Wayland Business Center Holdings, LLC and GRM Properties II, LLC v. Board of Assessors of the Town of Wayland (September 26, 2005)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD


WAYLAND BUSINESS CENTER HOLDINGS, LLC v. BOARD OF ASSESSORS OF
and GRM PROPERTIES II, LLC		     THE TOWN OF WAYLAND

Docket Nos. F271146 & F272457			Promulgated:
								September 26, 2005


	These are appeals under the formal procedure pursuant to G.L. c. 59, §§ 64 and 65 from the refusal of the appellee to abate taxes on certain real estate in the Town of Wayland, known as the Wayland Business Center, assessed under      G.L. c. 59, §§ 11 and 38 for fiscal years 2003 and 2004.  
	Commissioner Egan heard these appeals.  Chair Foley and Commissioners Scharaffa, Gorton and Rose joined her in deciding these appeals for the appellants.  The Decisions were entered on September 26, 2005.   
	These findings of fact and report are made pursuant to the Board's own motion under G.L. c. 58A, § 13 and 831 CMR 1.32, and are promulgated simultaneously with the Decisions.  
	
Evan Y. Semerjian, Esq. for the appellants.
	
	Mark J. Lanza, Esq. for the appellee.  

FINDINGS OF FACT AND REPORT
I. Introduction
On January 1, 2002 and January 1, 2003, the appellant, Wayland Business Center Holdings, LLC ("WBCH"), was the assessed owner of the real estate located at 400-440 Boston Post Road in the Town of Wayland.  This property is also known as the Wayland Business Center.  It consists of approximately 56.7 acres of land improved with a one- and two-story main building containing approximately 399,214 square feet, plus an incomplete one-story frame building containing approximately 10,480 square feet. 	
II. Jurisdiction
	For fiscal years 2003 and 2004, the Wayland Board of Assessors ("assessors") assessed the Wayland Business Center as three parcels as summarized in the tables below.  
Fiscal Year 2003
 Parcel	Land Area (acres)	Assessed Value ($)	Tax ($)	
23-52	      21.686	38,828,000	486,126.56	
 23-52C	      34.9	   122,200	  1,529.94	
 23-52F	       0.077	     5,800	     72.62	
TOTAL	      56.663	38,956,000	487,729.12	


Fiscal Year 2004

 Parcel	Land Area (acres)	Assessed Value ($)	Tax ($)	
23-52	      21.686	38,828,000	509,811.64	
 23-52C	      34.9	   338,600	  4,445.82	
 23-52F	       0.077	     5,800	     76.15	
TOTAL	      56.663	39,172,400	514,333.61	

