F299494; F306820; F310791•Wayne J. Griffin, Trustee of the Wayne J. Griffin Realty Trust v. Board of Assessors of the Town of Holliston (June 27, 2012)
Wayne J. Griffin, Trustee of the Wayne J. Griffin Realty Trust v. Board of Assessors of the Town of Holliston (June 27, 2012)
F299494; F306820; F310791Masstaxbd
Texte intégral
COMMONWEALTH OF MASSACHUSETTS
APPELLATE TAX BOARD
WAYNE J. GRIFFIN, TRUSTEE OF THE v. BOARD OF ASSESSORS OF THE
WAYNE J. GRIFFIN REALTY TRUST TOWN OF HOLLISTON
Docket Nos.: F299494 (FY 2009) Promulgated:
F306820 (FY 2010) June 27, 2012
F310791 (FY 2011)
These are appeals under the formal procedure, pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the Board of Assessors of the Town of Holliston (the "appellee" or the "assessors") to abate taxes on certain real estate in the Town of Holliston owned by and assessed to Wayne J. Griffin, Trustee of the Wayne J. Griffin Realty Trust (the "appellant") under G.L. c. 59, §§ 11 and 38 for fiscal years 2009, 2010, and 2011.
Commissioner Rose heard these appeals. Chairman Hammond and Commissioners Scharaffa, Mulhern, and Chmielinski joined him in the decision for the appellee for fiscal year 2009 and the revised decisions for the appellant in fiscal years 2010 and 2011. The revised decisions are promulgated simultaneously with these findings of fact and report.
These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.
Matthew A. Luz, Esq. for the appellant.
James F. Sullivan, Esq. for the appellee.
FINDINGS OF FACT AND REPORT
On January 1, 2008, January 1, 2009, and January 1, 2010, the appellant was the assessed owner of the property located at 116 Hopping Brook Road in the Town of Holliston (the "subject property"). For assessment purposes, the subject property is identified as Parcel 53 in Block 6 on Map 4. The subject property consists of approximately 2.86 acres of land (the "subject parcel") improved with a two-story, owner-occupied, single-tenanted, industrial office building with approximately 84,540 square feet of rentable space (the "subject building"), as of the latter two fiscal years.
The subject property is situated within the southwestern corner of Holliston near the Milford and Medway town lines. Interstate 495 is located approximately two miles away in Milford and is accessible by State Routes 16 and 109.
The subject property is located within the Hopping Brook Park (the "Park"), which is an industrial office park situated off of Washington Street (State Route 16). The Park is comprised of approximately eighteen buildings, including the subject building; the buildings' uses consist primarily of light manufacturing- and warehouse-type functions. Most of the buildings in the Park were built in the 1980s and 1990s and range in size from about 3,000 square feet to about 96,000 square feet. The majority of the buildings are owner-occupied, and there are undeveloped parcels of land in the Park for future development.
Washington Street, which is the primary access route to the Park's entrance, is predominantly residential in nature consisting of single-family homes. Also located along Washington Street within the subject property's immediate vicinity are several recreational fields and a cemetery. Holliston's downtown business district is situated about 2.5 miles northeast of the subject property which is located along Hopping Brook Road, the main roadway within the Park. Hopping Brook Road is a lightly traveled, somewhat circular, roadway that serves only the properties situated within the Park.
In summary, the subject property is an industrial office building situated within an industrial park with average access to regional transportation routes.
The subject property's 124,430-square-foot parcel is somewhat triangular shaped with over 570 feet of frontage along Hopping Brook Road. The subject parcel slopes downward in an east-to-west and southeast-to-northwest direction with the subject building being constructed into the sloping topography.
The completed subject building occupies approximately 27.7% of the subject parcel's total land area. There is an asphalt paved area situated in the front, along the right side and to the rear of the subject building that provides parking for about 200 vehicles, as well as access to an overhead door and loading dock located along the rear of the subject building. The subject property also benefits from a parking easement which encompasses 1.35 acres of land that abuts the east side of subject property. Access to the subject property is via curb cuts along Hopping Brook Road. All utilities are available to the subject property including municipal water, gas, electric, and telephone. The Park has a private on-site septic disposal system for the properties located there.
According to the Holliston zoning map, the subject property is located in the Industrial (I) zoning district. The subject property's current uses are allowed within the Industrial (I) zoning district; however, the subject property exceeds the 15,000-square-foot zoning-district limit necessitating the issuance of a special permit. Holliston's Zoning Board of Appeals issued special permits in 1984, 1999, and 2007 allowing for the current use of the subject property. Therefore, the subject property is considered to be a non-conforming legal use.
The subject building was constructed in three phases with a combined total of 39,606 square feet being built in 1985 and in 2000, and an additional 44,934 square feet being completed in 2009 (the "subject addition"). The subject building was constructed in harmony with the subject parcel's topography contours. As a result, the basement level of the subject building is partially below grade with only its rear-facing portion being grade level. Following completion of the subject addition in 2009, the subject building contained 34,781 square feet of gross floor area in the basement or lower level and 49,759 square feet of gross floor area in the above-grade or ground-floor and upper levels.
The main entrance to the subject building is situated in the front of the building on the ground-floor level. There are eight interior staircases and a 4,500-pound capacity passenger elevator that provides access to all three levels. The basement or lower level of the subject building contains warehouse space, shop space, training space, computer lab space, classroom space, office space, and an exercise room with a locker room. Much of the lower level is open space with movable partition walls. The ground-floor and upper-floor levels contain perimeter private offices with open areas for temporary cubicles, conference rooms, copy rooms, computer rooms, file rooms, small kitchenettes, a cafeteria area, and storage areas.
In general, the overall exterior and interior of the subject building are in average to good physical condition.
For fiscal years 2009, 2010, and 2011, the town's Tax Collector mailed the real estate tax bills on December 26, 2008, January 29, 2010, and December 30, 2010, respectively. The assessors valued the subject property at $3,885,900, $6,311,000, and $6,311,000, respectively, and assessed taxes thereon, at the corresponding rates of $15.46, $16.31, and $17.94 per thousand, in the amounts of $60,076.01, $102,932.41, $113,219.34, respectively. In accordance with G.L. c. 59, § 57C, the appellant timely paid the real estate taxes without incurring interest.
