F287656; F293813; F304922

Full text

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD

USAA PROPERTIES IV, INC. v. BOARD OF ASSESSORS OF
THE TOWN OF CHELMSFORD

Docket Nos.: F287656, F293813, Promulgated:
F304922 December 5, 2012

These are appeals under the formal procedure, pursuant to G.L. c. 59, §§ 64 and 65 and c. 58A, § 7, from the refusal of the Board of Assessors of the Town of Chelmsford ("assessors" or "appellee") to abate taxes on certain real estate in Chelmsford assessed to USAA Properties, IV, Inc. ("USAA" or "appellant") under G.L. c. 59, §§ 11 and 38, for fiscal years 2006, 2007, and 2009.
Commissioner Rose heard these appeals. Chairman Hammond and Commissioners Scharaffa and Chmielinski joined him in the decisions for the appellee.
These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

James F. Sullivan, Esq. for the appellant.

Richard Bowen, Esq., and Jeffrey T. Blake, Esq. for the appellee.

FINDINGS OF FACT AND REPORT

On the basis of the testimony and evidence entered into the record, the Appellate Tax Board ("Board") made the following findings of fact.
On January 1, 2005, January 1, 2006, and January 1, 2008, USAA was the assessed owner of a 26.65-acre parcel of land improved with a three-story, 303,715 square-foot office building ("subject building") located at 300 Apollo Drive in Chelmsford ("subject property").
In addition to the subject building, five other commercial buildings are located on Apollo Drive, which is relatively proximate to Interstate 495 and other local highways, such as Route 3, Route 4, and Route 129. The subject property is located in the 1A limited industrial zoning district, which permits the following uses: religious, educational, child care, agricultural, cemetery, municipal facilities, animal clinic or hospital, business and professional office, medical center or clinic, wireless communications facilities, and light manufacturing. At all times relevant to these appeals, the subject building was classified as a research and development building by the assessors, and it was considered a legally conforming use within the 1A zoning district.
The subject building is a steel frame structure with a concrete slab foundation. Its flat roof is covered with a ballasted rubber membrane, and its exterior is brick, while interior finishes include wallpapered or painted plaster walls; vinyl-tiled, ceramic-tiled, carpeted or hardwood flooring; and suspended acoustic tile or painted plaster ceilings. The subject building is surrounded by asphalt paved areas which provide parking for approximately 1,600 vehicles. There are landscaped areas in the front of the subject property and dense woodlands to the rear of the subject property.
The subject building was built in 1985 and was initially designed for use by a single tenant. In 2005, a substantial renovation of the subject property was commenced by the appellant with the aim of reconfiguring it for occupancy by multiple tenants, with a total of 291,424 square feet of net rentable area. Following is a description of the interior configuration of the subject property after the renovations were completed.
The main entrance to the subject building is ground-level at the front of the building, and there are additional entrances along either side and at the rear of the subject building. The main entrance leads to a large lobby area, off of which are five separate office suites. The ground floor also contains a 275-seat dining facility, a fitness center, and management offices. The subject property's second and third floors contain additional office space, with amenities such as conference rooms, private offices, open space, and kitchenettes. In addition, the subject building has three men's restrooms and three women's restrooms on each floor, for a total of 18 common lavoratories.
The subject building has four passenger elevators and four interior staircases, along with two freight elevators that provide access from the subject building's two shipping/receiving areas to all levels of the subject building. Additionally, there are four metal overhead doors at the rear of the subject building with tailboard access.
The subject building was vacant from the commencement of the renovation in 2005 until 2007, when the first tenant took occupancy of 127,531 square feet of office space and a second tenant leased 39,132 square feet of office space.
The assessed values, applicable tax rates, and total tax assessments for the subject property for each of the fiscal years at issue are summarized in the following table:

Fiscal
Year Assessed
Value Tax Rate
per $1,000 Total Taxes Assessed
2006 $15,883,600 $13.12 $208,392.83
2007 $20,581,400 $12.53 $257,884.94
2009 $20,393,900 $14.07 $286,942.17

The appellant timely filed its Applications for Abatement and petitions for each of the fiscal years at issue, and the Board found and ruled that it had jurisdiction to hear and decide these appeals. The hearings of these appeals took place over two days and involved the testimony of three witnesses.
The Appellant's Valuation Evidence
The appellant presented its case-in-chief through the testimony and summary appraisal report of Eric Wolff, a licensed appraiser whom the Board qualified as an expert in commercial real estate valuation. Mr. Wolff, who inspected the subject property as part of his appraisal, concluded that the subject property's highest and best use was its continued use as a research and development office property.
To value the subject property, Mr. Wolff considered the three usual approaches to valuation. He declined to use the cost approach because of the age of the improvements on the subject property. Mr. Wolff testified that because the building was being converted to a multi-tenant building, potential buyers would most likely be interested in the cash flow from such a property and would form an offer based on the income potential, rather than comparable sales in the market. He therefore placed primary reliance on the income-capitalization approach to value. Mr. Wolff testified that he nevertheless conducted sales-comparison analyses because there was activity within the market during the relevant fiscal years, and he used the sales-comparison approach as a "check" on the values determined in his income-capitalization analyses.
Mr. Wolff first testified about his sales-comparison analyses. To begin his analyses, Mr. Wolff researched recent sales of research and development office buildings in the Chelmsford area. For fiscal year 2006, he selected five properties which were sold in 2004 that he believed were comparable to the subject property, and used the adjusted per-square-foot sale prices of those properties to ascertain a value for the subject property. The following table contains relevant data regarding those five properties.

