ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT: BENJAMIN A. BLAIR MARILYN S. MEIGHEN BRENT A. AUBERRY ATTORNEY AT LAW ABRAHAM M. BENSON Carmel, IN FAEGRE DRINKER BIDDLE & REATH LLP BRIAN A. CUSIMANO Indianapolis, IN ATTORNEY AT LAW Indianapolis, IN
FILED IN THE Nov 19 2020, 4:31 pm
INDIANA TAX COURT CLERK Indiana Supreme Court Court of Appeals and Tax Court
LOWE’S HOME CENTERS, INC., ) ) Petitioner, ) ) v. ) Cause No. 19T-TA-00017 ) MONROE COUNTY ASSESSOR, ) ) Respondent. )
ON APPEAL FROM A FINAL DETERMINATION OF THE INDIANA BOARD OF TAX REVIEW
FOR PUBLICATION November 19, 2020
WENTWORTH, J.
Lowe’s Home Centers, Inc. (“Lowes”) appeals the Indiana Board of Tax of
Review’s final determination that established the assessed values of its real property for
the 2014 through 2017 tax years. Specifically, Lowes contends that the Indiana Board
erred in rejecting its sales comparison approach and income approach valuations and in
excluding the obsolescence depreciation adjustments from its cost approach valuations.
Upon review, the Court affirms the Indiana Board’s final determination. FACTS AND PROCEDURAL HISTORY
The subject property is a 134,791 square foot Lowe’s store that sits on
approximately 13 acres of land. (See Cert. Admin. R. at 120, 894-95.) The store was
constructed in 1998 and is located within the Whitehall Crossing/Whitehall Plaza
shopping center in Bloomington, Indiana. (See Cert. Admin. R. at 120, 142, 870, 898.)
The Assessor valued the property for the 2014 through 2017 assessments as follows:
$9,395,500; $9,406,400; $8,996,600; and $8,991,500. (See Cert. Admin. R. at 316.)
Believing those values to be too high, Lowes sought review first with the Monroe
County Property Tax Assessment Board of Appeals and then with the Indiana Board.
(Cert. Admin. R. at 1-35.) On March 26, 2018, after consolidating all of Lowes’s petitions
for review, the Indiana Board commenced a five-day administrative hearing. (See Cert.
Admin. R. at 81-83, 807 ¶ 3.) During the hearing, both parties presented appraisals that
valued the subject property for each of the years at issue using the sales comparison
approach, the income approach, and the cost approach. (Cert. Admin. R. at 115-228,
318-520.) The Assessor also presented an appraisal review that critiqued Lowes’s
appraisal. (See Cert. Admin. R. at 523-643.)
The Indiana Board concluded that the Assessor’s appraisal was unreliable
because all of its valuations contained “major flaws[.]” (See, e.g., Cert. Admin. R. at 854
¶ 136, 859 ¶ 152.) Neither party has challenged that finding on appeal.
Lowes’s Sales Comparison Approach Valuations
Lowes’s sales comparison approach valuations, prepared by Laurence G. Allen,
an Indiana certified general appraiser, estimated the total value of its property by
comparing it directly with other purportedly comparable properties that had sold in the
2 market. (See Cert. Admin. R. at 171-92, 224, 942-43.) See also 2011 REAL PROPERTY
ASSESSMENT MANUAL (“Manual”) (incorporated by reference at 50 IND. ADMIN. CODE 2.4-1-
2 (2011)) at 2 (defining the sales comparison approach). More specifically, Allen based
each of the valuations on the fee simple sale of six properties with single-tenant
freestanding retail stores. (See Cert. Admin. R. at 171-72, 947-48.) The six comparables
were sold between December of 2011 and January of 2014, ranged in size from 103,540
square feet to 192,814 square feet, and were located in Indiana, Wisconsin, Michigan,
and Illinois. (See Cert. Admin. R. at 172, 948-82.) After adjusting the sales price of each
comparable to account for a variety of factors, including differences in their locations and
the age and condition of their improvements, Allen concluded that the probable sales
price of Lowes’s property was between about $3.4 million and $3.6 million for the years
at issue. (See Cert. Admin. R. at 180-90, 192, 984-1023.)
