Fortifiber Corporation v. Board of Assessors of the City of Attleboro (September 8, 2014)

   COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD


FORTIFIBER CORPORATION	       v.		  BOARD OF ASSESSORS OF   
								  THE CITY OF ATTLEBORO						         

Docket No. F317331					  Promulgated:
				               	  September 8, 2014


	This is an appeal filed 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 City of Attleboro ("appellee" or "assessors") to abate taxes on certain real estate in Attleboro, owned by and assessed to Fortifiber Corporation ("Fortifiber" or "appellant") under G.L. c. 59, §§ 11 and 38, for fiscal year 2012 ("fiscal year at issue").  
	Commissioner Rose heard this appeal. Chairman Hammond and Commissioners Scharaffa, Chmielinski, and Good joined him in the decision for the appellant.  
	These findings of fact and report are made pursuant to the appellant's request under G.L. c. 58A, § 13 and 831 CMR 1.32.  

	Stephen M. Politi, Esq. for the appellant.
	
Michael R. Siddall, Esq., and Allison B. Turner, Esq. for the appellee.

 Findings of Fact and Report


Introduction and Jurisdiction
On the basis of all of the evidence, including the testimony and documentary exhibits entered into the record as well as the Presiding Commissioner's own view of the subject property, the Appellate Tax Board ("Board") made the following findings of fact.  On January 1, 2011, appellant Fortifiber Corporation was the assessed owner of a 32.4-acre parcel of land located at 55 Starkey Avenue in the City of Attleboro, improved with a cellular communications antenna ("cell tower") and a building totaling 204,380 square feet in size (collectively, the "subject property").  For the fiscal year at issue, the assessors valued the subject property at $6,337,400 and assessed a tax thereon, at the rate of $20.30 per thousand, in the total amount of $128,649.22.
The Collector of Taxes for Attleboro mailed the fiscal year 2012 actual tax bills on December 28, 2011, and the appellant paid the tax due without incurring interest.  On January 24, 2012, the appellant timely filed an Application for Abatement with the assessors.  The appellant's Application for Abatement was denied by vote of the assessors on April 19, 2012, and the assessors informed the appellant of the denial by notice dated April 23, 2012.  The appellant seasonably filed its petition with the Board on July 5, 2012.  On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide this appeal.
The Subject Property 
The subject property consists of 32.4 acres with frontage on Starkey Avenue to the north and Lindsey Street to the east. To the west, the subject property abuts the MBTA commuter railroad tracks and there is a rail spur on the subject property providing direct access to the railroad.   
Much of the subject property's acreage consists of wetlands and therefore cannot be developed.  In addition, the property is on the Massachusetts Department of Environmental Protection's ("DEP") list of contaminated sites, due to contamination found in the late 1980s and during the 1990s.  In-ground oil tanks were removed from the subject property during that time period; the parties did not offer evidence as to the status of the contamination at the subject property as of the relevant date of valuation.  
The subject building was constructed in stages from 1928 through 1968, and is comprised of a series of interconnected buildings.  The majority of the space, 167,072 square feet, is on the first floor and there is an additional 37,308 square feet of upper-level space.  There is a mezzanine consisting of approximately 25,000 square feet, constructed of steel and concrete, but that space was not included in the building's square footage.  
The subject building has a mixed-use configuration, which includes office space and high-bay warehouse areas, but the majority of the space is industrial shop space, with concrete floors.  The mezzanine area and second floor offices have been out of use for approximately two decades, and photographs of those spaces introduced into evidence revealed dated finishes, such as vinyl tile, acoustic drop-panel ceilings, and faux wood-paneled walls.  Ceiling heights at the subject property are variable, generally ranging from 13 to 24 feet.  However, a significant amount of space, including that beneath the mezzanine, has clear heights of less than eight feet, a layout which, as will be discussed further, limits the functional utility of that space.  Additionally, although there is a freight elevator on the premises, it is not operable, and there is no elevator access to the subject building's upper levels.  
Construction elements include a poured concrete foundation, steel frame, and a flat rubber roof.  Much of the exterior is brick, but the warehouse area has a metal exterior.  The subject property is also improved with a driveway and a paved parking area, which hosts several large, metal storage sheds and the cell tower.  There are loading docks to the rear of the subject property.  
The subject property is located in an industrial zoning district, which permits a broad range of commercial uses.  It is currently leased to and occupied by an affiliate of the appellant, Polyfiber, LLC, and is used for industrial production and storage, which is a legal, conforming use.  The lease between Polyfiber, LLC and the appellant was not an arm's-length lease, as the recited rent was $1 per year.  
The Appellant's Case-in-Chief
 The appellant presented its case-in-chief through the testimony of one witness and the submission of several documentary exhibits.  The appellant's witness was Eric T. Reenstierna, a licensed real estate appraiser whom the Board qualified as an expert in real estate valuation without objection.  Mr. Reenstierna was retained by the appellant to conduct an appraisal of the subject property and his self-contained appraisal report was entered into evidence.  
Mr. Reenstierna physically inspected the subject property as part of his appraisal.  He concluded that it was more valuable as improved than as vacant, and that its highest and best use was its continued use as an industrial building occupied by a single-tenant and hosting a cell tower.  However, Mr. Reenstierna considered the subject property to be in only fair condition and impacted by significant issues of functional obsolescence.  
First, he testified that the modern standards for production space require "an open layout." He opined that the columns and masonry partition walls breaking up the subject property's production space rendered it less useable in that regard.  Second, a significant portion of the subject property had ceiling heights of less than eight feet, including the areas beneath the mezzanine, which was significantly less than the modern ceiling height requirements for most industrial uses.  
According to Mr. Reenstierna, this problem could theoretically be remedied, in part, by removing the mezzanine.  However, because the mezzanine, constructed of steel and concrete, was an integral part of the building, the cost of removing it "would exceed the value that would be produced."  Mr. Reenstierna further noted that the appellant did not use the second-story office space, which had been vacant for approximately two decades and would, in his opinion, require significant updating to become rentable.  
Although Mr. Reenstierna's appraisal report acknowledged that the subject property appears on the DEP's list of contaminated sites, the status of the contamination as of the relevant date of valuation was indeterminate, and therefore Mr. Reenstierna treated the subject property as being free of contamination for purposes of his appraisal.  
Mr. Reenstierna considered the three usual approaches to value: the cost approach, the sales comparison approach, and the income-capitalization approach.  He did not use the cost approach because that method is more appropriate for new or special-purpose properties, and the subject building was neither.  He concluded that both the sales-comparison and income-capitalization methodologies were appropriate approaches to value the subject property, and he therefore conducted both types of analyses.  
To begin his sales-comparison analysis, Mr. Reenstierna reviewed the sales of five large industrial buildings that he considered comparable to the subject property.  The following table summarizes the relevant information about each of those sales:
    Mr. Reenstierna's Sales-Comparison Properties