On January 12, 2009 for fiscal year 2009, February 16, 2010 for fiscal year 2010, and January 7, 2011 for fiscal year 2011, in accordance with G.L. c. 59, § 59, the appellant timely filed abatement applications with the assessors, which were deemed denied three months later. On April 17, 2009, May 28, 2010, and April 14, 2011, respectively, in accordance with G.L. c. 59, §§ 64 and 65, the appellant seasonably filed with the Board corresponding Petitions Under Formal Procedure appealing the deemed denials. On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide these appeals.
The appellant contested the assessments in these appeals through the testimony of his real estate valuation expert, Eric Wolff, whom the Board qualified as an expert without objection. The appellant also submitted into evidence Mr. Wolff's summary appraisal report. In support of the assessments, the assessors relied on the testimony of Kathryn Peirce, the Principal Assessor for Holliston, and their real estate valuation expert, Daniel A. Dargon, Jr., whom the Board qualified as a real estate valuation expert without objection. The assessors also submitted into evidence the requisite jurisdictional documents and Mr. Dargon's summary appraisal report.
In discussing his approach for ascertaining the fair cash value of the subject property for the fiscal years at issue, Mr. Wolff reported and testified that he first inspected the subject property and thoroughly reviewed the Holliston area real estate market, in particular the industrial office building submarket. He also claimed that he researched market sales, lease data and zoning restrictions, and he maintained that he examined other pertinent information available through and in various sources and publications such as, the Warren Group, the CoStar Group, the South Middlesex County Registry of Deeds, and Holliston's assessing, tax, and building departments. In addition, he stated that he discussed the subject property with its owner and the subject property's market with knowledgeable area real estate brokers. After considering all of this information, along with the recognized criteria for formulating a property's highest and best use, Mr. Wolff determined that the subject property's highest-and-best use was its existing use as a single-tenanted industrial office building, with some warehouse uses.
To estimate the fair cash value of the subject property for fiscal years 2009, 2010, and 2011, Mr. Wolff developed values using both sales-comparison and income-capitalization techniques. He considered but rejected using a cost approach because he regarded the other two approaches as better methodologies for developing values for a property like the subject property. In addition, the age of the subject property's building and the marketplace's preference for the other two approaches militated against using a cost approach.
While Mr. Wolff developed values for the subject property for the fiscal years at issue using a sales-comparison method, he did not rely on those values in estimating values for the subject property because he believed that those values were less reliable indicators of the subject property's value than estimates developed using an income-capitalization methodology. Mr. Wolff determined that there were only a limited number of sales of industrial office buildings within the subject property's competitive market area during the relevant time period and those sale properties were difficult to compare to the subject property. He therefore only used the values that he derived from his sales-comparison approach - $3,345,000 for fiscal year 2009, $6,380,000 for fiscal year 2010, and $6,570,000 for fiscal year 2011 - as "reasonableness" checks on the values that he developed using his income-capitalization technique. Accordingly, Mr. Wolff considered his income-capitalization approach to be the most viable methodology to use to estimate the fair cash value of the subject property for the fiscal years at issue.
To determine the most appropriate office rents to use in his income-capitalization methodology for the fiscal years at issue, Mr. Wolff testified that he investigated market rental rates by surveying what he regarded as similar industrial office properties in Holliston, Hopkinton, and Milford and by conversing with local real estate brokers. His survey for industrial office space included eleven properties with triple-net leases ranging from $8.75 to $13.75 per square foot and one property under a gross lease charging $18.00 per square foot. Because of the subject building's "average location," Mr. Wolff selected $10.00 per square foot as a representative rent for the subject building's above-grade or ground- and upper-level industrial office space and $8.00 per square foot for its partially below-grade or basement and lower area. To determine a market rent for the subject building's industrial warehouse space, Mr. Wolff reviewed seven properties in Holliston with triple-net leases ranging from $4.75 to $7.00 per square foot. Because the subject building's industrial warehouse space is located in its partially below-grade area, Mr. Wolff chose $6.00 per square foot as a representative rent.
Mr. Wolff then applied these rents to the corresponding areas in the subject building. For fiscal year 2009, he determined that there were 19,680 square feet of industrial office space and 19,680 square feet of industrial warehouse space in the subject building. For fiscal year 2010, he determined that there were 45,949 square feet of ground- and upper-level industrial office space, 5,703 square feet of lower-level industrial office space, and 27,112 square feet of industrial warehouse space in the subject building. For fiscal year 2011, Mr. Wolff determined that there were 48,868 square feet of ground- and upper-level industrial office space, 6,336 square feet of lower-level or basement industrial office space, and 27,938 square feet of industrial warehouse space in the subject building. These areas and rental rates yielded potential gross incomes of $314,880 for fiscal year 2009, $667,786 for fiscal year 2010, and $706,996 for fiscal year 2011.
Mr. Wolff based his ten-percent vacancy rate for each of the fiscal years at issue on his discussions with local brokers who estimated vacancy rates for industrial office and warehouse space at 10 to 20% and on a market survey conducted by the CoStar Group placing the vacancy rate for industrial space in the Holliston area at 11.3 to 14.7%. Mr. Wolff stated that he also factored in the subject property's location, and the subject building's relative size and current physical condition in selecting his 10% vacancy rate. After applying his 10% vacancy and credit loss rate to his potential gross incomes, Mr. Wolff calculated effective gross income amounts of $283,392, $601,007, and $636,296, for fiscal years 2009, 2010, and 2011, respectively.
For his operating expenses, Mr. Wolff observed that the then current leasing activity within the subject property's competitive market area indicated that the landlord is responsible for expenses associated with the management and structural maintenance of the property. Based on his conversations with the owners of the subject property and the owners of similar properties, as well as his experience, Mr. Wolff selected a management fee equal to 5% of effective gross income, a replacement reserve equal to 3% of potential gross income, and a miscellaneous expense equal to 1% of potential gross income. Mr. Wolff subtracted these expenses from his effective gross incomes to achieve his net-operating incomes of $256,627, $544,245, and $576,201, for fiscal years 2009, 2010, and 2011, respectively.
In determining the capitalization rates for the subject property, Mr. Wolff utilized the band-of-investment technique. He verified his results for fiscal years 2009, 2010, and 2011 with the corresponding capitalization rate ranges contained in the First Quarter Korpacz Real Estate Investor Survey Reports for 2008, 2009, and 2010 for non-institutional grade office and industrial properties in the Boston area. Mr. Wolff also verified his band-of-investment results with capitalization rate ranges for Class B office and industrial properties in the Boston area published by CB Richard Ellis.