MR. WOLFF'S FY 2006 COMPARABLE SALES

Sale Address Sale
Date Sq. Ft. Sale
Price $/Sq. Ft.
1 220 and 222 Mill Rd.
Chelmsford 12/03/04 164,373 $15,175,000 $92.32
2 65 Sunnyslope Ave.
Tewksbury 10/07/04 152,400 $11,080,000 $72.70
3 270 Billerica Rd.
Chelmsford 07/22/04 101,390 $12,125,500 $119.59
4 200 Ballardvale St.
Wilmington 07/15/04 341,837 $17,250,000 $50.46
5 60-100 Minuteman Rd.
Andover 03/19/04 469,914 $25,312,380 $53.87

According to Mr. Wolff, two of these sales involved fee-simple interests, while three of them involved the sale of leased-fee interests. Mr. Wolff did not provide information about the leases in place at the properties involving leased-fee sales, other than to say that rents were considered to be market rents. Because each of the five sales occurred in 2004, he considered them to be reflective of market conditions on January 1, 2005, and therefore he made no adjustments to the sale prices to account for market conditions.
Mr. Wolff next considered the locations of his five sales-comparison properties relative to the location of the subject property, which he considered to be in a good location for industrial uses. Sales one and three involved properties located in Chelmsford like the subject property, and thus Mr. Wolff made no adjustments to those sale prices to account for location. Sales two, four, and five involved properties located along the Interstate 93 corridor, which Mr. Wolff considered to be an inferior location for industrial uses, and thus he made an upward adjustment of 10% to those sale prices to account for this difference in location.
With respect to building condition, Mr. Wolff noted that the subject building was in the process of being renovated and upon completion would be in overall good condition. He considered sales one, two, four and five to be in inferior condition to the subject building, as renovated, and thus he made an upward adjustment between 10 to 20% to those sale prices to reflect their inferior condition. Mr. Wolff considered sale three to be in similar condition to the subject building, and therefore he made no adjustment to sale three for building condition.
Mr. Wolff next considered building size. Sales one, two, and three involved buildings which were smaller in size than the subject building and he made downward adjustments ranging from 25 to 35% to those sale prices, while sale five involved a building which was larger in size than the subject building and its sale price was adjusted upward by 25% to reflect this difference. In making these adjustments for size, Mr. Wolff took into consideration the tendency for larger properties to sell for lower per-unit values than similar but smaller properties. Mr. Wolff made no adjustment to the sale price of sale four for building size because it was close in size to the subject building.
After making all of these adjustments, Mr. Wolff's sales-comparison properties ranged in sale price from $66.00 to $78.00 per square foot, rounded. Based on this data, Mr. Wolff formed the opinion that $78.00 per square foot was a realistic sale price for the subject property, and multiplying that value by the subject building's 303,715 square feet yielded an indicated value of $23,689,770 for the subject property, which Mr. Wolff then rounded to $23,700,000. That figure, however, was not his final estimate of the subject property's value.
As noted previously, the subject building was in the process of being completely renovated during 2005 and 2006, and the owner's estimate for the total renovation costs was $15,346,754. Mr. Wolff subtracted the estimated renovation costs from his rounded, indicated value to arrive at a final opinion of fair cash value of $8,355,000 for the subject property as of January 1, 2005.
For his sales-comparison analysis for fiscal year 2007, Mr. Wolff selected four industrial properties in the Chelmsford area that were sold in 2005. The following table contains relevant data regarding those properties.

MR. WOLFF'S FY 2007 COMPARABLE SALES

Sale Address Sale
Date Sq. Ft. Sale
Price $/Sq. Ft.
1 829 Middlesex Trnpk.
Billerica 12/27/05 184,140 $11,550,000 $62.72
2 290 Concord Rd.
Billerica 12/23/05 136,080 $25,600,000 $188.12
3 300 Billerica Rd.
Chelmsford 12/20/05 108,200 $10,000,000 $92.42
4 180 Hartwell Rd.
Bedford 01/31/05 345,794 $12,500,000 $36.15

According to Mr. Wolff, two of these sales were sales of fee-simple interests and two were sales of leased-fee interests. Mr. Wolff did not provide information about the leases in place at the properties involving leased-fee sales other than to say that he considered the rents to be market rents. Because each of the four sales occurred in 2005, he considered them to be reflective of market conditions on January 1, 2006, and therefore he made no adjustments to the sale prices to account for market conditions.
Mr. Wolff next considered the locations of his four sales-comparison properties relative to the location of the subject property. According to Mr. Wolff, sales one and four involved properties which had only average access to Route 3, and were therefore in locations inferior to the subject property, while sale two involved a property with better access to Routes 3 and 128, and was therefore in a superior location than the subject property. Accordingly, Mr. Wolff made upward adjustments of 10 to 20% to the sale prices of sales one and four, and he made a downward adjustment of 10% to the sale price of sale number two. Mr. Wolff considered sale three, which was located in Chelmsford, to be in a similar location to the subject property, and therefore he made no adjustment to the sale price of sale three for location.
With respect to building condition, it was Mr. Wolff's opinion that sales one and four involved properties in inferior condition to the subject building, as renovated, and thus he made an upward adjustment of 20% to those sale prices, while he made a 20% downward adjustment to the sale price of sale two because, in his opinion, it involved a building which was in superior condition to the subject building, as renovated. He made no adjustment to the sale price of sale three for building condition because he considered it to be similar in condition to the subject building.
Mr. Wolff next considered building size. Sales one, two, and three involved buildings that were smaller in size than the subject building and he made downward adjustments ranging from 20 to 35% to their sale prices. He made no adjustment for size to the sale price of sale four because it was close in size to the subject building.
After making all of these adjustments, Mr. Wolff's sales-comparison properties ranged in sale price from $51.00 to $85.00 per square foot, rounded. Based on this data, Mr. Wolff formed the opinion that $85.00 per square foot was a fair market price for the subject property, and multiplying that value by the subject building's 303,715 square feet, he yielded an indicated value of $25,815,775 for the subject property, which he then rounded to $25,815,000. From that rounded value Mr. Wolff again deducted the $15,346,754 estimated cost of renovation for the subject property, to arrive at a final, rounded opinion of fair cash value of $10,470,000 for the subject property for fiscal year 2007.
For his sales-comparison analysis for fiscal year 2009, Mr. Wolff selected four industrial properties in the Chelmsford area that sold between June of 2006 and January of 2007. The following table contains relevant data regarding those properties.
MR. WOLFF'S FY 2009 COMPARABLE SALES

