Lowe's Home Centers v. Iowa Property Assessment Appeal Board

IN THE COURT OF APPEALS OF IOWA

No. 20-0623
Filed April 14, 2021

LOWE'S HOME CENTERS, LLC,
Plaintiff-Appellant,

vs.

IOWA PROPERTY ASSESSMENT APPEAL BOARD,
Defendant-Appellee,

and

BLACK HAWK COUNTY BOARD OF REVIEW,
Intervenor-Appellee.
________________________________________________________________

Appeal from the Iowa District Court for Black Hawk County, Linda M.

Fangman, Judge.

Lowe’s Home Centers, LLC appeals the district court’s ruling on judicial

review affirming the Property Assessment Appeal Board’s valuation of its Waterloo

property. AFFIRMED.

Matthew M. Craft and Erich D. Priebe of Dutton, Daniels, Hines, Kalkhoff,

Cook & Swanson, P.L.C., Waterloo, for appellant.

Jessica Braunschweig-Norris and Bradley O. Hopkins, Des Moines, for

appellee Property Assessment Appeal Board.

Michael O. Treinen, Waterloo, for appellee intervenor, Black Hawk County

Board of Review.

Considered by Mullins, P.J., and May and Schumacher, JJ.
2

SCHUMACHER, Judge.

Lowe’s Home Centers, LLC appeals the district court’s ruling on judicial

review affirming the Property Assessment Appeal Board’s (PAAB) valuation of its

Waterloo property at $8,898,790. Lowe’s argues the PAAB violated Iowa law by

adopting an appraisal of the property at its “current use,” rather than its market

value; erred in interpreting Iowa law, which mandates the property be valued at

what it “would bring if sold in fee simple free and clear of any lease”;1 and the

improper interpretation and application of law violated Lowe’s due process rights

under the United States Constitution.

1 This is a quote from I.C.M. Realty v. Woodward, 433 N.W.2d 760, 762 (Iowa Ct.
App. 1988) (“We believe the trial court was correct in holding that the proper
measure of value is what the property would bring if sold in fee simple free and
clear of any leases.”). We believe Lowe’s reads too much into the isolated
statement.
In I.C.M Realty, we rejected a taxpayer’s argument that the property should
be assessed at a lower value because the property was subject to an existing
below-market lease. 433 N.W.2d at 762. We noted an existing lease is some
evidence of the property’s value, but the appraiser must ultimately determine the
property’s value independent of the existing lease. Id. (citing Oberstein v. Adair
Cty. Bd. of Review, 318 N.W.2d 817, 821 (Iowa Ct. App. 1982)). Because the
appraiser must consider the entirety of the rights to the property, an existing below-
market lease does not lower the value of the property. Id.
The PAAB addressed Lowe’s claim in this manner:
Relying on language from I.C.M. Realty, Lowes argues that
Manternach’s appraisal departs from fee simple valuation because
he valued the property under the income approach as if it had
stabilized occupancy. We think Lowes focuses too narrowly on
isolated phrases in I.C.M Realty. Iowa case law indicates that an
existing lease can serve as some evidence of the property’s value.
Oberstein, 318 N.W.2d at 821; Riso v. Pottawattamie Cty. Bd. of
Review, 362 N.W.2d 513 (Iowa 1985) (authorizing use of percentage
rent in determining economic rent in income approach). Within the
income approach specifically, the ultimate question is what the
subject property’s productive and earning capacity would be if
exposed to the market.
3

Lowe’s owns a commercial property located at 400 E. Tower Park Road,

Waterloo, which includes a large commercial retail store built in 2002. It has

137,643 square feet of gross building area, and a 19,476 square-foot fenced

outdoor sales and garden area. The roofed sales and garden areas have lights,

sprinklers, and interwoven roofing to the main building. The 15.78-acre site is also

improved with 284,000 square feet of paving. The improvements include three

dock-level truck doors with a load leveler and several other grade-level overhead

doors allowing for interior access. The Black Hawk County Board of Review

assessed the property for $8,898,790 in 2017.

Lowe’s protested the 2017 assessment to the Board of Review and claimed

the property was assessed for more than the value authorized by law under Iowa

Code section 441.37(1)(a)(1)(b) (2017). The Board of Review denied the protest.

Lowe’s appealed the Board of Review’s decision to PAAB. Two appraisals

were submitted. Lawrence Allen completed an appraisal for Lowe’s, and Russ

Manternach completed an appraisal for the Board of Review. The following table

summarizes the appraisers’ approaches to value and their respective conclusions

as of January 1, 2017.

Final
Sales Income Opinion of
Appraiser Approach Approach Cost Approach Value
Allen $5,490,000 $5,460,000 Not Developed $5,480,000
Manternach $9,080,000 $9,240,000 $9,080,000 $9,100,000

The PAAB affirmed the appraisal. In addition, the district court upheld the

PAAB’s decision on Lowe’s petition for judicial review. Lowe’s appeals.

We review the PAAB’s decision for correction of errors at law. Iowa Code

§ 441.39. Because the district court affirmed the agency on judicial review, “we
4

apply the standards of chapter 17A to determine if we reach the same conclusion

as the district court.” Wendling Quarries, Inc. v. Prop. Assessment App. Bd., 865

N.W.2d 635, 638 (Iowa Ct. App. 2015); Winnebago Indus., Inc. v. Haverly, 727

N.W.2d 567, 571 (Iowa 2006) (“When a district court exercises its authority on

judicial review, it acts in an appellate capacity to correct any errors of law by the

agency.”). If our conclusions are the same, we affirm. Winnebago, 727 N.W.2d at

571. “If the agency’s action was based on an erroneous interpretation of a

provision of law whose interpretation has not been clearly vested in the agency,

we shall reverse, modify or grant other appropriate relief from the agency action.”

Naumann v. Iowa Prop. Assessment App. Bd., 791 N.W.2d 258, 260 (Iowa 2010)

(citing Iowa Code § 17A.19(10)(c)).

This court recently addressed and rejected the first two issues Lowe’s raises

in a strikingly similar case. See Lowe’s Home Centers, LLC v. Iowa Prop.

Assessment App. Bd., No. 20-0764, 2021 WL 610105, at *1 (Iowa Ct. App.

Feb. 17, 2021). There, Lowe’s challenged the 2017 value of its Coralville property.

That case involved the same two expert appraisers: Laurence Allen for Lowe’s and

Russ Manternach for the board. Id. The evidence and arguments made in that

case are substantially the same as in this case. As was true in that case, the PAAB

found issues with both appraisers but ultimately found Manternach’s appraisal

more reliable. See id. at *3–4.

On judicial review, as is the case here, the district court upheld PAAB’s

valuations. On appeal to this court, we outlined the applicable statutes, reviewed

the supreme court’s analyses of pertinent case law, including Wellmark, Inc. v.

County Board of Review, 875 N.W.2d 667 (Iowa 2015), Soifer v. Floyd County
5

Board of Review, 759 N.W.2d 775 (Iowa 2009), and Maytag Co. v. Partridge, 210

N.W.2d 584 (Iowa 1973), and rejected Lowe’s claims that the PAAB was

misinterpreting Iowa law and had misapplied that law in considering the current

use of the property. See Lowe’s, 2021 WL 610105, at *4–5. For all the reasons

stated in Lowe’s, 2021 WL 610105, at *2–5, we reject Lowe’s same arguments

here. Because Lowe’s due process claim is premised on its allegations that the

PAAB misinterpreted and misapplied Iowa law, we also reject the constitutional

claim.

AFFIRMED.