For purposes of these appeals, the appellants challenged only the assessment on parcel 23-52, not the nominal assessments on the other two parcels.  The parties stipulated that the fair cash value of parcel 23-52 is the total fair cash value of all three parcels less the assessed values of parcels 23-52C and 23-52F.  References hereinafter to the "subject property" or "property" refer to the Wayland Business Center as a whole, while references to the "subject parcel" refer to parcel 23-52, the parcel under appeal.     
	The appellants paid the taxes due for both fiscal years 2003 and 2004 without incurring interest.  For fiscal year 2003, WBCH timely filed the applicable application for abatement on January 22, 2003.  On April 14, 2003, WBCH granted the assessors a three-month extension of time within which to act on the application.  The assessors subsequently denied WBCH's application on June 2, 2003, and WBCH seasonably appealed to the Board on July 22, 2003.  For fiscal year 2004, GRM Properties II, LLC ("GRM II") timely filed the application for abatement on January 23, 2004.  After the assessors denied it on April 16, 2004, GRM II seasonably filed its petition with this Board on May 6, 2004.  On the basis of these facts, the Board found that it had jurisdiction to hear and decide these appeals.
III. The Parties' Evidence
In presenting their case to the Appellate Tax Board ("Board"), the appellants called three witnesses and introduced thirty-eight exhibits, including their real estate valuation expert's appraisal report.  The appellants' witnesses were: Paula Phillips, Vice-President of Operations for the Congress Group; J. R. McDonald, a commercial real estate broker with Cushman and Wakefield; and James R. Johnston, an appraiser.  Ms. Phillips was responsible for the overall management of the subject property both before and during the relevant time period.  In her testimony, she credibly traced much of the Wayland Business Center's rental history and leasing terms, and its ownership and environmental contamination history.  She also discussed the market and Wayland Business Center's plummeting rents, soaring vacancies, and tenant improvement allowances from January 1, 2002 to January 1, 2003.      Ms. Philips explained the concerns and hesitancy of prospective tenants about leasing space at the Wayland Business Center during the relevant time period.  She verified that as of January 1, 2002 and January 1, 2003, Wayland Business Center's reputation as a contaminated site completely deterred potential new tenants from renting there.  In addition, she testified that the sale of the property in August 2004 was an arms-length and market transaction.  The Board, however, questioned these conclusions because she failed to adequately substantiate them.  
Mr. McDonald was familiar with the relevant commercial sales and office rental markets.  He testified to the resistance that he experienced from prospective tenants in trying to rent space to them at the Wayland Business Center, and his observations regarding relevant market rents and vacancy rates, as well as tenant improvement allowances, for the relevant time period.  Mr. McDonald also discussed declining rents and increasing vacancy rates in the relevant office rental markets beginning in October 2001.  He particularly noted Wayland Business Center's reputation for environmental contamination and inconvenient location, and the fifteen- to twenty-percent discount in rent that a larger tenant would receive over a smaller one.  The Board found that his testimony was credible.   
Mr. Johnston served as the appellants' real estate valuation expert.  He researched the historical, physical, economic, and locational factors potentially affecting the value of Wayland Business Center, including environmental contamination and stigma issues.  He also reviewed relevant market, sub-market, and actual property data, including rents, expenses, tenant improvement allowances, and vacancy rates.  In preparing his income capitalization analysis, Mr. Johnston consulted with the property manager and leasing agent for the Wayland Business Center and the engineer in charge of maintenance.  Mr. Johnston visited and viewed the Wayland Business Center on numerous occasions.  He estimated the value of the parcel at issue in these appeals at $23,372,000 for fiscal year 2003 and $13,756,000 for fiscal year 2004.     
In presenting their case to the Board, the assessors called only one witness, their real estate valuation expert, George Van Hazinga.  They also introduced nine exhibits, including Mr. Van Hazinga's appraisal report.  Mr. Van Hazinga did not review the property's actual rents and expenses and did not interview any agents, managers, brokers, or investors connected to the property.  He primarily relied on a sales comparison approach in estimating the value of the parcel at issue in these appeals at $30,900,000 for fiscal year 2003 and $26,700,000 for fiscal year 2004.   Mr. Van Hazinga's estimates of the parcel's value were almost $8,000,000 below the assessment for fiscal year 2003 and more than $12,000,000 below the assessment for fiscal year 2004.  Both parties filed post-hearing briefs.  
On the basis of the testimony and exhibits submitted into evidence at the three-day hearing of these appeals, ending on November 10, 2004, the Board made the following findings of fact. 
IV. Description of the Subject Property
Wayland Business Center's 56.7-acre site is irregularly shaped and contains frontage along both Boston Post Road and Old Sudbury Road.  It is in a limited commercial zone.  Access to the property is gained from the entrance on Boston Post Road.  No access to the site is permitted off Old Sudbury Road, which traverses through a residential area.  Boston Post Road is heavily trafficked creating difficult ingress to and egress from the subject property, particularly during morning and evening rush hours.  
	There are approximately 1,608 parking spaces on the paved asphalt portion of the subject property located west of the buildings.  The lot is in average condition physically and is inconvenient functionally since many of the spaces are situated nearly one-quarter mile from the buildings.  Utilities available at the site include: town water and sewer; electricity; telephone; and gas.  
	The property contains a sewer treatment facility comprising an area of 19,071 square feet near the center of the property, and referred to by the assessors as parcel 23-52B.  In October 1999, through an eminent domain taking, the town acquired the facility, along with permanent easements for access and drainage across and through the property.  The facility and all of its related rights and property are managed and controlled by the Wayland Wastewater Management District Commission.  The sewer systems of neighboring properties as well as the subject property's are all tied into this facility.  
The subject property's main building is E-shaped with three wings extending toward the parking lot.  The southern wing is the largest with both a first and second floor.  It has an address of 400 Boston Post Road.  The middle wing is single story and has an address of 420 Boston Post Road.  It is unfinished.  The northern wing has an address of 430 Boston Post Road for the first floor and 432 Boston Post Road for the second floor.  
The main building's exterior façade has a brick face with ½-inch insulated glass aluminum-frame windows.  Most of the roof consists of a single-ply insulated Carlyle rubber roofing material, which was installed in 1997.  The building's structure consists of a load-bearing steel skeleton plus concrete on a concrete slab.  The interior has five elevators, several HVAC systems, one hot water boiler, fifteen sets of men and women's rest rooms, shared electrical service, fifteen kitchenettes, a wet sprinkler system, and emergency battery-pack power.  Typical tenant finishes include painted concrete masonry and gypsum drywall, suspended acoustical ceilings, fluorescent lighting fixtures, commercial grade carpeting, and solid wooden doors in hollow metal frames.  The floor plates are large, the corridors are long, and the layout is best suited for primarily large tenants.  There is also a 223-seat cafeteria with a full kitchen containing leased appliances and equipment.  Approximately 45,000 square feet of space in the main building is completely unfinished and considered raw shell space.    
The smaller unfinished building is a one-story wood frame structure that was originally designed as a daycare facility.  It has an address of 440 Boston Post Road.  The exterior is finished, but the interior is only partially framed.  As explained in more detail infra, this structure must be redesigned and reconstructed for alternative uses since daycare uses are no longer allowed on the subject property.  
V. The Area
	The Town of Wayland is situated in Middlesex County in eastern Massachusetts and bordered by Sudbury and Framingham on the west, Natick on the south, Concord and Lincoln on the north, and Weston on the east.  Wayland is approximately seventeen miles west of Boston, twenty-six miles east of Worcester, and fifty miles north of Providence, Rhode Island.  Wayland contains approximately 15.3 square miles and, in 2000, had a population of about 13,100 residents.  The town's tax base is roughly ninety-five percent residential and five percent commercial and industrial.  Wayland is a member of the Massachusetts Bay Transportation Authority.  Commuter bus service to Boston is available locally, while commuter rail service to North Station in Boston is offered in neighboring Weston.  
Wayland is not directly served by any major highway.  Route 20, a two-lane road, is the main link to Routes I-95/128 and I-495.  The subject property is located on the northerly side of Boston Post Road, which is also Route 20, west of Old Sudbury Road, which is also Route 27, and approximately 1,000 feet west of Wayland center, where Routes 20, 27, and 126 intersect.  Boston Post Road traverses east and west connecting Wayland with Sudbury on the west and Weston on the east.  Immediately west of the subject property are the Sudbury River, wetlands, Wayland's refuse disposal area, and the Sudbury town line.  Great Meadows National Wildlife Refuge is located to the immediate northwest.  
	Across Boston Post Road from the subject property is Russell's Garden Center, and easterly along the road is a variety of local commercial and retail uses, including gas stations, banks, and local shops and offices.  Heading north along Sudbury Road are initially commercial establishments giving way to residential properties.  Heading south from the center of town are private residences and the Sandy Burr golf course.   
VI. Subject Property's Ownership, Leasing, 
and Environmental History