For fiscal year 2009, his basic band-of-investment assumptions included a mortgage loan-to-value ratio of seventy percent, a mortgage constant of 9.3%, an equity investment of thirty percent, and an equity dividend rate of 12.5%. These assumptions yielded weighted mortgage and equity components of 6.51% and 3.75%, respectively. Mr. Wolff added these two components together and adjusted for equity build-up but not for appreciation or depreciation, which he believed was stable for the relevant time period, and achieved a total band-of-investment rate of 8.97% for fiscal year 2009, which he rounded to 9.0%. For fiscal years 2010 and 2011, his basic assumptions included a mortgage loan-to-value ratio of seventy percent, a mortgage constant at 9.3%, an equity investment of thirty percent, and an equity dividend rate at 14.0%. These assumptions yielded weighted mortgage and equity components of 6.51% and 4.20%, respectively. Mr. Wolff added these two components together and adjusted for equity build-up but not for appreciation or depreciation, because he believed that the market was stable for the relevant time period, and achieved a total band-of-investment rate of 9.51% for fiscal years 2010 and 2011, which he rounded to 9.5%.
Mr. Wolf estimated the value of the subject property for fiscal years at issue by dividing his net-income figures by the corresponding overall capitalization rate. His indicated values for fiscal years 2009, 2010, and 2011 were $2,851,411, $5,728,995, and $6,065,274, respectively, which he then rounded to $2,850,000 for fiscal year 2009, $5,730,000 for fiscal year 2010, and $6,065,000 for fiscal year 2011. A summary of his income-capitalization methodology is contained in the following three tables.
Fiscal Year 2009
January 1, 2008 Valuation & Assessment Date
INCOME Size(SF) Rate/SF
Industrial Office Space 19,680 $10.00 $ 196,800
Industrial Warehouse Space 19,680 $ 6.00 $ 118,080
Potential Gross Income ("PGI"): $ 314,880
Less: Vacancy & Collection Allowance - 10.0%
($ 31,488)
Effective Gross Income ("EGI"): $ 283,392
EXPENSES
Management Fee $14,170 - 5.00% of EGI
Replacement Reserves $ 9,446 - 3.00% of PGI
Miscellaneous $ 3,149 - 1.00% of PGI
Less: Total Expenses: $26,765 ($ 26,765)
Net Operating Income ("NOI"): $ 256,627
Divide by: Capitalization Rate 9.0%
Estimated Value for Fiscal Year 2009 $2,851,411
Rounded Value for Fiscal Year 2009 $2,850,000
Fiscal Year 2010
January 1, 2009 Valuation & Assessment Date
INCOME Size(SF) Rate/SF
Industrial Office Space - Upper 45,949 $10.00 $ 459,490
Industrial Office Space - Lower 5,703 $ 8.00 $ 45,624
Industrial Warehouse Space 27,112 $ 6.00 $ 162,672
Potential Gross Income ("PGI"): $ 667,786
Less: Vacancy & Collection Allowance - 10.0%
($ 66,779)
Effective Gross Income ("EGI"): $ 601,007
EXPENSES
Management Fee $30,050 - 5.00% of EGI
Replacement Reserves $20,034 - 3.00% of PGI
Miscellaneous $ 6,678 - 1.00% of PGI
Total Expenses: $56,762 ($ 56,762)
Net Operating Income ("NOI"): $ 544,245
Divide by: Capitalization Rate 9.5%
Estimated Value for Fiscal Year 2010 $5,728,995
Rounded Value for Fiscal Year 2010 $5,730,000
Fiscal Year 2011
January 1, 2010 Valuation & Assessment Date
INCOME Size(SF) Rate/SF
Industrial Office Space - Upper 48,868 $10.00 $ 488,680
Industrial Warehouse Space - Lower 6,336 $ 8.00 $ 50,688
Industrial Warehouse Space 27,938 $ 6.00 $ 167,628
Potential Gross Income ("PGI"): $ 706,996
Less: Vacancy & Collection Allowance - 10.0%
($ 70,700)
Effective Gross Income ("EGI"): $ 636,296
EXPENSES
Management Fee $31,815 - 5.00% of EGI
Replacement Reserves $21,210 - 3.00% of PGI
Miscellaneous $ 7,070 - 1.00% of PGI
Total Expenses: $60,095 ($ 60,095)
Net Operating Income ("NOI"): $ 576,201
Divide by: Capitalization Rate 9.5%
Estimated Value for Fiscal Year 2011 $6,065,274
Rounded Value for Fiscal Year 2011 $6,065,000
In support of the assessments, the assessors called to testify both Kathryn Peirce, the Principal Assessor for Holliston, and Daniel A. Dargon, Jr., their real estate valuation expert. Ms. Peirce testified that for valuation purposes, the assessors use July 1st, as opposed to January 1st, as the valuation date for new construction. At the request of the Presiding Commissioner, the assessors submitted into evidence a certified copy of the town's prior acceptance of the relevant provisions in G.L. c. 59, § 2A ("§ 2A" or "section 2A"). In addition, Ms. Pierce testified that she inspected the subject property in June, 2008 and determined that the construction of the subject addition was 48% complete. She further testified that following her subsequent conversations with a representative of the appellant, the assessors agreed to lower the completion percentage to 45% for fiscal year 2009 valuation and assessment purposes. Lastly, Ms. Pierce related that the construction of the recent addition on the subject property was 100% complete as of July 1, 2009 and the assessors, therefore, valued and assessed the subject property as 100% complete for fiscal years 2010 and 2011.
In preparation for his assignment to estimate of the value of subject property for fiscal years 2009 and 2010, the two fiscal years for which the assessors retained him, Mr. Dargon stated that he completed an interior and exterior inspection of the subject property, an analysis of local market conditions, a review of his and other data bases for relevant information pertaining to the market area, and an analysis of sales and listings for the market area. In estimating the value of the subject property for the fiscal years 2009 and 2010, Mr. Dargon agreed with the appellant's real estate valuation expert that the subject property's highest-and-best use was its continued use as industrial office space, with warehouses uses, but as a multi-tenanted, as opposed to an owner-occupied, building. He also agreed with the appellant's real estate valuation witness that the income-capitalization approach was the preferred valuation methodology to use under the circumstances. Mr. Dargon considered but did not apply the cost approach because the age of certain portions of the subject building made "depreciation difficult to accurately measure." While he developed values using a sales-comparison approach, he only relied on those values as a check. The rounded estimates of value that he developed using this approach for fiscal years 2009 and 2010, were $4,485,000 and $6,340,500, respectively.