Sale Address Sale
Date Sq. Ft. Sale
Price $/Sq. Ft.
1 201 Burlington Rd. Bedford 01/24/07 84,140 $7,400,000 $87.95
2 100 River Rd. Andover 12/14/06 121,976 $7,100,000 $58.20
3 6 Riverside Dr. Andover 12/14/06 79,586 $8,300,000 $104.29
4 3 Riverside Dr. Andover 06/23/06 91,376 $8,200,000 $89.74

According to Mr. Wolff, one of these sales was the sale of a fee-simple interest while the remaining three were sales of leased-fee interests. Mr. Wolff did not provide information about the leases in place at the properties involving leased-fee interests other than to say that he considered the rents to be market rents. Further, he considered the sales, which occurred between June of 2006 and January of 2007, to be reflective of market conditions on January 1, 2008, and therefore he made no adjustments to the sale prices to account for market conditions.
Mr. Wolff next considered the locations of his four sales-comparison properties relative to the location of the subject property. According to Mr. Wolff, sales two, three and four involved properties located along the Interstate 93 corridor, which was, in his opinion, inferior to the subject property's location for industrial uses. Accordingly, Mr. Wolff made upward adjustments of 10% to the sale prices of those properties to account for their inferior location. He made no adjustment to the sale price of sale one because he considered it to be similar in location to the subject property.
Mr. Wolff likewise made upward adjustments of 10% to the sale prices of sales one, two, and four because they involved buildings which he considered inferior in physical condition to the subject building, as renovated. He made no adjustment for physical condition to the sale price of sale three because he considered it to be in similar condition to the subject building.
Finally, Mr. Wolff made downward adjustments ranging from 25 to 35% to the sale prices of all four sales because they each involved buildings which were smaller in size than the subject building.
After making all of these adjustments, Mr. Wolff's sales-comparison properties ranged in sale price from $55.00 to $78.00 per square foot, rounded. Based on this data, Mr. Wolff formed the opinion that $78.00 per square foot was a fair market sale price for the subject property, and multiplying that value by the subject building's 303,715 square feet, he yielded an indicated value of $23,689,770 for the subject property, which he then rounded to $23,700,000. From that rounded value, Mr. Wolff deducted the estimated cost of renovations in the amount of $5,908,791, to arrive at a final, rounded opinion of fair cash value of $17,790,000 for the subject property for fiscal year 2009.
Mr. Wolff next testified about his income-capitalization approach. The first step in that methodology was the determination of a fair market rent. Because the subject building was vacant and under renovation, no rent roll was available for fiscal year 2006. Mr. Wolff gathered information from area brokers about rents at research and development properties in the Chelmsford area, and the following table includes relevant data from the eleven properties that Mr. Wolff found most comparable to the subject property.

MR. WOLFF'S FY 2006 COMPARABLE LEASES

Lease Address Tenant Lease
Date Sq. Ft.
$/Sq. Ft.
1 10 Elizabeth Dr.
Chelsmford Accutronics, Inc. 03/04 16,421 $9.50-NNN
2 12 Elizabeth Dr.
Chelmsford Brooks Automation 03/03 92,750 $10.50-NNN
3 27 Industrial Ave.
Chelmsford AOI
Industries 07/03 10,000 $9.50-NNN
4 21 Alpha Rd.
Chelmsford Fidelity Integrated 05/03 11,411 $10.50-NNN
5 101 Billerica Ave.
Billerica Digital Lightwave 06/04 22,900 $8.50-NNN
6 44 Manning Rd.
Billerica Orbotech,
Inc. 08/04 16,000 $8.95-NNN
7 900 Middlesex Trnpk.
Billerica Photonic
Systems 03/04 8,241 $8.95-NNN
8 1100 Tech. Park Dr.
Billerica GE Industrial
Sensing 11/04 211,173 $10.50-NNN
9 300 Ballardvale St.
Andover Sager Electronics 06/03 3,380 $10.00-NNN
10 201 Middlesex Trnpk.
Bedford Reveal
Imaging 03/04 40,000 $8.75-NNN
11 9 Oak Park Dr.
Bedford Insulet Corporation 07/04 53,000 $12.00-NNN

The rents from Mr. Wolff's chosen comparable properties ranged from $8.75 to $12.00 per square foot. Noting that the subject property was in a good location and was expected to be in good condition upon the completion of the renovations, Mr. Wolff opined that $10.50 per square foot on a triple-net basis was a fair market rent for the subject property for fiscal year 2006. He then multiplied this figure by the subject building's square footage to calculate his potential gross rent.
The next step in his income-capitalization analysis was the determination of appropriate vacancy and credit loss figures as well as expenses. Mr. Wolff consulted with local brokers and learned that the vacancy rate for research and development space similar to the subject property in Chelmsford during the relevant period ranged from approximately 15 to 25%, while market survey reports produced by the CoStar Group indicated that the vacancy rates for such properties ranged from 16 to 22% during that time. Although the subject building was completely vacant as of January 1, 2005, Mr. Wolff selected a vacancy rate of 20%, which he felt was supported by the market data and reflective of rent losses due to tenant default and delinquencies. He therefore reduced his potential gross rent by 20% to arrive at his estimated gross rent.
Mr. Wolff next considered appropriate expense estimates. He reported that market data indicated that tenants in spaces similar to the subject property were responsible for nearly all operating expenses, excluding those associated with management and structural maintenance of the building. Mr. Wolff therefore incorporated a management fee of 5%, which he applied against the effective gross income, and replacement reserve allowances of 3%, which he applied against the potential gross income, into his expense estimates.
Mr. Wolff's income-and-expense statement for the subject property as of January 1, 2005 is substantially reproduced below.
MR. WOLFF'S INCOME AND EXPENSE STATEMENT FY 06
S.F Rent/S.F. Total
Potential Gross Rent 303,715 $10.50 $3,189,008