	Beginning in the mid-1950s and for approximately the next forty years, the subject property was occupied by Raytheon Company ("Raytheon") as a research, development, and testing facility.  From about 1968, the property was owned by Continental Assurance Company ("Continental") and leased to Raytheon until about 1996, when the facility was closed.  At that time the property contained approximately 82.63 acres of land.  During Raytheon's occupancy, there were various oil and chemical spills and discharges on the property resulting in environmental assessments, investigations, and cleanup activity.  In 1997, in accordance with General Laws, Chapter 21E and the Massachusetts Contingency Plan, the property was classified as a Tier 1B site, requiring site assessment, remedial response action, and public involvement under the auspices of the Massachusetts Department of Environmental Protection ("DEP").    
	In October 1997, Continental sold the property to Wayland Meadows Limited Partnership ("Wayland Meadows"), which, simultaneous with the recordation of the deed, also filed a Notice of Activity and Use Limitation that restricted certain uses and activities on the property because of the release of oil and hazardous materials on and into the site.  In addition, Wayland Meadows recorded an Easement and Restriction Agreement, which granted Raytheon perpetual access to the property for investigation, testing, and remediation of site contamination.  In December 1997, Wayland Meadows sold the property to Wayland Business Center, LLC (WBC) for $16.5 million.  
In 1998, WBC expended approximately $20 million and converted the main building on the property to approximately 399,214 square feet of commercial office space and also entered into a lease with Polaroid Corporation ("Polaroid") for 237,500 square feet to begin in July 1999.  In February 1999, WBC recorded another Notice of Activity and Use Limitation, which restricted activities and uses in the property's so-called courtyard area where a leaking tank had been extracted and the soil adversely impacted.  
	In October 1999, Wayland acquired by eminent domain, for $250,000, 19,071 square feet of land located near the center of the Subject property, which contained the property's sewerage or wastewater treatment facility.  Along with the plant, Wayland also obtained drainage easements, rights of access, and rights to connect to neighboring properties.  During 2000, WBC leased the remaining space to Polaroid and three other tenants.  
In June, 2000, after Raytheon discovered a potential imminent hazard condition from site contamination on the property, Wayland residents petitioned DEP and Raytheon to designate the property as a Public Involvement Plan ("PIP") site under Chapter 21E of the General Laws.  The property was so designated in June 2000, ensuring a high degree of public involvement.  Under the PIP, Raytheon agreed to inform and involve the town and public in future investigation and remediation actions on the property.  As part of the public process, Raytheon established a website on the Internet "to give the public quick and easy access to all documents pertaining to Raytheon's remediation and compliance activities at their former facility in Wayland."  The web site includes access to many documents and reports relating to the contamination, which are also reserved at the Wayland Public Library.  
In December 2000, WBC transferred, for nominal consideration, 25.73 acres of property back to Wayland Meadows, with reservations for utility easements.  WBC retained the buildings and approximately 56.7 acres of the property.  In June 2001, WBC transferred, for nominal consideration, the remaining property to its affiliate WBCH, one of the named appellants in these appeals.  In October 2001, Polaroid declared bankruptcy and indicated that it would vacate some or all of its space.  At the time, it had been leasing approximately eighty-two percent of the main building's leasable area.  In August 2002, Polaroid predictably rejected its lease as part of the bankruptcy proceeding.  In September 2002, the successor to Polaroid retained for one department 30,000 square feet for eighteen months in a non-market transaction.  
Throughout 2000, 2001, and 2002, there was extensive public participation in hearings and meetings conducted by or about Raytheon.  Raytheon accepted full and complete responsibility for essentially any and all costs relating to the contamination on the subject property including any monitoring and remediation expenses and any public involvement expenditures.  Raytheon has subsidized the installation and operation of numerous monitoring and injection wells located both on the grounds of the subject property and in the foundation of the main building.  At all relevant times, collections of the documents concerning contamination on the site have been and continue to be available for inspection and copying at the Wayland Town Hall and Public Library.  Since November 2001, the Wayland Conservation Commission has periodically publicized issues pertaining to the environmental contamination and remediation at the site.  During 2001, 2002, and 2003, numerous articles about environmental contamination on the property appeared in the Wayland Town Crier, the MetroWest Daily News, and the Boston Globe.  
On December 4, 2003, WBCH transferred the subject property to GRM II, the other appellant in these appeals, by the functional equivalent of a deed in lieu of foreclosure.  On August 24, 2004, GRM II deeded the property for $16.5 million to Wayland Business Associates, LLC ("WBA").  GRM II, which sold the property shortly after receiving it from the equivalent of a deed in lieu of foreclosure, was apparently related to the lender holding paper on the property.  WBA, the new owner, and WBCH, the former owner and borrower, were apparently related to the same business entity.  The Board found that this transaction resembled a sale under compulsion and one suggesting non-arms-length dealing.  In addition, the appellants did not successfully rebut these characterizations.  To the extent the sale may have been arms-length and not consummated with at least one of the parties under duress, the record contains no evidence to assist the Board in adjusting this leased fee transaction to a fee simple sale.  None of the real estate valuation experts testifying in these appeals relied on this sale in their valuation methodologies.  Because of its concerns regarding the sale and because of the viability of an income capitalization approach under the circumstances present in these appeals, the Board did not rely on the August 2004 sale of the subject property.     
As of each assessment date and during the relevant time period, the fact that the property was contaminated and often referred to as the "former Raytheon site" was wide-spread and notorious.  The numerous newspaper articles, recordings at the Registry, availability of information at the library and on-line, state designations, town mailings, cable broadcasts, and testimony of Ms. Phillips and Mr. McDonald amply supported the Board's findings in this regard.  Evidence of contamination, in the form of monitoring wells and devices, was clearly visible to anyone visiting the site.  Accordingly, the property was stigmatized by the contamination, and, as the evidence revealed, this stigmatization adversely affected rentals at the property.  Despite professional and competent marketing, there were no new tenants for the property during 2002 and 2003.    
VII. Valuation of the Subject Property
A. Introduction
	In addition to the subject property's contamination, stigma, and vacancy issues, which existed during the relevant time period, it also suffered from functional obsolescence created by design and layout problems.  The main building has an unusual configuration that includes long corridors and space originally designed for a single tenant.  The size and breadth of the parking lot, the property's limited ingress and egress from and onto Route 20, the rush-hour congestion along Route 20, the proximity of residential neighborhoods, and the property's relatively distant location from major highways also negatively influenced rentals.  Moreover, a general downturn in office rentals and increase in vacancies in the market of which the subject property was a part further exacerbated the appellants' attempts to lease space to prospective tenants in the subject property during the relevant time period.  
B. The Appellants' Real Estate Valuation Expert's Analysis
	The appellants' real estate valuation expert,       Mr. Johnston, relied on an income capitalization approach to estimate the value of the subject property for the fiscal years at issue.  He did not rely on either a cost approach or a sales comparison technique because of the income-producing nature of the property, its age, location, and size, its functional obsolescence, a dearth of timely sales of comparable properties, and the stigma relating to the environmental contamination in and on the property.  He also did not rely on the August 24, 2004 sale of the property.    
Mr. Johnston determined that the property's highest and best use was its continued used as an office- and research-and-development type of facility.  He based his suggested rents, vacancy rates, expenses, and capitalization rates on data gleaned from published reports, comparable rental properties, discussions with knowledgeable participants in the market, and historical information from and relating to the subject property.  He also considered other factors influencing the value or leasability of the property, including its location, accessibility, contamination, stigma, and functional obsolescence.  
In selecting an overall capitalization rate of 10.5% for both of the fiscal years at issue, Mr. Johnston relied on rates published in national reports, such as the Korpacz Report, for the first quarter of 2002 and 2003, for "Non Investment Grade" Suburban Office properties.  These rates ranged from 9.5% to 13.5% for the first quarter of 2002 and 9.0% to 11.79% for the first quarter of 2003.  He also applied reasonable assumptions in Band-of-Investment calculations, which suggested capitalization rates of 9.35% and 9.65% for fiscal years 2003 and 2004, respectively.  Because he used gross rents in his methodology, he also included a tax factor in his total capitalization rate.    
Mr. Johnston's methodology also incorporated particular considerations for the effects of contamination and stigma on the property, and what he termed "excess-vacancy" concerns.  To account for the property's stigma and concomitant increased investment risk, Mr. Johnston increased his capitalization rate by one percent, to 11.5%.  Because Raytheon was committed to pay all costs related to the contamination, he did not adjust his methodology for those potential costs.  To account for what he believed were the property's excessive actual vacancy rates of forty-two and seventy-five percent during parts or all of fiscal years 2003 and 2004, respectively, he incorporated into his income capitalization methodology several "below-the-line" adjustments.  Essentially, after estimating a market value for the subject property, he then took additional deductions for his estimates of the property's rent loss and extra tenant improvement and commission expenses occasioned by the property's excess actual vacancy beyond the twenty-percent market rate for vacancy that he used in his methodology.  He rationalized the inclusion of these "below-the-line" deductions as reasonable "lease-up" costs.  