Lowes’s Income Approach Valuations
The income approach “is used for income producing properties that are typically
rented[ and] converts an estimate of income, or rent, [a] property is expected to produce
into value through a mathematical process known as capitalization.” Manual at 2. (See
also, e.g., Cert. Admin. R. at 193-205, 1033.) Under this approach, Allen developed an
estimate of market rent for each of the years at issue by using the factors from his sales
comparison approach valuations to adjust the leases of twelve existing single-tenant retail
stores located in Indiana and Illinois. 1 (See Cert. Admin. R. at 194-97, 1044, 1051-55.)
Allen also considered the leases of four regional properties in Michigan, Missouri, and
1 In developing his market rent estimates, Allen explained that he considered build-to-suit leases, but did not use them, because the unadjusted rents for those properties typically did not reflect market rent. (See Cert. Admin. R. at 1033-36.) 3 Iowa. 2 (See Cert. Admin. R. at 196-97, 1054-55.) All of the sixteen lease comparables
had triple net leases from as early as April of 2003 to as late as May of 2015 and their
stores ranged in size from 60,000 square feet to 109,793 square feet. (See Cert. Admin.
R. at 194-97, 1040-41, 1044-52.) Allen opined that the size differences between the lease
comparables and the subject property likely resulted in a higher estimate of market rent
per square foot given the inverse relationship between a property’s size and rental rates.
(See Cert. Admin. R. at 194-95.) To arrive at a final value conclusion, Allen completed
several other steps, such as developing net operating incomes and capitalization rates,
and settled upon values ranging between $3.7 million and $4.3 million for the years at
issue. (See Cert. Admin. R. at 197-205, 1055-73.)
Lowes’s Cost Approach Valuations
Allen’s cost approach valuations estimated the value of the land as if it were vacant
and added the depreciated replacement cost of the improvements. (See Cert. Admin. R.
at 206-16, 1074, 1091-93.) See also Manual at 2 (defining the cost approach). With
respect to the obsolescence depreciation adjustments, Allen explained that his review of
a variety of sales, lease, and construction data indicated that Lowes’s property suffered
from obsolescence. (See Cert. Admin. R. at 209-15, 1105-20, 1126-30.) As a result,
Allen quantified the obsolescence using the data from his income approach valuations,
applied the resulting obsolescence depreciation adjustments to his preliminary
valuations, and concluded that the final value of the subject property under the cost
approach was between approximately $3.8 million and $4.3 million during the 2014
2 Allen’s appraisal states that he considered the leases of five regional properties, but he testified that he actually only considered four additional leases because one of the properties was already included in his first set of comparables. (Compare Cert. Admin. R. at 196-97 with Cert. Admin. R. at 1055.) 4 through 2017 tax years. (See Cert. Admin. R. at 213-14, 216, 1121-26, 1130-31.)
The Assessor’s Appraisal Review
The Assessor’s appraisal review, prepared by J. David Hall and Michael C. Lady,
who are both Indiana certified appraisers, provided opinions on the completeness,
accuracy, and credibility of Lowes’s appraisal, not on its concluded value of its property.
(See Cert. Admin. R. at 525-27, 625-628, 1263-64.) After reviewing Lowes’s appraisal
and publicly available information, the appraisers stated that several parts of the appraisal
were inadequate, unsupported, and unreasonable. (See, e.g., Cert. Admin. R. at 555-
619.) For instance, the appraisers opined that Lowes’s sales comparison approach
valuations were not credible because the adjustments made to the six sales comparables
were not sufficiently supported, appropriate, or reasonable. (See, e.g., Cert. Admin. R.
at 555, 1284-1391.) The appraisers also indicated that Lowes’s income approach
valuations were unreliable given the poor quality of the data and lack of support for the
final market rent estimates. (See, e.g., Cert. Admin. R. at 601, 1399-1407.) Furthermore,
the appraisers claimed that Lowes’s cost approach valuations were not credible because
Allen’s claims of obsolescence were questionable, and his obsolescence depreciation
adjustments were quantified by using the unreliable income approach data. (See, e.g.,
Cert. Admin. R. at 607, 1436-48.)