In developing these estimates, Mr. Dargon incorporated Ms. Peirce's uncontroverted testimony that the recent addition to the subject building was at least 45% complete as of July 1, 2009 and 100% complete as of July 1, 2010. The assessors maintained that these July first dates constituted the requisite valuation dates for new construction in Holliston for those fiscal years. Mr. Dargon selected and adjusted six area sales, including three from Holliston, to develop a price per square foot for fiscal years 2009 and 2010. The adjusted values of his purportedly comparable properties ranged from $66.00 to $83.00 per square foot with a $74.00 average. Based on this data, Mr. Dargon selected $75.00 per square foot as the most reasonable value for the subject property for these two fiscal years. The following two tables summarize his sales-comparison approach.
Sales-Comparison Approach for Fiscal Year 2009
SF Area Value/SF % Complete Total
Existing Area 39,606 $75.00 100% $2,970,450
Addition Area 44,934 $75.00 45% $1,516,523
Est. Market Value $4,486,972
Rounded Value $4,485,000
Sales-Comparison Approach for Fiscal Year 2010
SF Area Value/SF % Complete Total
Existing Area 39,606 $75.00 100% $2,970,450
Addition Area 44,934 $75.00 100% $3,370,050
Est. Market Value $6,340,500
Rounded Value $6,340,500
As stated, supra, his assignment did not entail developing values for fiscal year 2011.
In his income-capitalization methodology, Mr. Dargon estimated his potential gross income using market rents from properties located in Holliston and the surrounding area. He researched what he considered to be comparable industrial office leases, as well as warehouse leases, that were effective in fiscal years 2009 and 2010. From this research, he determined a rental range of $10.00 to $16.00 per square foot for the subject building's upper- and ground-level industrial office space and a range of $4.00 to $8.00 per square foot for its basement level space. From these rental ranges, Mr. Dargon estimated a $12.00-per-square-foot gross rent for the subject property's upper- and ground-level industrial office area and $7.00-per-square-foot gross rent for its basement space. Mr. Dargon observed that market rents for the subject property would be on a gross basis because of the subject building's type, size, and condition.
To estimate an appropriate vacancy and credit loss percentage for the fiscal years at issue, Mr. Dargon reviewed CoStar, which, according to Mr. Dargon, indicated a vacancy level of about 10% for Holliston industrial property market. He also considered his own observations regarding similar properties in the region, and factored in rates from data provided by the assessors. Based on this information, Mr. Dargon estimated a vacancy and credit loss percentage of 10%, which is the same percentage as the one recommended by the appellant's real estate valuation expert.
For expenses, Mr. Dargon assumed that the landlord would be responsible for insurance outlays, management fees, and shell maintenance costs, as well as any real estate taxes and replacement reserves, while the tenant would pay for its utilities and day-to-day maintenance costs. In his testimony, he referred to this arrangement as "a gross lease with net for utilities and common area maintenance be[ing] paid by the tenant." He set the landlord's expenses at $30,000 per year for insurance outlays, 4% of effective gross income for management fees, 4% of effective gross income for shell maintenance costs, and a replacement reserve for short-lived items of 3% of effective gross income.
Mr. Dargon developed his capitalization rate using band-of-investment, debt-coverage-ratio, and mortgage-equity techniques. For his band-of-investment and debt-coverage analyses, he stated that he researched mortgage rates and terms within the subject property's market area and from that research, identified what he considered to be appropriate capitalization variables. Those variables include a mortgage interest rate of 7.00%, a loan term of 25 years, a loan-to-value ratio of 75%, a debt-coverage ratio of 1.25 and an equity dividend rate of 8.00%. The following two tables are representative of those found in his summary appraisal report summarizing his first two methods.
Band-of-Investment Analysis
Mortgage Constant Loan Ratio Contributions
0.084813504 x 75% = 6.36%
Equity Dividend Rate Equity Ratio
8.00% x 25% = 2.00%
Band of Investment Capitalization Rate 8.36%
Debt Coverage Ratio Analysis
Debt Coverage Ratio Loan-to-Value Ratio Mortgage Constant
1.25 x 0.75 x 0.084813503673011 = 7.95%
Debt Coverage Ratio Capitalization Rate 7.95%
Mr. Dargon also derived a capitalization rate using a mortgage-equity analysis which incorporated a mortgage interest rate of 7% with a 25-year term, a loan-to-value ratio of 70%, an equity yield rate of 10%, an equity-to-value ratio of 30%, a ten-year holding period, and a minimal appreciation factor of 5% over the ten-year holding period, resulting in an approximate and rounded capitalization rate of 8.00%. Relying primarily on his mortgage-equity and band-of-investment analyses, Mr. Dargon selected a capitalization rate of 8.00% to which he added a tax factor of 1.546% for fiscal year 2009 and 1.631% for fiscal year 2010.
To estimate the value of the subject property for fiscal years 2009 and 2010, Mr. Dargon divided his net-operating income for the appropriate fiscal year by his corresponding capitalization rate and then rounded. Summaries of his income-capitalization analyses, with some alterations to facilitate clarity, are replicated in the following two tables.
Fiscal Year 2009
Space Type
Area in SF Market Rent/SF Income as Complete Percentage Complete Income Component
INCOME
Existing Office 19,803 $12.00 $237,636 100% $ 237,636
Existing Basement 19,803 $ 7.00 $138,621 100% $ 138,621
New Office 29,956 $12.00 $359,472 45% $ 161,762
New Basement 14,978 $ 7.00 $104,846 45% $ 47,181
Potential Gross Income ("PGI") $840,575 $ 585,200
Vacancy/Credit Loss @ 10% $ 84,058 ($ 58,520)
Effective Gross Income ("EGI") $756,518 $ 526,680
EXPENSES Annual Expenses
Insurance @ $30,000/year $ 30,000
Management @ 4.0% of EGI $ 30,261
Repairs/Maintenance @ 5.0% of EGI $ 37,826
Reserves @ 3% of EGI $ 22,696
Total Expenses $120,782 ($ 120,782)
Net Operating Income ("NOI") $ 405,898
Capitalization Rate 8.00% + 1.546% = 9.55%
Indicated Value $4,250,241
Rounded Value $4,250,000
Fiscal Year 2010
Space Type
Area in SF Market Rent/SF Income as Complete Percentage Complete Income Component
INCOME
Existing Office 19,803 $12.00 $237,636 100% $ 237,636
Existing Basement 19,803 $ 7.00 $138,621 100% $ 138,621
New Office 29,956 $12.00 $359,472 100% $ 359,472
New Basement 14,978 $ 7.00 $104,846 100% $ 104,846
Potential Gross Income ("PGI") $840,575 $ 840,575
Vacancy/Credit Loss @ 10% $ 84,058 ($ 84,058)
Effective Gross Income ("EGI") $756,518 $ 756,518
EXPENSES Annual Expenses
Insurance @ $30,000/year $ 30,000
Management @ 4.0% of EGI $ 30,261
Repairs/Maintenance @ 5.0% of EGI $ 37,826
Reserves @ 3% of EGI $ 22,696
Total Expenses $120,782 ($ 120,782)
Net Operating Income ("NOI") $ 635,735
Capitalization Rate 8.00% + 1.63% = 9.63%
Indicated Value $6,601,614
Rounded Value $6,600,000
In consideration of all of the evidence and reasonable inferences drawn therefrom, the Board found that the subject property's highest-and-best use for the fiscal years at issue was its existing use as an industrial office building with some warehouse uses, but, as Mr. Dargon suggested, for multi-tenanted occupancy. The subject property's history, size, location, and layout support the Board's determination in this regard. The Board's finding on highest-and-best use comports completely with the determination of the assessors' real estate valuation expert and largely, although not fully, with that of the appellant's real estate valuation expert. The Board's highest-and-best-use finding is also supported by the apparent uses of several other similar properties located in the subject property's market area.
