Ms. Downey calculated the value
of the Petitioner’s property by using two methods of the income approach:
direct capitalization and cash flow analysis. Petitioner Exhibit 1 and
Exhibit 4. According to Ms. Downey, based on the direct capitalization
method the property’s value would be between $700,000 and $810,000. Downey
testimony. And the cash flow analysis shows the value of the property to be
$680,000, $724,000 or $774,000, depending on the discount rate applied. Id.
“The income approach to value
is based on the assumption that potential buyers will pay no more for the
subject property … than it would cost them to purchase an equally desirable
substitute investment that offers the same return and risk as the subject
property.” MANUAL at 14. The income approach thus focuses on the
intrinsic value of the property; rather than the Petitioner’s operation of the
property because property-specific rents or expenses may reflect elements other
than the value of the property “such as quality of management, skill of work force,
competition and the like.” Thorntown Telephone Company, Inc. v. State Board
of Tax Commissioners, 588 N.E.2d 613, 619 (Ind. Tax Ct. 1992). See also
MANUAL at
5 (“[C]hallenges to assessments [must] be proven with aggregate data, rather
than individual evidence of property wealth. … [I]t is not permissible to use
individual data without first establishing its comparability or lack thereof to
the aggregate data”). Here, Ms. Downey used property-specific expense
information, including a deduction for real estate taxes. In addition,
Ms. Downey provided no support for the capitalization rates she used in her
calculations. Ultimately, Ms. Downey failed to show that her income approach
methodology conformed to the Uniform Standards of Professional Appraisal Practice
(USPAP) or any other generally accepted standards. Consequently, Ms. Downey’s
income calculations lack probative value in this case. See Inland Steel Co.
v. State Board of Tax Commissioners, 739 N.E.2d 201, 220 (Ind. Tax Ct.
2000) (holding that an appraiser’s opinion lacked probative value where the appraiser failed to explain
what a producer price index was, how it was calculated or that its use as a
deflator was a generally accepted appraisal technique).
Ms. Downey
also contends that the Petitioner’s property was over-valued based on the sale
prices of other multi-family residential properties. Downey testimony;
Petitioner Exhibit 2. In support of this contention, Ms. Downey submitted a
list of six multi-family properties with more than five units that sold between
2005 and 2007. Petitioner Exhibit 2. In making this argument, the
Petitioner’s witness essentially relies on a sales comparison approach to
establish the market value-in-use of the property. See MANUAL at 3 (stating that the sales comparison approach
“estimates the total value of the property directly by comparing it to similar,
or comparable, properties that have sold in the market.”) In order to
effectively use the sales comparison approach as evidence in a property
assessment appeal, however, the proponent must establish the comparability of
the properties being examined. Conclusory statements that a property is
“similar” or “comparable” to another property are not probative evidence of the
comparability of the properties. Long, 821 N.E.2d at 470. Instead, the
party seeking to rely on a sales comparison approach must explain the
characteristics of the subject property and how those characteristics compare
to those of purportedly comparable properties. See Id. at 470-71. They
must also explain how any differences between the properties affect their
relative market value-in-use. Id. Here, the Petitioner’s witness made no
attempt to show that the properties she used were comparable to the
Petitioner’s property. She merely concluded the subject property was assessed
higher than other multi-family properties. Thus, the Petitioner failed to raise
a prima facie case that its property was over-valued based on the sale prices
of other multi-family properties in Montgomery County.
Even if the
Petitioner could be seen as raising a minimally-sufficient prima facie case,
the Respondent rebutted the Petitioner’s evidence. The Respondent presented an
excerpt of an appraisal report prepared by Ms. Downey, whereby she estimated
the value of the Petitioner’s property to be $1,015,000 as of October 5, 2007. Thomas
testimony; Respondent Exhibit 1. While Ms. Downey explained that “clearly
looking into the future” the
Petitioner was unable to sell the property, she confirmed that her appraisal
was based on the best market information available at the time. Downey
testimony. And, in fact, Ms. Downey ultimately agreed that the property was
correctly assessed at $1,015,000 for 2008.