The Indiana Board’s Final Determination
On March 29, 2019, the Indiana Board issued its final determination that, among
other things, examined the strengths and weaknesses of all of Lowes’s valuations. (See
Cert. Admin. R. at 806, 847-54 ¶¶ 109-35.) The Indiana Board found that Lowes’s sales
comparison approach valuations were not credible because the adjustments Allen made
5 to the six sales comparables failed to reflect the subject property’s location, condition,
and use. (See Cert. Admin. R. at 847-49 ¶¶ 110-18.) The Indiana Board also rejected
Lowes’s income approach valuations, finding that the market rent estimates lacked
probative value for several reasons, including the use of questionable data and
unsupported location adjustments. (See Cert. Admin. R. at 849-52 ¶¶ 119-25.) With
respect to Lowes’s cost approach valuations, the Indiana Board found them to be
“minimally credible” if the obsolescence depreciation adjustments were excluded. (See
Cert. Admin. R. at 852-54 ¶¶ 126-35.) Consequently, the Indiana Board eliminated the
obsolescence depreciation adjustments from Lowes’s cost approach valuations to arrive
at final assessments of $5,946,914 for 2014, $5,677,455 for 2015, $5,358,355 for 2016,
and $5,092,506 for 2017. (Cert. Admin. R. at 859-60 ¶¶ 153-54.)
On May 13, 2019, Lowes initiated this original tax appeal. The Court conducted
oral argument on November 25, 2019. Additional facts will be supplied when necessary.
STANDARD OF REVIEW
The party seeking to overturn an Indiana Board final determination bears the
burden of showing that it is invalid. CVS Corp. v. Searcy, 137 N.E.3d 1053, 1055 (Ind.
Tax Ct. 2019). Thus, to prevail on appeal, Lowes must demonstrate to the Court that the
Indiana Board’s final determination is arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law; contrary to constitutional right, power, privilege, or
immunity; in excess of or short of statutory jurisdiction, authority, or limitations; without
observance of procedure required by law; or unsupported by substantial or reliable
evidence. See IND. CODE § 33-26-6-6(e)(1)-(5) (2020).
6 LAW AND ANALYSIS
On appeal, Lowes contends that the Indiana Board’s final determination must be
reversed because it is contrary to law, constitutes an abuse of discretion, and is
unsupported by substantial evidence. (See, e.g., Oral Arg. Tr. at 3-5.) More specifically,
Lowes contends that neither the law nor the evidence supports the Indiana
Board’s findings that its sales comparison approach valuations were not credible, its
market rent estimates from its income approach valuations lacked probative value, and
its cost approach valuations were probative only if the adjustments for obsolescence
depreciation were excluded. (See, e.g., Pet’r Initial Br. (“Pet’r Br.”) at 1-2; Oral Arg. Tr. at
4.)
I. Lowes’s Sales Comparison Approach Valuations
Lowes claims that the Indiana Board erred in rejecting its sales comparison
approach valuations because its finding regarding the desirability of the subject property’s
location in relation to the six sales comparables is not supported by substantial or reliable
evidence. (See Pet’r Br. at 37-41; Pet’r Reply Br. at 16-21; Oral Arg. Tr. at 3-4, 31-36.)
Lowes maintains that the Indiana Board discounted Allen’s “years of appraisal
experience” and, relying on its “apparent intuition about the strength of the Whitehall
location, not data or any objective facts[,]” found that the subject property’s location was
“superior to all others[.]” (Pet’r Br. at 41; Oral Arg. Tr. at 36-37.)
As previously mentioned, both of the parties presented appraisals during the
Indiana Board hearing to support their respective valuation positions. The Indiana Board
determined that the appraisals demonstrated that Lowes’s property was located in a
successful thriving commercial area given its traffic counts and the fact that it was over
7 90% built up with, for example, several competing national chain retailers, discount
retailers, restaurants, and grocery stores. (See Cert. Admin. R. at 808-09 ¶ 8, 849 ¶ 118
(citing, e.g., Cert. Admin. R. at 343, 345, 553).) In fact, the area was so built up and
popular that new construction sites were created by purchasing existing buildings for
demolition. (See Cert. Admin. R. at 343, 808-09 ¶ 8.) Along the same vein, the appraisal
review provided that the traffic counts for the subject property were nearly equivalent to
or higher than those of the sales comparables. (See Cert. Admin. R. at 562-64, 569-71,
575-77, 583-85, 590-92, 596-98.) On the other hand, evidence was presented that some
of the sales comparables were located in areas with failing regional malls and a variety
of shuttered retail businesses, not areas with thriving retail corridors like the subject
property. (See Cert. Admin. R. at 580-82, 588-89, 593-95.)
Contrary to Lowes’s claim, therefore, the Indiana Board’s finding that Allen’s
comparables did not reflect Lowes’s superior location was not based on “intuition.”
