Argued February 9, 2015.
[Copyrighted Material Omitted]
Appealed from No. 2008-32608. Common Pleas Court of the County of Montgomery. Moore, J.
Joseph J. McAlee, Southeastern, for appellant.
Joan R. Price, Norristown, for appellee Montgomery County Board of Assessment Appeals.
Margaret P. Choksi, Blue Bell, for appellee Whitpain Township.
Scott H. Wolpert, Ft. Washington, for appellee Wissahickon School District.
Nicole R. Forzato, Norristown, for appellee Montgomery County.
BEFORE: HONORABLE DAN PELLEGRINI, President Judge, HONORABLE P. KEVIN BROBSON, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge. OPINION BY JUDGE McCULLOUGH.
PATRICIA A. McCULLOUGH, Judge
Aetna Life Insurance Co. (Aetna) appeals from the June 25, 2014 order of the Court of Common Pleas of Montgomery County (trial court) denying its tax assessment appeal. We affirm.
For tax year 2009, Aetna filed a real estate tax assessment appeal with the Montgomery County Board of Assessment Appeals (Board) with respect to a parcel of real property located at 980 Jolly Road, Whitpain Township, Montgomery County (the Property). On October 27, 2008, the Board issued a notice denying the appeal, and Aetna appealed to the trial court, challenging the assessments to the Property for tax years 2009 through 2014. Thereafter, Montgomery County, Wissahickon School District (School District), and Whitpain Township praeciped for intervention. (Trial court op. at 1-2.) The trial court convened a non-jury trial.
At trial, the parties introduced into evidence a joint stipulation of facts and the appraisal reports of their experts, Leonard J. Patcella (Patcella) for Aetna and Mark Abissi (Abissi) for the School District. (Finding of Fact (F.F.) at 1.) The Property is approximately 10 acres and is currently located in a Research and Engineering (R-E) District. The Property has situated on it one office building that is 155,614 gross square feet; the office building is multi-story and configured for single-tenant occupancy; and the office building has a parking lot with 725 parking spaces. The Property is located in a developed commercial area that includes office uses by various large corporations. (F.F. at 4, 6, 10-13.)
The office building on the Property is fully air-conditioned, has adequate electrical and heating service, and each floor has private offices, cubicle partitions, men's and ladies' lavatories, and elevators. Additionally, the office building has an employee cafeteria with a full service kitchen; a fitness area; training areas; a mail room; conference rooms; and a loading dock area. Aetna is the only owner and occupier of the Property, no other tenants are present, and Aetna uses the office space for its corporate business. In their appraisal reports, Patcella and Abissi agreed that the Property is best suited for single-tenant occupancy, and they both used the sales and income approaches to determine the Property's fair market value. (F.F. at 16-23; Reproduced Record (R.R.) at 221a, 381a.)
The parties also presented the expert testimony of Patcella and Abissi. The parties stipulated to their qualifications and they were accepted by the trial court as experts. (R.R. at 16a-17a, 222a.)
Patcella and Abissi both testified and agreed that out of all the approaches to property valuation, the sales comparison approach was the most reliable and valid indicator of the Property's market value. They also agreed that the highest and best use of the property was single-tenant occupancy. (F.F. at 23, 25, 27, 40, 43.)
Abissi testified that in employing his methodology for the sales comparison approach, he first identified those sales that he felt were most comparable and then confirmed that the sales were arm's length transactions by calling either the buyer, seller, or broker. Abissi stated that the most important factors in determining comparable sales for the Property were: (1) the size and square footage of the building; (2) location; (3) age; (4) owner-occupied or tenant occupied use; (5) sale
date; (6) condition and quality of construction; (7) functional utility; (8) land-to-building ratio; (9) parking ratio; and (10) overall utility of the property. Abissi testified that he also performed an income analysis for purposes of serving as a check against the sales comparison approach. Abissi stated that his use of the income approach resulted in lowering the Property's fair market value in some years, but, in any event, he did not place significant weight on the income approach in determining fair market value. (F.F. at 35, 43, 49-50.)
Abissi further testified that the owner-occupied nature of the building was a factor for valuation under the comparable sales approach because there are two different markets, one for owner-occupiers and one for multi-tenant buildings. (F.F. at 36-37.)
According to Abissi, single-tenant or occupied-owner sales are more reliable in valuing the Property because the Property is owner-occupied or has a single-tenant use. However, Abissi testified that there were not many sales of owner-occupied facilities within the past few years, and, as a result, he had to also include sales involving tenant-occupied buildings in his analysis. Abissi stated that in using tenant-occupied sales as comparables, he considered making adjustments to account for the fact that the Property was owner-occupied. (F.F. at 39, 41, 46; R.R. at 225a-26a.)
Ultimately, Patcella and Abissi rendered opinions as to the fair market value of the Property for tax years 2009 through 2014, based primarily upon the sales comparison approach. ( See F.F. at 51-122.) Pertinent to this appeal, Abissi utilized a total of twelve comparables, five of which were not owner-occupied and had either a single tenant or multiple tenants in place at the time of sale. The five properties that were sold subject to a tenancy are located at: (1) 2750 Monroe Boulevard, Lower Providence Township; (2) 2800 Kelly Road, Warrington Township; (3) 1150 Northbrook Drive, Bensalem Township; (4) 455 South Gulph Road, Upper Merion Township; and (5) 200-400 Campus Drive, Upper Providence Township (collectively, " the Tenant Comparables" ). ( See R.R. at 586a-87a; 656a-57a; 735a-36a; 739a-40a; 819a-21a; Aetna's brief at 10-11).
