Lowe's Home Centers, LLC v. City of Wauwatosa

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
July 7, 2021
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2020AP393 Cir. Ct. No. 2015CV6376

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT I

LOWE’S HOME CENTERS, LLC,

PLAINTIFF-APPELLANT,

V.

CITY OF WAUWATOSA,

DEFENDANT-RESPONDENT.

APPEAL from an order of the circuit court for Milwaukee County:
CLARE L. FIORENZA, Judge. Affirmed.

Before Dugan, Graham and White, JJ.

¶1 GRAHAM, J. Lowe’s Home Centers, LLC appeals an order of the
circuit court that upheld the 2015 tax assessment of its commercial retail property
in the City of Wauwatosa. Lowe’s argues that the trial evidence demonstrates that
the City did not comply with Wisconsin law when it assessed its property in 2015,
No. 2020AP393

and further, that the court should have credited the single property appraisal
prepared by its expert. The circuit court determined that the 2015 assessment
complied with Wisconsin law, and that Lowe’s did not present significant contrary
evidence that the assessment was excessive. We affirm.

BACKGROUND

¶2 The following facts are taken from the circuit court’s findings of fact
and the undisputed trial evidence. They are summarized in broad strokes, with
additional facts provided in the discussion section below.1

¶3 Lowe’s is the owner of a 138,515 square foot big box home
improvement store located at Burleigh Square in the City of Wauwatosa. Lowe’s
originally opened its Burleigh Square store in October 2006, and it leased the land
on which the store was built from the developer pursuant to a ground lease. The
following year, Lowe’s executed its contractual right of first refusal to purchase
the land. Accordingly, as of 2007, Lowe’s owned the land and all improvements
on the tax parcel in question. For ease of reference, we refer to the land and
improvements collectively as “the Lowe’s Property” throughout this opinion.

¶4 The City first assessed the Lowe’s Property in January of 2007. At
that time, the City determined that its fair market value was $13,614,700. The
Lowe’s Property continued to be assessed at that same value each year through
2015.

1
The parties disagree about how the trial evidence is properly understood, and each
party contends that its opponent’s brief mischaracterizes the trial evidence. In this opinion, we
rely on our interpretation of the circuit court record rather than either party’s characterization of
the record.

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¶5 In 2013, the City conducted a citywide revaluation pursuant to WIS.
STAT. § 70.05(5)(b) (2019-20).2 This revaluation, which valued all real property
in the City using a computer-assisted mass appraisal system, assessed the value of
the Lowe’s Property as $13,614,700.

¶6 In 2015, after the City again assessed the Lowe’s Property at
$13,614,700 and after that assessment was entered into the tax roll, Lowe’s
appealed to the City of Wauwatosa’s Board of Review. The Board subpoenaed
documents from Lowe’s including, but not limited to, documents related to the
costs to acquire and improve the Lowe’s Property. Lowe’s also submitted
information to the Board about sales of other big box stores that Lowe’s
considered to be comparable. By that time, the City’s assessor lacked authority to
change the assessment for the Lowe’s Property because she had already finalized
the assessment roll and provided it to the Board. See WIS. STAT. § 70.45.

¶7 After receiving the subpoenaed documents, the Board waived the
hearing and declined to alter the assessment. Lowe’s then commenced this action
in the circuit court pursuant to WIS. STAT. § 74.37(3)(d). Both parties hired expert
appraisers who prepared single property appraisals to support their respective
opinions about the fair market value of the Lowe’s Property.

¶8 The circuit court presided over an extensive ten-day bench trial. The
first witness was the City’s assessor, Shannon Krause, who was on the stand for
three days. She testified, among other things, that the City is required to assess
each parcel in accordance with the Wisconsin Property Assessment Manual (2015)

2
All references to the Wisconsin Statutes are to the 2019-20 version unless otherwise
noted.

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(hereinafter, the Assessment Manual).3 She further testified that the 2015
assessment of the Lowe’s Property was determined using mass appraisal
techniques and not single property appraisal techniques. According to Krause, she
started with the base property values established in the 2013 citywide revaluation
and then analyzed sales, rental, and cost data to confirm that the model was justly
and equitably applied to all classes of property.

¶9 The expert witnesses retained by Lowe’s and the City testified about
their respective single property valuation methodologies and professional opinions
as to the fair market value of the Lowe’s Property. See State ex rel. Markarian v.
City of Cudahy, 45 Wis. 2d 683, 685-86, 173 N.W.2d 627 (1970) (providing a
three-tier hierarchy for appraising property).4 The Markarian hierarchy and the
experts’ methodologies are discussed at length below. For now, it suffices to say
that the expert retained by Lowe’s, Michael MaRous, opined that the property’s
value was $7,100,000 based on a Tier II comparable sales approach. The City’s
expert, William Miller, testified that a Tier II comparable sales approach was not
an appropriate appraisal methodology because there were no reasonably

3
The parties relied on the 2015 edition of the Assessment Manual during trial, and all
subsequent references are to the 2015 version unless otherwise noted.
4
As discussed in greater detail below, Tier I considers a recent arm’s-length sale of the
property in question and is not at issue here because there has not been a recent arm’s-length sale
of the Lowe’s Property. Nestlé USA, Inc. v. DOR, 2011 WI 4, ¶28, 331 Wis. 2d 256, 795
N.W.2d 46. Tier II extrapolates fair market value based on recent sales of comparable properties
and is only a viable methodology if the recent sales are of properties that are reasonably
comparable. Regency West Apartments LLC v. City of Racine, 2016 WI 99, ¶¶28, 70, 372 Wis.
2d 282, 888 N.W.2d 611. Tier III encompasses other valuation techniques, most prominently the
cost and income approaches. Nestlé USA, 331 Wis. 2d 256, ¶29.

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comparable sales. Miller testified that the property’s fair market value was
$17,330,000 based on his Tier III analysis of cost and income.5

¶10 In January 2020, the circuit court issued a written decision upholding
the City’s assessment. The court determined that Lowe’s had not overcome the
presumption of correctness afforded to assessments by WIS. STAT. § 70.49(2). As
discussed in greater detail below, the court found that Krause conducted a mass
appraisal in 2015, and that Lowe’s failed to identify any aspect of the mass
appraisal that did not comply with Wisconsin law and the Assessment Manual.

¶11 The circuit court also considered the testimony and evidence from
both experts’ single property appraisals and determined that Lowe’s failed to show
that the 2015 assessment of the Lowe’s Property was excessive. This
determination was based largely on the court’s conclusion that the appraisal
offered by MaRous did not comply with Wisconsin law and the Assessment
Manual. The court explained that, while MaRous acknowledged that the highest
and best use of the Lowe’s Property is continued retail use, he based his opinion
on sales that were not comparable and “generated conclusions [about] the value of
the Property as if it were [to be] redeveloped and sold for multi-tenant use.” As
for MaRous’s Tier II analysis, the court found that the sales that MaRous
considered were not reasonably comparable to the Lowe’s Property. It also found
that MaRous’s Tier III cost approach analysis made “excessive adjustments for
functional obsolescence” premised on “speculative redevelopment.” Finally, it

5
The circuit court also heard testimony from Dr. Thomas Hamilton who testified for the
City and David Lennhoff who testified for Lowe’s. Neither of these experts personally appraised
the Lowe’s Property; both generally testified about assessment practices and valuation
techniques. The court found that Dr. Hamilton’s experience was relevant and that his testimony
was credible, in contrast to the testimony offered by Lennhoff.

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found that MaRous’s Tier III income approach “estimated the potential net income
based on dark, vacant, and deed-restricted properties in locations with different
economics from Wauwatosa.” For these and other reasons, the court discredited
MaRous’s opinion about the fair market value of the Lowe’s Property.

¶12 On the other hand, the circuit court determined that the City’s expert,
Miller, “properly determined that there were no reasonably comparable sales
sharing the highest and best use” of the Lowe’s Property and “properly moved to a
Tier III analysis using cost and income approaches.” The court further determined
that Miller’s appraisal was credible and consistent with Wisconsin law and the
Assessment Manual. Therefore, the court concluded that Miller’s appraisal
provided significant support for the City’s assessment.