Instead, the finding was based on the weight of the evidence that laid bare the appraisers’
opposing views regarding the desirability of the subject property’s location. Time and
again, this Court has explained that because the Indiana Board is the finder of fact, it, not
the Tax Court, must weigh the evidence and judge the credibility of the witnesses who
testified during the administrative proceedings. See, e.g., Stinson v. Trimas Fasteners,
Inc., 923 N.E.2d 496, 498-99 (Ind. Tax Ct. 2010); Freudenberg-NOK Gen. P’ship v. State
Bd. of Tax Comm’rs, 715 N.E.2d 1026, 1030 (Ind. Tax Ct. 1999), review denied. Here,
the Indiana Board found that the Assessor’s evidence concerning the desirability of the
subject property’s location was more persuasive than Lowes’s evidence. (See, e.g., Cert.
Admin. R. at 847-49 ¶¶ 112-18.) Having reviewed the administrative record, the Court
8 finds that substantial and reliable evidence supports the Indiana Board’s finding, and thus,
the Court cannot say that the Indiana Board erred in rejecting Lowes’s sales comparison
approach valuations. See, e.g., Starke Cnty. Assessor v. Porter-Starke Servs., Inc., 88
N.E.3d 814, 820 (Ind. Tax Ct. 2017) (defining substantial evidence as “more than a
scintilla[;]” it is such relevant evidence as a reasonable mind might accept as adequate
to support a conclusion).
II. Lowes’s Income Approach Valuations
Next, Lowes contends that the Indiana Board’s finding that its market rent
estimates lacked probative value is both contrary to law and not supported by substantial
evidence because it was based on the identities of the lessees, creating an arbitrary
standard for determining the comparability of retail rental properties. (See Pet’r Br. at 8-
17; Pet’r Reply Br. at 1-6; Oral Arg. Tr. at 4-10.) Additionally, Lowes maintains that
although several of the Indiana Board’s other findings supported its rejection of Lowes’s
market rent estimates, they too are contrary to the law and not supported by substantial
evidence. (See, e.g., Pet’r Br. at 15-21; Pet’r Reply Br. at 6-8.)
A. Identities of the Lessees
Lowes claims that the Indiana Board found its market rent estimates were not
probative because none of the lessees of the comparable leases were “national tier
tenants[.]” (See, e.g., Pet’r Br. at 8-9 (citing Cert. Admin. R. at 850-51 ¶¶ 121-22.) Lowes
asserts that the Indiana Board’s steadfast focus on the lessees’ identities rather than the
general uses of the property was in direct contravention of Indiana Code § 6-1.1-31-6(e),
the definition of market value-in-use, and this Court’s case law. (See, e.g., Pet’r Br. at 8-
14 (citing, e.g., Howard Cnty. Assessor v. Kohl’s Indiana LP, 57 N.E.3d 913 (Ind. Tax Ct.
9 2016), review denied; Marion Cnty. Assessor v. Washington Square Mall, LLC, 46 N.E.3d
1 (Ind. Tax Ct. 2015); Millennium Real Estate Inv., LLC v. Benton Cnty. Assessor, 979
N.E.2d 192 (Ind. Tax Ct. 2012), review denied; Meijer Stores Ltd. P’ship v. Smith (Meijer
I), 926 N.E.2d 1134 (Ind. Tax Ct. 2010)).) Lowes further claims that by analyzing the
issue in the way that it did, the Indiana Board created an arbitrary comparability standard
that equates the comparability of a retail rental property to a lessee’s national tier status
without describing any of the lessee’s characteristics. (See Pet’r Br. at 8-9, 12-16.)
As an initial matter, each of the authorities upon which Lowes has relied explain,
in one way or another, that Indiana assesses real property on the basis of its “true tax
value,” which is not the value of the property to the user but rather is the property’s “market
value-in-use.” See IND. CODE § 6-1.1-31-6(e)-(f) (2020); Manual at 2; Kohl’s Indiana, 57
N.E.3d at 916-19; Washington Square Mall, 46 N.E.3d at 9-10; Millennium, 979 N.E.2d
at 195-96; Meijer I, 926 N.E.2d at 1136-39. Market value-in-use, in turn, is defined as the
value “of a property for its current use, as reflected by the utility received by the owner or
by a similar user, from the property.” Manual at 2. In light of this standard, the Court has
explained that “‘market value-in-use, as determined by objectively verifiable market data,
is the value of a property for its use, not the value of its use’” because Indiana’s property
tax system taxes the value of real property, not business value, investment value, or the
value of contractual rights. Kohl’s Indiana, 57 N.E.3d at 917 (citation omitted).)
Nonetheless, these principles are not at issue because Lowes has misconstrued the
Indiana Board’s finding.