In his appraisal report, Mr. Johnston considered the values that he derived for the subject property using his income capitalization methodology equivalent to fair cash values for the subject parcel for the fiscal years at issue "[s]ince the bulk of the assessed value is on parcel 23-52, the other assessments being nominal only, no allocation of value is necessary."   In his testimony, however,        Mr. Johnston incorporated the parties' stipulation by reducing his estimate of the subject parcel's value by the assessed values attributable to the two parcels not appealed.  Accordingly, after accounting for the $128,000 and $344,000 reduction in the subject's parcel values for fiscal year 2003 and 2004, respectively, in accordance with the parties' stipulation, he estimated the value of the subject parcel at $23,372,000 for fiscal year 2003 and $13,756,000 for fiscal year 2004.  The following tables incorporate detailed summaries of his approach for fiscal years 2003 and 2004, respectively.

Fiscal Year 2003
INCOME				
	Net Rentable Area
in Square Feet	Rent ($) per
Square Foot	Total
($)	
Polaroid Finished	291,203	18.00	5,241,654	
Polaroid Unfinished	 34,650 	20.00	  693,000	
Storage Apps	 20,884	20.00	  417,680	
Moldflow	 22,694	20.00	  453,880	
Sound Vision	 23,343	20.00	  466,860	
Wayland Cafeteria	  6,440	 3.50	   22,540	
Daycare Building	 10,480	16.00	  167,680	
Potential Gross Revenue	   409,694		7,463,294	
				
Vacancy at 20%			(1,492,659)	
				
Effective Gross Revenue			5,970,635	
				
EXPENSES				
				
Management at 3.0%			  179,119	
Administrative			   35,863	
Utilities			  972,722	
Payroll			  251,030	
Building Service & Supplies			  243,050	
Security			  141,008	
Grounds Maintenance			  110,309	
Maintenance & Repairs			   74,935	
Insurance			   91,575	
Subtotal Operating Expenses			2,099,611	
				
Tenant Improvements			  270,398	
Commissions			  167,975	
Reserve for Replacements at 2.0%			  119,413	
				
Total Expenses			2,657,396	
				
NET OPERATING INCOME			3,313,239	
				
CAPITALIZATION RATE (%)				
				
Overall Rate                  10.50				
Environmental Risk Factor      1.00				
Real Estate Tax Factor         1.252				
Total Cap Rate & Tax Factor	 12.75			
				
VALUE AS IF MARKET VACANCY			25,982,112	
DEDUCTION FOR EXCESS PROPERTY VACANCY			(2,545,136)	
FAIR CASH VALUE "AS IS"			23,436,976	
ROUNDED			23,500,000	
Deduction for parcels not appealed in accordance with parties' stipulation			    
    (128,000)	
FAIR CASH VALUE OF SUBJECT PARCEL			23,372,000	


Fiscal Year 2004

INCOME				
	Net Rentable Area
in Square Feet	Rent ($) per
Square Foot	Total
($)	
Polaroid Finished	291,203	15.75	4,586,447	
Polaroid Unfinished	 34,650 	17.50	  606,375	
Storage Apps	 20,884	17.50	  365,470	
Moldflow	 22,694	17.50	  397,145	
Sound Vision	 23,343	17.50	  408,503	
Wayland Cafeteria	  6,440	 3.50	   22,540	
Daycare Building	 10,480	14.00	  146,720	
Potential Gross Revenue	   409,694		6,533,200	
				
Vacancy at 20%			(1,306,640)	
				
Effective Gross Revenue			5,226,560	
				
EXPENSES				
				
Management at 3.0%			  156,797	
Administrative			   35,863	
Utilities			  972,722	
Payroll			  251,030	
Building Service & Supplies			  243,050	
Security			  141,008	
Grounds Maintenance			  110,309	
Maintenance & Repairs			   94,170	
Insurance			  109,093	
Subtotal Operating Expenses			2,114,042	
				
Tenant Improvements			  270,398	
Commissions			  167,975	
Reserve for Replacements at 2.0%			  104,531	
				
Total Expenses			2,656,946	
				
NET OPERATING INCOME			2,569,614	
				
CAPITALIZATION RATE (%)				
				
Overall Rate                  10.50				
Environmental Risk Factor      1.00				
Real Estate Tax Factor         1.313				
Total Cap Rate & Tax Factor	 12.81			
				
VALUE AS IF MARKET VACANCY			20,054,743	
DEDUCTION FOR EXCESS PROPERTY VACANCY			(5,967,154)	
FAIR CASH VALUE "AS IS"			14,087,589	
ROUNDED			14,100,000	
Deduction for parcels not appealed in accordance with parties' stipulation			    
    (344,000)	
FAIR CASH VALUE OF SUBJECT PARCEL			13,756,000	


