The Indiana Tax Court has partially affirmed and remanded a final determination from the Indiana Board of Tax Review for a longtime northern Indiana shopping mall.
In February 2014, the Ross Township assessor issued Form 113 Notices of Assessment Change to the Southlake Mall in Hobart. The mall is made up of 12 parcels including its land, surface parking lots, retention ponds and other freestanding stores and restaurants located on outparcel lots.
The form issued by the assessor retroactively increased the assessed values of eight of the 12 parcels from a combined $110,432,100 in 2010 to $239,200,000 for each of the 2011, 2012 and 2013 tax years, prompting Southlake to appeal.
When the Lake County Property Tax Assessment Board of Appeals denied its appeals, as well as Southlake’s subsequent appeal of the mall’s 2014 assessed value on all 12 parcels, Southlake sought relief from the Indiana Board of Tax Review. The assessor presented testimony of Mark Kenney, who prepared the appraisal. Similarly, the mall offered testimony from David Lennhoff, who prepared its appraisal.
Following a hearing on all of the appeals, the Indiana board made two overarching conclusions. First, because Kenney and Lennhoff both relied on the mall’s contract rents in their income capitalization approach analyses, it concluded that any argument about whose estimates best reflected the market was “misplaced” because they were substantially similar.
Second, it found that Kenney’s approach to valuing the mall, and his rationale supporting that approach, was much more understandable than Lennhoff’s. It concluded, in part, that after weighing the evidence, the board must find that Kenney presented the more persuasive estimate of NOI for each year on appeal.
Southlake appealed in Southlake Indiana, LLC v. Lake County Assessor, 18T-TA-30, where the Indiana Tax Court affirmed in part and remanded in part.
The Tax Court initially agreed with the board’s rationale for rejecting Southlake’s claim that the Ross Township assessor violated Indiana Code § 6-1.1-9-1 by retroactively increasing the assessments based on Kenney’s appraisal report.
Addressing the mall’s claim that it was improper for the Indiana board to adopt and use Kenney’s rental income estimates because he did not demonstrate that they reflected the market, the Tax Court found that based on all of the evidence before it, the Indiana board could reasonably conclude Kenney’s rental income estimates reflected the market. It likewise found that Southlake’s argument was merely an attempt to have the court reweigh the evidence in its favor.
As to the non-taxable property, the Tax Court first found that the evidence reasonably supported the Indiana board’s conclusion that retail merchandising unit income was attributable to the mall’s real property. It further found that the testimony of the mall’s general manager during the administrative hearing reasonably supported the conclusion that “Brand/Media” income was attributable to the real property because it was income received for the use of mall space for advertising purposes.
However, the Tax Court remanded to the Indiana board to decide the issues regarding the Central Plant reimbursements and common area maintenance reimbursements and to adjust its final value conclusions as necessary.
“When there are competing opinions about how a property should be valued, the Indiana Board must determine which opinion is more probative. On appeal, this Court will not substitute its judgment for that of the Indiana Board simply because it or one of the parties might disagree with the decision,” Indiana Tax Court Judge Martha Blood Wentworth wrote.
“In its appeal, Southlake has largely asked the Court to reweigh the evidence, to find Lennhoff’s point of view more credible than Kenney’s, and to reduce its assessment accordingly. But Southlake’s disagreement with how the Indiana Board weighed the evidence does not demonstrate that the Indiana Board’s final determination is unsupported by the evidence,” Wentworth concluded.