous.” Bonstores, 351 Wis. 2d 439, ¶6 (citation omitted); see WIS.
STAT. § 805.17(2). “In particular, it is within the province of the factfinder to
determine the weight and credibility of expert witnesses’ opinions.” Bonstores,
351 Wis. 2d 439, ¶6.

¶15 On appeal, Lowe’s argues that the Village is not entitled to the
presumption of correctness for several reasons. First, Lowe’s argues that the 2016
and 2017 assessments were arrived at contrary to Wisconsin law and the Property
Assessment Manual because the assessed value for the subject property remained
unchanged between 2005 and 2017 and the Village failed to comply with the
procedures for a mass appraisal. Second, Lowe’s contends that the circuit court
improperly rejected Lowe’s’ suggested comparable sales. Finally, Lowe’s argues
that the court’s analysis of the Tier III cost approach was flawed because, among
other things, the court did not take into account the functional and economic
obsolescence identified by Lowe’s’ expert, MaRous.

¶16 For the reasons explained below, we agree with the circuit court that
Lowe’s has failed to overcome the presumption of correctness, and we affirm the
court’s decision upholding the assessments and dismissing Lowe’s’ claims.

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No. 2019AP974

I. Mass Appraisal

¶17 Lowe’s argues that the Village is not entitled to the presumption of
correctness because the Village’s 2016 and 2017 assessments violated the
Property Assessment Manual by carrying over the exact market value from the
2005 appraisal for 12 years. Lowe’s relies on the Property Assessment Manual’s
statements that “[a]ssessments should not be carried over from year to year with
no adjustments” but should instead reflect various trends and factors that affect
market value. Wisconsin Property Assessment Manual, at 19-19. Lowe’s argues
that, contrary to the circuit court’s conclusion, there was no mass appraisal
underlying the 2016 and 2017 assessments. Lowe’s’ arguments are not
persuasive.

¶18 Our supreme court approved of the use of mass appraisal in
Metropolitan Associates, noting that the practice is “widely used throughout the
country.” Metropolitan Assocs., 379 Wis. 2d 141, ¶44. “Mass appraisal is the
systematic appraisal of groups of properties, as of a given date, using standardized
procedures and statistical testing.” Wisconsin Property Assessment Manual, at
7-39; see also Metropolitan Assocs., 379 Wis. 2d 141, ¶29 (using same definition
from 2009 Property Assessment Manual).

¶19 The Property Assessment Manual explains that “[t]he purpose of
mass appraisal is the equitable and efficient appraisal of all property, in a
jurisdiction, for ad valorem tax purposes. Mass appraisal is the underlying
principle that Wisconsin assessors should be using to value properties in their
respective jurisdictions.” Wisconsin Property Assessment Manual, at 7-39-7-40.
The Property Assessment Manual further explains that “[a] mass appraisal system
is comprised of four interdependent subsystems”: (1) a “[d]ata management

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No. 2019AP974

system,” (2) a “[s]ales analysis system,” (3) a “[v]aluation system,” and (4) an
“[a]dministrative system.” Id., at 7-40.

¶20 The circuit court determined that valid mass appraisals occurred in
2016 and 2017. Specifically, the court found that “[t]he Village Assessor, Deb
Edwards, testified that mass appraisal was performed for the January 1, 2016 and
January 1, 2017 years of value. The mass appraisal included a sales ratio analysis
through use of a computer-assisted mass appraisal program that identified
properties that needed adjustment from the prior year.” The court continued:

A review of the evidence shows that the Village
contracted with Dan McHugh, Jr. of Affiliated Property
Valuation Services, LLC. to perform commercial
assessments in 2016 and 2017. WIS. STAT. § 70.055
specifically allows municipalities to retain expert
assessment help.

Lowe’s failed to demonstrate that the mass
appraisal performed by the Village for the January 1, 2016
and January 1, 2017 years did not comply with Wisconsin
law.

As we explain, the record supports the circuit court’s determination that valid
mass appraisals occurred.

¶21 Edwards testified that the Village did not simply carry over the
assessed value without analysis but instead performed a mass appraisal each year
from 2006 through 2017 and that the evaluation resulted in no change to the
assessments. Edwards further testified that Dan McHugh, of Affiliated Property
Valuation Services, was responsible for creating the computer-assisted mass
appraisal models for the Village’s commercial properties, which identified
properties needing adjustment. Despite McHugh’s role in the mass appraisals,
Lowe’s did not call McHugh as a witness and instead questioned only Edwards on
the mass appraisals, including with respect to the four “subsystems” of mass

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No. 2019AP974

appraisal. Edwards testified regarding the subject property’s record card, which
contains data about the property. She also testified to the Village’s use of a sales
ratio study, which, according to the Property Assessment Manual, is “the primary
product” of a sales analysis system and “generally provide[s] the best available
measures of appraisal performance.” Wisconsin Property Assessment Manual, at
7-41. The sales ratio analysis was conducted through use of a computer-assisted
mass appraisal program that identified properties that needed adjustments from the
prior year. Edwards agreed that a valuation system includes a “cost approach” and
testified that, although she did not personally perform a cost approach analysis for
the mass appraisals for 2016 and 2017, McHugh may have. Edwards also testified
to having produced annual assessor’s reports. Edwards’ testimony provides a
basis for the circuit court to determine that valid mass appraisals occurred.