Sale No.	Address	Property
Rights	Sale Date	Sale Price
($)	Sq. Ft.
	$/Sq. Ft.	Year Built		1	525 and 533 Pleasant Street, Attleboro	Leased Fee	6/11/09	5,266,500	214,849	24.51	 1926, 1968		2	1 Kiddie Drive, Avon	Fee Simple	10/30/09	2,125,000	111,318	19.09	1979		3	56 Oak Hill Way, Brockton	Fee Simple	11/17/11	1,675,000	109,244	15.33	1960		4	125 Depot Street, Bellingham	Fee Simple	9/24/09	1,750,000	 86,970	20.12	1975		5	240 Industrial Ave. East, Lowell	Fee Simple	12/24/09	1,875,000	167,079	11.22	1963		
Mr. Reenstierna then made adjustments to these sale prices to account for differences from the subject property in building quality, building size, and floor area ratios.  In addition, he made a positive adjustment of 6% to each of the comparison properties to account for the subject property's cell tower, a feature which each of the comparison properties lacked.  After adjustment, his comparable sales ranged in price from $10.66 to $23.04 per square foot.  Mr. Reenstierna next allocated an influence ratio to each of the comparable sales based on his own "judgment of the reliability of that sale as an indicator of the value of the subject."  After doing so, he ultimately determined a per-square-foot sale price of $16.23 for the subject property.
Mr. Reenstierna explained that he attributed value to only 167,072 square feet of the subject building because, in his opinion, there was no "economically feasible use" for 37,308 square feet of the building's second-story.  That area had no elevator access and would, according to Mr. Reenstierna, require as much money to restore to usable condition as it would generate, as renovated, in rent.  He therefore considered that space to have no value and he applied his per-square-foot sales prices of $16.23 to 167,072 square feet of space, resulting in a fair cash value of $2,710,000.
Mr. Reenstierna additionally conducted an income-capitalization analysis.   He began by considering the "rental of the subject property from the point of view of potential occupants."  He concluded that a space on the east side of the subject building, totaling approximately 95,000 square feet and consisting of office, production, and unheated warehouse space, would be marketable to potential tenants, as would an additional space totaling approximately 10,000 square feet on the western side of the subject building, consisting of a high-bay industrial space with a loading dock as well as adequate parking.  Mr. Reenstierna did not consider the remaining 62,000 square feet of space on the ground floor to be marketable to or usable by potential tenants because of its low ceiling heights and lack of loading doors, and he therefore did not include that area in his income-capitalization analysis.  
To determine fair market rent for the 105,000 square feet of space that he considered rentable, Mr. Reenstierna selected seven leases in the same market as the subject property.  The following table summarizes relevant information about each of those leases:








   Mr. Reenstierna's Comparable Leases
Lease No.	Address	Lease  Date	Rent PSF ($)	Sq. Ft.
	Year Built	Notes		1	220 O'Connell Way, Taunton	12/1/10	5.00	41,445	2008	Modern, high-quality building		2	22 Forge Park, Franklin	9/1/11	4.85	115,000	1989	Modern, high-quality building		3	31 Suffolk Road, Mansfield	12/1/10	4.75	57,963	1974	Modern, high-quality building		4	25 Revolutionary Way, Taunton	4/1/10	4.00	43,835	2007	Modern, high-quality building		5	527 Pleasant Street, Attleboro	6/13
	3.75	15,000	1950	Near subject property, asking rent only		6	353  Franklin McKay Road, Attleboro	6/13
	3.53	11,880	1970	Older, metal-sided building, asking rent only		7	34 Forest Street, Attleboro	6/13
	2.00	192,000	1928	100% vacant building with lower ceilings than subject , asking rent only		  
Mr. Reenstierna noted that the rents at the higher end of the range, ranging from $4.00 to $5.00 per square foot, reflected higher quality, newer buildings.  The rents at the lower end of the range - all of which were, like the subject property, located in Attleboro, reflected older, lower quality buildings, some with lower ceiling heights than the subject property.   Further, these leases had not been consummated and reflected only asking rents.  Thus, Mr. Reenstierna observed, they had the potential to result in even lower actual rents.  After taking into consideration differences in quality between his comparable lease properties and the subject property, Mr. Reenstierna concluded a rent of $2.75 per square foot for the 105,000 square-foot area that he deemed rentable and a rent of $3.00 per square foot for the 10,000 square-foot area that he deemed rentable, noting that smaller spaces often rent for a higher per-square-foot dollar amount than larger spaces.  
In calculating his estimated gross income, Mr. Reenstierna also accounted for reimbursements for insurance, utilities, and maintenance, as he assumed the net leases typical for industrial buildings, under which the tenants pay for all, or nearly all, expenses.  His figures reflected his estimated vacancy and were based on a combination of the subject's actual reported expenses and market data, as discussed below.  
To determine an appropriate vacancy rate, Mr. Reenstierna consulted Co-Star reports, which indicated a vacancy rate of 5% for industrial space within a five-mile radius of the subject, and a rate of 4% within a one-mile radius.  However, Mr. Reenstierna noted that not all buildings in the area were surveyed, including one major property, the 192,000-square foot industrial building located at 34 Forest Street in Attleboro, which was completely vacant.  That building was an older, two-story industrial building, and its vacancy reflected the tendency for higher vacancies in older industrial buildings, like the subject.  Mr. Reenstierna therefore selected a vacancy rate of 10% to reflect the subject's age.  
Mr. Reenstierna then determined appropriate operating expenses.  For insurance, he relied on the subject's actual reported expenses of $14,683.  In addition, he applied an expense of $0.45 per square foot for utilities to prevent freezing during vacancy, based on the subject's reported actual expenses, and a maintenance expense of $0.60 per square foot, which represented the low end of the range for commercial buildings as reported by industry publications, including the Institute for Real Estate Management ("IREM").   
In addition, Mr. Reenstierna included a management fee equal to 2% of gross income.  He explained that this figure was lower than the 3% to 4% management fees typically seen at commercial buildings because the subject building is configured for single-tenant use.  He also added general administrative expenses of 1.5% of gross income, which was also slightly lower than average to reflect single-tenant occupancy.  All together, these expenses totaled $94,178, resulting in a net operating income ("NOI") for the subject property of $242,114.
In order to determine a proper capitalization rate, Mr. Reenstierna first reviewed published market surveys.  PriceWaterhouseCoopers ("PWC") 2011 survey reported a 10.18% average capitalization rate for non-institutional-grade industrial warehouse properties and a range of 6.0 to 12.0% for institutional-grade properties.  Mr. Reenstierna concluded that as a low quality, non-institutional-grade property, the subject property would likely be near or above the high end of this range.  
In addition, Mr. Reenstierna considered a capitalization rate from a recent, local sale. Specifically, he reviewed the sale terms of the South Boston Commerce Center - a multi-tenant industrial complex - in early 2011.  He was able to determine that the capitalization rate from that sale was 9.3%.  Mr. Reenstierna stated that the subject property represented a riskier investment, as it was inferior to the South Boston Commerce Center in many respects.  Accordingly, he determined that 12% was an appropriate capitalization rate, to which he added a tax factor, pro-rated to reflect vacancy, resulting in a final capitalization rate of 12.203%.
After applying that capitalization rate to his NOI, Mr. Reenstierna computed a value for the subject property, excluding the cell tower, of $1,984,053.
 	Mr. Reenstierna then conducted a separate income-capitalization analysis to value the cell tower.  He used the actual January 2011 rental income from the cell tower of $1,725 to calculate a projected gross income of $20,700.  He stated that vacancy is minimal for cell towers and he therefore applied a vacancy and rent loss rate of 1% resulting in a gross income of $20,493.  Mr. Reenstierna additionally stated that expenses are typically borne by the tenant, but he allowed minimal expenses for management and administrative costs, in the total amount of 1.5% of income, resulting in an NOI of $20,186.
 	Mr. Reenstierna used the same 12% capitalization rate that he had used for the subject building, and again added a tax factor.  However, he made no adjustment to the tax factor for vacancy since, in his experience, cell towers have negligible vacancy rates.  Mr. Reenstierna's NOI and overall capitalization rate of 14.03% resulted in an indicated fair market value of $143,877 for the subject cell tower. 
	After adding the value of the cell tower to the value of the subject building as determined through his income-capitalization analysis, Mr. Reenstierna arrived at an indicated fair cash value for the subject property of $2,127,930, which he rounded to $2,130,000.
Because the subject property was designed for single-tenant occupancy, and as such it was more likely to be purchased by an owner-user than an investor, Mr. Reenstierna ultimately concluded that the sales-comparison approach provided the most reliable indication of the subject property's fair cash value.  Accordingly, after relying exclusively on the value obtained through his sales-comparison approach, Mr. Reenstierna's final opinion of fair cash value for the subject property was $2,710,000 for the fiscal year at issue.  