DISCUSSION

¶13 This appeal requires us to review the circuit court’s decision that
rejected the challenge Lowe’s made to the 2015 tax assessment of the Lowe’s
Property.

¶14 “The question on appeal in a WIS. STAT. § 74.37 action is not
whether the initial assessment was incorrect, but whether it was excessive.”
Metropolitan Assocs. v. City of Milwaukee, 2018 WI 4, ¶40, 379 Wis. 2d 141,
905 N.W.2d 784. “Whether a [taxing authority] has erroneously failed to follow
statutory requirements in making an assessment is a question of law that we
review de novo.” Walgreen Co. v. City of Madison, 2008 WI 80, ¶17, 311
Wis. 2d 158, 752 N.W.2d 687; see also Regency West Apartments LLC v. City of
Racine, 2016 WI 99, ¶22, 372 Wis. 2d 282, 888 N.W.2d 611. When there is
conflicting evidence, we defer to the circuit court’s findings of fact and will not
disturb such findings unless they are clearly erroneous. Bonstores Realty One,

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LLC v. City of Wauwatosa, 2013 WI App 131, ¶6, 351 Wis. 2d 439, 839 N.W.2d
893. “The weight and credibility to be given to the opinions of expert witnesses is
‘uniquely within the province of the fact finder.’” Adams Outdoor Advert., Ltd. v.
City of Madison, 2006 WI 104, ¶27, 294 Wis. 2d 441, 717 N.W.2d 803 (citation
omitted); see also Bonstores, 351 Wis. 2d 439, ¶6.

¶15 We begin by setting forth background information about the annual
assessment process and the pertinent legal standards for assessments that govern
this appeal. We then address whether the evidence supports the circuit court’s
determination that the City conducted a mass appraisal that complied with
Wisconsin law and the Assessment Manual when it assessed the value of the
Lowe’s Property in 2015. Finally, we consider the experts’ single property
appraisals to determine whether the court erred when it concluded that Lowe’s
failed to prove that the 2015 assessment was excessive.

I. The Pertinent Legal Standards and Background
of the 2015 Assessment

¶16 Under Wisconsin law, “[r]eal property shall be valued by the
assessor in the manner specified in the Wisconsin property assessment manual ...
from actual view or from the best information that the assessor can practicably
obtain, at the full value which could ordinarily be obtained therefor at private
sale.” WIS. STAT. § 70.32(1). “This statute requires adherence to the [Assessment
Manual] absent conflicting law.” Allright Props., Inc. v. City of Milwaukee, 2009
WI App 46, ¶10, 317 Wis. 2d 228, 767 N.W.2d 567.

¶17 Additionally, WIS. STAT. § 70.05(5)(b) provides that “[e]ach taxation
district shall assess property at full value at least once in every 5-year period.”
This is usually accomplished in what this statute and the Assessment Manual refer

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to as a “revaluation,” which is a significant undertaking for a taxation district.
WIS. STAT. § 70.05(5)(b); Assessment Manual at 4-1 & ch. 19.

¶18 Wisconsin Statutes and the Assessment Manual recognize that
property values are likely to change somewhat in the years following a
revaluation. One of an assessor’s primary responsibilities is determining whether
adjustments to property assessment values are necessary to ensure that they are
fair and equitable. See generally, Assessment Manual ch. 4. The Assessment
Manual describes this process as follows:

Each year the governing body selects the type of
assessment that will be conducted for the current
assessment year.…

Assessments fall into two broad categories:
maintenance and revaluation. Maintenance consists of
copying the assessment roll from the previous year and
updating values to the current level of assessment when
changes warrant. Examples of changes include new
construction, combining or splitting of parcels, remodeling,
demolition, annexation and zoning changes, changes in
classification, and any other occurrence that might affect
value or the attributes of the parcel. These changes may, or
may not, result in a change in value; nonetheless each of
these requires the Property Record Card (PRC) to be
updated….

Sometimes maintenance is not enough to meet the
requirements of fair and uniform assessments. At these
times, a revaluation is needed. Revaluation refers to
assessment of all parcels in the municipality. This is
periodically necessary because economic conditions are
constantly changing.…

Other situations arise that are less extreme.
Maintenance is not enough, but the expense of a full
revaluation isn’t justified. Perhaps a full revaluation was
conducted in the past five years and property record cards
seem largely accurate, yet certain neighborhoods seem to
be increasing or decreasing in value faster than others. Or
perhaps the property record cards are reasonably reliable
but the governing body wants exterior viewings conducted
to ascertain what’s happening in various neighborhoods or

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for some other compelling reason (for example, the effect
of flood damage). Each of these situations requires a
different work effort on the part of the assessor.

Id. at 4-1; see also id. at 4-3 (describing tasks by assessment type).

¶19 Once an assessor prepares the annual assessment roll, the roll is open
for inspection by taxpayers. See WIS. STAT. § 70.45 (return and examination of
rolls). Following an open book period, the assessor submits the roll and an
affidavit stating that, among other things, “the valuations of real and personal
property for the present year … have been made with the best information
available using professionally accepted appraisal practices.” Assessment Manual
at 4-19; see also WIS. STAT. §§ 70.45, 70.49(1) (affidavit of assessor), 70.50
(delivery of roll). Taxpayers may challenge an assessment with the board of
review for the taxing district, as Lowe’s did in this case. See WIS. STAT. § 70.47.

¶20 Provided that statutory requirements are met, taxpayers may also file
an action in circuit court pursuant to WIS. STAT. § 74.37(3)(d) to recover from
excessive assessments. When considering such challenges, the court begins with
the presumption that the assessed value is correct upon entry of that value into the
assessment roll and submission of the assessor’s affidavit. WIS. STAT. § 70.49(2);
see also Bonstores, 351 Wis. 2d 439, ¶5; Adams Outdoor Advert., 294 Wis. 2d
441, ¶25. The source of this presumption is § 70.49(2), which states:

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

¶21 Here, it is undisputed that the Lowe’s Property was assessed at
$13,614,700 in 2015, and that this value was entered into the assessment roll. It is

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also undisputed that the City’s assessor, Shannon Krause, signed and submitted
the requisite affidavit. Consequently, the City is entitled to a presumption that the
assessment was “justly and equitably” made, giving rise to a presumption of
correctness. WIS. STAT. § 70.49(2); see also Bonstores, 351 Wis. 2d 439, ¶10
(“Because both parties agreed that the property was assessed at $25,593,300, the
City has met its burden of establishing the presumptive fair market value of the
property.”).

¶22 A taxpayer may overcome the presumption of correctness by
presenting “significant contrary evidence.” Allright Props., 317 Wis. 2d 228, ¶12
(citation omitted). The taxpayer may demonstrate that the assessor did not comply
with Wisconsin law when assessing the property, see Regency West, 372 Wis. 2d
282, ¶¶3-4, 22, or that the assessment is excessive, see Metropolitan Associates,
379 Wis. 2d 141, ¶50. “[W]hen a city assessor correctly applies the Property
Assessment Manual and Wisconsin statutes, and there is no significant evidence to
the contrary, courts will reject a party’s challenge to the assessment.” Allright
Props., 317 Wis. 2d 228, ¶12 (citation omitted).

¶23 Here, Lowe’s argues that the 2015 assessment is not entitled to the
presumption of correctness because the City’s assessor, Krause, did not actually
undertake a mass appraisal to determine the value of the Lowe’s Property as of
January 1, 2015. Lowe’s also argues that MaRous’s single property appraisal
shows that the assessment was excessive, and that the circuit court erroneously
discredited it. We address these arguments in turn.

II. The City’s Initial Assessment Using Mass Appraisal

¶24 The Assessment Manual identifies assessment techniques generally
applicable to commercial property. It explains that “[e]stimates of market value

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can be derived by using the cost, income and/or sales comparison approaches,”
and further, that “[c]ommercial property can be valued by either single property or
mass appraisal techniques.” Assessment Manual at 9-7.

