160 N.E.3d 1156
Ind. T.C.2020Background
- Southlake Indiana, LLC owns Southlake Mall (super-regional mall in Hobart, IN) comprised of multiple parcels, inline retail, anchors (JCPenney, Dick's), outparcels, and specialty leasing (kiosks/RMUs, Brand/Media).
- Ross Township Assessor issued retroactive assessment increases for 2011–2013 and assessed 2014; PTABOA denied appeals and cases proceeded to the Indiana Board of Tax Review.
- The Assessor presented a USPAP appraisal by Mark Kenney using an income-capitalization approach relying largely on contract rents, including specialty leasing and a management-fee deduction; Kenney concluded values ~ $224M–$243M (2011–2014 after correction).
- Southlake presented critiques, a USPAP appraisal by David Lennhoff (begins from a going-concern/TAB approach, then deducts personal property and intangibles, uses a higher cap rate), and a comparable-assessment analysis by Benton. Lennhoff concluded significantly lower real-property-only values (~$98M–$146M).
- Indiana Board found Kenney more persuasive overall but adjusted his NOI/cap rates to remove certain personal-property and intangible components, producing mid-range values (~$173M–$191M). The Court affirmed in part, remanded issues about Central Plant and CAM reimbursement profits for further Board consideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Market rent (use of contract rents) | Southlake: Kenney improperly relied on unadjusted contract rents without market corroboration; they are unreliable. | Assessor: Contract rents reflect the mall market; Kenney’s and Lennhoff’s starting points largely agree and cost-of-occupancy analyses support them. | Court: Board could reasonably find Kenney’s contract-rent-based estimates reflected market; decline to reweigh evidence. |
| Business income (RMUs, Brand/Media, Central Plant, CAM) | Southlake: These revenues are business income/intangible and must be removed from real-property NOI. | Assessor: RMU and Brand/Media are payments for use of space (real-property income); Assessor/Board removed utility profits where shown. | Court: Board reasonably treated RMU and Brand/Media as real-property income; remanded Central Plant and CAM profit issues for the Board to analyze and adjust as needed. |
| Intangible value (start-up costs, anchor inducements, management fee) | Southlake: Lennhoff properly removed intangibles (start-up and inducements) beyond a management fee; Board erred rejecting them. | Assessor: Management-fee (Rushmore) method adequately removes intangible going-concern value; Lennhoff’s deductions were unsupported and risk double-counting. | Court: Board reasonably rejected Lennhoff’s start-up and inducement deductions as unsupported or double-counting; upheld Board’s treatment. |
| Comparable-assessment analysis (disparate assessments) | Southlake: Benton’s analysis showing Southlake’s assessment far above peers proves overassessment and should carry more weight. | Assessor: Two USPAP appraisals are more probative; comparable-assessment may reflect different valuation methodologies (cost approach) and is less persuasive. | Court: Board may assign less weight to Benton’s analysis relative to two USPAP appraisals; no abuse of discretion. |
Key Cases Cited
- Osolo Twp. Assessor v. Elkhart Maple Lane Assocs., 789 N.E.2d 109 (Ind. Tax Ct. 2003) (party challenging Board must show Board acted arbitrarily, capriciously, or not in accordance with law)
- Kooshtard Prop. VI, LLC v. White River Twp. Assessor, 836 N.E.2d 501 (Ind. Tax Ct. 2005) (presentation of a USPAP appraisal is an effective evidentiary method to substantiate or refute an assessment)
- Orange Cnty. Assessor v. Stout, 996 N.E.2d 871 (Ind. Tax Ct. 2013) (discusses burden-shifting statute history and evidentiary burdens)
- Shelby Cnty. Assessor v. CVS Pharmacy, Inc., 994 N.E.2d 350 (Ind. Tax Ct. 2013) (fee-simple income valuations require market-rent estimates; contract rents may be used if shown to reflect market)
- CVS Corp. v. Monroe Cnty. Assessor, 83 N.E.3d 1281 (Ind. Tax Ct. 2017) (substantial and reliable evidence standard; Board decisions upheld where record supports reasonable inference)
- Stinson v. Trimas Fasteners, Inc., 923 N.E.2d 496 (Ind. Tax Ct. 2010) (property tax system taxes real property value, not business or contractual rights)
- Grider v. Dep’t of Local Gov’t Fin., 799 N.E.2d 1239 (Ind. Tax Ct. 2003) (court will not substitute its judgment for Board’s factual determinations)
- Madison Cnty. Assessor v. Sedd Realty Co., 125 N.E.3d 676 (Ind. Tax Ct. 2019) (Board decides relevance and weight of competing appraisal evidence)