The paragraphs of an Indiana Board final determination may not
be read in isolation, but must be read within the context of the finding of which they are a
10 part. In its final determination, the Indiana Board explains in at least seven separate
paragraphs why Lowes’s market rent estimates and thus its income approach are not
probative. (See Cert. Admin. R. at 849-52 ¶¶ 119-25.) For example, the Indiana Board
discounted Allen’s lease comparables because the evidence indicated, among other
things, that the leases were not typical big box build-to-suit leases and were for properties
smaller than the subject property. (See, e.g., Cert. Admin. R. at 849-51 ¶¶ 119-22.) (See
also, e.g., Cert. Admin. R. at 931 (where Allen testifies that “national retailers generally
prefer to build their own store because each retailer has a certain strategy or business
plan”), 935 (where Allen testifies that “[b]ig-box stores aren’t built on a speculative basis
like . . . an apartment or an office building . . . [because t]hey [are] built specifically for . .
. the needs of [a] particular retail[er]”).) Moreover, even though Allen indicated junior box
and big box stores behave differently in the market, most of his lease comparables were
leases for smaller junior box properties. (See, e.g., Cert. Admin. R. at 946 (where Allen
discusses the relationship between junior box properties and big box properties).)
Furthermore, Allen admitted that his use of smaller and older leases was less reliable
than if he used more similar comparables. (See, e.g., Cert. Admin. R. at 194-95, 1205.)
When weighing evidence, the Indiana Board may reasonably consider the lessees’
identity (e.g., national tier tenants, regional tier tenants, etc.) as one way to gauge the
similarity, based on characteristics such as size and lease type, of purported comparable
leases. It bears repeating, after all, that market value-in-use is the value “of a property
for its current use, as reflected by the utility received by the owner or by a similar user,
from the property.” Manual at 2 (emphases added). Unpersuaded that the Indiana Board
relied on a new comparability standard focused on the user of the property and satisfied
11 that it merely weighed the evidence and drew reasonable inferences therefrom, the Court
cannot reverse this finding by substituting its judgment for that of the Indiana Board even
if it disagrees with how the Indiana Board found the facts. See, e.g., Monroe Cnty.
Assessor v. Kooshtard Prop. I, LLC, 38 N.E.3d 754, 756-57 (Ind. Tax Ct. 2015).
B. Other Findings
Lowes further contends that six of the Indiana Board’s other findings regarding
Lowes’s market rent estimates are not supported by substantial evidence. (See, e.g.,
Pet’r Br. 17-21; Pet’r Reply Br. at 6-8.) In general, those findings concerned the following
subjects: the inverse relationship between a building’s size and its rental rate, the use of
junior box data, the Great Recession, the use of the Harrington Study, Allen’s location
adjustments, and the data used. (See, e.g., Pet’r Br. 17-21; Pet’r Reply Br. at 6-8.)
1. Inverse Relationship
The Indiana Board found Allen’s opinion that an “inverse relationship of size to rent
compensate[d] for the differences in size and age” between the subject property and the
lease comparables unpersuasive because other evidence (i.e., Hall’s appraisal review
and testimony) demonstrated “that the inverse relationship was not reflected in Allen’s
[lease] comparables.” (Cert. Admin. R. at 851 ¶ 123.) Lowes now claims that the Indiana
Board erred because
Hall conducted a “very simplistic” analysis of rental rates as compared to building size. Hall only compared building sizes to rental rates on a scatterplot graph. He admitted that he made no effort “to make specific adjustments for other elements of comparison here that might explain differences in rental rates.” Hall placed his “results” on a scatterplot graph; this graph, he readily admitted, was not a regression analysis. . . . Hall’s review was, at best, cursory and his resulting criticisms sketchy and unreliable. His rebuttal did not constitute substantial or reliable evidence.
12 (Pet’r Br. at 17-18 (citations omitted).) (See also, e.g., Pet’r Reply Br. at 9-10.)