For valuation purposes, the Board found, like the parties' real estate valuation experts, that an income-capitalization methodology was the best approach for estimating the value of the subject property for the fiscal years at issue. Both of the parties' real estate valuation experts rejected the cost approach and relied on values derived from their sales-comparison approaches only as checks on values developed using income-capitalization methodologies. The Board found that a cost approach was not appropriate here because of the age of the older portions of the subject property, the difficulty in determining the extent and varying degrees of the depreciation and obsolescence, and the presence of adequate information to support a preferred income-capitalization technique. In addition, the Board found that no special valuation circumstances existed here, which might necessitate a cost approach, and even if a cost approach were indicated, there was virtually no underlying data in evidence to support its use. As for a sales-comparison approach, the Board agreed with both real estate valuation experts' reasoning that this approach was a less reliable indicator of the subject property's fair cash value because of the limited number of sales of comparable industrial office properties within the subject property's competitive market area.
A threshold issue in these appeals is the degree to which the subject addition was completed for each of the fiscal years at issue. The appellant argued that the degree of completion should be measured as of the usual valuation and assessment date of the January first preceding the fiscal year at issue. The appellant further maintained that, under G.L. c. 59, § 2D ("§ 2D" or "section 2D"), only after the issuance of the certificate of occupancy for the subject addition on October 22, 2009, could the assessors value the addition and assess its pro rata value to the appellant for the remaining period in fiscal year 2010, and its full value thereafter. The Board found however, that Holliston previously adopted the provisions of § 2A, which allows "buildings or other things affixed to land" between January 2 and June 30 of the preceding fiscal year to "be deemed part of such real property as of [the] January first [valuation and assessment date]" for the succeeding fiscal year. Accordingly, the Board found that the degree of the subject addition's completion on June thirtieth, not January first or when the occupancy permit was issued, is the critical date for this inquiry. Primarily relying on Ms. Peirce's undisputed testimony, and the appellant's acquiescence to it assuming § 2A applied, the Board found that, for fiscal year 2009, the degree of the subject addition's completion, by June 30, 2008, was at least 45%. The Board further found that the added value associated with that degree of completion should be included in the subject property's valuation for that fiscal year. For fiscal years 2010 and 2011, the Board found that the degree of the subject addition's completion was 100% by June 30, 2009 and its full value should likewise be included in those two fiscal years' valuations. In addition, the Board found that § 2D did not apply here because the value of the addition did not increase the subject property's value by more than 50% and the assessors never invoked § 2D by notifying the appellant of its liability under § 2D, as required under § 2D(c).
In its income-capitalization methodology for fiscal years 2009 and 2010, the Board adopted Mr. Dargon's measurements, most of his methodology and many of his figures and percentages. Based on Mr. Wolff's opinion that market rents, vacancy rates, expense percentages, and overall capitalization rates did not change from fiscal year 2010 to fiscal year 2011, and the assessors' continuation of the subject property's assessed value from fiscal year 2010 to fiscal year 2011, the Board carried over most of Mr. Dargon's methodology and many of his figures and percentages from fiscal year 2010 to the Board's income-capitalization methodology and data for fiscal year 2011.
For market rents, Mr. Dargon suggested $12.00 per square foot for general office space and $7.00 per square foot for the basement area. Mr. Wolff used $10.00 per square foot for upper-and ground-level level industrial office space, $8.00 per square foot for lower-level industrial office space, and $6.00 per square foot for warehouse space. The Board found that rents of $11.00 per square foot for general office space and $6.50 for the basement area best reflected the market for industrial office and warehouse rents for a property comparable to the subject property for the fiscal years at issue. These rents were within Mr. Dargon's range of market rents for each category and Mr. Wolff's range of rents on a triple-net basis, after adjustment. Relying on these rents, Mr. Dargon's area measurements and categories, and its findings regarding the subject addition's degree of completion, the Board found that the subject property's potential gross incomes were $538,645 for fiscal year 2009 and $773,425 for fiscal years 2010 and 2011.
The Board adopted Mr. Dargon's and Mr. Wolff's recommended vacancy and credit loss rate of ten percent for the fiscal years at issue. The Board found this rate to be reasonable and within the ranges suggested by market data for the fiscal years at issue. After applying this vacancy rate to the subject property's potential gross incomes, the Board found that the subject property's effective gross incomes were $484,781 for fiscal year 2009 and $696,083 for fiscal years 2010 and 2011.
For operating expenses, the Board adopted most of Mr. Dargon's recommendations including $30,000 per year for insurance outlays, 4% of effective gross income for management fees, 4% of effective gross income for shell maintenance costs, and a replacement reserve for short-lived items equal to 3% of effective gross income. Unlike Mr. Dargon, however, for fiscal year 2009, the Board applied these expense percentages to the subject property's effective gross income that integrated the subject addition's 45% degree of completion; Mr. Dargon applied his expense percentages to the subject property's effective gross income as if the subject addition were 100% complete. The Board considered Mr. Dargon's approach illogical for fiscal year 2009 because expenses computed on a percentage basis should reflect the subject addition's degree of completion as measured by the subject property's effective gross income for that fiscal year. Accordingly, the Board found that the subject property's total expenses were $83,325 for fiscal year 2009 and $106,568 for fiscal years 2010 and 2011. Subtracting these expense totals from the subject property's corresponding effective gross incomes resulted in net-operating incomes of $401,456 for fiscal year 2009 and $589,515 for fiscal years 2010 and 2011.