¶22 Lowe’s contends that the Village relied on Annual Assessment
Reports (AARs) to prove the execution and propriety of mass appraisals for the
2016 and 2017 assessments. Lowe’s states that “[t]he 2016 and 2017 Village
AARs were presented at trial as if they constituted the ‘mass appraisal’ pertaining
to 2016 and 2017 assessments of the subject property.” Lowe’s asserts that the
AARs do not suffice as evidence of mass appraisal.

¶23 Lowe’s relies in substantial part on the Village’s discovery response,
which referred Lowe’s to the AARs “for more information on the mass appraisal
performed in years 2016 and 2017.” However, this response does not convey that
the AARs constituted the mass appraisal. Moreover, the circuit court did not
mention the AARs as a basis for its determination that a valid mass appraisal
occurred, nor does the Village argue on appeal that the AARs constitute the mass
appraisals at issue. Lowe’s fails to show that the AARs constituted the Village’s
mass appraisals.

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No. 2019AP974

¶24 Lowe’s also argues that the Village’s mass appraisals did not include
a valuation system as required by the Property Assessment Manual because none
of the properties included in its commercial sales ratio analysis were reasonably
comparable to the subject property. Lowe’s relies on the Property Assessment
Manual’s statement that a valuation system consists of “mass appraisal
applications of the sales comparison, cost, and income approaches to value.”
Wisconsin Property Assessment Manual, at 7-41. Lowe’s further relies on the
Property Assessment Manual’s statement that “[a] good mass appraisal system
uses market data to build models that replicate the market in order to value all
properties in the jurisdiction at market, for ad valorem tax purposes.” Id., at 7-42.

¶25 To the extent Lowe’s is challenging the Village’s determination that
there were no reasonably comparable properties, we will address that argument
below as part of a Tier II analysis. Any other argument Lowe’s intends to make
with regard to comparable sales and mass appraisals is undeveloped. Lowe’s does
not explain or apply the Property Assessment Manual’s phrase, “mass appraisal
applications of the sales comparison, cost, and income approaches to value”
(emphasis added), nor does Lowe’s describe how the Village’s mass appraisals
failed to comply with this requirement. Lowe’s likewise fails to explain how the
Village’s mass appraisals failed to “use[] market data to build models that
replicate the market in order to value all properties in the jurisdiction at market,”
as the Property Assessment Manual suggests is necessary for a good mass
appraisal. We do not address Lowe’s’ unsupported and undeveloped arguments.

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See State v. Pettit, 171 Wis. 2d 627, 646-47, 492 N.W.2d 633 (Ct. App. 1992)
(arguments that are unsupported or undeveloped need not be considered).5

¶26 Moreover, in criticizing Edwards’ testimony, Lowe’s ignores the
role played by McHugh, the consultant the Village hired to assist with its
commercial assessments, including the 2016 and 2017 assessments. At trial,
Edwards testified that McHugh’s company was responsible for creating the
models used by the Village for mass appraisal.

¶27 Significantly, Lowe’s did not call McHugh as a witness, despite the
fact that the Village’s interrogatory responses mention McHugh multiple times
and make clear that he was involved in assisting the Village in its appraisals of the
subject property. For instance, in its responses, the Village acknowledged
contracting with McHugh for commercial appraisals since 2009. The Village also
stated in its responses that McHugh was a person who prepared or assisted with
preparing the assessments of the subject property as of both January 1, 2016, and
January 1, 2017. The discovery responses were produced on April 19, 2017, and
on July 3, 2018, giving Lowe’s ample notice of McHugh’s involvement prior to
the January 2019 trial. Furthermore, the Village’s contract with McHugh’s

5
In support of its mass appraisal argument, Lowe’s makes assertions that are
unsupported by the record, such as that Edwards “admitted” that the assessments were not
“performed in accordance with Wisconsin law,” and that Edwards “repeatedly admitted” that the
sales ratio analyses “were irrelevant to the valuation of the subject property.” Also, in an
apparent attempt to convince this court that the Village essentially made up its response that mass
appraisals occurred, Lowe’s spends multiple pages comparing the Village’s initial response to
discovery to the Village’s amended response. This same suggestion was made before the circuit
court, which rejected the premise, instead crediting Edwards’ testimony that the assessments were
based on valid mass appraisals. Lowe’s has not shown that the circuit court’s determination was
in error.

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No. 2019AP974

company, Affiliated Property Valuation Services, LLC, was provided to Lowe’s in
discovery.