Lowes’s claims attack the quality of the Assessor’s evidence, characterizing Hall’s
scatterplot graph as “simplistic,” his criticisms of its evidence as “sketchy,” and his failure
to complete a regression analysis problematic. The record reveals, however, that Lowes
did not discuss the relevance of a regression analysis during the administrative
proceedings. (See generally Cert. Admin. R. at 861-2126.) Instead, it merely asked
whether Hall’s scatterplot graph was a “traditional regression analysis” and the answer to
that question did not convince the Indiana Board to reject Hall’s criticisms of Lowes’s
evidence. (See, e.g., Cert. Admin. R. at 1596.) Therefore, without something more,
Lowes’s claims on appeal simply invite the Court to do several things that it cannot do
given the totality of the record evidence, i.e., find that the Indiana Board abused its
discretion, reweigh the evidence, and then conclude that the reweighed evidence shows
that Hall’s scatterplot graph lacked probative value. See Trimas Fasteners, 923 N.E.2d
at 498-99 (providing that the Court may not reweigh the evidence absent an abuse of
discretion). Consequently, the Court will not reverse the Indiana Board’s finding on this
basis.
2. Junior Boxes
In its final determination, the Indiana Board stated that “[m]ore than half [of the
lease comparables] were substantially less than 100,000 square feet and none were
greater than 110,000 square feet. Most of the lease[ comparables] were for the type of
properties that Allen considered junior boxes and that he intentionally excluded from his
sales comparison analysis.” (Cert. Admin. R. at 850 ¶ 121.) Lowes asserts that this
finding is not supported by substantial evidence because Allen never stated that junior
13 boxes are a subcategory of big boxes nor did he state that he used junior box leases in
his income approach valuations. (See, e.g., Pet’r Br. at 15; Oral Arg. Tr. at 18, 49.)
During the administrative hearing, Allen explained that properties like Lowes’s are
referred to as “big box” properties: i.e., “a[ny 80,000 square foot or larger] store that’s
just a big shell of a building, mostly [with] open areas that could be used by . . . [and is]
typically built specifically, at least originally, for” entities like Menards, Walmart, Target,
Kmart, Kohl’s, Cabela’s, or Bass Pro Shops. (See Cert. Admin. R. at 883-85.) Allen also
testified that he avoided using junior box properties in sales comparison approach
valuations
[b]ecause the subject [property] was about 134,000 square feet, and there’s a big difference between big-box stores and what I call like junior box stores, like much smaller retail boxes, like Best Buy or a supermarket generally . . . [that] are big boxes but not the same, I call them more like junior boxes. There’s a different market for the . . . larger big-box stores.
(Cert. Admin. R. at 946.) Allen also explained that the rental rates of junior boxes are
“much higher” than those of properties between 100,000 and 200,000 square feet. (See
Cert. Admin. R. at 1021-22.) Thus, from Allen’s own testimony it was reasonable for the
Indiana Board to consider junior box properties as a subset of big box properties with
stores ranging in size from 80,000 to perhaps just under 100,000 square feet. Consistent
with the Indiana Board’s finding, the majority of Allen’s lease comparables, specifically
nine of the sixteen comparables, were junior boxes. (See Cert. Admin. R. at 194, 197.)
Moreover, an additional lease comparable did not meet Allen’s definition of a big box
property because the store was only 60,000 square feet. (See Cert. Admin. R. at 194.)
Thus, the Court finds no basis for reversing the Indiana Board’s finding with respect to
this issue.
14 3. Great Recession
Lowes further asserts that substantial evidence does not support the Indiana
Board’s finding regarding the leases used to determine market rent, stating that “[a]ll but
two of [the] . . . leases were [executed] prior to the Great Recession [of 2008], and none
reflected the improved economy during the years at issue.” (Pet’r Br. at 18 (citing Cert.
Admin. R. at 850 ¶ 121).) (See also Cert. Admin. R. at 194, 926, 1004 (indicating that the
Great Recession began in 2008).) Lowes explains that this finding disregards the
evidence that shows that “Allen considered seven leases that were executed after that
time – two on page 75 of his report and all five on page 78 of his report (ranging from
August 2010 to May 2015).” (Pet’r Br. at 18 (citing Cert. Admin. R. at 194, 197).)
The Indiana Board’s finding indicates that Allen’s market rent estimates were
derived from only one set of data, but the evidence shows they were based on Allen’s
review of sixteen lease comparables, and thus, derived from two sets of data. As such,
six of the leases were executed prior to the Great Recession, not merely two. (See Cert.
Admin. R. at 194, 197.) Nonetheless, the Indiana Board’s mistake does not constitute
reversible error in this case because the evidence is consistent with its finding, which
explores the comparability of the properties based on when the majority of the leases
were executed (i.e., before the Great Recession). (See Cert. Admin. R. at 850 ¶ 121.)
Consequently, the Court will not reverse this finding either.