The Assessors' Case
The assessors presented their case through the testimony of one witness, Assessor Stanley J. Nacewicz, Chief Assessor for Attleboro, and the submission of several documentary exhibits, including an income-analysis.  
Mr. Nacewicz testified that he was very familiar with industrial buildings in Attleboro, not only from his tenure as an assessor but also because, prior to becoming an assessor, he worked in a large, industrial building in Attleboro for 23 years.  It was his opinion that the subject property is substantially similar to most of the industrial properties in Attleboro.
Much of Mr. Nacewicz's testimony concerned the data and methodology used by the assessors to value the subject property, which included both a mass appraisal cost approach and income-analysis.  Mr. Nacewicz acknowledged that mass appraisal methodology does not take into consideration highest-and-best use.  He also testified that much of the data used in the income-analysis was gathered from income-and-expense information submitted by other building owners in Attleboro, but not the subject property's actual income-and-expense information, because the appellant did not submit that information to the assessors.  He stated that approximately 80% of industrial property owners submitted the requested income-and-expense information, and the information gathered therefrom, in his opinion, accurately reflected the Attleboro market.  
Based on that information, the assessors determined a base rent of $5.00 per square foot, but made downward adjustments to account for the subject property's inferior location, resulting in a rent of $4.00 per square foot for the subject's first-floor space and $4.18 per square foot for the subject's second-floor space.  
An area of major disagreement between the parties was the building's proper square footage.  Mr. Nacewicz strongly disagreed with Mr. Reenstierna's conclusion that only a portion - approximately half - of the subject property was rentable or usable space.  It was Mr. Nacewicz's opinion that 204,380 square feet of the subject building's interior, an amount which did not include the 25,000-square-foot mezzanine, was usable space and should be included when calculating potential gross income.  Mr. Nacewicz testified that he has inspected the subject building several times over the past decade, most recently in 2010, and as of his last visit, the entire building was being used.  The assessors therefore applied the first-floor rent of $4.00 per square foot to 160,960 square feet of space and the second-floor rent of $4.18 per square foot to 37,308 square feet of space.  
To account for vacancy, Mr. Nacewicz testified that the assessors used a rate of 8%, which was based on the city-wide information received by the assessors.  Similarly, he stated that they used a rate of 13% of gross income to account for operating expenses, a figure which was again based on the city-wide data provided to the assessors.  
After making these deductions, the assessors arrived at an NOI of $647,328.  Using sources such as Marshall & Swift, and Loopnet, as well as the information provided to them by building owners citywide, the assessors selected a base capitalization rate of 8.5%.  They added a tax factor to that base rate to arrive at a final rate of 10.5%, resulting in an indicated value for the subject property, exclusive of the cell tower, of $6,165,000.
Mr. Nacewicz testified that an income-approach was not performed to estimate the value of the cell tower.  He stated without further elaboration that the assessors relied on the cost approach alone to value the cell tower.  