¶25 “Mass appraisal is the systematic appraisal of groups of properties,
as of a given date, using standardized procedures and statistical testing.” Id. at
7-41. “The purpose of mass appraisal is the equitable and efficient appraisal of all
property, in a jurisdiction, for ad valorem tax purposes.” Id. Unlike single
property appraisal, mass appraisal “requires the development of a valuation
model” that is “capable of replicating the forces of supply and demand over a large
area” and that “recreates mathematically, the changes in value and real estate
activity happening in the particular town, village, or city being assessed.” Id.
According to the Assessment Manual, “[m]ass appraisal is the underlying principle
that Wisconsin assessors should be using to value properties in their respective
jurisdictions.” Id.6

¶26 Our supreme court approved the use of mass appraisal in
Metropolitan Associates, 379 Wis. 2d 141. The court noted that the practice is
“equitable and efficient,” is “widely used throughout the country,” id., ¶44, and is
consistent with statutory requirements, id., ¶¶26-45. As the court explained, “the
best information the City can ‘practicably’ obtain” at the initial assessment stage

6
The Assessment Manual explains that an assessor “need[s] skills in both mass appraisal
and single property appraisal.” Assessment Manual at 7-12. Mass appraisal is used “for
producing initial values, whether during a reappraisal year or not,” and single property appraisal
is used “to defend specific property values or to value special purpose properties that do not lend
themselves to mass appraisal techniques.” Id. at 7-41; see also Metropolitan Assocs. v. City of
Milwaukee, 2018 WI 4, ¶36, 379 Wis. 2d 141, 905 N.W.2d 784. Here, consistent with the
Assessment Manual and Metropolitan Associates, the circuit court found that the City valued the
Lowe’s Property through mass appraisal, and the City defends against this lawsuit with a single
property appraisal prepared by its expert, William Miller.

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“is often that underlying a mass appraisal,” and “[c]ompleting annual assessments
in a major metropolitan area would simply not be feasible without the use of mass
appraisal.” Id., ¶¶45, 43. Lowe’s does not challenge the holding of Metropolitan
Associates. It concedes that, provided that a mass appraisal was actually
undertaken in 2015, it was lawful for the City to use that mass appraisal to
establish its initial assessment of the Lowe’s Property.

¶27 In this case, after considering the evidence, the circuit court found
that Krause valued the Lowe’s Property in 2015 in a mass appraisal using the best
information practicably available to the City. The court made the following
findings of fact:

The City Assessor used the mass appraisal model in
the valuation of the 2015 year. She testified she used the
base values established in the 2013 citywide revaluation,
then analyzed sales and rental information to confirm that
the model was being justly and equitably applied to the
subsets of property within the City, including large retail
properties like the Lowe’s property.

Ms. Krause testified that in order to ensure the 2013
mass appraisal model was justly and equitably applied in
2015, she performed an income and cost approach analysis
to support her assessment. In support of her analysis, she
considered various sales of other large retail properties
throughout the state, rental rates for new construction, and
the Assessor’s Annual Report.

….

Accordingly, Ms. Krause found that the 2013 mass
appraisal model was justly and equitably applied to the
Property in 2015 and declined to make any adjustments.
Ms. Krause confirmed the value of the Property was
$13,614,700 as of January 1, 2015. She set the 2015
assessment based upon the best information practically
available to her.

¶28 These findings of fact are not clearly erroneous. Krause was on the
stand for three days, and her testimony provides ample evidence to support the

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circuit court’s findings.7 Therefore, we conclude that the court did not err when it
determined that Krause conducted a mass appraisal that was consistent with the
requirements of Wisconsin law and the Assessment Manual. See supra ¶¶18,
24-26. Our conclusion is bolstered by the fact that Lowe’s does not identify any
flaw in the computer-assisted mass appraisal model that Krause used, nor does it
identify any additional information that Krause should have obtained.

¶29 Instead, Lowe’s asks us to disregard Krause’s testimony as “smoke
and mirrors.” According to Lowe’s, Krause’s testimony “evidences that she
conducted virtually no mass appraisal analysis of the value of the subject property
as of January 1, 2015,” and that she simply “carried over” the assessment from
prior years and “rubberstamped” it without analysis. (Emphasis added.) Lowe’s
points out that “the City offered no summary, notes, or any other documentary
evidence of any assessment analysis” of the value of the Lowe’s Property as of
January 1, 2015. The crux of its argument is that the circuit court should have
discredited Krause’s testimony and found that she did not actually assess the value
of “the subject property” as of January 1, 2015.

¶30 The argument Lowe’s advances appears to be founded on the flawed
premise that, during a maintenance year, an assessor must individually analyze

7
Specifically, Krause explained that every property in the City had been reevaluated in
2013 using a mass appraisal model that set a value for each property. She started with those base
values and analyzed new data to ensure that the model was still justly and equitably being applied
against subsets of property in 2015. As Krause explained, “[e]ach year after a revaluation you’re
reviewing additional information that becomes available to see that that base model year from the
revaluation is still being equitably applied,” and that “you’re testing that initial mass appraisal
model to make sure that it is still justly and equitably applied against those properties within its
class or subclass.” Krause further testified that in 2015, she analyzed market evidence, rental
rates, and recent sales. In addition, Krause elaborated on how she specifically reviewed the
confidential data that had been generated for the Lowe’s Property during the 2013 revaluation and
determined that the data had not changed, and that the analysis was still fair and equitable.

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properties in the taxing district to determine whether there has been a change in
value, and that the assessor must have documentary evidence to prove it. Yet
Lowe’s points to no statute or other legal authority to support such a requirement,
and its argument would undermine the concept of a mass appraisal in its entirety.
As shown above, properties must be evaluated at full market value at least once
every five years, and the Assessment Manual does not require individual properties
to be updated in maintenance years unless some change would justify an update.
See supra, ¶18. Examples of such changes include specific changes to a particular
parcel (for example, “new construction, combining or splitting of parcels,
remodeling, demolition, annexation and zoning changes, changes in
classification”) or market-based evidence of significant changes in value to
particular neighborhoods or classes of property. Assessment Manual at 4-1. Here,
Krause testified that there was no information that would justify a change in value
of the Lowe’s Property in 2015, and the circuit court credited that testimony. 8 We
reject the argument advanced by Lowe’s because it is based on a fundamental
misunderstanding of Wisconsin law and the Assessment Manual.

¶31 Finally, Lowe’s attempts to cast doubt on whether the Lowe’s
Property was actually reevaluated in 2013, noting that the value did not change

8
Krause also testified that she completed the 2015 Annual Assessment Report (AAR)
required by the Department of Revenue. The purpose of an AAR is to determine the overall
accuracy of a mass appraisal using statistical testing to decipher whether a municipality’s mass
appraisal values are in proper relationship to market sales. Krause testified that in the process of
completing the AAR, her office analyzed sales that occurred in the local community: “We
outline our neighborhoods, residential and commercial. We list all the sales activity, sales ratio
analysis, how many inspections we did, how many sale inspections, how many permit
inspections, the change of value.” Krause’s testimony about this process further undermines any
argument that Krause did nothing in 2015 but “rubberstamp” the values determined in the 2013
revaluation.

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from the original assessment in 2007.9 Lowe’s did not formally challenge the
2013 assessment, and we question whether this issue is properly before this court.
Yet, putting that concern to the side, there was ample evidence that the Lowe’s
Property was reevaluated as part of the 2013 revaluation. Krause testified that in
2013, the City’s mass appraisal model determined that the fair market value of the
Lowe’s Property was $13,782,900—a $168,200 increase from the original
assessed value of $13,614,700. Because the City concluded that the increase was
not significant and the fair market value was “substantially the same” as it had
been in prior years, the City opted not to increase the assessment of the Lowe’s
Property in the 2013 revaluation.10 Simply put, contrary to the argument made by
Lowe’s, the fact that the assessed value of the Lowe’s Property has been constant

9
Lowe’s relies on a single sentence of the Assessment Manual, which provides that
“[a]ssessments should not be carried over from year to year with no adjustments.” Assessment
Manual at 19-19. Lowe’s reads this sentence of the Assessment Manual in isolation. However,
the remainder of the paragraph makes clear that what is required is annual review, not necessarily
a change in assessed value:

Property values are continually changing, and the values do not
change at the same rate for all properties. With no changes in
the assessments, inequities will soon develop. Therefore, they
should still be reviewed annually and sales analyses performed
to determine if specific classes or types of property need to be
adjusted to maintain equity in the assessments.