¶28 Lowe’s concedes that Wisconsin municipalities may retain outside
help to assist with assessments. See WIS. STAT. § 70.055. Thus, there was
nothing improper about the Village having hired McHugh. The Village was under
no obligation to call McHugh to testify, as it was Lowe’s that had the burden to
overcome the presumption of correctness. See WIS. STAT. § 70.49(2). Lowe’s
disputes the propriety of the underlying practices that led to the 2016 and 2017
assessments, but, by declining to call McHugh as a witness, Lowe’s chose to forgo
the opportunity to call his work into question at trial. On appeal, Lowe’s makes
no argument that it was prevented from calling McHugh. Lowe’s knew as early as
April 2017 that McHugh had information related to the assessments, as the
Village’s discovery responses identified him as someone who assisted the
assessor. Instead of calling McHugh, Lowe’s relied solely on Edwards’ testimony
in an effort to show the nonexistence or flawed execution of a mass appraisal.
However, Edwards testified that the 2016 and 2017 assessments were based on
mass appraisals, and Lowe’s did not present sufficient evidence to convince the
court otherwise. We do not disturb the circuit court’s factual findings, including
findings involving the credibility and weight of witness testimony, unless they are
clearly erroneous. See Bonstores, 351 Wis. 2d 439, ¶6.

¶29 Based on the foregoing, Lowe’s has failed to show that a mass
appraisal did not occur or that the procedures employed to conduct the mass
appraisals were contrary to Wisconsin law or the principles in the Property
Assessment Manual.

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No. 2019AP974

II. Three-Tier Analysis

¶30 Lowe’s argues that the circuit court misapplied the three-tier
hierarchy set forth in Markarian, 45 Wis. 2d at 685-86.

¶31 WISCONSIN STAT. § 70.32(1) provides a rubric for the three methods
by which assessors may determine the value of real property. Our appellate courts
have explained that these methods constitute a three-tier hierarchy:

“Evidence of an arm[’]s-length sale of the subject property
is the best evidence of true cash value. [Tier 1] If there has
been no recent sale of the subject property, an assessor
must consider sales of reasonably comparable properties.
[Tier 2] Only if there has been no arm[’]s-length sale and
there are no reasonably comparable sales may an assessor
use any of the third-tier assessment methodologies.
[Tier 3]”

Allright Props., Inc. v. City of Milwaukee, 2009 WI App 46, ¶11, 317 Wis. 2d
228, 767 N.W.2d 567 (quoting Adams Outdoor Advert., Ltd. v. City of Madison,
2006 WI 104, ¶34, 294 Wis. 2d 441, 717 N.W.2d 803). The third tier is comprised
of “‘all the factors collectively which have a bearing on value of the property in
order to determine its fair market value.’” Adams Outdoor Advert., 294 Wis. 2d
441, ¶35 (quoting Markarian, 45 Wis. 2d at 686). “These factors include ‘cost,
depreciation, replacement value, income, industrial conditions, location and
occupancy, sales of like property, book value, amount of insurance carried, value
asserted in a prospectus and appraisals produced by the owner.’” Id. (quoting
State ex rel. Mitchell Aero, Inc. v. Board of Rev. of City of Milwaukee, 74 Wis.
2d 268, 278, 246 N.W.2d 521 (1976)).

¶32 It is undisputed in this case that the subject property had not been
sold in the approximately 15 years since its construction so as to enable a Tier I
analysis. Thus, the circuit court first addressed the second tier.

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A. Tier II Analysis

¶33 The Tier II sales comparison approach “relies on recent market sales
of similar properties to predict the probable market price of the subject.”
Wisconsin Property Assessment Manual, at 7-22. According to the Property
Assessment Manual, “[c]omparable sales refer to properties that are similar to the
subject property in age, condition, use, type of construction, location, design,
physical features, and economic characteristics.” Id., at 7-24.

¶34 Lowe’s’ expert, MaRous, based his Tier II sales comparison
approach on the sale of eight properties that he concluded were reasonably
comparable to the subject property. Based on this analysis, MaRous determined
the value of the subject property to be $4,550,000 for the 2016 and 2017
assessment periods, as compared to the Village’s assessed value of $7,356,600.
However, the circuit court agreed with the Village’s expert, Landretti, that the
eight properties were not reasonably comparable and that there were no reasonably
comparable properties under the Tier II sales comparison approach.

