GC Net Lease @ (3) (Westerville) Investors, L.L.C. v. Franklin Cty. Bd. of Revision (Slip Opinion)
111 N.E.3d 1170
| Ohio | 2018Background
- Owner GC Net Lease challenged the 2014 auditor valuation ($35,500,000), seeking reduction to $28,000,000 for a single-tenant office building leased to J.P. Morgan Chase under a 15-year net lease.
- Owner presented an appraisal by Samuel Koon valuing the fee-simple estate at $28,500,000 (income and sales-comparison approaches).
- Westerville City Schools (BOE) introduced documentary evidence of a November 2013 arms-length sale of the property for $44,500,000.
- The Franklin County Board of Revision (BOR) and later the Board of Tax Appeals (BTA) adopted the $44,500,000 sale price as the 2014 value, stating a recent arm’s-length sale should not be adjusted for encumbrances.
- Owner appealed to the BTA, which again favored the sale price and largely declined to consider the appraisal; the Supreme Court of Ohio vacated and remanded, holding the BTA failed to adequately consider the appraisal alongside the sale price.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BTA reasonably adopted the sale price without fully considering appraisal evidence | Koon’s appraisal reliably valued the unencumbered fee-simple estate at $28.5M and must be considered under R.C. 5713.03 and post-H.B. 487 amendments | A recent arm’s-length sale ($44.5M) is the best evidence of value and should not be adjusted for lease encumbrances | Vacated BTA decision and remanded: BTA must consider appraisal evidence alongside sale price and determine whether sale reflects unencumbered fee-simple value |
| Whether a sale price reflecting a property subject to a long-term net lease can be used without adjustment to value the unencumbered fee-simple estate | The sale may be elevated by tenant creditworthiness and net-lease structure; appraisal analysis is required to assess effect | A sale price from an arms-length transaction need not be adjusted for an encumbrance | Court: BTA improperly treated a limited appraisal comment as full consideration; must analyze lease rent, tenant credit, and net-lease effects on sale price |
Key Cases Cited
- Terraza 8, L.L.C. v. Franklin Cty. Bd. of Revision, 83 N.E.3d 916 (Ohio 2017) (appraisal evidence must be admissible and evaluated alongside sale-price evidence)
- Berea City School Dist. Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 834 N.E.2d 782 (Ohio 2005) (discusses role of sale price in valuation)
- HIN, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 5 N.E.3d 637 (Ohio 2014) (cases addressing adjustment of sale price for encumbrances)
- Cummins Property Servs., L.L.C. v. Franklin Cty. Bd. of Revision, 885 N.E.2d 222 (Ohio 2008) (sale-price evidence and encumbrance issues)
- Pingue v. Franklin Cty. Bd. of Revision, 717 N.E.2d 293 (Ohio 1999) (treatment of sale-price evidence)