4. The Harrington Study
The Indiana Board’s final determination also provides that “Allen’s market rent data
came from leases where the landlord was an atypical investor, and the tenant was an
atypical tenant.” (Cert. Admin. R. at 849-50 ¶ 119.) This finding was derived from the
15 Harrington Study, which provided “information, research and conclusions inferred from
unadjusted sales data” of just over 200 properties with freestanding retail buildings
ranging in size from 90,200 square feet to 231,500 square feet. (See Cert. Admin. R. at
246.) Lowes contends that the Indiana Board’s finding “that the lessors and [lessees] for
Allen’s [lease comparables] were ‘atypical’ is legally invalid and is not based on the record
evidence” because the Harrington Study does not estimate market rents or provide
guidelines for estimating market rents. (See Pet’r Br. at 20.) The Court, however, is not
persuaded for two reasons.
First, Lowes has not identified any legal authority in support of its claim that the
Indiana Board’s finding is “legally invalid.” (See Pet’r Br. at 18-20; Pet’r Resp. Br. at 11-
12.) The Court does not have an affirmative duty to make the case on behalf of a party;
rather, the party is responsible for presenting arguments and directing the Court to the
record evidence and authorities, whether binding or persuasive, that support its positions.
See Marion Cnty. Assessor v. Simon DeBartolo Grp., LP, 52 N.E.3d 65, 68-69 (Ind. Tax
Ct. 2016). Second, but just as importantly, the record evidence supports the Indiana
Board’s finding. (See, e.g., Cert. Admin. R. at 931-41 (explaining that 1) although retailers
often use build-to-suit leases to finance the construction of big box properties, Allen
avoided those types of leases in valuing the property because they usually do not reflect
market rent and 2) because “there aren’t a lot of tenants” for stores similar in size to
Lowes’s store, developers buy the properties and separate them into smaller leasable
portions).) The Indiana Board’s finding assumes that the Harrington Study properties
represent the subject property’s market by suggesting that the market primarily consists
of build-to-suit leases. While this finding may not withstand scrutiny in all instances, the
16 Court will not disturb it in this case because it is supported by the evidence and has not
been shown to be inconsistent with the law. See, e.g., Trimas Fasteners, 923 N.E.2d at
502 (explaining that the valuation of real property is a formulation of an opinion, not an
exact science); Bartholomew Cnty. Assessor v. Housing P’ships, Inc., 151 N.E.3d 821,
826-27 (Ind. Tax Ct. 2020) (explaining that fact sensitive cases stand on their own facts
and, ultimately, how the parties present those facts).
5. Location Adjustments
The Indiana Board also found that Allen’s estimates of market rent did not
“rationally reflect[] the desirability of the subject property’s location relative to his lease
comparables.” (Cert. Admin. R. at 851-52 ¶ 125.) Lowes contends that because the
Indiana Board criticized only two of Allen’s lease comparables, its finding is not based on
substantial evidence and just provides “conclusory observations, not analysis, in
analyzing what it deems the most critical alleged ‘shortcoming’ in Allen’s market rent
analysis.” (Pet’r Br. at 21.)
Once again, Lowes has read the Indiana’s Board finding in a vacuum. As
mentioned, the Indiana Board analyzed Lowes’s income approach valuations within
several paragraphs of its final determination and, in some instances, it explained that
Allen did not disclose the basis for his time adjustments, made no effort to explain why
certain properties were selected, and failed to discuss why the locations of the lease
comparables were comparable to the subject property’s location. (See Cert. Admin. R.
at 851-52 ¶¶ 124-25.) In fact, Hall criticized Allen’s income approach valuations because
Allen failed to explain, both in the appraisal and while testifying, how the sales comparison
factors that he considered influenced his ultimate market rent estimates. (See, e.g., Cert.
17 Admin. R. at 1399-1401.) Consequently, the Indiana Board’s finding comports with the
record evidence even though the evidence as to Allen’s adjustments was scant.
6. The Data
The Indiana Board’s final determination further provides that “Allen cobbled
together the best evidence of market rent he could find, but we are persuaded that there
is insufficient market evidence to establish an income approach from his lease
comparables.” (Cert. Admin. R. at 850-51 ¶ 122.) Lowes contends that the Indiana Board
should have deferred to Allen’s conclusion “that he had sufficient data to indicate a market
rent for the [s]ubject [p]roperty” because nothing within the record contradicted Allen’s
conclusion. (See Pet’r Reply Br. at 6-8.)