Abissi also employed three properties as comparables that were purchased through transactions that were not advertised to the public. The first property (455 South Gulph Road, Upper Merion Township) was sold through what is commonly known as a 1031 exchange, where the individual deferred capital gains under 26 U.S.C. § 1031 by exchanging property for another " like-kind" property. The second property (250 Gibraltar Road, Horsham Township) was sold as part of a sale-leaseback agreement, where the buyer entered into a lease agreement with the seller for the sale price. The third property (200 Tournament Drive, Horsham Township) was sold pursuant to an option-to-purchase agreement, where a tenant exercised its contractual rights to purchase the property (collectively, " the Transactional Comparables" ). ( See R.R. at 187a-91a; 299a.)
On the other hand, Patcella testified that, in general, he relied on comparable sales that were different from those utilized by Abissi. ( See F.F. at 52, 57-58, 66-73, 104-07, 109.) However, Patcella stated that, like Abissi, he employed sales of multi-tenant and single-tenant office buildings in arriving at the Property's fair market value. Of the numerous comparable sales used by both Patcella and Abissi, only four were the same and only two were owner-occupied office buildings. (R.R. at 507a-39a; 585a-91a; 655a-59a; 737a-44a; 811a-20a.)
Patcella and Abissi also testified with respect to market stabilization. In short, Abissi opined that the relevant market was stabilizing between 2012 and 2013, while Patcella opined that the relevant market was in a state of significant decline and showed no signs of improving. ( See F.F. at 123-42.)
By order dated June 25, 2014, the trial court accepted the opinions and testimony of Abissi as reliable and credible and found that they were more persuasive than those proffered by Patcella. (F.F. at 143-44.) In pertinent part, the trial court made the following findings of fact:
A. Details of Subject Property
11. The subject property contains one office building that is approximately 155,614 gross square feet.
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20. For each year at issue, the subject property was owner occupied as office space for its corporate business.
21. Aetna is the single occupier of the subject property and is the only entity currently occupying the subject property, as no tenants are present.
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D. Valuation Approach
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36. Both Mr. Abissi and Mr. Patcella testified that the owner occupied nature of the building was important for a valuation under the comparable sales approach and that there are two different markets, one for owner-occupiers and one for multi-tenant buildings; with the former looking more at a property's location, address, building amenities and the latter looking more at the property's income stream.
37. Mr. Abissi testified that the market for owner-occupied office buildings is smaller than the market for multi-tenant office buildings. An owner-occupier is looking at the amenities that a building can offer such as a large atrium, cafeteria, training centers; whereas investors looking at multi-tenant buildings are looking to maximize interior space for leasing.
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39. Mr. Abissi testified that in valuing the subject property based on comparable sales, single owner/occupied sales were more reliable since the subject property was owner occupied or single tenant use.
40. Both Mr. Abissi and Mr. Patcella testified that the sales comparison approach was the more reliable and a more valid indicator of value for the subject property because of the subject property's owner-occupied or single tenant use.
41. Mr. Abissi stated that there were not many sales of owner-user facilities within the past few years.
42. Mr. Abissi stated that he did not believe that the property would sell as an investor type property.
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47. Based on the type of property at issue and the credible testimony from School District's expert, Mr. Abissi, the sales approach to valuation provides the most persuasive and appropriate method to determine market value.
48. Mr. Abissi testified that the appropriate size range for determining comparable sales under the sales approach for the subject property is between 50,000 square feet and 250,000 square feet given the subject's gross square footage and because of the lack of sales in the 100,000 to 200,000 square footage range.
49. Mr. Abissi testified that his methodology was to first to identify those sales that he felt were most comparable, then gather the sale information to confirm
that the sales were arm's length transactions and verify the sales information by calling either the buyer, seller or broker.
50. With regard to verifying sales, Mr. Abissi stated[:] " If you can't verify the sale, it's very difficult to use that sale in an analysis for an appraisal because there could be factors that you're not aware of. There could be special financing involved. There could have been some givebacks at settlement that aren't showing on the deed or anywhere in terms of public records. . . [I]ts very important to verify the sales."
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E. Valuation for Tax Year 2009
51. In determining value for tax year 2009 under the sales comparison approach, Mr. Abissi reviewed four properties, ranging in size from 62,739 to 200,976 square feet and that were transacted between February 2007 and June 2008.
52. Mr. Patcella acknowledged that the various properties identified in the Abissi report evaluation as of January 1, 2009 used comparable sales that were much closer to or even exceeded the gross square footage of the subject Aetna property, as compared to those comparable sales utilized by Mr. Patcella, specifically: 220 Tournament Drive, Horsham Township [ Transactional Comparable ]; 2750 Monroe Boulevard, Lower Providence Township [ Tenant Comparable ]; and 250 Gibraltar Road, Horsham Township [ Transactional Comparable ].
53. The adjusted price per square foot for the four sales used by Mr. Abissi for 2009 ranged from $141.52 to $195.58 per square foot.
54. Of the four reviewed, two were most significant in determining value as they were most like the subject property.
55. The first sale that was most significant was a September 2007 sale of a 109,281 square foot, single-tenant office building built in 1982 located at 2750 Monroe Boulevard, Lower Providence Township for $26,700,000 or $244.32 per square foot. [ Tenant Comparable ]
56. The second sale that was most significant was a March 2007 sale of a much smaller (62,739 square foot) multi-tenant building constructed in 1973 located at 901 East ...