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Marion County, Simon tangle over valuation of Indianapolis malls

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Arguments in two cases before the Indiana Tax Court in recent weeks featured wildly divergent views of the valuation of two Indianapolis shopping malls that have seen better days.

The Marion County assessor argues the cases represent far more than just determining whether the assessments of Washington Square and Lafayette Square for property-tax purposes were lowballed. In both cases, the Indiana Board of Tax Review sided with the mall owners at the time, Indianapolis-based Simon Property Group or a subsidiary.

rop-washington-mall04-15col.jpg Washington Square (left) and Lafayette Square malls both have dealt over the years with declining sales and high rates of vacancy, factors which have helped drive down their assessed values. But the Marion County Assessor’s Office has appealed to Indiana Tax Court, claiming plummeting assessments in some cases were two- to three-times too low. (IL file photo)

Assessor’s office attorney John C. Slatten seized on a finding in the Indiana Board of Tax Review’s final determination that lowered the assessed value of Washington Square for the 2006-2010 assessment years. While the board sided with Simon’s appraisers, it wrote the methods used to arrive at the value “were not supported by his evidence and he made income and expense assumptions that seemed designed to value property at the lowest possible rate.”

“It would be a novel finding then in Indiana that a totally flawed appraisal can support a reduction of value,” Slatten argued to Tax Court Judge Martha Blood Wentworth in Marion Co. Assessor v. Washington Square Mall, LLC, et al., 49T10-1211-TA-70.

“If the court upholds this case, these are bad appraisals, and that’s the takeaway,” Slatten argued.

Ice Miller LLP attorney Paul M. Jones Jr. represented Simon interests in both cases. He said the board justified its findings, that it found fault in all the appraisals before it and didn’t abuse its discretion.

focus-malls-facts.jpg“This is a simple case that can be decided quickly,” Jones argued. He disputed that the flaws in the Washington Square appraisal were serious and said the board exercised its right to determine which appraisal was most persuasive.

“The board properly weighed the evidence and gave more weight to the taxpayer’s assessment,” he said. “It’s also not surprising the board arrived at the decision it did.”

Wentworth noted that the board also explained its rationale, and she challenged Slatten’s suggestion that the findings were “flawed in every approach.”

“You can’t look in isolation and say the board just completely eviscerated the probative value (of appraisals),” Wentworth said. But Slatten said that when presented with defective assessments, the tax review panel should have deferred to the assessments affirmed by the Marion County Property Tax Assessment Board of Appeals.

That board determined Washington Square’s total assessment for the 2010 tax year, for instance, was more than $36.5 million. But the Indiana Tax Review Board reduced that assessment to $9.5 million.

“This particular property is struggling,” Jones said, noting that Simon’s appraiser addressed issues from a high rate of tenant vacancy to condition issues, such as a bad roof. “I think it’s not surprising why the board found that evidence was more persuasive.”

“For this court to overturn the Indiana board decision in this case, it would have to get into the business of reweighing the evidence,” he told Wentworth.

rop-lafayette-mall02-15col.jpg Lafayette Square was sold in 2007 for $18 million to Ashkenazy Acquisition Corp. in 2007 after a tax appeal began on the property.(IL file photo)

Jones said Simon also presented evidence that the shopping center wouldn’t attract the interest of real estate investment trust giants similar to Simon as potential buyers.

Wentworth challenged Jones on whether that should have been a factor in the assessment. “Even though in reality an entrepreneurial investor with a new focus might be the only buyer you would get, you still have to meet the market value in use definition,” she said. Jones replied that while sale prospects were considered, the property was valued in Simon’s assessment as a regional mall.

Sale prices also factored into Slatten’s arguments. Simon sold Lafayette Square for $18 million to Ashkenazy Acquisition Corp. in 2007 after a tax appeal began on that property. He argued that Washington Square is considered a much more valuable property, which makes the $9.5 million assessment for 2010 questionable.

“Lafayette Square sold for twice as much, so you know the value’s low,” he said. “We need to value (Washington Square) as the value that it has to the owner.”

Slatten told Indiana Lawyer it’s unusual for the assessor’s office to push a case to Tax Court, and typically such disputes are resolved before this third-level appeal. “It’s a continuing problem we have with them,” he said of some Simon properties, “appraisals that just don’t make any sense.”

Jones could not be reached for comment. Ice Miller associate Matthew J. Ehinger, who also represents Simon in the litigation, said he could not comment on the pending cases.

Regarding the Lafayette Square case, Marion Co. Assessor v. Simon DeBartolo Group, LP, et al., 49T10-1211-TA-76, Jones said at oral argument that the Tax Court should affirm valuations of $15.2 million and $16.4 million for the 2006 and 2007 years, which represent assessments that employed a trending analysis based on the sale price.