Id. (emphasis added).
10
Whether the City’s decision to overlook this increase in value was equitable to other
taxpayers in the City is not at issue in this case. See Trailwood Ventures, LLC v. Village of
Kronenwetter, 2009 WI App 18, ¶10, 315 Wis. 2d 791, 762 N.W.2d 841 (determining that WIS.
STAT. §§ 74.37 and 74.39 do not permit the court to impose a greater tax burden than the one the
taxpayer challenges).

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over a period of years does not undermine our confidence in the circuit court’s
decision.11

¶32 In sum, Lowe’s has not met its burden to show that a mass appraisal
did not occur or that the system and procedures that the City employed in 2015
failed to comply with Wisconsin law or the Assessment Manual. Accordingly,
Lowe’s has not overcome the presumption of correctness with its arguments about
the 2015 mass appraisal. Regency West, 372 Wis. 2d 282, ¶¶3-4, 22.

III. The Single Property Appraisals

¶33 We now turn to the single property appraisals and the expert
testimony offered by Michael MaRous (for Lowe’s) and William Miller (for the
City). Our analysis occasionally discusses Miller’s analysis and the circuit court’s
findings about his appraisal. However, since Lowe’s has the burden to present
significant contrary evidence to overcome the presumption of correctness, the
focus of our discussion in this section is the appraisal offered by MaRous. Based
on an analysis of comparable sales, MaRous opined that the fair market value of
the Lowe’s Property as of 2015 was $7,100,000, and he “supported” his

11
As a possible corollary to this argument, Lowe’s asserts that there is an “oversupply”
of big box retail stores on the market in Milwaukee County following the “Great Recession” of
2008 and the “Retail Apocalypse” that followed, and that Lowe’s and other big box retailers have
closed retail locations in Milwaukee County due to the recession and other market forces.
Although its briefs do not specifically connect the necessary dots, we understand Lowe’s to be
arguing that the market value of the Lowe’s Property must have decreased at some point between
2007 and 2015. Again, Lowe’s did not formally challenge prior assessments, and the question for
trial was the market value of the Lowe’s Property on January 1, 2015. The circuit court heard
testimony about big box store closings in failed retail locations in and around Milwaukee County,
and it also heard testimony that the market in Wauwatosa had long since rebounded from the
2008 recession. The fact that some retailers closed stores in other unsuccessful retail locations
does not necessitate the conclusion that there is an oversupply of big box stores in Wauwatosa or
that the market value of the Lowe’s Property must have been lower in 2015 than it was in 2007.

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comparable sales analysis with analyses under the cost and income approaches.
Lowe’s argues that the court erroneously discredited MaRous’s analysis, and that
the court should have determined that the 2015 assessment is excessive based on
his opinion.

¶34 For reasons we explain below, we conclude that the circuit court did
not clearly err when it determined that MaRous’s opinions were not credible. As
we have explained, “[t]he weight and credibility to be given to the opinions of
expert witnesses is ‘uniquely within the province of the fact finder.’” Adams
Outdoor Advert., 294 Wis. 2d 441, ¶27 (citation omitted). Here, the court
sufficiently explained its reasons for determining that MaRous’s sales comparison,
cost, and income approaches were not credible, and Lowe’s does not persuade us
that the court erred.

A. The Markarian Hierarchy

¶35 We begin our discussion by elaborating on the Markarian hierarchy.
In so doing, we explain why “highest and best use” is often a “determinative
factor” in an analysis of the value of real property. Nestlé USA, Inc. v. DOR,
2011 WI 4, ¶32, 331 Wis. 2d 256, 795 N.W.2d 46.

¶36 As mentioned above, Wisconsin law and the Assessment Manual set
forth a three-tiered valuation methodology, commonly referred to as the
Markarian hierarchy, for determining the full market value of real property.
Nestlé USA, 331 Wis. 2d 256, ¶28. Starting with Tier I, an appraiser looks to
“[e]vidence of a recent arm’s-length sale of the subject property” as “the best
evidence of full value.” Id. If, as here, “the subject property has not been recently
sold,” the appraiser should move to Tier II and “consider sales of reasonably
comparable properties.” Id. “Only in situations where there has been no arm’s-

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length sale of the subject property and there are no reasonably comparable sales
may an [appraiser] use one of the third-tier assessment methodologies.” Id. The
common Tier III methodologies are the cost and income approach, both discussed
in greater detail below.

¶37 Regardless of the methodology used, all property must be assessed at
its “highest and best use,” which should not be speculative. Id., ¶27; Assessment
Manual at 7-12. A determination of highest and best use is a “threshold issue”
which will drive the decisions made in any Tier II or Tier III analysis. Nestlé
USA, 331 Wis. 2d 256, ¶32; Allright Props., 317 Wis. 2d 228, ¶18. This is
because, if a property is appraised for some use other than its highest and best use,
the resulting appraisal will undervalue the property. See, e.g., Assessment Manual
at 7-12.

B. The Lowe’s Property’s Highest and Best Use

¶38 A recurring reason that the circuit court provided for discrediting
MaRous’s appraisal was the court’s determination that MaRous did not properly
determine the highest and best use of the Lowe’s Property. According to the
court, this flaw fatally infected both his Tier II and Tier III analyses.

¶39 In his written report, MaRous opined that “the highest and best use
of the subject property is to continue to market it for an alternative big box user or
to redemise the space for multi-tenant [use].” MaRous’s report expressly
acknowledged that the second option, redemising the building for multi-tenant use,
would “likely require an extensive amount of capital improvements … and is
likely to not be economically feasible.” Nevertheless, as we discuss in greater
detail below, MaRous conducted his Tier II and Tier III approaches as if the
Lowe’s Property was vacant and its highest and best use was to redevelop it for

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another use. More specifically, MaRous valued the improvements on the Lowe’s
Property as if it were to be sold and repurposed for “alternative” uses such as “a
flea market, a health club, a craft store, supermarkets, and other secondary
commercial uses.” Thus, MaRous ultimately valued the Lowe’s Property for a use
that he had determined was not “economically feasible.”

¶40 The circuit court found that MaRous’s opinion “is discredited by his
position on the foundational issue of highest and best use.” According to the
court, “the whole of MaRous’s report and testimony is highly speculative because
it values the Lowe’s Property in a condition that it is not in.” As the court
explained, “[r]ather than opining to a single highest and best use,” MaRous
“speculates as to multiple highest and best uses” for the Lowe’s Property and then
“generate[s] conclusions based on the value of the Property if it were redeveloped
and sold for multi-tenant use.” The court ultimately concluded that MaRous’s
“approach is inconsistent with Wisconsin law and the Manual and discredits [his]
findings for each tier of his analysis.”

¶41 By contrast, the circuit court found that Miller identified a single
narrow use for the Lowe’s Property that would achieve the greatest net return for
the owner. As the court explained, “Miller’s testimony—that the … single highest
and best use is continued use as a retail store—is consistent with Wisconsin law
and the Manual, and credible.” Ultimately, the court determined that there were
“numerous characteristics of the Lowe’s property that are advantageous for its use
as a home improvement store,” and that its highest and best use is “continued use”
as a big box home improvement store.

¶42 Lowe’s disagrees with the circuit court’s determination of highest
and best use for several reasons. None of these arguments are persuasive.

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No. 2020AP393

¶43 First, Lowe’s argues that, although MaRous “considered” multiple
potential uses for the Lowe’s property, he ultimately testified that the highest and
best use was “continued big box retail use.” Lowe’s accurately quotes MaRous’s
testimony—but we read this testimony as an admission that undermines his
appraisal. That is, MaRous acknowledged that the highest and best use was
continued use for big box retail, yet the assumptions and calculations he used to
generate values were not consistent with that use. As discussed below, he instead
generated Tier II and III values based primarily on data from former big box
properties that were sold to be redeveloped for other uses.