¶35 In concluding that the properties were not reasonably comparable,
the circuit court found that the properties upon which MaRous relied “were either
vacant stores or stores in transition/distressed,” whereas Lowe’s had been
continually operating since its construction in 2005, with no indication that it
would become vacant prior to the dates of value. There is no dispute that all of
MaRous’s proposed properties were vacant. The court also found that MaRous
failed to analyze “how the vacancies impacted the marketability of the properties.”
The court further found: “MaRous never explained in his report or in court what a
normal vacancy time period is for the Plover commercial real estate marketplace.
Nevertheless, he used comparable sales that were vacant for extended periods of

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time; in one case, a former Target store was vacant for four years prior to the date
of the sale ....” In contrast, when summarizing Landretti’s Tier II analysis, the
court found:

[Landretti] described in his report that he located numerous
sales of big box retail properties; however, the sales
included properties that were vacant, distressed, purchased
for redevelopment, or leased. Based on the [Property
Assessment Manual’s] direction that when valuing
stabilized, operating retail properties, the assessor should
choose comparable sales exhibiting a similar highest and
best use and similar placement in the retail marketplace,
Landretti concluded that the sales were not reasonably
comparable.

¶36 The circuit court also rejected MaRous’s analysis because MaRous
failed to explain how the sales prices of his proposed comparables were affected
by variations in market exposure time, a consideration that MaRous himself
indicated may influence a property’s eventual selling price. The court noted the
very short exposure times associated with the sales of three of MaRous’s eight
proposed comparable sales. These sales were former American TV stores that
sold to Steinhafel’s after an exposure time of approximately two months,
following American TV going into receivership. The court considered MaRous’s
testimony that, if a property is exposed to the market for a shorter time (i.e., less
than two to three years), it should sell for less than if the property had been fully
exposed to the market. Nevertheless, the court observed, MaRous’s report
“excludes information about the short exposure time” for the three American TV
stores. The court also concluded that a shorter exposure time is a sign that the
property is not reasonably comparable and may be evidence of a distressed sale.

¶37 Finally, the circuit court took into account the locations of the
properties, noting that “[a]ll the experts agree that location is a primary factor
when assessing any real estate.” The court summarized the issue in the case as

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whether, when assessing fair market value, “a home improvement retail building,
Lowe’s, which is located in a thriving low vacancy retail setting, compares with
vacant or transition properties located in other areas of the state.” The court
agreed with Landretti in rejecting MaRous’s comparable sales based on location.

¶38 We now address Lowe’s’ arguments that the circuit court erred in
rejecting MaRous’s comparables based on vacancy status and exposure time, as
well as the court’s consideration of location, its alleged failure to consider two of
MaRous’s comparables, and its purported consideration of the property’s use as a
home improvement store versus a big box store.

1. Vacancy status

¶39 Lowe’s’ primary argument is that the circuit court acted contrary to
Wisconsin law and the Property Assessment Manual by considering vacancy
status when it rejected MaRous’s proposed comparable sales. However, Lowe’s’
argument is expressly refuted by the Property Assessment Manual and by this
court’s precedent.

¶40 As the circuit court noted, the Property Assessment Manual instructs
as follows:

The assessor should avoid using sales of improved
properties that are vacant (“dark”) or distressed as
comparable sales unless the subject property is similarly
dark or distressed. A vacant store is considered dark when
it is vacant beyond the normal time period for that
commercial real estate marketplace and can vary from one
municipality to another.

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Wisconsin Property Assessment Manual, at 9-12.6 The circuit court concluded
that MaRous did not follow this directive. This provision from the Property
Assessment Manual, which Lowe’s’ brief-in-chief ignores, undercuts Lowe’s’
argument that the court erred by rejecting proposed sales because the properties
were vacant at the time of sale.

¶41 This passage from the Property Assessment Manual references our
decision in Bonstores, in which we upheld a circuit court’s determination that an
expert’s opinion was unreliable because the opinion disregarded differences in the
vacancy statuses of the proposed comparable properties. See Bonstores, 351 Wis.
2d 439, ¶¶20-22. We noted the circuit court’s finding that the comparable sales
identified by the taxpayer’s expert “‘were all distressed in one way or another,’”
and that a majority had gone “‘dark,’” which was defined as “‘a period of time
where the store is not operating.’” Id., ¶21. We concluded:

[The taxpayer’s expert] agreed that the subject property is
not a “dark” store, has never gone dark, and there is no
evidence it would go dark and be sold off as a single
property. As such, the circuit court did not erroneously
determine that [the taxpayer’s expert’s] reliance on the
sales of properties he deemed comparable was unreliable.

Id., ¶22. Bonstores is consistent with the Property Assessment Manual’s directive
to consider vacancy status in determining whether sales are comparable for
purposes of a Tier II analysis. And, as in Bonstores, the subject property here “is

6
Similar language is used at other points in the Property Assessment Manual. See
Wisconsin Property Assessment Manual, at 9-43 (“Regardless of the approach used, the assessor
should be careful to avoid using comparable sales involving properties that are vacant, in
transition or suffering from some form of distress unless the subject property is similarly vacant,
in transition, or distressed.”).

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No. 2019AP974

not a ‘dark’ store, has never gone dark, and there is no evidence it would go dark.”
See id.