Mr. Wolff suggested overall capitalization rates of 9.00% for fiscal year 2009 and 9.50% for fiscal years 2010 and 2011. Mr. Dargon recommended overall capitalization rates of 8.00% plus a tax factor for fiscal years 2009 and 2010, which resulted in higher final rates. After adding tax factors, Mr. Dargon's final capitalization rates were 9.55% and 9.63% for fiscal years 2009 and 2010, respectively. The Board adopted Mr. Dargon's final capitalization rates for fiscal years 2009 and 2010 and also used his overall capitalization rate of 8.00% for fiscal years 2009 and 2010 plus a tax factor of 1.794% for fiscal year 2011. The Board found that Mr. Dargon's assumptions, calculations, and underlying data were more compelling than Mr. Wolff's and Mr. Dargon's inclusion of a tax factor was more in keeping with his and the Board's highest-and-best-use determination. The Board also found that these capitalization rates appropriately incorporated the risk associated with the subject property's highest-and-best use. The Board further concluded that the overall capitalization rates for fiscal years 2010 and 2011 should be equivalent based on Mr. Wolff's identical overall capitalization rates for those fiscal years. By dividing the subject property's net-operating incomes by the Board's overall capitalization rates plus appropriate tax factors, the Board determined that the fair cash value of the subject property was $4,203,725 for fiscal year 2009, $6,121,651 for fiscal year 2010 and $6,021,604 for fiscal year 2011. The Board then rounded these values to $4,200,000, $6,100,000, and $6,000,000 for fiscal years 2009, 2010, and 2011, respectively. Summaries of the Board's income-capitalization methodologies for fiscal years 2009, 2010, and 2011 are contained in the following two tables.
Board's Income-Capitalization Methodology for Fiscal Year 2009
Space Type
Area in SF Market Rent/SF Income as Complete Percentage Complete Income Component
INCOME
Existing Office 19,803 $11.00 $217,833 100% $ 217,833
Existing Basement 19,803 $ 6.50 $128,720 100% $ 128,720
New Office 29,956 $11.00 $329,516 45% $ 148,282
New Basement 14,978 $ 6.50 $ 97,357 45% $ 43,811
Potential Gross Income ("PGI") $773,426 $ 538,646
Vacancy/Credit Loss @ 10% $ 77,343 ($ 53,865)
Effective Gross Income ("EGI") $696,083 $ 484,781
EXPENSES Annual Expenses
Insurance @ $30,000/year $ 30,000
Management @ 4.0% of EGI $ 19,391
Repairs/Maintenance @ 4.0% of EGI $ 19,391
Reserves @ 3% of EGI $ 14,543
Total Expenses $ 83,325 ($ 83,325)
Net Operating Income ("NOI") $ 401,456
Capitalization Rate 8.00% + 1.546% = 9.55%
Indicated Value $4,203,725
Rounded Value $4,200,000
Board's Income-Capitalization Methodology
for Fiscal Years 2010 & 2011
Space Type
Area in SF Market Rent/SF Income as Complete Percentage Complete Income Component
INCOME
Existing Office 19,803 $11.00 $217,833 100% $ 217,833
Existing Basement 19,803 $ 6.50 $128,720 100% $ 128,720
New Office 29,956 $11.00 $329,516 100% $ 329,516
New Basement 14,978 $ 6.50 $ 97,357 100% $ 97,357
Potential Gross Income ("PGI") $773,426 $ 773,426
Vacancy/Credit Loss @ 10% $ 77,343 ($ 77,343)
Effective Gross Income ("EGI") $696,083 $ 696,083
EXPENSES Annual Expenses
Insurance @ $30,000/year $ 30,000
Management @ 4.0% of EGI $ 27,843
Repairs/Maintenance @ 4.0% of EGI $ 27,843
Reserves @ 3% of EGI $ 20,882
Total Expenses $106,568 ($ 106,568)
Net Operating Income ("NOI") $ 589,515
Capitalization Rate for FY 2010 8.00% + 1.631% = 9.63%
Indicated Value for FY 2010 $6,121,651
Rounded Value for FY 2010 $6,100,000
Capitalization Rate for FY 2011 8.00% + 1.794% = 9.79%
Indicated Value for FY 2011 $6,021,604
Rounded Value for FY 2011 $6,000,000
In sum, the Board found that, for the fiscal years at issue, the subject property's highest-and-best use was its current use as an industrial office building with some warehouse uses, but for multi-tenanted occupancy. This finding fully comports with the determination of the assessor's real estate valuation expert and is consistent, except for the multi-tenanted occupancy element, with the subject property's actual use and the determination of the appellant's real estate valuation expert.
The Board also found that, for the fiscal years at issue, an income-capitalization methodology was the best approach to use to estimate the value of the subject property. Both parties' real estate valuation experts used an income-capitalization approach as their predominant valuation methodology. In its income-capitalization methodology, the Board found that it was appropriate to use virtually the same income, vacancy, and expense figures for all three fiscal years at issue. The primary difference was in fiscal year 2009 when the subject addition was deemed to be 45% complete as of the relevant valuation and assessment date and the Board's income and expense estimates for that fiscal year reflected that completion factor. In addition, for all three fiscal years, the capitalization rates required different tax factors. The Board adopted most of the methodology utilized by assessors' real estate valuation expert and, with only slight adjustment or variation, his suggested income and expense figures, as well as his vacancy rates, because, in the Board's view, his data best reflected the market for a property like the subject property for the fiscal years at issue. For similar reasons, and in consideration of the Board's findings regarding the subject property's highest-and-best use for the fiscal years at issue, the Board adopted the overall capitalization rates recommended by the assessors' real estate valuation expert and then, as the assessors' real estate valuation expert had done, added appropriate tax factors.
On this basis, the Board decided the fiscal year 2009 appeal for the appellee and the fiscal years 2010 and 2011 appeals for the appellant. The Board granted tax abatements in the amount of $3,493.03 for fiscal year 2010 and $5,663.03 for fiscal year 2011. The Board's revised decisions for the fiscal year 2010 and 2011 appeals are issued simultaneously with the promulgation of these findings of fact and report.
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).