¶44 Second, Lowe’s argues that the circuit court’s determination that the
highest and best use is as a big box home improvement retailer is “impermissibly
narrow.” We disagree based on our supreme court’s reasoning in Nestlé USA, 331
Wis. 2d 256.

¶45 In Nestlé, the property at issue was a powdered infant formula
production facility designed to meet rigorous federal standards specific to that use.
Id., ¶1. The parties disputed whether the highest and best use of the property was
its current use as an infant formula processing plant or more general use as a food
processing plant. Id., ¶8. There were no recorded sales of infant formula
production facilities throughout the United States, and Nestlé argued that the
facility should be assessed as a food processing plant because there were actual
sales for that use. Id., ¶6. The court rejected Nestlé’s argument. As it explained,
the “actual sales” approach “would always force assessors to look for active
markets when determining a property’s highest and best use, even if the subject
property already operated in a thriving, albeit limited, industry.” Id., ¶40. That
approach is untenable because it “would result in subject properties in limited
markets being assessed, not at their fair market value, but rather at a value based

20
No. 2020AP393

on the subject properties’ costly and hypothetical conversions to alternative uses.”
Id. The court concluded that the highest and best use was the use for which the
property was specifically designed—an infant formula production facility—and
that it should be assessed based on that use. Id., ¶9.

¶46 Here, consistent with Nestlé, the circuit court’s highest and best use
determination places value on the physical features that make the Lowe’s Property
especially advantageous to its current use as a big box home improvement store.
Those features include “the high ceilings, large truck bays, heavily reinforced
floor, outside lawn and garden center, and the warehouse style finish.” As in
Nestlé, the circuit court found that “these features might devalue the Property if it
were sold to be redeveloped for multi-tenant use,” but they “reflect” its value “in
its current, highest and best use as a big box home improvement store.”

¶47 Third, Lowe’s argues that Miller testified inconsistently about the
highest and best use of the Lowe’s Property, and that his determination of highest
and best use improperly considered Lowe’s as a potential buyer of the property
contrary to State ex rel. Northwestern Mutual Life Insurance Co. v. Weiher, 177
Wis. 445, 188 N.W. 598 (1922). We question the accuracy of this characterization
of Miller’s testimony, but there is no need to belabor the point. Unlike in
Northwestern Mutual, the circuit court’s decision shows that it did not improperly
place value on any “intrinsic worth” or unique features valuable only to Lowe’s.
Instead, as in Nestlé, the court’s highest and best use determination places value
on the attributes of the real estate that would be valuable to any retailer who sold
similar products.

¶48 The final argument advanced by Lowe’s is based on a flawed
extension of legal principles from Walgreen Co. v. City of Madison

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No. 2020AP393

(Walgreen/Madison), 311 Wis. 2d 158, and Walgreen Co. v. City of Oshkosh
(Walgreen/Oshkosh), No. 2013AP2818, unpublished slip op. (WI App Dec. 17,
2014).12 Lowe’s contends that the circuit court’s highest and best use
determination inflates the assessment based on the value of the “business concern
that [is] using the property,” contrary to Walgreen/Madison and
Walgreen/Oshkosh. As we now explain, its reliance on these cases is inapt.

¶49 The issue in both Walgreen cases was “whether a property tax
assessment of retail property leased at above market rent values should be based
on market rents” (as Walgreens argued), or instead on “the above market rent
terms of Walgreens’ actual leases” (as argued by the taxing authorities).
Walgreen/Madison, 311 Wis. 2d 158, ¶2. The key to both cases was “the
nationally recognized principle that ‘[a] lease never increases the market value of
real property rights to [a] fee simple estate.’” Id., ¶3 (citation omitted).

¶50 As explained in Walgreen/Madison, Walgreens’ business model
was to contract with a real estate developer, who would acquire property and build
retail stores to Walgreens’ specifications. Id., ¶6. Walgreens would then lease
these stores from the developer at above-market rates to compensate the developer
for its land acquisition, construction, development, and financing costs. Id.
Property is typically assessed at the price it would sell for in an arm’s-length
transaction, and it was undisputed that an arm’s-length buyer would pay more for
the Walgreens property than for an equivalent property that did not have an

12
See WIS. STAT. RULE 809.23(3)(a) and (b) (generally, an “unpublished opinion may
not be cited in any court of this state as precedent or authority,” but an “unpublished opinion
issued on or after July 1, 2009, that is authored by a member of a three-judge panel … may be
cited for its persuasive value”).

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income stream generated from Walgreens’ above-market rents. See id., ¶33; see
also id., ¶94 (Abrahamson, C.J., concurring). Based on these principles, the taxing
authority assessed the Walgreens property to reflect that increased value.
Walgreens challenged the assessment, arguing that the assessment conflated
“property value and contract value,” and that “the increased value” added by
favorable lease terms “is not a real property value subject to taxation.” Id., ¶33.
Our supreme court agreed, concluding that the assessment was improperly inflated
to reflect the value of “contract rights” above and beyond “the bundle of [real]
property rights ordinarily considered at a property sale.” Id., ¶66.

¶51 Likewise, in Walgreen/Oshkosh, Oshkosh’s tax assessment was
based on the actual sale price of a Walgreens property. No. 2013AP2818,
unpublished slip op., ¶¶5-6, 14. As had been predicted in Walgreen/Madison, the
sales price was inflated due to the value of the income stream of Walgreens’
above-market rents. Id., ¶2. When Walgreens challenged the assessment, the
parties’ arguments revolved around highest and best use. Oshkosh argued that the
Walgreens property’s highest and best use was “continued use as 1st generation
drug stores” and consequentially included only “investment grade real estate.” Id.,
¶¶12-13. We disagreed. The problem was not that Oshkosh identified the highest
and best use as “continued use” as a drug store. Id., ¶13. Instead, the problem
was that the “investment grade real estate” Oshkosh identified as comparable had
the same problem identified in Walgreen/Madison—the “the value of the real
estate” was inflated by “the creditworthiness of the tenant” and “the value of the
lease itself.” Id. Thus, by restricting the highest and best use to investment-grade
real estate, the assessment impermissibly valued the “business concern” that might
use the property. Id., ¶2.

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No. 2020AP393

¶52 In summary, in both Walgreen cases, the assessments improperly
valued a contract right to an income stream as if it were a property right.
Walgreen/Madison, 311 Wis. 2d 158, ¶3; Walgreen/Oshkosh, No. 2013AP2818,
¶11. This violated the principles of fee simple valuation and the concept that “‘[a]
lease never increases the market value of real property rights to the fee simple
estate.’” Walgreen/Madison, 311 Wis. 2d 158, ¶3 (citation omitted);
Walgreen/Oshkosh, No. 2013AP2818, ¶11 (citation omitted).

¶53 Here, by contrast, there is no “income stream” or “contract right”
that factored into the circuit court’s determination of highest and best use. Instead,
as discussed above, the court’s determination accounts for attributes of the Lowe’s
Property that would be valuable to any retailer that sold similar products.

¶54 For all of these reasons, we conclude that the circuit court’s highest
and best use determination is not clearly erroneous. As shown below, that
determination undergirds many of the court’s reasons for determining that
MaRous’s appraisal was not credible.

C. Tier II Sales Comparison Approach

¶55 We now turn to whether the circuit court’s decision to reject
MaRous’s Tier II comparable sales analysis is clearly erroneous. The Tier II sales
comparison approach “relies on recent market sales of similar properties to predict
the probable market price of the subject.” Assessment Manual at 7-23. As the
Assessment Manual explains, this approach “is predicated on the principle of
substitution; that the typical buyer will pay no more for a property than it would
cost to buy a reasonably comparable property.” Id.