¶42 Lowe’s asserts that none of MaRous’s proposed comparable sales
were “distress sales” like those at issue in Bonstores, because the properties did
not involve sellers acting under “undue duress.” However, Lowe’s does not
provide any authority indicating that Wisconsin has adopted the “undue duress”
definition of a distress sale that Lowe’s advances. Moreover, in Bonstores we
observed that the circuit court had “used the phrase ‘distressed property’ to refer to
a ‘dark’ business,” id., and that “dark” referred to “‘a period of time where the
store is not operating,’” id., ¶21. Finally, as shown above, the Property
Assessment Manual uses “vacant” and “dark” synonymously.

¶43 Regardless of whether any or all of MaRous’s proposed comparable
sales were distress sales, Lowe’s’ argument fails because it is contrary to the
Property Assessment Manual’s explicit directive that the assessor “should avoid
using sales of improved properties that are vacant (‘dark’) or distressed as
comparable sales unless the subject property is similarly dark or distressed.”
Wisconsin Property Assessment Manual, at 9-12 (emphasis added). Thus, whether
distressed or vacant, such attributes are properly considered in determining if
properties are reasonably comparable to the subject property.

¶44 Despite the Property Assessment Manual’s clear directive, Lowe’s
also argues that the circuit court’s consideration of vacancy status is prohibited by
Walgreen Co. v. City of Oshkosh, No. 2013AP2818, unpublished slip op. (WI

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No. 2019AP974

App Dec. 17, 2014). We disagree. Even as persuasive authority,7
Walgreen/Oshkosh is distinguishable and does not prohibit consideration of
vacancy status for purposes of evaluating proposed comparable properties under a
Tier II analysis.

¶45 In Walgreen/Oshkosh, the two stores at issue were built to
Walgreen’s specifications, but Walgreen was a lessee, not an owner-occupier. See
id., ¶3. In examining the assessment, we determined that Oshkosh’s assessments
of the subject properties impermissibly incorporated the value of the ongoing
business concern at the properties, as “the evidence presented at trial showed that
the City’s assessments relied on above-market sale prices and contract rents.” Id.,
¶14. In contrast, in this case there is no indication that the Village or the circuit
court considered Lowe’s’ ongoing business concern. Also, Walgreen/Oshkosh in
no way negates the Property Assessment Manual’s directive to consider vacancy
status in determining whether a property is reasonably comparable under a Tier II
analysis.

2. Exposure times

¶46 Lowe’s also challenges the circuit court’s findings with respect to
exposure times, arguing that there was no evidence that exposure time disqualified
any of MaRous’s sales. Lowe’s acknowledges MaRous’s testimony that a short
exposure time could impact the sales price, but asserts that, according to MaRous,
his proposed properties “were in desirable locations, were marketed by a seller

7
See WIS. STAT. RULE 809.23(3)(a) and (b) (generally, an “unpublished opinion may not
be cited in any court of this state as precedent or authority,” but an “unpublished opinion issued
on or after July 1, 2009, that is authored by a member of a three-judge panel or by a single judge
under s. 752.31(2) may be cited for its persuasive value”).

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No. 2019AP974

without distress, and sold at full market value.” Although Lowe’s states that
MaRous’s testimony was “unrebutted” on these points, a review of the four-day
trial belies that assertion. After hearing this evidence, the circuit court found
Landretti’s opinion more credible than MaRous’s—in part because of MaRous’s
omission of his proposed properties’ exposure times from his report—and Lowe’s
has not shown that the court erroneously exercised its discretion in weighing the
credibility of the parties’ experts.

3. Location

¶47 Lowe’s also takes issue with the circuit court’s consideration of the
locations of Lowe’s’ proposed properties. As stated, the court summarized the
issue in the case as whether, when assessing fair market value, “a home
improvement retail building, Lowe’s, which is located in a thriving low vacancy
retail setting, compares with vacant or transition properties located in other areas
of the state.” Lowe’s relies on the Property Assessment Manual’s instruction that
sales from outside of the municipality should be utilized and adjustments made for
location. Wisconsin Property Assessment Manual, at 7-25. Lowe’s states that
MaRous made “locational adjustments” to the properties he deemed to be in a
superior location and concluded that the locational attributes of his other four
properties were sufficiently comparable to the subject property so as to not require
an adjustment.

¶48 Lowe’s cites State ex rel. Brighton Square Co. v. City of Madison,
178 Wis. 2d 577, 588, 504 N.W.2d 436 (Ct. App. 1993), in which we approved of
adjustments to properties that enable comparison to the subject property.
However, as the Village notes, Brighton Square does not require that courts find
properties to be reasonably comparable whenever a taxpayer’s expert makes

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No. 2019AP974

adjustments based on location or other attributes. Moreover, as the Property
Assessment Manual notes: “The location for a retail store is of extreme
importance. National firms do extensive market studies to determine the exact
location of their retail outlets. Even the side of the street on which the property is
located can have an effect on value.” Wisconsin Property Assessment Manual, at
9-43. Given this specificity, Lowe’s has not demonstrated that the circuit court’s
consideration of location was erroneous.