In determining fair cash value, all uses to which the property was or could reasonably be adapted on the relevant assessment dates should be considered. Irving Saunders Trust v. Assessors of Boston, 26 Mass. App. Ct. 838, 843 (1989). The goal is to ascertain the maximum value of the property for any legitimate and reasonable use. Id. If the property is particularly well-suited for a certain use that is not prohibited, then that use may be reflected in an estimate of its fair market value. Colonial Acres, Inc. v. North Reading, 3 Mass. App. Ct. 384, 386 (1975). "In determining the property's highest and best use, consideration should be given to the purpose for which the property is adapted." Peterson v. Assessors of Boston, Mass. ATB Findings of Fact and Reports 2002-573, 617 (citing The Appraisal Institute, The Appraisal of Real Estate at 315-316 (12th ed., 2001)), aff'd, 62 Mass. App. Ct. 428 (2004). On this basis, the Board ruled that the highest-and-best use of the subject property during the fiscal years at issue was, as the assessors' real estate valuation witness recommended, its existing industrial office use coupled with some warehouse uses, but for multi-tenanted occupancy. In making this ruling, the Board considered, among other factors, the subject property's history, size, location, and layout, as well as the uses of properties similar to the subject property and located in its market area. Except for the multi-tenanted occupancy element, the appellant's real estate valuation expert found a nearly equivalent highest-and-best use for the subject property as a single-tenanted industrial office building, with some warehouse uses.
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 reproduction. Correia v. New Bedford Redevelopment Authority, 375 Mass. 360, 362 (1978). "The [B]oard is not required to adopt any particular method of valuation." Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447, 449 (1986). In these appeals, the Board ruled that neither the sales-comparison nor the cost approaches were appropriate under the circumstances. The parties' real estate valuation experts agreed -- finding that the sales-comparison technique was useful only as a check on values developed using an income-capitalization method. The Board, like the parties' real estate valuation experts, found that there were not enough market sales of reasonably comparable properties to meaningfully estimate the value of the subject property using a sales-comparison technique. Furthermore, the Board ruled that "[t]he introduction of evidence concerning the value based on [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. The Board found here that no such "special situations" existed, and, even if they did, there was no evidence on which to base a value using a cost approach. In addition, the Board found that the extent and varying degrees of depreciation and obsolescence in the subject building would be difficult to determine. Accordingly, the Board ruled that this method of valuation was not an appropriate technique to use for valuing the subject property for the fiscal years at issue in these appeals.
The use of the income-capitalization approach is appropriate when reliable market-sales data are not available. Assessors of Weymouth v. Tammy Brook Co., 368 Mass. 810, 811 (1975); Assessors of Lynnfield v. New England Oyster House, 362 Mass. 696, 701-702 (1972); Assessors of Quincy v. Boston Consolidated Gas Co., 309 Mass. 60, 67 (1941). It is also an appropriate technique to use for valuing income-producing property. Id. at 64-65. In these appeals, the Board relied exclusively on the values determined from the income-capitalization approach because the other methods were not appropriate under the circumstances, and the approach that the Board used was equivalent to the ones that the parties' real estate valuation experts preferred.
A threshold issue in these appeals is the degree to which the subject addition was completed for each of the fiscal years at issue. The appellant argued that the degree of completion should be measured as of the usual valuation and assessment date of the January first preceding the fiscal year at issue. The appellant further maintained that, under § 2D, only after the issuance of the certificate of occupancy for the subject property on October 22, 2009, could the assessors value the subject addition and assess its pro rata value to the appellant for the remaining period in fiscal year 2010, and its full value thereafter. The Board found however, that Holliston previously adopted the provisions of § 2A, which allows "buildings or other things affixed to land" between January 2 and June 30 of the preceding fiscal year to "be deemed part of such real property as of [the] January first [valuation and assessment date]" for the succeeding fiscal year. Accordingly, the Board found and ruled that the degree of the addition's completion on June thirtieth, not January first or when an occupancy permit is issued, is the critical date for this inquiry.
Primarily relying on Ms. Peirce's undisputed testimony, and the appellant's acquiescence to it assuming § 2A applied, the Board found and ruled that, for fiscal year 2009, the degree of the subject addition's completion, by June 30, 2008, was at least 45%. The Board further found and ruled that the added value associated with that degree of completion should be included in the subject property's valuation for that fiscal year. For fiscal years 2010 and 2011, the Board found and ruled that the degree of the subject addition's completion was 100% by June 30, 2009 and its full value should likewise be included in those two fiscal years' valuations. In addition, the Board found and ruled that § 2D did not apply here because the value of the addition did not increase the subject property's value by more than 50% and the assessors never invoked § 2D by notifying the appellant of its liability under § 2D, as required under § 2D(c). See generally Kamholz v. Assessors of Newton, Mass. ATB Findings of Fact and Reports 2012-15.
The income stream used in the income-capitalization method must reflect the property's earning capacity or economic rental value. Pepsi-Cola Bottling Co., 397 Mass. at 451. Imputing rental income to the subject property based on fair market rentals from comparable properties is evidence of value if, once adjusted, they are indicative of the subject property's earning capacity. See Correia v. New Bedford Redevelopment Auth., 5 Mass. App. Ct. 289, 293-94 (1977), rev'd on other grounds, 375 Mass. 360 (1978); Library Services, Inc. v. Malden Redevelopment Auth., 9 Mass. App. Ct. 877, 878 (1980)(rescript). 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, 610 (1984). The expenses should also reflect the market. Id.
The Board's selections of its market rents and measurements and categories of rental space for the fiscal years at issue were largely consistent with those suggested by the assessors' real estate valuation expert and were supported by the more compelling evidence. The Board, however, made appropriate adjustments to the market rents suggested by the assessors' real estate valuation expert and those in evidence to better reflect the market for a property like the subject property for all of the fiscal years at issue and to better reflect the subject addition's degree of completion for fiscal year 2009.
The Board's vacancy and credit loss rates were based on the rates selected by both parties' real estate valuation experts and on information in the record. The Board's expense deductions were also based on the testimony and information contained in the assessors' real estate valuation expert's appraisal report regarding the relevant market and his conclusions in this regard. The Board made appropriate adjustments to the expenses suggested by the assessors' real estate valuation expert for fiscal year 2009 to reflect the subject addition's 45% degree of completion. The Board found and ruled that the amounts and percentages used by the assessors' real estate valuation expert were otherwise reasonable and appropriate expenses deductions for the fiscal years at issue.