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No. 2020AP393

¶56 According to the Assessment Manual, the sales comparison approach
“is the preferred method of estimating market value provided the comparable sales
are arm’s-length transactions,” and it “should be used to arrive at market value if
comparable sales data is available.” Id. at 9-12. The advantage of the sales
comparison approach is that it “reflect[s] the actions and decisions of buyers and
sellers in the marketplace.” Id. The disadvantage is the difficulty of finding
comparable sales, especially when appraising larger retail stores. Id.13

¶57 For properties to be “reasonably comparable,” they must “represent
the ‘subject property in age, condition, use, type of construction, location, design,
[and] physical features….” Regency West, 372 Wis. 2d 282, ¶28 (quoting
Wisconsin Property Assessment Manual 7-22 (2011)).

¶58 Additionally, commercial properties should be similar in “economic
characteristics including similarities in the ability to generate income and/or
similar income streams.” Assessment Manual at 9-12. To that end, our supreme
court has explained that “reasonably comparable” properties “must have ‘similar
restrictions’ to the subject property.” Regency West, 372 Wis. 2d 282, ¶34; see
also id., ¶58 (determining that Section 42 housing units are not reasonably
comparable to other subsidized rental properties because the income and rent
restrictions imposed by Section 42 result in a different ability to generate income).
Similarly, this court has cautioned against using “dark stores” as reasonably

13
The Assessment Manual cautions: “Because of the wide variety of commercial
properties it may be difficult to find comparable sales.” Assessment Manual at 9-12. It elaborates
on this point as follows: “The sales comparison approach is often used to value smaller retail
stores. Because smaller retail stores may be easily adapted to other retail uses, sales of these
stores can be used as comparable sales ….” Id. at 9-40. However, “[f]or the larger stores and
those smaller stores for which there are no comparable sales, the assessor should use the income
and/or cost approaches.” Id.

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No. 2020AP393

comparable properties to determine the value of a store that is not dark.
Bonstores, 351 Wis. 2d 439, ¶¶21-22. As we understand Bonstores, a dark store
is a store that is vacant, either because the retailer that occupied it has gone out of
business or because the retailer moved to another location. Id., ¶¶20-21. Lowe’s
focuses its argument on Bonstores, and we discuss that case at greater length
below.

¶59 Although the Tier II comparable sales approach is the preferred
method of estimating market value, Wisconsin law “does not permit” the use of
“an appraisal method when insufficient data exists to perform an accurate
valuation under that method.” Regency West, 372 Wis. 2d 282, ¶26. This is
because “an appraiser cannot accurately value a property using data from the sales
of properties that are not ‘reasonably comparable’ to the subject property.” Id.,
¶60. Accordingly, if there are no recent arm’s-length sales of reasonably
comparable properties, an appraiser must move on to Tier III. See id.; see also
Nestlé USA, 331 Wis. 2d 256, ¶45.

¶60 Here, MaRous testified that he based his Tier II sales comparison
approach on the sale of four properties14 that he concluded were reasonably
comparable to the Lowe’s Property:

14
MaRous actually discussed six properties in his comparative sales analysis. Yet, two
of those properties were listed for sale and remained unsold as of 2015, and MaRous relied on the
asking price for his analysis of “comparative sales.”

On appeal, Lowe’s asserts that MaRous’s consideration of these listings is “as directed”
by page 7-23 of the Assessment Manual. The Assessment Manual says no such thing. At page
7-23, it says that an assessor “should be aware of asking prices, listing prices, and typical market
exposure time for the area as these may indicate trends in the market.” Assessment Manual at
7-23 (emphasis added). It does not say that listing prices can be substituted for prices from
“recent arm’s-length sales” and used in a Tier II analysis. See WIS. STAT. § 70.32(1). We discuss
MaRous’s analysis of these listings no further.

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No. 2020AP393

Sale #1 is a former Lowe’s store located at 6300 W.
Brown Deer Road in Brown Deer. The store was built in
2006 and Lowe’s closed it in or around 2011. After it had
been vacant for two years, Walmart purchased it in
December 2013 for a sale price of $5,150,000 ($36.90 per
square foot). The sales price was “adjusted for [the]
indebtedness owed by Lowe’s to [the] Village of Brown
Deer.”

Sale # 2 is a former Sentry Foods grocery store
located at 123 W. Oklahoma in Milwaukee. The store was
built in 1984 and was sold to another grocery chain in May
2011 for $3,700,000 ($57.27 per square foot).

Sale # 3 is a former Target located at 7450 Green
Bay Road in Kenosha. The store was built in 1994, and
later closed. The property was sold in a deed-restricted sale
in November of 2012 for $2,385,000 ($24.81 per square
foot) and then divided into two units, Gordmans and Bed,
Bath & Beyond.

Sale # 4 is a former Home Depot located at 2020 N.
Spring Street in Beaver Dam. Home Depot opened the
store in 2006 and vacated it in 2008. The property was sold
in November of 2013 for $2,500,000 ($24.39 per square
foot) and converted to manufacturing use. According to
MaRous’s report, “the least amount of weight was given to
this sale due to its inferior location.”

As MaRous acknowledged, all four of these properties were vacant at the time of
the sale.15

¶61 In his report, MaRous acknowledged that the number of sales that
could be considered comparable was “limited,” and further, that some of these
properties differed significantly from the Lowe’s Property in location, size, and
age. Even so, his report asserted that these four properties were “the most

15
When testifying, MaRous equivocated about whether Sale #2, the Sentry Foods, was
vacant, and the circuit court did not make any specific findings about whether it was.
Nevertheless, on appeal, Lowe’s acknowledges that all four properties were “‘vacant,’ meaning
they did not have businesses occupying the properties at the time of sale.”

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No. 2020AP393

appropriate to this analysis and they do serve to prove a meaningful basis for a
market comparison analysis.” To account for differences between these properties
and the Lowe’s Property, MaRous made multiple adjustments, each one ranging
from negative 30% to positive 45% of the sale price, based on professional
judgment.

¶62 Miller, by contrast, testified that he considered the sales MaRous
identified and concluded that none were reasonably comparable. Among other
things, all had been vacant for years before they were sold. None had been sold
for use as the highest and best use as a big box home improvement store, and all
but Sale #1 were sold for a purpose other than big box use. Miller also discussed
deed restrictions on some of the properties and noted that as an additional reason
he did not consider them comparable. Miller went through MaRous’s comparative
sales one by one and explained his specific reasons for concluding that the sales
were not comparable and, therefore, not appropriate for a Tier II analysis.16

¶63 Miller further testified about the steps he took to determine whether
there were any other sales that he could use to conduct a Tier II analysis. After
determining that the sales MaRous identified were not reasonably comparable, he
looked for other potentially comparable sales of a “big box retail store in general

16
For example, Miller testified that Sale #1 was an underperforming store, and Lowe’s
sold it to Walmart in a complex tripartite agreement between Lowe’s, the City of Brown Deer,
and Walmart. As part of the agreement, Walmart stipulated to an $11,000,000 tax assessment.
As we understand Miller’s testimony, he concluded that Sale #1 did not truly represent an arm’s-
length transaction. As for Sale #2, the grocery was a significantly smaller and older property that
needed extensive work, and “grocery” was not the highest and best use of the Lowe’s Property.
As for Sale #3, Target placed significant deed restrictions on the sale to limit certain retailers. As
for Sale #4, this Home Depot in Beaver Dam closed within two years of opening, shortly after
Menards opened a competing retail location. As we understand it, Miller inferred that Home
Depot closed its Beaver Dam store after concluding that the small community was unable to
support multiple big box home improvement stores.

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No. 2020AP393

in excess of 100,000 square feet throughout the state,” as well as national sales to
inform him of whether there were any sales that could be adjusted to account for
differences in location.17 Miller acknowledged that there were scattered examples
of big box home improvement stores that had been closed and were marketed for
other uses, but those stores had been closed for a reason—the market did not
support a big box home improvement store in those locations. Miller testified that,
based on highest and best use, he did not find any state or national sales that were
similar in both physical and economic characteristics, “including similarities in the
ability to generate income and/or similar income streams.” Therefore, he opined
that there was not sufficient reliable market data to perform a reliable Tier II
analysis.