4. MaRous’s second and seventh properties

¶49 Lowe’s challenges the circuit court’s analysis under Tier II because
the court did not refer to MaRous’s second and seventh properties, two former
K-Mart stores built in 1967 and 1989, respectively. Lowe’s argues that this shows
a failure of the circuit court to “properly conclude that no reasonably comparable
sales exist” before relying on a Tier III analysis.

¶50 However, contrary to Lowe’s’ assertion, the circuit court did in fact
evaluate all of MaRous’s proposed comparable sales and concluded that no
reasonably comparable sales exist. As stated in the court’s decision: “The Court
looked at the eight comparables studied by MaRous (Exhibit 24, pp 24-38) to
determine whether it is an apples-to-apples comparison with the subject Lowe’s
property.” After hearing all of the evidence presented at the four-day trial, and
following briefing from the parties, the court “agree[d] with the Village’s position
that there are no comparables to the subject property.” Citing the Property
Assessment Manual and mirroring its language, the court therefore concluded that,
“since there are no comparables from sales for this larger retail venue, the assessor
should use the Cost and/or Income Approach” to determine the fair market value.
See Wisconsin Property Assessment Manual, at 9-43 (“For larger retail venues and

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No. 2019AP974

those smaller stores for which there are no comparable sales, the assessor should
use the income and/or cost approaches.”).8

¶51 Furthermore, Lowe’s points to no authority requiring that the circuit
court specifically explain its conclusion separately for each purported comparable
sale offered by the taxpayer. Nor does Lowe’s provide any analysis to explain
why these two properties were comparable, except by generally recounting
MaRous’s testimony. Lowe’s’ reliance on Hanning Regency LLC v. Town of
Brookfield Board of Review, No. 2018AP1584, unpublished slip op. (WI App
July 3, 2019), is likewise unavailing because Hanning stands only for the well-
established proposition that a court may not move to a Tier III analysis if Tier I or
Tier II information is available. Here, the circuit court clearly followed the law in
proceeding to a Tier III analysis only after determining that there were no
reasonably comparable sales and no arm’s-length sale involving the subject
property.

5. Home improvement store versus big box store

¶52 Lowe’s highlights comments by the circuit court to the effect that the
subject property’s “highest and best use would be to another home improvement
store desiring to be a main anchor in a thriving retail environment.” Lowe’s
objects to the specificity of the court’s finding of highest and best use, asserting
that the parties’ experts agreed that the highest and best use of the subject property

8
Lowe’s asserts that this “ambiguous commentary” in the Property Assessment Manual
cannot supplant the Markarian hierarchy’s mandate that Tier II comparable sales must be used if
any reasonable comparable sales exist. Lowe’s fails to supports its assertion that the language is
either ambiguous or that the circuit court used it to supplant the Markarian hierarchy. As stated,
the court specifically found that no comparable sales exist.

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No. 2019AP974

was the more general category of big box retail. However, we note that, although
MaRous and Landretti sometimes expressed the highest and best use in more
general terms of “big box retail,” MaRous himself stated in his report and
testimony that the subject property’s highest and best use was its continued use as
an operating Lowe’s, and Landretti stated that the property’s highest and best use
was its “continuing” or “existing” use. In addition, Lowe’s fails to explain how
the court’s statement affected its decision.

¶53 In sum, Lowe’s has failed to show that the circuit court erroneously
determined that there were no reasonably comparable properties under the Tier II
approach, based on its crediting Landretti’s opinion over MaRous’s for the reasons
it stated.

B. Tier III Cost Approach

¶54 The Property Assessment Manual explains the basic contours of the
Tier III cost approach: “The cost approach relies on determining either the
reproduction or replacement cost of the improvements, subtracting all
depreciation, then adding the value of the land.” Wisconsin Property Assessment
Manual, at 7-23. The Property Assessment Manual lists three types of
depreciation: “physical, functional, and economic.” Id., at 7-31. “Functional
obsolescence is the loss in value, due to a lack of or excessive utility. Functional
obsolescence occurs over time because of changing needs, technology, design,
promotion/marketing, and cost/construction.” Wisconsin Property Assessment
Manual, at 7-32.

¶55 The circuit court determined that the Tier III cost approach was the
best measure of the subject property’s market value and credited Landretti’s cost
approach analysis over that provided by MaRous. The court concluded:

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No. 2019AP974

The Court finds that the Village’s expert Landretti
provided the most credible Cost Approach opinion. It was
based on market evidence of demand for big box stores in
the Plover area, as well as a highest and best use analysis.
It provides the best estimate of the fee simple value of the
property on the dates of value and is supported by
Landretti’s other Tier 3 analysis [i.e., Landretti’s income
approach].