Vacancy and Collection Loss 20% ($637,802)

Effective Gross Rent $2,551,206

Expenses
Reserve for Replacement 3% ($95,670)
Management Fee 5% ($127,560)
Total Operating Expenses ($223,231)

Net Operating Income (NOI) $2,327,975
After arriving at his NOI, the next step in Mr. Wolff's income-capitalization approach was the determination of an appropriate capitalization rate, and to aid in the determination of that rate, he used the band-of-investment technique, which resulted in a rounded capitalization rate of 9.0%. Mr. Wolff concluded that a capitalization rate of 9.0% was supported by data published in national surveys, such as The Korpacz Survey ("Korpacz"), which indicated capitalization rates ranging from 6.5 to 10.25%, with an average of 8.69% for institutional grade research and development properties.
Thus, Mr. Wolff applied a capitalization rate of 9.0% to his NOI of $2,327,975, which resulted in a rounded indicated value of $25,865,000. As he did in his sales-comparison analysis, Mr. Wolff deducted the estimated renovation cost of $15,346,754 from his indicated value to arrive at a final, rounded estimate of fair cash value of $10,520,000 for the subject property for fiscal year 2006.
For his fiscal year 2007 income-capitalization analysis, Mr. Wolff again relied on market rents in the Chelmsford area because the subject building remained vacant and as such there was no rent roll. The following table contains the relevant data from the nine properties that Mr. Wolff considered most comparable to the subject property.

MR. WOLFF'S FY 2007 COMPARABLE LEASES
Lease Address Tenant Lease
Date Sq. Ft.
$/Sq. Ft.
1 10 Elizabeth Dr.
Chelmsford The Maricor Group 04/05 17,000 $8.50-NNN
2 27 Industrial Ave.
Chelmsford Confidential 10/05 5,000 $8.50-NNN
3 21 Alpha Rd.
Chelmsford Confidential 11/05 8,500 $9.50-NNN
4 300 Ballardvale St.
Andover Pennio Associates 04/05 8,000 $9.00-NNN
5 300 Ballardvale St.
Andover Mad Doc Software 12/05 10,211 $8.95-NNN
6 6-8 Preston Ct.
Bedford Diversified Technologies 03/05 14,000 $10.00-NNN
7 6-8 Preston Ct.
Bedford Sionex Corp. 01/05 20,000 $11.50-NNN
8 65 Wiggins Ave.
Bedford Confidential 11/05 13,000 $13.00-NNN
9 213 Middlesex Trnpk.
Bedford Actuality Systems 10/05 14,900 $12.00-NNN

The rents from Mr. Wolff's chosen comparable properties ranged from $8.50 to $13.00 per square foot, on a triple-net basis. Noting that the subject property was in a good location and was expected to be in good condition upon the completion of the renovations, Mr. Wolff opined that $11.00 per square foot on a triple-net basis was a fair market rent for the subject property for fiscal year 2007.
In order to select a vacancy rate, Mr. Wolff consulted with local brokers who indicated that the vacancy rate for research and development space similar to the subject property in Chelmsford during the relevant period ranged from approximately 15 to 25%, while market survey reports produced by the CoStar Group indicated that the vacancy rates for such properties ranged from 18 to 22% during that time. Although the subject building was completely vacant as of January 1, 2006, Mr. Wolff selected a vacancy rate of 20%, which he felt was supported by the market data and reflective of rent losses due to tenant default and delinquencies. Because the market data indicated that most leases for space similar to the subject property were on a triple-net basis, the only expenses which Mr. Wolff incorporated into his analysis were a management fee of 5%, which he applied to effective gross income, and replacement reserve allowance of 3%, which he applied to potential gross income.
Mr. Wolff's income-and-expense statement for the subject property as of January 1, 2006 is substantially reproduced below.
MR. WOLFF'S INCOME AND EXPENSE STATEMENT FY 07
S.F Rent/S.F. Total
Potential Gross Rent 303,715 $11.00 $3,340,865

Vacancy and Collection Loss 20% ($668,173)

Effective Gross Rent $2,672,692

Expenses
Reserve for Replacement 3% ($100,226)
Management Fee 5% ($133,635)
Total Operating Expenses ($233,861)