C. The Assessors' Real Estate Valuation Expert's Analysis
	The assessors' real estate valuation expert, George Van Hazinga, agreed with the appellants' valuation expert that the property's highest and best use was its continued use as a commercial office complex.  Unlike Mr. Johnston, however, Mr. Van Hazinga used both sales comparison and income capitalization approaches in his appraisal report in estimating the value of the subject property at $30,900,000 and $26,700,000 for fiscal years 2003 and 2004, respectively.  He primarily relied on his sales comparison method and only used his income capitalization approach as a check.  Like Mr. Johnston, Mr. Van Hazinga recognized that a cost approach was not an appropriate methodology to use to value the subject property for the fiscal years at issue because of the property's age and difficulty in assigning depreciation values to it.  
	In his sales comparison approach, Mr. Van Hazinga relied on six purportedly comparable sales in Waltham, Boxboro, Marlboro, Needham, and Woburn.  The properties were sold in mid-2001 to mid-2003.  Their sale prices ranged from $13,800,000 to $69,250,000 with adjusted sale prices of $64.28 to $76.73 per square foot for fiscal year 2003 and $59.27 to $68.04 per square foot for fiscal year 2004.  Mr. Van Hazinga adjusted the sale prices to account for what he considered to be the degrees of differences with the subject property in land area, location, and building size and condition, as well as differences in market conditions from the assessment dates to his purportedly comparable properties' sale dates.  While his net adjustments per property ranged from 0% to 40%, his total gross adjustments per property averaged over 40%.  The values that he derived for the subject property for fiscal years 2003 and 2004 were $75.00 per square foot and $65.00 per square foot, respectively, producing total estimates of $31,201,275 and $27,041,105, respectively.     
	In his income capitalization methodology, Mr. Van Hazinga relied on "a sampling of recent lease agreements for comparable properties" for his estimates of market rents.  The vast majority of these leases were for properties located in Framingham, Natick, or Marlboro.  Only one lease was for a property in Wayland.  He did not use any actual lease information from the subject property or consider possible discounts to large renters.  Using these purportedly comparable rents, he estimated net market rents for the subject property at $17.00 per square foot for fiscal year 2003 and $15.50 per square foot for fiscal year 2004.  These rents were actually lower than the appellants' real estate valuation expert's weighted average estimates, albeit for gross rents, of $18.22 and $15.95 for fiscal years 2003 and 2004, respectively.  Mr. Van Hazinga's 416,017-square-foot gross estimate of the subject property's total rentable area included, unlike          Mr. Johnston's net measurement of 409,694 square feet, certain unrentable areas, such as hallways, management areas, staircases, elevators, and mechanical rooms.  
	Mr. Van Hazinga applied an even higher vacancy and credit loss rate of 25% than that used by the appellant's valuation expert.  For operating expenses, Mr. Van Hazinga estimated management costs at three percent, and other expenses for utilities, insurance, landscaping, and maintenance at $5.00 per square foot of the buildings' area.  Mr. Johnston's estimate for management fees was also three percent and less than $5.00 per square foot for other operating expenses.  Mr. Van Hazinga also included a reserve for replacements at $1.00 per square foot where  Mr. Johnston included reserves at two percent plus additional expenses for tenant improvements and commissions, which Mr. Van Hazinga did not even consider at this point in his methodology.  Mr. Van Hazinga's total expense figure was $1,095,165 for fiscal year 2003 and $1,081,124 for fiscal year 2004, leaving his net operating incomes at $4,209,052 and $3,755,073, respectively.
	For both fiscal years at issue, Mr. Van Hazinga used a capitalization rate of 10.00% plus an appropriate tax factor.  He made no adjustments for the subject property's environmental stigma related to the continuing publicity and widespread notoriety concerning the property's contamination.  Mr. Van Hazinga based his capitalization rate primarily on a mortgage-equity or Band-of-Investment technique, which he purportedly confirmed with information contained in published investor surveys.  In his methodology, Mr. Johnston used a capitalization rate of 10.50%, plus an appropriate tax factor, as well as an additional environmental risk premium of 1.00% to account for the stigma associated with the publicity and widespread notoriety concerning the environmental contamination on subject property.  Mr. Johnston's Band-of-Investment analysis, however, produced capitalization rates 0.50% lower than Mr. Van Hazinga's.  
Mr. Van Hazinga's indicated market values for the subject property were $41,055,911 for fiscal year 2003 and $36,411,068 for fiscal year 2004.  Similar to            Mr. Johnston's approach, Mr. Van Hazinga then reduced his indicated market values, "below the line," by what he termed capital costs totaling $9,360,383, which were one-time brokerage and tenant improvement expenses that he deemed necessary to successfully rent and refurbish this nearly vacant property.  In this way, using an income capitalization approach, Mr. Van Hazinga estimated the property's "as is" value at $31,695,529 for fiscal year 2003 and $27,050,686 for fiscal year 2004.  
	Mr. Van Hazinga reconciled the values produced by his two valuation approaches at $31,201,275 for fiscal year 2003 and $27,041,105 for fiscal year 2004, by relying almost entirely on the values derived from his sales comparison approach and then using the values from his income capitalization methodology only as a check.  Finally, he subtracted the assessments for the parcels not appealed and rounded the remaining values to $30,900,000 for fiscal year 2003 and $26,700,000 for fiscal year 2004.  Mr. Van Hazinga's final estimate of the subject parcel's value for the fiscal year 2003 was almost $8,000,000 below the assessed value.  His final estimate for fiscal year 2004 was more than $12,000,000 below the assessed value.  A summary of Mr. Van Hazinga's income capitalization approach for fiscal years 2003 and 2004 is set forth in the following table.
	Fiscal Year
           2003	Fiscal Year 
            2004	
Income - 416,017 sq. ft.	@$17.00    $7,072,289 	@$15.50   $6,448,264	
			
Vacancy & Credit Loss (%)	25        ($1,768,072)	25       ($1,612,066)	
			
Effective Gross Income	          $5,304,217	         $4,836,198	
			
Normal Operating Expenses			
 Management   	3.0%        ($159,127)	3.0%      ($145,086)	
 Costs During Vacancy	@$5.00      ($520,021)	@$5.00    ($520,021)	
 Reserve for Replacements	@$1.00      ($416,017)	@$1.00    ($416,017)	
Total Expenses	          ($1,095,165)	        ($1,081,124)	
			
Net Operating Income	          $4,209,052	        $3,755,073	
			
Capitalization Rate (%)	10.00 + 0.252 = 10.252	10.00 + 0.313 = 10.313	
			
Indicated Market Value	         $41,055,911	       $36,411,068	
			
 Brokerage	          ($3,120,128)	          ($3,120,128)	
 Tenant Improvements	          ($6,240,255)	          ($6,240,255)	
Total Capital Costs	          ($9,360,383)	          ($9,360,383)	
			
