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Click here to see the Legal Issues Archives.Insufficient Assessment Evidence
by Ron Davis
Owners of an Oregon shopping center can’t catch a break, or so it seems.
That unfortunate shopping center, Lighthouse Square, is located in Lincoln City, and has been plagued by a persistence decline in the number of tenants. As a result, the property’s net income has declined during each of the previous four years.
Adding to the problem, the county tax collector had not taxed the portion of the property occupied by Goodwill Industries. As a result of that company’s problems, the local assessor added “exception value” to the tax toll in the amount of $524,460.
The shopping center’s financial problems understandably have therefore amounted to numerous difficulties. For example, the center owners’ ability to lease has been hindered by a local ordinance that prevented the centers owners from renting to prospect major tenants.
Moreover, the subject property’s physical characteristics limited leasing options. For instance, certain sections of the center occupied different elevations, preventing them from being combined for larger tenants. And two sections were too narrow and deep to be divided for smaller tenants.
Also, the economy in Lincoln City is generally poor, resulting in less demand for commercial space. And the property apparently suffers greatly from maintenance neglect. One expert stated that she was/is not aware of any shopping center “with comparable vacancy rates being sold.”
Because the shopping center’s owner were seeking the reduction of the subject property’s tax role value, the center owns were told that they must establish “by competent evidence” the appropriate value of the property as of the assessment date in question. To say the least, an appropriate value figure can be difficult to evaluate.
In this case, the evidence submitted by the center’s owners apparently did not include any marketing related to the subject property’s profit and loss statement. In response, the judge hearing the case pointed out that the center owners “attempted to compensate for the lack of a market-derived capitalized rate by offering the testimony of an experienced developer regarding the likely capitalization rate in the subject property’s locale.”
However, added the judge, in such matters “personal conclusions with no basis in actual market data are entitled to little or no weight.”
And at trial, the center’s representative offered no evidence of the correct exception value of the center property. As a result, the court ruled that the evidence is not sufficient to establish the real market value of the subject property. He added, “The evidence before the court is therefore insufficient for a determination of the subject property’s real market value. The plaintiff consequently did not bear its burden of proof, and the evidence before the court is insufficient.”
(Lighthouse Square, LLC v. Lincoln County Assessor. TC-MD 160113S)
Decision: April 2017
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