¶64 After considering the evidence, the circuit court agreed with Miller
and found that the sales identified by MaRous were not reasonably comparable
properties. The court provided multiple reasons for rejecting MaRous’s
comparable sales analysis. Among other things, MaRous had selected dark and
vacant properties that were not reasonably comparable to the Lowe’s Property.
See Bonstores, 351 Wis. 2d 439, ¶¶22-23. The properties were sold to be
converted to a use that was not reasonably comparable to the highest and best use
of the Lowe’s Property. See Nestlé USA, 331 Wis. 2d 256, ¶32. Additionally,
some were deed-restricted sales, even though the Lowe’s Property has no such
restrictions. See Regency West, 372 Wis. 2d 282, ¶34. For these and other

17
Lowe’s criticizes Miller for limiting his search to properties greater than 100,000
square feet, which “excluded many potential comparable big box properties.” Yet, Lowe’s does
not explain how its critique of Miller’s search parameters could influence the outcome of this
appeal. Lowe’s bears the burden to overcome the presumption of correctness, and its expert, who
used broader parameters, did not identify any properties that the circuit court found to be
reasonably comparable.

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No. 2020AP393

reasons, the court discredited MaRous’s appraisal and found that it was not
possible to perform a reliable Tier II analysis.

¶65 As we have explained, the decision to credit expert testimony is
uniquely within the province of the fact finder. See, e.g., Adams Outdoor Advert.,
294 Wis. 2d 441, ¶27. As shown above, there is ample evidence to support the
circuit court’s findings of fact and credibility determinations regarding the experts’
Tier II analyses. MaRous selected sales that the court determined were not
reasonably comparable, and he then applied multiple adjustments in an attempt to
force the comparison rather than moving on to a Tier III valuation approach.18
The court did not err when it rejected this analysis as contrary to Wisconsin law.
See Regency West, 372 Wis. 2d 282, ¶60 (“[A]n appraiser cannot accurately value
a property using data from the sales of properties that are not ‘reasonably
comparable’ to the subject property. Absent comparable sales, an appraiser must
apply the third tier for valuing property.”).

¶66 The primary argument to the contrary advanced by Lowe’s is that it
was improper for the circuit court to consider the vacancy status of the properties
MaRous identified as comparable. According to Lowe’s, the court’s
determination that the vacant properties are not reasonably comparable stems from
an “over-extrapolation and misinterpretation” of our decision in Bonstores, 351
Wis. 2d 439, and violates Walgreen/Oshkosh, No. 2013AP2818, unpublished slip

18
Lowe’s argues that the Assessment Manual directs appraisers to make adjustments to
account for differences between a subject property and comparable sales. This is true if the
property being adjusted is reasonably comparable in the first instance. Neither Wisconsin law nor
the Assessment Manual support the proposition that an appraiser can use a sale that is not
reasonably comparable as a starting point and then adjust it to the point where it is. See, e.g.,
Regency West, 372 Wis. 2d 282, ¶60.

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No. 2020AP393

op. We disagree. It is Lowe’s that misinterprets Bonstores and over-extrapolates
from Walgreen/Oshkosh.

¶67 In Bonstores, the owner of a department store relied on its expert
appraiser’s analysis of comparable sales to challenge its tax assessment as
excessive; however, the purportedly comparable department stores the expert
relied on had gone “dark.” Bonstores, 351 Wis. 2d 439, ¶21. We affirmed the
circuit court, which rejected the appraiser’s opinion that the sales were reasonably
comparable. As we explained, “the subject property is not a ‘dark’ store, has
never gone dark, and there is no evidence it would go dark and be sold off as a
single property.” Id., ¶22. As such, it was appropriate for the circuit court to
reject the appraiser’s comparative sales analysis as unreliable because it was based
on properties that were not reasonably comparable. Id.

¶68 Lowe’s asserts that the holding from Bonstores should be limited to
“distressed property sales—not merely vacant sales.” But Lowe’s barely develops
the argument, and it does not even define what it means by “distressed” in its
appellate brief. Lowe’s appears to be relying on MaRous’s testimony that a
“distressed” sale is one where the seller must sell the property in a very short time
period because it is unable to make payments on the property as they come due.
The distinction that Lowe’s attempts to make is not grounded in the text of the
Bonstores opinion, in which we explained that the circuit court used the phrase
“distressed” property to refer to a property that had gone “dark,” id., ¶22, and that

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No. 2020AP393

the appraiser used “dark” to mean “a period of time where the store is not
operating,” id., ¶21.19

¶69 We need not decide whether it would ever be appropriate to
determine that a vacant retail store is reasonably comparable to a retail store that is
occupied. It is enough that Bonstores provides ample support for the circuit
court’s determination that the sales MaRous identified are not reasonably
comparable to the Lowe’s Property, which undisputedly was not a ‘dark’ store in
2015, was not at risk of closing, and has never closed. Bonstores, 351 Wis. 2d
439, ¶¶21-22.

¶70 Along similar lines, Lowe’s argues that consideration of the
occupancy status of the Lowe’s Property violates the principle of fee simple
valuation discussed in Walgreen/Oshkosh, No. 2013AP2818. This argument
likewise fails. As we have already discussed, the principle that emerged from the
Walgreen cases is that it is improper to value contract rights as if they are property
rights. See supra, ¶52. The fact that the Lowe’s Property was occupied supports
the circuit court’s conclusion that the Lowe’s Property, and particularly its

19
Indeed, subsequent revisions to the Assessment Manual have explained that an
assessor “should be careful to avoid using comparable sales involving properties that are vacant,
in transition or suffering from some form of distress unless the subject property is similarly
vacant, in transition, or distressed,” and that, “when valuing stabilized, operating retail properties,
the assessor should choose comparable sales exhibiting a similar highest and best use and similar
placement in the retail marketplace.” Wisconsin Property Assessment Manual 13-42 (2021)
(citing Bonstores Realty One, LLC v. City of Wauwatosa, 2013 WI App 131, 351 Wis. 2d 439,
839 N.W.2d 893).

This text was added in December of 2015 and remains in the current version of the
Assessment Manual. During the trial, Lowe’s strenuously objected to any reliance on this passage
from the Assessment Manual because it was added after the valuation date for the Lowe’s
Property. However, there’s no indication in the circuit court’s decision that it relied on this
language from the Assessment Manual. In any event, Bonstores was binding precedent at that
time and Lowe’s fails to explain how this language misinterprets Bonstores.

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No. 2020AP393

location and physical attributes, was suitable and marketable for use as a big box
home improvement store. These are attributes of the real estate, not of the
business concern that occupied it. The court in Walgreen/Oshkosh did not hold
that appraisers are required to use vacant properties as comparative sales when
valuing a property that is occupied, nor did it hold that consideration of occupancy
automatically and impermissibly values the “business concern” of the current
occupant.

¶71 Finally, Lowe’s takes issue with the circuit court’s reliance on deed
restrictions in determining that two of the sales MaRous identified were not
reasonably comparable. It contends that there was “uncontroverted” testimony by
Richard Keller, the property manager for Lowe’s, that deed restrictions are
ubiquitous in retail real estate transactions and have limited impact in negotiations.
This argument fails for two reasons. First, the circuit court found that Keller did
not have personal involvement with the sales in question. Second, assuming
without deciding that this argument has merit, it would not change the outcome of
this case. Even if the court had credited Keller’s testimony, it gave other reasons
for determining that these properties were not reasonably comparable, the most
prominent being that the highest and best uses of these properties were not
reasonably comparable to the Lowe’s Property.

¶72 For all these reasons, we conclude that the circuit court did not err
when it determined that MaRous’s comparable sales analysis did not constitute
significant contrary evidence that the 2015 tax assessment was excessive.

D. Tier III Cost Approach

¶73 We now turn to the circuit court’s discussion of the cost approach
analyses conducted by MaRous and Miller. The cost approach is also premised on

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the concept of substitution—“that a well-informed buyer will pay no more for a
property than the cost of constructing an equally desirable substitute property with
like utility.” Assessment Manual at 7-31. When using the cost approach method,
an appraiser considers how much it would cost to acquire the land and build the
improvements and then deducts for various categories of depreciation and
obsolescence. Id. at 7-23, 7-31.