Indicated Value As Is	         $31,695,529	         $27,050,686	

C.	The Board's Valuation Findings

	The Board agreed with both real estate valuation experts' determination that the subject property's highest and best use was its continued present use as a commercial office and research and development rental property.  The Board also agreed with their decisions not to use a cost approach to value this older income-producing property.  The Board found that the most reliable methodology to use to value the subject property was an income capitalization methodology.  Mr. Johnston used this approach exclusively, and Mr. Van Hazinga also used it, as a check, in his appraisal report.  The Board found that a sales comparison approach was not viable here because there was a paucity of information in the record derived from truly comparable properties.  Mr. Van Hazinga mistakenly relied on sales of properties without any known environmental contamination or related stigma issues and, to the extent adjustments could be made to account for these factors, he failed to make any.  Even assuming that this error was not determinative, the Board further found that the properties upon which   Mr. Van Hazinga relied were not truly comparable to the subject property because of significant differences in their designs, layouts, locations, conditions, sizes, proximities to residential neighborhoods, and proximities to major highways.  In addition, Mr. Van Hazinga did not adequately support his seemingly subjective adjustments with any objective data.  Neither valuation expert relied on the 2004 sale of the subject property for $16.5 million, apparently because of concerns regarding possible compulsion and non-arms-length dealing.  Notwithstanding the sale and under the circumstances present in these appeals, the Board found that an income capitalization methodology was the best method to use to value this older income-producing property encumbered with a stigma relating to its environmental contamination issues.     
	For its income capitalization methodology, the Board essentially adopted Mr. Johnston's well-reasoned and well-supported approach, changing only his overall capitalization rate from 10.5% to 10.0% and eschewing his "below-the-line" deductions because they reflected a leased fee analysis and not a fee simple valuation.  The Board found that a fee simple valuation in these appeals included appropriate market data for rents, vacancies, expenses, and capitalization rates.  It did not include the "lease-up" costs suggested by the appellants' real estate valuation expert because they were not consistent with the use of market data, but instead were similar to using a non-market lease, which is, of course, a leased fee concept.  The Board further found that, as a whole, the data and assumptions contained in Mr. Johnston's income capitalization methodology were more reliable and better substantiated than Mr. Van Hazinga's.  
The Board reduced Mr. Johnston's overall capitalization rate by 0.50% to 10.00% because, in the Board's view, this lower rate better reflected: the risk associated with the property without regard to the stigma; Raytheon's commitment to subsidize any monitoring and clean-up costs; and the rates of 9.35% and 9.65% for fiscal years 2003 and 2004, respectively, derived by            Mr. Johnston's Band-of-Investment technique.  The Board noted that Mr. Van Hazinga, also using a Band-of-Investment analysis, suggested an overall capitalization rate of 10.00% for both of the fiscal years at issue.  The added investment risk caused by the notoriety and widespread publicity concerning the stigma relating to the subject property's environmental contamination was adequately addressed by increasing by 1.0% the overall capitalization rate for this property from 10.00% to 11.00%.  
The Board adopted Mr. Johnston's estimate of the building's rentable areas because his measurements reflected the subject property's net rentable area according to actual leases and measurements.  The area used by Mr. Van Hazinga was a gross measurement, which included unrentable space.  The Board adopted Mr. Johnston's suggested gross rents because they were well-supported by actual and market data, as well as the credible testimony of the appellants' other two witnesses.  His suggested rents also appropriately accounted for the size, condition, and type of space at the subject property.  
In addition, the Board adopted Mr. Johnston's expenses, including his suggested costs for commissions, tenant improvements, and reserves for replacements because, like his suggested rents, they were appropriately supported by market and actual data.  For the most part, Mr. Van Hazinga's suggested expenses were similar, even considering and accounting for his use of net as opposed to gross rents.  Like Mr. Johnston, the Board added another percent to its overall capitalization rate to account for the notorious and widespread stigma associated with the subject property's environmental contamination issues, and also added a tax factor, which is consistent with its adoption of gross rents.  
As stated, supra, the Board did not allow           Mr. Johnston's suggested "below-the-line" deductions, as representative of the cost for "leasing-up" the near-vacant facility, because the Board found that they were not appropriate for a fee simple valuation.  Detailed summaries of the Board's methodology for each of the fiscal years at issue are set forth below.
Fiscal Year 2003
INCOME				
	Net Rentable Area
in Square Feet	Rent ($) per
Square Foot	Total
($)	
Polaroid Finished	291,203	18.00	5,241,654	
Polaroid Unfinished	 34,650 	20.00	  693,000	
Storage Apps	 20,884	20.00	  417,680	
Moldflow	 22,694	20.00	  453,880	
Sound Vision	 23,343	20.00	  466,860	
Wayland Cafeteria	  6,440	 3.50	   22,540	
Daycare Building	 10,480	16.00	  167,680	
Potential Gross Revenue	   409,694		7,463,294	
				
Vacancy at 20%			(1,492,659)	
				
Effective Gross Revenue			5,970,635	
				
EXPENSES				
				
Management at 3.0%			  179,119	
Administrative			   35,863	
Utilities			  972,722	
Payroll			  251,030	
Building Service & Supplies			  243,050	
Security			  141,008	
Grounds Maintenance			  110,309	
Maintenance & Repairs			   74,935	
Insurance			   91,575	
Subtotal Operating Expenses			2,099,611	
				
Tenant Improvements			  270,398	
Commissions			  167,975	
Reserve for Replacements at 2.0%			  119,413	
				
Total Expenses			2,657,397	
				
NET OPERATING INCOME			3,313,238	
				
CAPITALIZATION RATE (%)				
				
Overall Rate                  10.00				
Environmental Risk Factor      1.00				
Real Estate Tax Factor         1.252				
Total Cap Rate & Tax Factor	 12.25			
				
FAIR CASH VALUE OF ENTIRE PROPERTY			27,046,840	
Deduction for parcels not appealed in accordance with parties' stipulation			
   (128,000)	
FAIR CASH VALUE OF PARCEL ON APPEAL			26,918,840	
ROUNDED			26,900,000	

Fiscal Year 2004
INCOME				
	Net Rentable Area
in Square Feet	Rent ($) per
Square Foot	Total
($)	
Polaroid Finished	291,203	15.75	4,586,447	
Polaroid Unfinished	 34,650 	17.50	  606,375	
Storage Apps	 20,884	17.50	  365,470	
Moldflow	 22,694	17.50	  397,145	
Sound Vision	 23,343	17.50	  408,503	
Wayland Cafeteria	  6,440	 3.50	   22,540	
Daycare Building	 10,480	14.00	  146,720	
Potential Gross Revenue	   409,694		6,533,200	
				