The capitalization rate selected should consider the return necessary to attract investment capital. Taunton Redevelopment Assoc. v. Assessors of Taunton, 393 Mass. 293, 295 (1984). 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 [capitalization] formula." Assessors of Lynn v. Shop-Lease Co., 364 Mass. 569, 573 (1974). It is appropriate to add a tax factor to the capitalization rate in most multiple tenancy scenarios because the landlord is assumed to be responsible for paying the real estate taxes. Taunton Redevelopment Assoc., 393 Mass. at 295-96. Relying on these principles, the Board selected overall capitalization rates of 8.00% plus appropriate tax factors for the fiscal years at issue. These rates are equivalent to those recommended by the assessors' real estate valuation expert and are also consistent with the stability reflected in the rates recommended by the appellant's real estate valuation expert for fiscal years 2010 and 2011. In the Board's view, these capitalization rates also appropriately incorporate the risk associated with the subject property's highest-and-best use.
In reaching its opinion of fair cash value in these appeals, the Board was not required to believe the testimony of any particular witness or to adopt any particular method of valuation that an expert witness suggested. Rather, the Board could accept those portions of the evidence that the Board determined had more convincing weight. Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 683 (1982); New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 473 (1981); New England Oyster House, Inc., 362 Mass. at 702. In evaluating the evidence before it, the Board selected among the various elements of value and formed its own independent judgment of fair cash value. General Electric Co., 393 Mass. at 605; North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass 296, 300 (1984).
The Board need not specify the exact manner in which it arrived at its valuation. Jordan Marsh v. Assessors of Malden, 359 Mass. 106, 110 (1971). The fair cash value of property cannot be proven with "mathematical certainty and must ultimately rest in the realm of opinion, estimate and judgment." Boston Consol. Gas Co., 309 Mass. at 72. "The credibility of witnesses, the weight of the evidence, and inferences to be drawn from the evidence are matters for the [B]oard." Cummington School of the Arts, Inc. v. Assessors of Cummington, 373 Mass. 597, 605 (1977).
"'The burden of proof is upon the [appellant] to make out its right as a matter of law to abatement of the tax.'" Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974), quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922). The appellant must show that it has complied with the statutory prerequisites to its appeal, Cohen v. Assessors of Boston, 344 Mass. 268, 271 (1962), and that the assessed valuation of its property was improper. See Foxboro Assoc., 385 Mass. at 691. The assessment is presumed valid until the taxpayer sustains its burden of proving otherwise. Schlaiker, 365 Mass. at 245. The Board ruled here that the appellant met his burden of proving that the subject property was overvalued for fiscal years 2010 and 2011, but not for fiscal year 2009.
The Board applied these principles in reaching its opinion of the fair cash values of the subject property for the fiscal years at issue. On this basis, the Board decided that the subject property was overvalued by $211,000 and $311,000, for fiscal years 2010 and 2011, respectively.
The Board, therefore, decided the fiscal year 2009 appeal for the assessors and the fiscal year 2010 and 2011 appeals for the appellant, granting tax abatements in its revised decisions in the amount of $3,493.03 for fiscal year 2010 and $5,663.03 for fiscal year 2011.
THE APPELLATE TAX BOARD
By: _______________________________
Thomas W. Hammond, Jr. Chairman
A true copy,
Attest: _________________________
Clerk of the Board
Upon further review, the Board found a computational error in the methodology that it adopted for fiscal years 2010 and 2011. The revised decisions correct that error.
The appellant and his real estate valuation expert maintained that the subject building, once finished, contained a total of 83,142 square feet. However, they failed to provide any underlying support for this assertion. Accordingly, the Appellate Tax Board (the "Board") adopted the total measurements contained in the subject property's property record card and used by the assessors' valuation expert. The subject building's area measurements over time, and the rationale and support behind them, are discussed in greater detail, infra.
The Board relied on the measurements provided by the assessors' valuation expert, which were based on his inspection of the subject property and the subject property's property record card. In his methodologies, the appellant's real estate valuation expert placed the subject addition's size at 43,782 square feet and its completion in 2009. He considered the addition to be 90% complete as of January 1, 2009 and not yet started as of January 1, 2008.
In addition to the real estate taxes, the town charged the appellant a Community Preservation Act ("CPA") surcharge for fiscal year 2009 in the amount of $901.40, and CPA surcharges in the amounts of $1,543.99 and $1,698.29, for fiscal years 2010 and 2011, respectively.
Ordinarily, in a band-of-investment technique, there is no direct adjustment for equity build-up because the owner receives any additional equity upon the sale of the property. See Appraisal Institute, The Appraisal of Real Estate 505-507 (13th ed. 2008).
See footnote 5, supra.
The Board presents here each income and expense statement substantially as it appears in Mr. Wolff's appraisal report.
General Laws, c. 59, § 2A provides, in pertinent part, that: "[I]n any city or town which accepts the provisions of this sentence, buildings and other things erected on or affixed to land during the period beginning January second and ending on June thirtieth of the fiscal year preceding that to which the tax relates shall be deemed part of such real property as of January first."
The Board found that the percentage of the subject property's completion on July 1, 2009 and July 1, 2010 was equivalent to its degree of completion on June 30, 2009 and June 30, 2010, respectively, the ending dates, under § 2A, for new construction in Holliston to be included in the preceding January first assessments for those fiscal years.
In several places of his report, Mr. Dargon indicates that net- or triple-net-lease terms, as opposed to gross-lease terms, are incorporated into his methodology. Given his testimony and his table summarizing his income-capitalization analysis, the Board assumed that these references were inadvertent and likely the result of scrivener error.
Section 2D provides, in pertinent part, that:
[W]henever in any fiscal year real estate improved in assessed value by over 50 per cent by new construction is issued a temporary or permanent occupancy permit after January 1 in any year, the owner of the real estate shall pay a pro rata amount . . . that would have been due for the applicable fiscal year if the real estate had been so improved on the assessment date for the fiscal year in which the occupancy permit is issued.
Section 2D(c) provides, in pertinent part, that : "[The pro rata tax due under § 2D] shall be paid by the property owner to the collector of the city or town within 30 days of the date of issuance by said city or town of a notification of such liability to said property owner . . . ."
The Board further noted that if the appellant's real estate valuation expert used the same degree of completion for the subject addition in his income-capitalization methodology that the Board found, his estimates of value would closely approximate those found by the Board for all three fiscal years at issue.
These tax-abatement amounts include the applicable CPA surcharges.
See footnote 14, supra.
ATB 2012-842
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