The Board's Subsidiary Findings and Ultimate Conclusions
Based on the evidence of record, as well as the view taken of the subject property, the Board made the following ultimate findings of fact.  The Board agreed with Mr. Reenstierna that the highest and best use of the subject property was its current use as a single-tenant industrial building also improved with a cell tower.  This was the subject property's actual historical use and no evidence was offered establishing that an alternate use would be superior.  
The Board declined to give significant weight to the valuation evidence presented by the assessors, as it was based primarily on mass appraisal and it was not readily apparent from the record whether it adequately took into consideration the individual characteristics of the subject property.  For example, the assessors used a mass appraisal cost approach.  However, given the subject building's age, the Board found that the cost approach was not a reliable method to value the subject property.  Further, Mr. Nacewicz testified that mass appraisal does not take into consideration highest and best use.  As stated above, the Board found that the highest and best use of the subject property was its continued use as a single-tenant industrial building with a cell tower.  Because factors such as vacancy, operating expenses, and other items can vary considerably between buildings occupied by a single-tenant and those occupied by multiple tenants, the Board declined to place significant weight on this evidence.  
In addition, in their income-capitalization analysis, the assessors used percentages based on city-wide data for items such as vacancy and operating expenses, and there was no indication in the record that they took into consideration factors such as the age and size of the subject property in selecting their vacancy and expense estimates.  Moreover, Mr. Nacewicz's calculations appeared to have errors that were not corrected or explained, and the Board found that this detracted from the reliability of the assessors' opinion of value.  
Thus, the Board declined to place weight on the assessors' evidence and instead placed more weight on Mr. Reenstierna's opinions, which were, for the most part, supported by the market data.  However, the Board did not adopt all of Mr. Reenstierna's conclusions, and instead formed its own, independent opinions based on the evidence of record.  
For example, the Board placed no weight on the sales-comparison approach offered by Mr. Reenstierna, as the properties offered for comparison lacked fundamental similarities to the subject property.  Sales two through four involved properties that were approximately half the size of the subject property. While sale number five was closer in size to the subject property, it was located in Lowell, and the Board found that it was too geographically remote to be considered in the same market as the subject property.  Finally, although sale number one shared many similarities with the subject property, including size and location, that sale was a leased-fee sale, and without additional information in the record to make the necessary adjustments, the Board found that sale number five did not provide a reliable indication of the subject property's fee-simple fair cash value.  Accordingly, the Board declined to place weight on the sales-comparison analysis and relied instead on the income-capitalization approach, which was an appropriate valuation methodology because the subject property is an income-producing property.  
 A major area of disagreement between the parties was the proper square footage to use.  The Board disagreed with Mr. Reenstierna that only 105,000 square feet of the subject property was leasable.  The Board concluded that a tenant would not consider renting a building of the subject's size if it could not use all or most of the space.  In addition, the Board found that Mr. Reenstierna's theory was inconsistent with his - and the Board's - conclusion regarding highest and best use, which was for occupancy of the subject property by a single-tenant.  Thus, in conducting its income-capitalization analysis, the Board used the subject building's total area of 204,380 square feet.  
However, the Board did assign differing rents to the subject property's first-floor space and its second-floor space, based on the evidence in the record that first-floor space is more desirable for most industrial uses.  The Board concluded a rent of $3.75 per square foot for the 167,072 square feet of first-floor space and $3.00 per square foot for the 37,308 square feet of second-floor space.  The Board made these determinations based on Mr. Reenstierna's comparable leases one through four, which showed that the rents at the higher end of the range, between $4.00 to $5.00 per square foot, were in much newer, better quality buildings than the subject.  The Board did not place significant weight on lease comparables five through seven, as they represented asking rents only, and therefore were less reliable.  
Because they were well supported by the record and not meaningfully contradicted by the evidence offered by the assessors, the Board adopted Mr. Reenstierna's expenses, vacancy, and capitalization rates for the subject building as well as the cell tower.  
After incorporating its fair market rents, vacancy, expenses, and capitalization rate into an income-capitalization analysis, the Board determined a fair market value of $4,275,077, which it rounded to $4,275,000.  The Board's income-capitalization analysis is reproduced below:

        The Board's Income-Capitalization Analysis

Subject Building

First Fl. Gross Area		(sf)		167,072
Market Rent PSF			($)		3.75
Potential Gross Income		($)		626,520

Second Fl. Gross Area		(sf)		37,308
Market Rent PSF			($)		3.00
Potential Gross Income		($)		111,924

Total Potential Gross Income	($)		738,444
Vacancy @ 10%				($)		73,844.40

Effective Gross Income		($)		664,599.60

Insurance				($)		(14,683)
Maintenance @ .60/sq ft		($)		(122,528)
Management @ 2% of EGI		($)		(13,291.99)
Administrative @ 1.5% of EGI	($)		(9,968.99)
Total Expenses			($)		(160,471.98)

NOI					($)		 504,127.62

Capitalization Rate 				  12.0%
Tax Factor						   0.203%
Overall Rate 						   0.12203

Indicated Value, Rounded		($)        4,131,200

Cell Tower

Rent					($)		 20,700
Vacancy @ 1%				($)		   (207)

EGI					($)		 20,493		

   Expenses
   Management @ 1.0%			 ($)		   (205)
   General and admin. @ .5%	      ($)		   (102)

   NOI					 ($)	       20,186

   Capitalization Rate				   12.0%
   Tax Factor						    2.03%
   Overall Rate						   14.03%

  Indicated Value  		 			  143,877
	

Indicated Total Value		($)		4,275,077

Rounded	Fair Cash Value		($)		4,275,000


	Based on the foregoing, the Board found that the appellant met its burden of proving that the subject property's assessed value exceeded its fair cash value for the fiscal year at issue. Accordingly, the Board issued a decision for the appellant in this appeal, and granted an abatement of $41,866.72 in tax, along with interest.  
	