Vacancy at 20%			(1,306,640)	
				
Effective Gross Revenue			5,226,560	
				
EXPENSES				
				
Management at 3.0%			  156,797	
Administrative			   35,863	
Utilities			  972,722	
Payroll			  251,030	
Building Service & Supplies			  243,050	
Security			  141,008	
Grounds Maintenance			  110,309	
Maintenance & Repairs			   94,170	
Insurance			  109,093	
Subtotal Operating Expenses			2,114,042	
				
Tenant Improvements			  270,398	
Commissions			  167,975	
Reserve for Replacements at 2.0%			  104,531	
				
Total Expenses			2,656,946	
				
NET OPERATING INCOME			2,569,614	
				
CAPITALIZATION RATE (%)				
				
Overall Rate                  10.00				
Environmental Risk Factor      1.00				
Real Estate Tax Factor         1.313				
Total Cap Rate & Tax Factor	 12.31			
				
FAIR CASH VALUE OF ENTIRE PROPERTY			20,874,199	
Deduction for parcels not appealed in accordance with parties' stipulation			
   (344,400)	
FAIR CASH VALUE OF PARCEL ON APPEAL			20,529,799	
ROUNDED			20,530,000	


	On this basis, the Board decided these appeals for the appellants and granted tax abatements in the amounts of $149,338.56 for fiscal year 2003 and $240,252.74 for fiscal year 2004.  

OPINION
	The assessors are required to assess real estate at its fair cash value.  G.L. c. 59, § 38.  Fair cash value is defined as the price on which a willing seller and a willing buyer will agree if both of them are fully informed and under no compulsion.  Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).  Accordingly, fair cash value means fair market value.  Id.  Generally, real estate valuation experts, the Massachusetts courts, and this Board rely upon three approaches to determine the fair cash value of property: income capitalization; sales comparison; and cost reproductions.  Correia v. New Bedford Redev. Auth., 375 Mass. 360, 362 (1978) ("Correia").  
The Board ruled that the capitalization of net income attributable to the subject property was the best method of determining fair cash value in these appeals.  "[T]he introduction of evidence concerning value based on [reproduction or replacement cost] computations has been limited to special situations in which data cannot be reliably computed under the other two methods."  Correia, 375 Mass. at 362.  Use of the income capitalization method is appropriate when reliable market sales data are not available. Assessors of Weymouth v. Tammy Brook Co., 368 Mass. 807, 811 (1975); Assessors of Lynnfield v. New England Oyster House, 362 Mass. 696, 701-702 (1972); Assessors of Quincy v. Boston Consol. Gas Co., 309 Mass. 60, 67 (1941) ("Boston Consol. Gas").  The Board found that the instant record was devoid of reliable market sales data.  At any rate, the income capitalization method is frequently applied to income producing property.  See Taunton Redev. Assoc. v. Assessors of Taunton, 393  Mass. 293, 295 (1984) ("Taunton Redev. Assoc.").    
In addition, the Board found that the August 2004 sale of the subject property was not a reliable indicator of the subject parcel's value for the fiscal years at issue because of possible compulsion and lack of arms-length dealing and both valuation experts' reluctance to rely on it.  The sale price recited on the deed is not conclusive evidence of fair cash value.  Foxboro Associates v. Assessors of Foxborough, 385 Mass. 679, 682-83 (1982).  While a sale is presumptively at arms-length, Epstein v. Boston Housing Authority, 317 Mass. 297, 301 (1944), "the burden of proof that the price was fixed by fair bargaining or bidding, and not some form of compulsion preventing the normal operation of the self interest of buyer and seller, is on the party offering the price."  Id. at 300.  Accordingly, the Board did not rely on the sale to value the subject property for the fiscal years at issue, particularly considering the appropriateness of using an income capitalization methodology under the circumstances present in these appeals.      
When employing the income capitalization technique, evidence of the rental value of property has long been considered relevant.  However, the earning capacity rather than the actual income from the property is more probative in ascertaining potential gross income.  Boston Consol. Gas, 309 Mass. at 64.  After accounting for vacancy and rent losses, the net-operating income is obtained by deducting the landlord's appropriate expenses.  General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 609 (1984) ("General Electric").  
The capitalization rate applied should reflect the return on investment necessary to attract investment capital.  Taunton Redev. Assoc., 393 Mass. at 295.  The tax factor is a percentage added to the capitalization rate "to reflect the tax which will be payable on the assessed valuation produced by the [income capitalization approach]."  Assessors of Lynn v. Shop-Lease Co., 364 Mass. 569, 573 (1974).  
Government restrictions may have an impact on fair cash value.  See, e.g., Parkinson v. Assessors of Medfield, 398 Mass. 112, 116 (1986) (regarding conservation restriction); Boston Edison Co. v. Assessors of Watertown, 387 Mass. 298, 304 (1982) (regarding rate-base restriction); and Community Development Co. v. Assessors of Gardner, 377 Mass. 351, 354-355 (1979) (regarding federal rent regulation).  Proven environmental contamination may also affect the fair cash value of property.  Reliable Electronic Finishing Co. v. Assessors of Carver, 410 Mass. 381, 382-83 (1991); 23 West Bacon Corp. v. Assessors of Plainville, ATB Findings of Fact & Reports 2000-678, 708-709 ("West Bacon"); Lyman v. Assessors of Cambridge, ATB Findings of Fact & Reports 1998-257, 294-96 ("Lyman"); Woburn Services, Inc. v. Assessors of Woburn, ATB Findings & Reports 1996-553, 574-75 ("Woburn Services").  The Board ruled here that the subject property's stigma relating to the environmental contamination issues on site affected its fair cash value.  
Traditional appraisal techniques, which are appropriately modified to account for the effects of stigma caused by environmental contamination are satisfactory for determining a property's fair market value.  Westling v. County of Mille Lacs, 512 N.W.2d 863, 866 (Minn. 1994).  The Board has ruled that an income capitalization methodology in which the capitalization rate is modified or adjusted to account for the effects of stigma caused by environmental contamination on an income-producing property's value, is particularly useful in this regard.  See, e.g., West Bacon, ATB Findings of Fact & Reports 2000 at 708-709; Lyman, ATB Findings of Fact & Reports 1998 at 294-96; and Woburn Services, ATB Findings of Fact & Reports 1996 at 574-75.  The presence of stigma relating to environmental contamination may reduce the fair market value of the property even though the property remains capable of being used as intended.  See Id. (and the cases cited therein, including Almor Corp. v. County of Hennepin, 1996 WL 112634 (Minn. Tax); Westling v. County of Mills Lacs, 543 N.W.2d 91, 92 (Minn. 1996); and Bisson v. Eck,  40 Mass. App. Ct. 942 (1996)).  Accordingly, the effects on value caused by a stigma relating to a property's environmental contamination must be recognized by this Board when proven.  The Board found and ruled here that the appellants introduced sufficient evidence to prove a negative effect on the subject property's value caused by stigma relating to the environmental contamination on the property and, therefore, accounted for the negative effect on the Wayland Business Center's value by upwardly adjusting the capitalization rate.  
"[The Board can] accept such portions of the evidence as appear[s] to have the more convincing weight.  The market value of the property [can] not be proved with mathematical certainty and must ultimately rest in the realm of opinion, estimate, and judgment. . . .  The board [can] select the various elements of value as shown by the record and from them form . . . its own independent judgment."  Boston Consol. Gas, 309 Mass. at 72.  See also North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass. 296, 300 (1984); New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 473 (1981); Jordan Marsh Co. v. Assessors of Malden, 359 Mass. 106, 110 (1971).  
The Board rejected the appellants' valuation expert's suggested "below-the-line" deductions to account for what he considered extraordinary "lease-up" costs relating to excess vacancy at the property during the fiscal years at issue.  The Board considered these deductions inappropriate in a fee simple valuation, which is the standard in this state.  "The assessors must determine a fair cash value for the property as a fee simple estate, which is to say, they must value an ownership interest in the land and the building as if no leases were in effect.  Olympia & York State Street Company v. Assessors of Boston, 428 Mass. 236, 247 (1998).  "A real estate tax is a '"tax upon the whole land and not merely on the interest of the person taxed."  Therefore, the assessment must be "on the entire estate and not upon any interest therein."'"  Id., quoting Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447, 450 (1986), quoting Donovan v. Haverhill, 247 Mass. 69, 71-72 (1923).  The Board found and ruled that, in these appeals, "lease-up" costs were similar to non-market leases, which ordinarily should not be included in a fee simple valuation.     
The Board further ruled that the appellants' reliance on Reservoir Place Realty Trust v. Assessors of Waltham,  1995 ATB Findings of Fact & Reports 1995-48 ("Reservoir Place") to support these "below-the-line" deductions was misplaced where significant factual differences between the two properties exist.  Moreover, to the extent Reservoir Place might be considered precedent in the instant appeals for including the appellants' valuation expert's "below-the-line" deductions in the income capitalization methodology used to value the fee simple interest here, the Board overruled Reservoir Place for improperly incorporating leased fee concepts into a fee simple valuation.   
CONCLUSION
	The burden of proof is upon the appellants to establish their right as a matter of law to an abatement of the tax.  Schlaiker v. Assessors of Great Barrington,    365 Mass. 243, 245 (1974).  "By holding that the assessment is entitled to a presumption of validity, we are only restating that the taxpayer bears the burden of persuasion of every material fact necessary to prove that its property has been overvalued."  General Electric, 393 Mass. at 599.  In appeals before this Board, a taxpayer "may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors' method of valuation, or by introducing affirmative evidence of value which undermines the assessors' valuation."  Id. at 600.  

