You are signed in as
Sign in now
Lease Age and Length not a Factor
by Michael Blahy
Walgreen Eastern Company (Walgreen) objected to the market value assigned to its property in the Town of West Hartford Connecticut (town) after a town wide revaluation was conducted of properties on the grand list as of October 1, 2011. The town assessor, John Leary, determined the fair market value of the Walgreen property to be $5,020,000.
Walgreen challenged the valuation and appealed to the Board of Assessment Appeals (board), which upheld the assessor’s valuation.
Walgreen then appealed to the Superior Court claiming the town overvalued its property and that assessment was ‘‘manifestly excessive and could not have been arrived at except by disregarding the provisions of the statutes for determining the valuation of the property.’’
The property is a 1.5 acre parcel located at a high traffic volume intersection, controlled by a traffic light. The 12,805 square foot building constructed in 1949 was originally a movie theater. In 2003, a developer purchased the subject property and the adjoining property to the south and formally subdivided them. The theater was converted, ‘build to suit’ for Walgreen, which entered into 75 year ‘triple net’ or ‘NNN’ lease, where Walgreen was responsible for the payment of all insurance, maintenance, and property tax expenses. The rent is fixed at $430,000 per year for the term of the lease plus a small percentage of the gross sales. In 2006, the developer sold the property to an investor company for $6,718,750.
At trial Walgreen presented the testimony of two appraisers, Richard Michaud and Anthony Barna, who both valued the property at $3 million. The town presented the testimony of the town appraiser, and Christopher Kerin, who valued the property at $4,900,000.
The trial court explained as follows: ‘‘Barna and Michaud, the plaintiff’s appraisers, determined that the market rent for comparable triple net retail properties, which included stores in in-line shopping centers, averaged $20 and $22 per square foot, respectively. They calculated the subject property’s contractual rent at $33.58 per square foot. They declined to adjust the market rate for their analyses because the contract rate was above market.
‘‘Kerin, looking at pharmacies only, found the average market rental rate to be $32.16 per square foot. Because the contract [rental] rate of $33.58 [per square foot] was similar, he used a rate of $32 per square foot for the income capitalization analysis.’’
The trial court then concluded: ‘‘The analysis of Barna and Michaud did not comply with the statutory command to ‘consider the actual rental income . . . .’
The Superior Court determined the new valuation for the subject property of $4.9 million and ordered the town to provide Walgreen with the appropriate reimbursement or credit for any overpayment plus interest. The trial court also found that the town’s assessment was not manifestly excessive.
Walgreen did not like the Superior Court ruling, and appealed to the Connecticut Supreme Court that the relief awarded was insufficient because the trial court improperly determined the true and actual value of the subject property.
The Supreme Court of Connecticut ruled:
Walgreen Eastern Co. v. Town of West Hartford, (Connecticut Supreme Court, Docket: SC19750))
Decided: July, 2018
If you have an opinion on the retailing or retail real estate industries, take this opportunity to share your thoughts. Articles should run between 400 and 800 words. Topics can, be general in nature, consumer observation or specific to retail concepts or practices.
Articles will be posted for at least one week and will then be placed in the Editorial Archives. All articles submitted will be read and considered but we cannot guarantee publication. Each published article will carry the submitters byline (if desired) and is a free service to our community.
Article ideas and suggestions are also always welcomed. Contact PVS@PlainVanillaShell.com
| Terms & Conditions
| About Us