 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 in a free and open market 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).  
The appellant has the burden of proving that the property has a lower value than that assessed.  "'The burden of proof is upon the petitioner to make out its right as [a] matter of law to [an] 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)).  "[T]he board is entitled to 'presume that the valuation made by the assessors [is] valid unless the taxpayers . . . prov[e] the contrary.'" General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 598 (1984) (quoting Schlaiker, 365 Mass. at 245).
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.  
In the present appeal, the Board agreed with Mr. Reenstierna and found and ruled that the highest-and-best use of the subject property during the fiscal year at issue was its continued use as a single-tenant industrial building hosting a cell tower.  In making this ruling, the Board considered, among other factors, the subject property's historical use as well as its size and layout.
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 board is not required to adopt any particular method of valuation."  Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447, 449 (1986).
The cost-reproduction approach has generally "been limited to special situations in which data cannot be reliably computed under the other two methods."  Correia at 362.  Those circumstances were not present in this appeal, and accordingly, the Board ruled out the cost-reproduction approach.
Sales of property generally "furnish strong evidence of market value, provided they are arm's-length transactions and thus fairly represent what a buyer has been willing to pay for the property to a willing seller."  Foxboro Associates v. Assessors of Foxborough, 385 Mass. 679, 682 (1982); New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 469 (1981); First National Stores, Inc. v. Assessors of Somerville, 358 Mass. 554, 560 (1971).  Also required are "fundamental similarities" between the comparison properties and the property at issue.  Lattuca v. Robsham, 442 Mass. 216 (2004).  For example, sales in the same geographic area and within reasonable time of the assessment date generally contain probative evidence for determining the value of the property at issue.  Graham v. Assessors of West Tisbury, Mass. ATB Findings of Fact and Reports 2007-321, 400, aff'd, 73 Mass. App. Ct. 1107 (2008).  The appellant bears the burden of "establishing the comparability of . . .  properties [used for comparison] to the subject propert[y]."  Fleet Bank of Mass. v. Assessors of Manchester, Mass. ATB Findings of Fact and Reports 1998-546, 554.  Accord New Boston Garden Corp., 383 Mass. at 470.  In the present appeal, the Board rejected the sales-comparison analysis proffered by Mr. Reenstierna, as his comparable-sales properties lacked fundamental similarities to the subject property to provide a reliable indication of its fee simple, fair cash value.  
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).  Further, it is a method frequently used for valuing income-producing properties.  Taunton Redevelopment Associates v. Assessors of Taunton, 393 Mass. 293, 295 (1984).  Having concluded that the other approaches to value were not suitable in this case, the Board found and ruled that the income-capitalization approach was the most reliable method to determine the subject property's fair cash value.
The Board, however, rejected Mr. Reenstierna's conclusion that only 105,000 square feet of the subject property were rentable, as this conclusion was in conflict with his - and the Board's - determination regarding the subject property's highest and best use, which was for occupancy by a single-tenant.  The Board concluded that a single-tenant would not consider renting a building of the subject's size if it could not make use of all, or most, of it.  The Board therefore included 204,380 square feet of the building's space in its income-capitalization analysis.  
Based on the record evidence, and taking into consideration the age and condition of the subject property, the Board concluded rents of $3.75 per square foot for the 167,072 square-foot first-floor space and $3.00 per square foot for the 37,308 square-foot second-floor space.  
The Board found and ruled that the operating expenses, vacancy and capitalization rates determined by Mr. Reenstierna's were reasonable and supported by the evidence, and the assessors presented no evidence which meaningfully undermined his conclusions.  Accordingly, the Board adopted Mr. Reenstierna's operating expenses, vacancy, and capitalization rates.  
The Board is not required to believe the testimony of any particular witness or to adopt any particular method of valuation that an expert witness suggests.  Rather, the Board can accept those portions of the evidence that the Board determines have more convincing weight, and form its own independent judgment of fair market value.  Foxboro Associates, 385 Mass. at 683; New Boston Garden Corp., 383 Mass. at 473; New England Oyster House, Inc., 362 Mass. at 702; General Electric Co., 393 Mass. at 605; North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass. 296, 300 (1984).  
On the basis of all of the evidence, and after exercising its own, independent judgment, the Board determined a fair cash value for the subject property of $4,275,000.  The Board therefore found and ruled that the appellant met its burden of proving that the subject property's assessed value exceeded its fair cash value for the fiscal year at issue.  Accordingly, the Board issued a decision for the appellant in this appeal and granted an abatement in the amount of $41,866.72 in tax, along with interest.  

   THE APPELLATE TAX BOARD



	By:	_____	   __________________	       
   Thomas W.  Hammond, Jr., Chairman 

A true copy,

Attest:				_____undefinedundefinedundefinedundefined______
	      Clerk of the Board 

 The assessors considered the subject building to have 204,380 square feet of space. However, on their income-analysis, they used 160,960 square feet for the subject building's first floor rather than 167,072, and there was no explanation in the record for this discrepancy. 
 There appeared to have been calculation errors in the income-analysis submitted by the assessors. With respect to the vacancy and operating expenses, the recited amounts did not correlate to the percentages that they claimed to have used.  No explanation or correction was submitted and the Board could not reconcile the figures.  The Board found that these errors undermined the reliability of the assessors' valuation evidence.  
 The Board agreed with both parties that the 25,000 square-foot mezzanine space should not be included.

ATB 2014-559