Net Operating Income (NOI) $2,438,831
After arriving at his NOI, the next step in Mr. Wolff's income-capitalization approach was the determination of an appropriate capitalization rate, and to aid in the determination of that rate, he used the band-of-investment technique, which resulted in a rounded capitalization rate of 8.5%. Mr. Wolff concluded that that rate was supported by data published in national surveys, such as Korpacz, which indicated capitalization rates ranging from 6.5 to 10.0%, with an average of 8.13% for institutional grade research and development properties, and thus he used a capitalization rate of 8.5%.
After applying that capitalization rate to his NOI, Mr. Wolff arrived at a rounded, indicated fair cash value of $28,700,000, from which he deducted estimated costs of renovation in the amount of $15,346,754 to arrive at a final, rounded fair cash value of $13,355,000 for the subject property for fiscal year 2007.
As of the January 1, 2008 valuation date for fiscal year 2009, the subject property was partially occupied by two tenants. Thus, to aid in the determination of a fair market rent for fiscal year 2009, Mr. Wolff reviewed the subject property's actual rent roll. Aspect Software entered into a ten-year lease for 127,531 square feet of space with graduated rent beginning at $9.50 per square foot on a triple-net basis for the first year, increasing to $15.35 per square foot on a triple-net basis for the last year. A second tenant, Circle Company Associates, Inc., entered into an eight-year lease for 39,132 square feet of space with graduated rent beginning at $11.00 per square foot on a triple-net basis for the first year, increasing to $15.00 per square foot on a triple-net basis for the last year. Mr. Wolff also reviewed market rents in the Chelmsford area. The following table contains relevant data from the ten properties that Mr. Wolff considered most comparable to the subject property.

MR. WOLFF'S FY 2009 COMPARABLE LEASES
Lease Address Tenant Lease
Date Sq. Ft.
$/Sq. Ft.
1 10 Elizabeth Dr. Chelmsford ADA
Solutions 11/07 15,000 $9.50-NNN
2 101 Billerica Ave.
Billerica Digital
Lightwave 07/07 22,900 $10.50-NNN
3 101 Billerica Ave. Billerica Newport
Corp. 08/07 48,000 $8.50-NNN
4 129 Concord Rd. Billerica Nuvera Fuel
Cells 06/07 110,684 $8.50-NNN
5 16 Esquire Rd. Billerica Confidential 03/07 18,000 $8.50-NNN

6 5 Fortune Dr. Billerica Object
Geometrics 03/07 6,500 $7.50-NNN
7 900 Middlesex Trnpk.
Billerica Omtool,
Ltd. 05/06 44,048 $8.69-NNN
8 300 Ballardvale St. Andover MaestroMD 03/06 2,300 $8.85-NNN
9 14 Hartwell Ave. Lexington BAE
Systems 10/07 33,600 $18.42- Gross plus utilities or
$11.42-NNN

Based on the actual rents at the subject property, which ranged from $9.50 to $11.00 per square foot on a triple-net basis, and the area market rents, which ranged from $7.50 to $11.42 per square foot on a triple-net basis, Mr. Wolff concluded that fair market rent for the subject property as of January 1, 2008 was $10.00 per square foot on a triple-net basis.
While the subject property was 55% vacant during fiscal year 2009, market data published by the CoStar Group indicated that vacancy rates for research and development space in the Chelmsford area ranged from 18 to 20%, while area brokers indicated to Mr. Wolff that vacancy rates for research and development space ranged from 15 to 25% at that time. Based on this data, Mr. Wolff selected a vacancy rate of 20%.
For expenses, Mr. Wolff again used his estimates of 3% for a replacement reserve allowance, which he applied to his potential gross income, and 5% for management fees, which he applied to his estimated gross income. In addition, although tenants are responsible for most operating expenses under a triple-net lease, Mr. Wolff noted that the owner would be responsible for expenses relating to any vacant space, which was projected at 20% for fiscal year 2009. Mr. Wolff indicated that as of December 31, 2007, the subject property had reported actual expenses of $1,061,895. Thus, Mr. Wolff deducted operating expenses in the amount of $212,000, which was 20% of the reported actual expenses.
Mr. Wolff's income-and-expense statement for fiscal year 2009 is substantially reproduced below.

MR. WOLFF'S INCOME AND EXPENSE STATEMENT FY 09
S.F Rent/S.F. Total
Potential Gross Rent 303,715 $10.00 $3,037,150

Vacancy and Collection Loss 20% ($607,430)

Effective Gross Rent $2,429,720

Expenses
Reserve for Replacement 3% ($91,115)
Management Fee 5% ($121,486)
Operating Expenses ($212,000)

Total Operating Expenses ($424,601)

Net Operating Income (NOI) $2,005,120

Lastly, Mr. Wolff determined an appropriate capitalization rate. He first used a band-of-investment analysis, which produced a rounded capitalization rate of 9.0%. Mr. Wolff's report indicated that this rate was supported by the data contained in Korpacz, which reported rates ranging from 5.5 to 10.0%, with an average of 7.6%, for industrial research and development properties. Because the operating expenses did not include an amount for real estate taxes, Mr. Wolff added an additional 0.28% to his estimated capitalization rate, resulting in a final capitalization rate of 9.28%.
After applying that capitalization rate to his NOI, Mr. Wolff determined a rounded, indicated fair cash value of $21,605,000, from which he deducted the remaining estimated costs of renovation in the amount of $5,908,791 to arrive at a final opinion of fair cash value for the subject property in the amount of $15,700,000 for fiscal year 2009.
Mr. Wolff's Final Opinions of Value
As he testified and stated in his report, it was Mr. Wolff's opinion that the sales-comparison approach is most relevant for owner-occupied, single-tenant properties. The subject property, however, was purchased by an investor and designed for multiple-tenant occupancy, and as such, Mr. Wolff opined that the income-capitalization approach provided the best indication of fair cash value in the present appeals, as most investor-buyers would be interested in the income potential of such a property. Mr. Wolff therefore selected the values determined through his income-capitalization analyses as his final opinions of fair cash value for the subject property, and those values were:

Fiscal Year 2006 $10,520,000
Fiscal Year 2007 $13,355,000
Fiscal Year 2009 $15,700,000