Lowes has alleged, but has been unable to establish, that several of the Indiana
Board’s findings with respect to the probative value of its market rent estimates were not
supported by substantial evidence. The findings reveal, however, that the Indiana Board
identified many deficiencies in Allen’s income approach methodology, as well as his lease
comparables, that led it to conclude that the quality of his data was too poor to provide
probative market rent estimates. Lowes’s own appraisal provides that “there is not a lot
of leasing activity for existing big box stores especially for the size of the subject property
[because u]nleased big box stores are most often sold to users rather than investors[.]”
(Cert. Admin. R. at 195.) Indeed, all of Lowes’s complaints, including this one, have failed
because the Indiana Board’s findings were not only based on the evidence, but also were
consistent with the law. Accordingly, the Court will not disturb the Indiana Board’s finding
with respect to this issue.
18 III. Lowes’s Cost Approach Valuations
Finally, Lowes claims the Indiana Board’s finding that its cost approach valuations
were probative only if its obsolescence depreciation adjustments were excluded is
contrary to law, constitutes an abuse of discretion, and is not supported by substantial
evidence. (See, e.g., Pet’r Br. at 2, 22-37; Pet’r Reply Br. at 12-16; Oral Arg. Tr. at 25-
28.) Specifically, Lowes argues that the Indiana Board’s finding contradicts the case law
that prohibits the Indiana Board from taking “the parts of [a] cost approach it likes and
omit [the probative evidence of obsolescence because it is] the component[] that tie[s] the
approach to the market value-in-use standard.” (See Pet’r Br. at 23-26 (citing, e.g.,
Trimas Fasteners, 923 N.E.2d at 501; Hometowne Assocs. v. Maley, 839 N.E.2d 269
(Ind. Tax Ct. 2005); Meridian Towers E. & W. v. Washington Twp. Assessor, 805 N.E.2d
475 (Ind. Tax Ct. 2003)).) (See also, e.g., Pet’r Br. at 34-37; Pet’r Reply Br. at 13-16; Oral
Arg. Tr. at 25-28.) In addition, Lowes argues that the Indiana Board abused its discretion
in excluding its obsolescence depreciation adjustments because it made a prima facie
case for obsolescence during the administrative proceedings by identifying the causes of
obsolescence and quantifying the obsolescence. 3 (See, e.g., Pet’r Reply Br. at 13-16;
Oral Arg. Tr. at 25-31.)
It is well established that the Indiana Board may not ignore a party’s probative
evidence when rendering its final determination. See, e.g., Hometowne Assocs., 839
N.E.2d at 273-81; Clark v. State Bd. of Tax Comm’rs, 694 N.E.2d 1230, 1233-35 (Ind.
3 Lowes also claimed that the Indiana Board erred in excluding the obsolescence depreciation adjustments from its cost approach valuations because “[n]either appraiser placed primary weight on the cost approach [valuations], and neither appraiser testified that the cost approach [valuations], in the absence of other evidence, should be given sole weight.” (Pet’r Initial Br. at 23.) Lowes, however, abandoned this claim during oral argument. (See Oral Arg. Tr. at 23-25.) 19 Tax Ct. 1998). Moreover, when a taxpayer claims that obsolescence has diminished the
value of its property, the taxpayer must present probative evidence that 1) identifies the
causes of the alleged obsolescence and 2) quantifies the amount of obsolescence to be
applied to its improvements. Wigwam Holdings LLC v. Madison Cnty. Assessor, 125
N.E.3d 7, 14 (Ind. Tax Ct. 2019). Neither argument is persuasive because, as previously
stated, Lowes quantified the obsolescence through its income approach data that the
Indiana Board determined to be unreliable and not probative. On appeal, Lowes has
challenged, but failed to overturn, the Indiana Board’s finding on that matter. Accordingly,
the Indiana Board’s rejection of Lowes’s obsolescence depreciation adjustments was not
contrary to law or an abuse of discretion, and it was supported by substantial evidence.
See, e.g., CVS Corp., 137 N.E.3d at 1056-57 (explaining that an Indiana Board final
determination constitutes an abuse of discretion when it is against the logic and effect of
the facts and circumstances of the case). Consequently, the Court will not reverse the
Indiana Board’s final determination on this basis either.
CONCLUSION
Lowes has not demonstrated to the Court that the Indiana Board erred in rejecting
its sales comparison approach and income approach valuations or in excluding the
obsolescence depreciation adjustments from its cost approach valuations. Accordingly,
the Indiana Board’s final determination in this matter is AFFIRMED.