¶56 Under the cost approach, MaRous indicated a value for the subject
property of $4,620,000 as of January 1, 2016, and $4,500,000 as of January 1,
2017. Landretti’s cost approach indicated a value of $8,500,000 for 2016 and
$8,700,000 for 2017. The circuit court found that, without MaRous’s deductions
for functional and external obsolescence, Landretti’s and MaRous’s calculations
under the cost approach “did not differ greatly.” The significant difference in the
two experts’ opinions of value under the cost approach is that MaRous included a
50% deduction for functional obsolescence. The court’s decision identifies this
50% deduction as a primary reason for rejecting MaRous’s analysis under the cost
approach.

¶57 The circuit court agreed with the Village that the 50% deduction for
functional obsolescence was “flawed.” Specifically, the court noted that, although
MaRous agreed that the highest and best use of the subject property was as a big
box retail store, MaRous’s calculation that the building was 50% functionally
obsolete was based on attributes of the building that differed from attributes of
multi-tenant buildings. As the court explained, MaRous had “estimated the cost to
build a big box store, but then improperly depreciated it because it was not a
multi-tenant improvement that would cost twice as much to build.”

¶58 Lowe’s argues that the circuit court misapplied the cost approach in
several respects. We address each in turn. First, Lowe’s argues that the court
erred because, according to Lowe’s, the court concluded that MaRous should have

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No. 2019AP974

started with the cost to construct a multi-tenant building. Lowe’s contends that it
would be inappropriate to start with the cost to construct a multi-tenant building
because both experts agreed that the highest and best use was continued use as a
big box retail property. In so arguing, Lowe’s misapprehends the court’s
reasoning. Contrary to Lowe’s’ assertion, the court did not reject MaRous’s cost
approach on grounds that MaRous should have started with the cost to construct a
multi-tenant building. Rather, the flaw that the court identified was that MaRous
started with the cost to build a large single-tenant big box retail building but then
substantially deducted value from the property because it was not functional as a
multi-tenant building. In other words, as the Village aptly states, MaRous
“switche[d] highest and best uses midstream.” Lowe’s has failed to establish that
the circuit court erred in finding MaRous’s opinion less credible than Landretti’s
based on this flaw.

¶59 Second, Lowe’s argues that MaRous properly used the “reproduction
cost” method. However, Lowe’s fails to explain how this is at all relevant to the
flaw in MaRous’s functional-obsolescence calculation, which was the primary
reason for the circuit court’s rejection of MaRous’s analysis, nor does Lowe’s
otherwise indicate how MaRous’s purported application of the reproduction cost
method caused the court to err.9 We are not persuaded that the type of cost
estimate used by MaRous was material to the court’s rejection of MaRous’s
opinions.

9
The Village argues that MaRous did not in fact apply the reproduction cost method but
instead used the replacement cost method. We need not decide this issue.

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No. 2019AP974

¶60 Third, Lowe’s argues that the circuit court was influenced by
Hamilton’s rebuttal testimony regarding “first generation” concepts, the substance
of which Lowe’s alleges was contrary to Wisconsin law. In characterizing
Hamilton’s testimony and report, the court stated that Hamilton “found that
Lowe’s expert, Michael MaRous (MaRous), used unoccupied, second generation
properties as comparables, and opined that the appropriate comparables would be
a first generation occupied property.” Lowe’s argues that the “first generation”
concept is contrary to Wisconsin law in that it suggests “that the property should
be viewed in light of Lowe’s business occupancy.”10 Lowe’s’ argument is not
persuasive for at least two reasons. First, Lowe’s has failed to show that the court
relied in any way on Hamilton’s “first generation” theory, including in rejecting
MaRous’s cost approach. It is clear from the circuit court’s decision that the
court’s credibility determination rested on the flawed treatment of functional
obsolescence in MaRous’s testimony and report, rather than on a “first generation”
or “second generation” concept.

¶61 Moreover, the law on which Lowe’s relies is inapplicable here.
Lowe’s argues that the circuit court’s Tier III analysis ran afoul of State ex rel.
Northwestern Mutual Life Insurance Co. v. Weiher, 177 Wis. 445, 188 N.W. 598
(1922). Citing Northwestern Mutual, Lowe’s argues that the subject property
cannot be valued based on the particular use of the current owner or occupant, and
the current owner should not be viewed as a purchaser.

10
Lowe’s does not cite the record or any authority for a definition of “first generation”
and “second generation” properties. In its brief-in-chief, Lowe’s describes “second generation”
retail properties as “properties which were sold by the retailer[s] for whom the propert[ies] [were]
originally constructed.” Thus, using Lowe’s definition, “first generation” properties would
presumably be those properties built for the retailers for whom the properties were constructed.