The appellant also called as a witness Frank Reen, Assessor for Chelmsford, who testified regarding the methodology used by the assessors to value the subject property. Mr. Reen testified that Chelmsford contracts with a third-party, Vision Appraisal, ("Vision") to perform most of the valuations in Chelmsford. Mr. Reen also stated that Vision uses mostly a cost approach to valuation, with support from the income-capitalization approach.
The Assessors' Valuation Evidence
The assessors presented their case-in-chief through the testimony and summary appraisal report of William LaChance. Mr. LaChance is a licensed appraiser and a partner in the realty appraisal firm Peterson, LaChance, Regan, Pino, LLC. He is also a member of the Appraisal Institute and the former president of its Massachusetts chapter. The Board qualified Mr. LaChance as an expert in commercial real estate valuation.
Mr. LaChance inspected the subject property as part of his appraisal. Like Mr. Wolff, he concluded that the highest and best use of the subject property was its continued use as a research and development property, and also like Mr. Wolff, he used both the sales-comparison and income-capitalization approaches to value the subject property, but not the cost approach.
Mr. LaChance began with the income approach, in which he used the direct-capitalization methodology. To ascertain market rents for each of the fiscal years at issue, Mr. LaChance reviewed the rent roll at the subject property, which, as noted above, had two tenants beginning in 2007. Aspect Software entered into a ten-year lease for 127,531 square feet of space with graduated rent beginning at $9.50 per square foot on a triple-net basis for the first year, increasing to $15.35 per square foot on a triple-net basis for the last year. Circle Company Associates, Inc., entered into an eight-year lease for 39,132 square feet of space with graduated rent beginning at $11.00 per square foot on a triple-net basis for the first year, increasing to $15.00 per square foot on a triple-net basis for the last year. In addition, Mr. LaChance compiled data from 18 leases in research and development or office buildings which he felt were comparable to the subject property. The following table contains relevant data from those 18 leases.

MR. LaCHANCE'S COMPARABLE LEASES

Lease Address Tenant Lease
Date Sq. Ft. $/Sq. Ft.
1 5 Omni Way
Chelmsford BF Goodrich 05/04 131,252 $9.43-NNN
2 225 Presidential Way
Woburn Raytheon 06/04 442,000 $12.50-NNN
3 1100 Tech. Pk. Billerica GE/Panametrics 11/04 153,746 $10.50-NNN
4 150 Apollo Dr. Chelmsford Avaya 05/05 79,873 $10.85-NNN
5 9 Crosby Dr.
Bedford Nextel 06/05 70,000 $10.50-NNN
6 32 Crosby Dr.
Bedford Interactive
Data 01/06 95,725 $21.00-
$25.00-GR
7 330 Billerica Rd. Chelmsford Comcast 2/06 98,084 $8.75-NNN
8 25 Industrial Ave. Chelmsford Comcast Media Services 07/07 29,708 $9.88-NNN
9 2 Executive Dr. Chelmsford Rockwell
Automation 06/07 57,483 $9.73-NNN
10 220 Mill Rd. Chelmsford Sycamore
Networks 01/07 113,000 $9.50-NNN
11 321 Billerica Rd. Chelmsford Biscom, Inc. 11/07 21,774 $9.25-NNN
12 1 Executive Dr. Chelmsford Kewill 12/08 38,233 $18.50-GR
13 1 Executive Dr. Chelmsford ConMed 06/08 27,911 $18.50-GR
14 6 Omni Way
Chelmsford Arbor
Networks 10/08 51,300 $11.75-NNN
15 330 Billerica Rd. Chelmsford Comcast 07/10 98,048 $9.75-NNN
16 270 Billerica Rd. Chelmsford Brix
Networks 07/10 29,200 $14.57-GR
17 150 Apollo Dr. Chelmsford Harris
Corporation 04/10 79,873 $12.17-NNN
18 310 Littleton Rd. Westford NetScout
Systems 09/10 175,000 $13.87-NNN

In his report, Mr. LaChance noted that the average lease-length among his selected comparables was 7.1 years, with an average first-year rent of $12.35 per square foot, while the subject property had an average rent of $10.25 per square foot with an average lease-length of 9.33 years. Mr. LaChance further noted that rents did not deviate significantly in the period surrounding the relevant dates of assessment. Thus, on the basis of this data, Mr. LaChance concluded that market rent for the subject property for each of the three fiscal years at issue was $11.00 per square foot. Mr. LaChance applied his market rent to a net rentable area of 291,424 square feet, a figure which he got from the subject property's 2007 rent roll, to arrive at a potential gross income of $3,205,664.
The next step in Mr. LaChance's income analyses was the determination of appropriate vacancy and collection loss estimates. According to Mr. LaChance, market reports, including those published by CB Richard Ellis, indicated that during the three relevant valuation years, vacancy rates at research and development space were improving, declining from 27.5 to 20.8% over this time period. Mr. LaChance further noted that because of the renovations, the subject building would be considered one of the best buildings within its competitive submarket, and thus, he concluded that a vacancy rate of 11% was appropriate. Mr. LaChance additionally accounted for collection loss at a rate of 1%.
To estimate appropriate operating expenses, Mr. LaChance consulted numerous resources, including the subject property's 2007 profit and loss statement and 2008 occupancy summary, as well as market data compiled by the Building Owners and Managers Association ("BOMA") and the Institute of Real Estate Management ("IREM"). According to Mr. LaChance, the subject's actual data indicated operating expenses ranging from $6.71 per square foot in 2005 to $7.33 per square foot in 2008, while the information compiled by BOMA and IREM indicated expenses ranging from $6.62 to $8.92 per square foot and $6.33 to $8.72 per square foot, respectively. Mr. LaChance also consulted his own appraisal files for information regarding office properties in Wellesley, Lexington, and Acton, which showed a similar range of operating expenses during the relevant time period. After noting that the range of operating expenses indicated by all sources varied very little, Mr. LaChance concluded that appropriate estimates of operating expenses for the subject property were: $6.75 per square foot for fiscal year 2006, $7.00 per square foot for fiscal year 2007, and $7.50 per square foot for fiscal year 2009.
To determine an appropriate estimate for tenant improvements ("TIs"), Mr. LaChance spoke with buyers, sellers, and project managers for comparable properties. He also reviewed TIs from his selected comparable leases, and using information from all of these sources, he concluded that a stabilized TI estimate of $5.00 per square foot amortized over a nine-year period was appropriate, and thus he incorporated into his income-capitalization analysis a TI allowance of $0.55 per square foot for each of the fiscal years at issue. He applied that TI allowance to 89% of the net rentable area of the subject property, to reflect his estimated 11% vacancy.
In his report, Mr. LaChance stated that leasing commissions for new tenants were $1.00 per square foot and $0.55 per square foot for lease renewals. Because renewals were more common than new leases, Mr. LaChance weighted them at 60%/40% respectively, arriving at a rate of $0.70 per square foot. Noting that the average lease term for new leases was nine years, Mr. LaChance applied his estimate for brokerage commissions to only 32,057 square feet, or 11% of the subject building's net rentable area. Additionally, Mr. LaChance allowed for a modest $0.20 per square foot for replacement reserves, after considering the renovated condition of the subject building. He applied that estimate to the entire square footage of the subject property.
The following table substantially reproduces Mr. LaChance's stabilized operating statement:

MR. LaCHANCE'S STABILIZED OPERATING STATEMENT

Income FY 06 FY 07 FY 09

Rent/SF $11.00 $11.00 $11.00

Rentable SF 291,424 291,424 291,424
Potential Gross $3,205,664 $3,205,664 $3,205,664
Income

Recoveries $1,750,730 $1,815,572 $1,945,255

Vacancy & Collection ($594,767) ($602,548) ($618,110)
Loss

Effective Gross Income $4,361,626 $4,418,687 $4,532,809

Expenses

Reimbursable
$/SF $6.75 $7.00 $7.50
SF 291,424 291,424 291,424
Total ($1,967,112) ($2,039,968) ($2,185,680)

Non-reimbursable
TIs @$0.55/sf ($142,652) ($142,652) ($142,652)
Commissions @$0.70/sf ($22,440) ($22,440) ($22,440)
Reserves @$0.20/sf ($60,743) ($60,743) ($60,743)

Total Expenses ($2,192,947) ($2,265,803) ($2,411,515)

Net Operating Income $2,168,679 $2,152,884 $2,121,294

The final step in Mr. LaChance's income-capitalization analyses was the determination of an appropriate capitalization rate. To determine an appropriate capitalization rate, Mr. LaChance first reviewed sales of nine class A or B office and research and development properties which were sold between September of 2004 and November of 2007. Most of these properties were in Chelmsford or the Chelmsford area, while a few were closer to the Boston area. After reviewing the data from these sales, Mr. LaChance determined that capitalization rates ranged from 7.0 to 8.0%. Mr. LaChance also determined a range of capitalization rates using a debt coverage formula, with data compiled in market surveys. Using that formula and data, Mr. LaChance determined capitalization rates between 7.18 and 8.64%. Lastly, Mr. LaChance reviewed data contained in Korpacz, which showed rates for suburban Boston office properties ranging from 7.5 to 9.5%.
Based on all of these sources, Mr. LaChance concluded that the market data indicated the following capitalization rates: 8.0% for fiscal years 2006 and 2007 and 7.8% for fiscal year 2009. He then "unloaded" those rates to account for tenant improvements, brokerage commissions, and replacement reserves, and then "loaded" them to account for a tax factor, which he prorated to reflect his estimated vacancies and collection losses. Mr. LaChances' final overall capitalization rates were: 7.37% for fiscal year 2006; 7.35% for fiscal year 2007; and 7.18% for fiscal year 2009.
After applying these capitalization rates to his NOIs, Mr. LaChances' income-capitalization analyses yielded the following preliminary fair cash values: $29,425,773 for fiscal year 2006; $29,290,943 for fiscal year 2007; and $29,544,484 for fiscal year 2009. Like Mr. Wolff, Mr. LaChance then deducted from those preliminary estimates of value the estimated reconstruction costs for the subject property. He used an estimate of $45.00 per square foot for fiscal year 2006 and $39.00 per square foot for fiscal years 2007 and 2009, which he stated that he based upon discussions with buyers and sellers and upon reviews of data from actual buildouts of comparable properties. After the subtraction of these estimated renovation costs, Mr. LaChance's income-capitalization analyses yielded the following fair cash values for the subject property:

$15,800,000 FY 2006
$17,900,000 FY 2007
$24,700,000 FY 2009

To begin his sales-comparison analyses, Mr. LaChance reviewed recent sales of properties similar to the subject property. He ultimately selected seven sales as being most relevant for his analysis, each of which were 100% vacant at the time of sale and thus were sales of fee-simple interests. The following table contains relevant data about those seven sales.