	The Board found and ruled here that, upon all of the evidence, the appellants met their burden of proving that the subject parcel was overvalued and its fair cash value was adversely affected by stigma related to the presence of environmental contamination in and on the property during the fiscal years at issue.  Accordingly, the Board granted appropriate abatements in these appeals.

						APPELLATE TAX BOARD

					     									    	By: ___________________________________
				    Anne T. Foley, Chair


				    ___________________________________
				    Frank J. Scharaffa, Commissioner


				    ___________________________________
				    Donald E. Gorton, III, Commissioner


				    ___________________________________
				    Nancy T. Egan, Commissioner


				    ___________________________________
				    James D. Rose, Commissioner


A true copy,



Attest:____________________________
       Assistant Clerk of the Board

 On or about December 4, 2003, the appellant GRM Properties II, LLC acquired title to the subject property.  In accordance with G.L. c. 59, § 59, it is "treated as a person upon whom a tax has been assessed" for fiscal year 2004.  Unless referred to individually by name, the two above appellants will be collectively identified as "appellants."    

 The assessors referred to Wayland Business Center's address on the relevant tax bills as 400 Boston Post Road.  The appellants assigned certain portions of the property's main building addresses of 400, 420, 430, and 432 Boston Post Road, and the incomplete building an address of 440 Boston Post Road.  One of the property's former owners referred to the property as 430 Boston Post Road.  The Board adopted the address designation of 400-440 Boston Post Road, which was used by the parties' real estate valuation experts and encompasses designations for the main building as well as the unfinished building.  
 The assessors placed all of the assessed value attributable to the improvements on parcel 23-52.   
 Certain uses on the property, such as childcare, daycare, and residential, recreational, agricultural, horticultural, and gardening activities, are prohibited without approval from a licensed professional.  Similarly, any excavation, reconstruction, or new construction below grade must also receive such approval.     
 The Board noted several minor computational errors, which did not affect Mr. Johnston's estimates of value.
 Because he used net rents in his methodology, Mr. Van Hazinga applied the $5.00 per square foot operating expense figure to only the vacant square footage, assuming that the tenants paid the expenses for the occupied space.
 Apparently, Mr. Van Hazinga's net rents did not assume that the tenants pay the real estate taxes.
 The Board noted several minor computational errors, which did not significantly affect Mr. Van Hazinga's estimates of value.
 In Appraisal Institute, The Appraisal of Real Estate at 68-69 (12th ed., 2001), a fee simple interest is described as the "most complete form of ownership," that is, "absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by governmental powers of taxation, eminent domain, police power, and escheat."  The complete bundle of rights associated with a fee simple interest include: the right to sell an interest; the right to lease an interest and to occupy the property; the right to mortgage an interest; the right to give an interest away; and the right to do none or all of these things.  A leased fee interest, on the other hand, is only one portion of the fee simple's bundle of rights.  It is an ownership interest held by a landlord with the rights for use and occupancy conveyed by the terms of a lease to others.  See Appraisal Institute, The Appraisal of Real Estate at 81-84.

ATB 2005-600