December 10, 2010
SP ONE MEADOWLANDS PLAZA, LLC, PLAINTIFF-RESPONDENT,
BOROUGH OF EAST RUTHERFORD, DEFENDANT-APPELLANT.
On appeal from the Tax Court of New Jersey, Docket Nos. 004105-2004 and 000981-2005. Stephen P. Sinisi argued the cause for appellant (Law Offices of Stephen P. Sinisi, LLC, attorneys; Mr. Sinisi, on the brief). William T. Pardue argued the cause for respondent (McCarter & English, LLP, attorneys; Frank E. Ferruggia, of counsel and on the brief; Mr. Pardue, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 26, 2010 - Decided
Before Judges Wefing and Koblitz.
The Borough of East Rutherford (Borough) appeals the Tax Court decision rejecting its 2005 assessment of plaintiff SP One Meadowlands Plaza, LLC's fifteen-story office building (Property). We affirm substantially for the reasons stated by Presiding Tax Court Judge Patrick DeAlmeida in his well-reasoned written opinion issued on August 25, 2009.
We add only a few comments regarding the Borough's argument that the Tax Court judge committed reversible error and abused his discretion in overriding the presumption of correctness of the Borough's 2005 assessment by placing little or no weight upon evidence of the comparable sales and actual sales of the Property.
Trial in this matter consisted of the testimony of one expert commercial real estate appraiser for each side. Both experts used the income capitalization approach to valuation. Plaintiff's expert opined that the fair market value was $72,611,000 on October 1, 2004, the valuation date for tax year 2005. The Borough's expert opined that the fair market value was $91,400,000 on the same date. The two experts arrived at only slightly differing rentable square footages and fair market rent. They arrived at significantly different fair market values because the Borough's expert considered comparable sales as well as actual sales of the Property in his calculation, while plaintiff's expert did not. When factoring in the actual sales of the Property, the Borough's expert explained,
It gave me a good barometer as to where that property was as of that date in question . . . the real estate market turned, if you recall, just before that time period and then took an increase, a drastic increase upwards, where, you know, just between the sale, the first sale and the second sale, was 22 percent a year. So, it gave me an idea as to what the market was for that property as of that date.
Regarding plaintiff's expert's decision not to factor any comparable sales of the Property into his calculation, plaintiff's expert explained that he did not find that approach to be reliable. He also noted that:
[T]he subject property sold in 2002, was purchased by the owner at this point for $71 million and I did look at the agreement of sale and the deed. It sold again in 2005 for $120 million and then it sold again in 2008 for $61 million.
The Tax Court judge stated that he gave "little weight to the comparable sales approach" and "little weight to the scant evidence in the record regarding recent sales of the subject property." However, he went on to explain,
Plaintiff purchased the property in late 2002 for $71,750,000 and sold it in late 2005 for $120,000,000. The record contains no evidence regarding the circumstances of the sales. The court, therefore, cannot make a determination of whether these sales were bona fide and possess special indicia of reliability so as to warrant their consideration when determining the fair market value of the subject property. As a result, the court places no weight on these transfers in reaching its value determination. A third transfer of the property, alluded to at trial, was described by defendant's expert as a bulk sale involving multiple properties, the consideration for which may have been allocated in a fashion not fully reflective of fair market value. (citations omitted).
Beyond this sparse testimony, the record contains no evidence regarding this sale, upon which the court does not rely. [Emphasis added.]
When determining that plaintiff overcame the presumption that the Borough's assessment was correct, MSGW Real Estate Fund, LLC v. Borough of Mountain Lakes, 18 N.J. Tax 364, 373 (Tax 1998), the Tax Court judge explained that, "[p]ursuant to N.J.S.A. 54:51A-6(a), commonly known as Chapter 123, in a nonrevaluation year an assessment must be reduced when the ratio of the assessed value of the property to its true value exceeds the upper limit of the common level range." A subject property's ratio of its assessed value to its true value is within the common level range when it is "plus or minus 15% of the average ratio" for the taxing district in which the property is located. N.J.S.A. 54:1-35a(b). The average ratio for East Rutherford for tax year 2005 was .6553, with an upper limit of .7536 and a lower limit of .5570.
In his independent assessment, the Tax Court judge valued the Property at $78,400,000 for tax year 2005. Using this value he determined that the ratio for the Property was .7653, exceeding .7536, the upper limit of the common level range for East Rutherford. The Tax Court judge therefore determined the proper assessment for the Property for tax year 2005 to be $51,375,520, by multiplying the true value as he found it, $78,400,000, by .6553, the average ratio for East Rutherford.
The Borough argues that in light of the closeness between the upper limit of the common level range for East Rutherford and the ratio for the Property as found by the judge (.7536 and .7653), by only adopting the income approach to value and declining to consider actual sales of the Property or any of the comparable sales presented by the Borough, the Tax Court judge committed reversible error. Regardless of the proximity of the two ratios, we defer to the Tax Court judge's expertise in making his calculations. Although he did not put weight on the comparable sales or other actual sales of the Property as advocated by the Borough, we find that the judge adequately considered these alternate valuation methods before making his assessment.
Generally, "a bona fide sale of property which is not remote should be taken into account as an indication of fair value, but should not necessarily be dispositive." Harrison Realty Corp. v. Town of Harrison, 17 N.J. Tax 174, 177 (App. Div. 1997). The Court has recognized that "there may be instances where the sale price may not reflect the true value. In such instances it is for the court to appraise the circumstances surrounding a sale to determine if there were special factors which affected the sale price without affecting the true value." Glen Wall Assocs. v. Twp. of Wall, 99 N.J. 265, 282 (1985). Here, the Borough did not provide the judge with sufficient details concerning the circumstances of the actual sales of the Property for him to use those sales in his calculations.
"Evidence of comparable [recent] sales is effective in determining value only where there is a substantial similarity between the properties to admit of reasonable comparison." Glenpointe Assocs. v. Twp. of Teaneck, 241 N.J. Super. 37, 48 (App. Div.), certif. denied, 122 N.J. 391 (1990) (citing Venino v. Borough of Carlstadt, 1 N.J. Tax 172, 175 (Tax 1980), aff'd, 4 N.J. Tax 528 (Tax 1981)). After consideration, the judge gave "little weight" to the comparable sales presented by the Borough.
The appellate court generally defers to the expertise of the Tax Court and has a limited scope of review following a determination by that court. Metromedia v. Dir., Div. of Taxation, 97 N.J. 313, 327 (1984); Yilmaz, Inc. v. Dir., Div. of Taxation, 390 N.J. Super. 435, 443 (App. Div.), certif. denied, 192 N.J. 69 (2007); First Republic Corp. of Am. v. E. Newark Borough, 17 N.J. Tax 531, 536-37 (App. Div. 1998). The scope of appellate review of a Tax Court's findings of fact "'is limited to determining whether [such] findings of fact are supported by substantial credible evidence with due regard to the Tax Court's expertise and ability to judge credibility.'" Yilmaz, Inc., supra, 390 N.J. Super. at 443 (quoting First Republic Corp. of Am., supra, 17 N.J. Tax at 536-37). Accordingly, we affirm the Tax Court judge's assessment of the Property and his decision not to place any weight on actual or comparable sales of the Property in determining its value.
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