That’s a more logical approach than the assessor’s proposed valuations that in one year was more than twice as high. “Or is it logical the alternative the assessor would suggest, that this same publicly traded group, the world’s largest … would sell a property for a 30 percent or a 50 percent discount like one of the retailers at the mall when they’re trying to unload things at the end of a season,” Jones argued.

“It’s outrageous that the assessor’s value – $36 million and $30 million – represent the market value in use when the property sold for $18 million.”

In the case of Lafayette Square, neither side agreed with the Marion County Property Tax Assessment Board of Appeals, which set assessments at $28 million for 2006 and $20 million for 2007.

But Slatten said the sale price analysis in determining assessment value was insufficient. “It’s too remote from the valuation data of 2005 (for the 2006 assessment value) and goes against generally accepted valuation principles,” he argued.

“It doesn’t indicate the market value in use,” Slatten said of the purchase price versus the assessment standard. “It indicates what someone was willing to pay for it.”

But Jones argued Wentworth should affirm Simon’s Lafayette Square assessments that were approved by the Tax Review Board, noting that the sale was exposed to the market, which determined its value.

“If the standard is value for its use,” he said, “and you have a property that is marketed and sold and then market factors are used to trend that, then that is sufficient.”•

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  1. On a related note, I offered the ICLU my cases against the BLE repeatedly, and sought their amici aid repeatedly as well. Crickets. Usually not even a response. I am guessing they do not do allegations of anti-Christian bias? No matter how glaring? I have posted on other links the amicus brief that did get filed (search this ezine, e.g., Kansas attorney), read the Thomas More Society brief to note what the ACLU ran from like vampires from garlic. An Examiner pledged to advance diversity and inclusion came right out on the record and demanded that I choose Man's law or God's law. I wonder, had I been asked to swear off Allah ... what result then, ICLU? Had I been found of bad character and fitness for advocating sexual deviance, what result then ICLU? Had I been lifetime banned for posting left of center statements denigrating the US Constitution, what result ICLU? Hey, we all know don't we? Rather Biased.

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  3. This law is troubling in two respects: First, why wasn't the law reviewed "with the intention of getting all the facts surrounding the legislation and its actual impact on the marketplace" BEFORE it was passed and signed? Seems a bit backwards to me (even acknowledging that this is the Indiana state legislature we're talking about. Second, what is it with the laws in this state that seem to create artificial monopolies in various industries? Besides this one, the other law that comes to mind is the legislation that governed the granting of licenses to firms that wanted to set up craft distilleries. The licensing was limited to only those entities that were already in the craft beer brewing business. Republicans in this state talk a big game when it comes to being "business friendly". They're friendly alright . . . to certain businesses.

  4. Gretchen, Asia, Roberto, Tonia, Shannon, Cheri, Nicholas, Sondra, Carey, Laura ... my heart breaks for you, reaching out in a forum in which you are ignored by a professional suffering through both compassion fatigue and the love of filthy lucre. Most if not all of you seek a warm blooded Hoosier attorney unafraid to take on the government and plead that government officials have acted unconstitutionally to try to save a family and/or rescue children in need and/or press individual rights against the Leviathan state. I know an attorney from Kansas who has taken such cases across the country, arguing before half of the federal courts of appeal and presenting cases to the US S.Ct. numerous times seeking cert. Unfortunately, due to his zeal for the constitutional rights of peasants and willingness to confront powerful government bureaucrats seemingly violating the same ... he was denied character and fitness certification to join the Indiana bar, even after he was cleared to sit for, and passed, both the bar exam and ethics exam. And was even admitted to the Indiana federal bar! NOW KNOW THIS .... you will face headwinds and difficulties in locating a zealously motivated Hoosier attorney to face off against powerful government agents who violate the constitution, for those who do so tend to end up as marginalized as Paul Odgen, who was driven from the profession. So beware, many are mere expensive lapdogs, the kind of breed who will gladly take a large retainer, but then fail to press against the status quo and powers that be when told to heel to. It is a common belief among some in Indiana that those attorneys who truly fight the power and rigorously confront corruption often end up, actually or metaphorically, in real life or at least as to their careers, as dead as the late, great Gary Welch. All of that said, I wish you the very best in finding a Hoosier attorney with a fighting spirit to press your rights as far as you can, for you do have rights against government actors, no matter what said actors may tell you otherwise. Attorneys outside the elitist camp are often better fighters that those owing the powers that be for their salaries, corner offices and end of year bonuses. So do not be afraid to retain a green horn or unconnected lawyer, many of them are fine men and woman who are yet untainted by the "unique" Hoosier system.

  5. I am not the John below. He is a journalist and talk show host who knows me through my years working in Kansas government. I did no ask John to post the note below ...

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