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No. 2019AP974

¶62 Northwestern Mutual in no way undermines the circuit court’s
conclusion here. In that case, our supreme court affirmed the circuit court’s
reduction of the city’s assessment by half because the city based its assessment on
the “intrinsic worth” of the “fine, substantial, artistic building, gracing half a block
in the city of Milwaukee, built to meet the peculiar needs of its owner, and not
well adapted for other uses.” Id. at 449-50. The court concluded that “[t]he
statutory rule of assessment of real estate is to assess it at its sale value and not at
its intrinsic value if that differs from the sale value.” Id. at 448. The court further
stated: “The argument that the owner may be considered as standing in the place
of a purchaser who, if desiring to buy, would pay its reasonable intrinsic worth,
forgets the statutory test, namely, What will it bring if the owner is the seller and
somebody else is the buyer?” Id. Unlike in Northwestern Mutual, the record in
the instant case does not show that the subject property’s assessments were based
on the property’s “intrinsic worth” or unique features valuable only to Lowe’s.
Nor does the record show that the circuit court relied on such principles in
rejecting MaRous’s cost approach or his proposed comparable sales. Thus,
Lowe’s’ comparison of the circuit court’s decision to Northwestern Mutual is
unavailing.11

11
Lowe’s also cites State ex rel. Keane v. Board of Review of City of Milwaukee, 99
Wis. 2d 584, 299 N.W.2d 638 (Ct. App. 1980). But as Lowe’s acknowledges, that case simply
reaffirmed the conclusion in Northwestern Mutual Life Insurance Co. v. Weiher, 177 Wis. 445,
188 N.W. 598 (1922). Specifically, Keane cited Northwestern Mutual in rejecting an assessment
based on the property’s “intrinsic value,” namely, special leasehold improvements valuable to the
lessee. See Keane, 99 Wis. 2d at 597. Amicus curiae Wisconsin Manufacturers & Commerce
also stresses that an assessment must be based only on the market value of the subject property’s
fee simple interest. We agree, but reject the contention that the assessments at issue here were
based on the intrinsic value of the building to Lowe’s or on the value of Lowe’s ongoing
business, as it has no basis in the record.

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No. 2019AP974

¶63 In sum, Lowe’s has not established that the circuit court erred in
weighing the expert testimony in favor of Landretti’s cost approach.

C. Tier III Income Approach

¶64 Lowe’s contends that the circuit court erred in failing to evaluate
MaRous’s calculations under the Tier III income approach. As stated, the court
found that Landretti’s opinion under the cost approach “was based on market
evidence of demand for big box stores in the Plover area, as well as a highest and
best use analysis. It provides the best estimate of the fee simple value of the
property on the dates of value and is supported by Landretti’s other Tier 3
analysis.” After determining the cost approach to be the “best estimate” of the
property’s value, the court did not detail its reasoning for rejecting Lowe’s’
income approach. Lowe’s argues that “[t]he failure to consider admitted evidence
of one of the three major valuation approaches as potentially significant contrary
evidence that rebuts the assessments at issue is error.”

¶65 The circuit court found Landretti’s analysis under the cost approach
to be more persuasive than MaRous’s analysis under the income approach, and it
explained why it found the cost approach most persuasive. Lowe’s cites no
authority for its three-sentence assertion that the court was required to make
findings or conclusions regarding the Tier III income approach when it found that
Landretti provided the most credible analysis under the Tier III cost approach.
Thus, we do not further consider Lowe’s’ argument on this point. See Pettit,
171 Wis. 2d at 646-47.12

12
We note that Lowe’s’ brief also contains arguments that are based on a
mischaracterization of the Property Assessment Manual and the record. For example, Lowe’s
(continued)

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No. 2019AP974

CONCLUSION

¶66 Based on the foregoing, we conclude that Lowe’s has not overcome
the presumption of correctness that attached to the Village’s assessments and that
the record supports the circuit court’s determinations in this case. Accordingly,
we affirm the circuit court’s order upholding the assessments.

By the Court.—Order affirmed.

Not recommended for publication in the official reports.

cites the Property Assessment Manual for its assertion that the Tier III cost approach is a method
“typically appropriate for new and special purpose properties.” In so arguing, Lowe’s omits the
other half of this sentence in the Property Assessment Manual. The full sentence reads:
“[Assessors] typically use the cost approach in cases of new or special purpose structures or
where limited sales or rental data activity exist.” Wisconsin Property Assessment Manual, at
7-24. Another example of Lowe’s’ mischaracterization is its statement that “[t]he circuit court
erroneously concluded that no functional or economic obsolescence should be accounted for in
the cost approach.” However, both the circuit court’s decision and the record make clear that
functional and economic obsolescence was accounted for in Landretti’s cost approach
methodology. In fact, in addressing Landretti’s cost approach, the court specifically found:
“Landretti used the Economic Age-Life Method to arrive at an annual depreciation rate of 2.9%
over the subject property; with the effective age of Lowe’s in 2016/2017 of 10 years, for a total of
29%.” The court further found that “Landretti opined that the property did not have any
abnormal functional obsolescence or economic obsolescence and, therefore, did not make a
deduction for those forms of obsolescence.” With regard to Landretti’s application of the cost
approach, the court found that “[Landretti’s] analysis in his report (Exhibit 119, p 72-75), along
with the testimony at trial is reasonable and credible, and, therefore, the Court accepts it.”

30