¶74 According to MaRous, he performed a cost approach as a “check”
on the reliability of his Tier II analysis. Using a cost approach method, MaRous
valued the Lowe’s Property at $7,300,000.20 The court concluded that MaRous’s
cost approach analysis was not credible and did not constitute “significant contrary
evidence that the City’s assessment of the Property was excessive.”

¶75 In its appellate brief, Lowe’s argues that the cost approach is not a
reliable means of determining the market value of the Lowe’s Property. At trial,
MaRous testified that “market participants don’t even look at cost,” and that
“market buyers of big box owner-occupied, retail buildings do not rely on the cost
approach.” We could rely on these statements as a concession that MaRous’s cost
approach analysis fails to provide significant contrary evidence to overcome the
presumption of correctness.

¶76 Nevertheless, we briefly address the circuit court’s findings
regarding “functional obsolescence” and the objections Lowe’s makes to those
findings. “Functional obsolescence is the loss in value due to a lack of or

20
Miller, by contrast, valued the Lowe’s property at $17,330,000 using the cost
approach.

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excessive utility” that “occurs over time because of changing needs, technology,
design, promotion/marketing, and cost/construction.” Assessment Manual at 7-33.

¶77 MaRous estimated that it would cost $62 per square foot to build an
equivalent retail store. He then deducted, among other things, 40% for functional
obsolescence. MaRous explained that the 40% deduction was necessary because
the store’s “large building size and deep retail footprint … appeals to a relatively
narrow segment of the market,” and because significant costs would be incurred
for “re-purposing [the] large big box retail store for multi-tenant uses.” In other
words, MaRous calculated the cost to build a new big box home improvement
store, and then deducted 40% of that value based on a hypothetical and costly
conversion to multi-tenant use.

¶78 The circuit court found that “MaRous failed to calculate functional
obsolescence based on the Manual and Wisconsin law.”21 As the court explained,
MaRous’s functional obsolescence calculation was made “based on pure
speculation” and values what the Lowe’s Property would be worth if it were
redeveloped as a multi-use property, “thereby devaluing the characteristics of the
Property that are specific to its highest, best, and current use.”

¶79 The argument Lowe’s makes to the contrary is based on arguments
that we have already rejected—that the circuit court’s determination of highest and

21
In its decision, the circuit court mistakenly stated that MaRous deducted 27% for
“external obsolescence.” According to his report, MaRous actually deducted 10% for external
obsolescence (to account for the fact that he considered Burleigh Square an inferior location to
Wauwatosa’s “much more dynamic Mayfair Road corridor”) and an additional 17% for physical
depreciation (to account for the age of the building), for a total of 27% for these two categories.
Lowe’s points to the court’s error, but does not explain how it is material to our review. It was
MaRous’s deduction for functional obsolescence, not his deduction for the two other categories,
that led the court to discredit MaRous’s analysis.

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best use was erroneous and that the court valued the property at an above-market
value because it is suitable for ongoing use by Lowe’s. Lowe’s does not persuade
us that the court’s findings and credibility determinations are clearly erroneous or
that MaRous’s cost approach helped it overcome the presumption of correctness. 22

E. Tier III Income Approach

¶80 When using the income approach, an appraiser estimates the
income-generating potential over the life of the property and reduces it to present
value. Assessment Manual at 9-15. The income approach is “a calculation of
present value based on anticipated future benefits,” typically, the “rent and other
income that the property may produce.” Id. at 7-23. MaRous and Miller each
conducted a Tier III income approach.

¶81 MaRous testified that, similar to his cost approach analysis, he
analyzed income as a “check” on the accuracy of his Tier II analysis. MaRous’s
analysis resulted in a value of $5,870,000—substantially less than the value he
obtained under a Tier II comparable sales approach.23 The circuit court found that,

22
The circuit court gave additional reasons for discrediting MaRous’s cost approach. It
found, for example, that MaRous estimated the value of the land based on sales of land that was
not comparable because it could not be used for retail. Lowe’s does not challenge the court’s
finding on appeal.

The circuit court also found that MaRous failed to “fully account” for the costs of site
improvements. In his appraisal, MaRous added $700,000 for the “depreciated value of site
improvements,” but did not explain how he calculated that number or what it included. Lowe’s
disagrees with the court’s finding, but it does not present any developed argument that challenges
it on appeal, and we address it no further. See State v. Pettit, 171 Wis. 2d 627, 646-47, 492
N.W.2d 633 (Ct. App. 1992) (arguments that are unsupported or undeveloped need not be
considered).
23
Miller, by contrast, valued the Lowe’s Property at $18,100,000 using the income
approach.

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similar to his Tier II comparative sales approach, MaRous’s income approach
“estimated the potential net income based on dark, vacant, and deed restricted
properties in locations with different economics from Wauwatosa.” The court
further found that MaRous applied “adjustments for vacancy that do not reflect the
stable and occupied status of the Lowe’s Property.” Finally, the court found that
“MaRous overlooked the overall capitalization rate data for properties most
similar to the Lowe’s property in favor of a capitalization rate that treats the
Property as destabilized.” For these reasons and others, the court did not credit
MaRous’s income analysis.

¶82 The circuit court’s findings are supported by the evidence. In his
report, MaRous identified ten rental properties that he determined were
comparable, and he extrapolated what the market rent for the Lowe’s Property
would be based on the rents asked for or received by those ten properties.24 Yet,
the five Wisconsin properties he identified were unoccupied with no rents in place,
and all were located in significantly inferior locations than the Lowe’s Property.
The remaining five properties were in Illinois and had been converted to a use
other than big box retail. Notably, in his search for comparable rentals, MaRous
overlooked six comparable properties in the Wauwatosa area that were occupied
with rent in place at more than double the asking rate of the vacant properties
MaRous used in his calculations.

24
MaRous then applied an adjustment for vacancy of 15% based on “appraiser
judgment,” even though the vacancy rate in Milwaukee was less than 9%. The court discredited
this adjustment because there was no indication that the subject property was likely to become
vacant. For this reason and others, the court rejected MaRous’s analysis under the income
approach.

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¶83 Lowe’s disagrees with the circuit court’s findings of fact, but it does
not demonstrate that these findings are clearly erroneous with any citations to the
record. It instead rehashes arguments that we have rejected above—that valuing
the Lowe’s Property in its current state impermissibly values its business concern,
and that the Lowe’s Property should be appraised as if it were vacant, in transition,
or distressed. We conclude that the court did not err when it determined that
MaRous’s income approach did not constitute “significant contrary evidence that
the City’s assessment of the Property was excessive.”25

CONCLUSION

¶84 For all of the above reasons, we conclude that the circuit court did
not err when it determined that Lowe’s failed to overcome the presumption of
correctness. Accordingly, we affirm the order that rejected its challenge and
upheld the assessment.

By the Court.—Order affirmed.

Not recommended for publication in the official reports.

25
Lowe’s appears to argue that the circuit court relied too heavily on Dr. Hamilton, who
the City presented as an expert on assessment practices and valuation techniques. Lowe’s argues
that the court “went so far as to embrace Dr. Hamilton as a source of legal authority … and
supplant actual Wisconsin law with entirely unfounded and contradictory appraisal concepts.”
We are not persuaded for at least two reasons. First, this argument is conclusory, and it fails to
identify any portion of Dr. Hamilton’s testimony that contradicts the legal principles set forth
above. See Pettit, 171 Wis. 2d at 646-47. Second, Lowe’s has failed to show that the court relied
in any way on Dr. Hamilton’s “appraisal concepts” in rejecting MaRous’s Tier II and Tier III
analyses; it is apparent that the court’s credibility determination rested on MaRous’s selection of
sale and rental properties that are not comparable and his treatment of obsolescence, among other
things.

To the extent that Lowe’s attempts to make any other arguments on appeal, we reject
them as undeveloped. See Pettit, 171 Wis. 2d at 646-47.

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