MR. LaCHANCE'S COMPARABLE SALES

Sale Address Net Rentable
Sq. Ft. Sale
Date Sale
Price
1 250 Royall St.
Canton 185,171 08/03 $24,665,000
2 100 Fairbanks Blvd. Marlborough 496,000 02/04 $43,500,000
3 150 Royall St.
Canton 280,000 04/05 $23,000,000
4 334 South St.
Shrewsbury 400,000 07/05 $27,400,000
5 75 Sylvan St.
Danvers 272,378 07/06 $16,700,000
6 550 King St.
Littleton 491,119 04/06 $25,500,000
7 10 Lyberty Way
Westford 104,000 07/07 $11,500,000

Mr. LaChance noted that each of these buildings were over twenty years old and in need of renovation at the time of sale. Two were located along Route 495 in Littleton and Chelmsford, quite close to the subject property, while most of the others were proximate to major highways. Mr. LaChance made minor adjustments to the sales prices of his chosen comparables to account for differences in building and lot size, location, and market conditions, and building condition. After making these adjustments, his comparables yielded sales prices ranging from $62.00 to $90.00 per square foot. Based on this data, Mr. LaChance concluded the subject property's fair cash values were $68.00 per square foot for fiscal year 2006; $78.00 per square foot for fiscal year 2007; and $100.00 per square foot for fiscal year 2009. After applying these values to the subject building's net rentable area of 291,424 square feet, Mr. LaChance's sales-comparison analyses resulted in rounded fair cash values of:

$19,800,000 FY 2006
$22,800,000 FY 2007
$29,000,000 FY 2009

As he testified and explained in his appraisal report, because there was considerable sales activity in the market in 2005 and 2006, Mr. LaChance believed that he was able to extract information from highly comparable sales, which provided, in his opinion, strong evidence of value for fiscal years 2006 and 2007. In addition, it was Mr. LaChance's opinion that the buyer of a vacant building would likely be an owner-user, who would more likely form an offer based on sales prices of comparable buildings, rather than an investor, who would be more interested in the income-potential of such property. Therefore, Mr. LaChance gave weight to the values derived through his sales-comparison analyses for fiscal years 2006 and 2007, although he did not adopt those exact values as his final estimates. Rather, he gave nearly equal weight to the values obtained through his sales-comparison and income-capitalization analyses, arriving at final opinions of value which were approximate averages of the values obtained through the two methods.
Because the subject building was partially tenanted beginning in 2007, Mr. LaChance believed that the income-capitalization approach provided the most reliable indication of the subject property's value for fiscal year 2009. Thus, he adopted the value obtained in his income-capitalization analyses as his final opinion of fair cash value for fiscal year 2009. Mr. LaChance's final opinions of the subject property's fair cash value were:

$17,600,000 FY 2006
$20,000,000 FY 2007
$24,700,000 FY 2009

The Board's Valuation Findings

Fiscal Years 2006 and 2007

The Board found that the highest and best use of the subject property was its use as a research and development office building. The subject property was vacant and under renovation in 2005 and 2006, and as such, there were no actual rents from the subject property in evidence for those fiscal years. Moreover, the record showed that there was an active market for vacant buildings during the relevant valuation periods for fiscal years 2006 and 2007. The Board therefore found that the sales-comparison approach provided the most reliable evidence of the subject property's fair cash value for fiscal years 2006 and 2007.
However, the Board could not credit the values determined by the appellant's expert, Mr. Wolff, through his sales-comparison analyses because he relied on inapposite data. While the relevant issue before the Board was the fair cash, fee-simple value of the subject property for each of the fiscal years at issue, Mr. Wolff used sales of both leased-fee and fee-simple interests in his sales-comparison analyses. Mr. Wolff provided no information about the leases in place in the leased-fee transactions and made no analysis of the impact of those leases on the sale prices, nor any adjustment to account for the difference in interest conveyed. Because the question before the Board was the fee-simple value of the subject property, sales involving leased-fee interests would require adjustments to be utilized in deriving an indicated fee-simple value for the subject property, and more thorough investigation and analysis would have been required to arrive at an indication of value based on sales of leased-fee interests. The Board found that Mr. Wolff's failure to provide this information about his selected leased-fee sales undermined the reliability and probative worth of his sales-comparison analyses, and it therefore placed no weight on his opinions of value as determined through those analyses.
Further, and as discussed more fully below, the Board placed no weight on the fair cash values derived through Mr. Wolff's income-capitalization analyses as there was a lack of evidentiary support for the renovation costs which Mr. Wolff incorporated into his analyses. The Board therefore afforded no weight to Mr. Wolff's opinions of value.
In contrast, the Board found that Mr. LaChance's sales-comparison analyses provided persuasive evidence that the subject property's assessed value did not exceed its fair cash value for fiscal years 2006 and 2007. Mr. LaChance's analyses used data from properties which were vacant at the time of sale and, thus, involved the sale of fee-simple interests. Further, Mr. LaChance's comparable-sales properties were older buildings that were in need of renovation at the time of sale, and, having sold between August of 2003 and July of 2007, sold within a reasonable time of the relevant dates of valuation. Two of Mr. LaChance's comparable-sales properties were located quite close to Chelmsford, along Route 495 in Littleton and Westford, while the remaining properties were, for the most part, like the subject property, proximate to major highways. The Board found that the properties selected for comparison by Mr. LaChance were sufficiently comparable to the subject property to provide probative evidence of its fair cash value, and it further found that Mr. LaChance made appropriate adjustments to the sale prices of his selected comparable-sales properties to account for differences in market conditions, location, building condition, and surplus land.
Although Mr. LaChance did not adopt the values derived through his sales-comparison analyses as his final opinions of value for fiscal years 2006 and 2007, the Board found that his sales-comparison analyses provided the most reliable evidence of the subject property's fair cash value for fiscal years 2006 and 2007. Because those values exceeded the subject property's assessed values for fiscal years 2006 and 2007, the Board concluded that the subject property's assessed value did not exceed its fair cash value for fiscal year 2006 and 2007.
Fiscal Year 2009
For fiscal year 2009, the Board again found that the highest and best use of the subject property was its use as a research and development office property. Because the subject building was partially tenanted as of the relevant valuation date, there were actual rents in evidence for fiscal year 2009. Further, although both parties introduced evidence of numerous sales, most of those sales took place between 2003 and 2006. Each expert offered just one sale in 2007, and the Board found that the limited number of timely sales diminished the probative value of the sales-comparison approach for fiscal year 2009. Thus, the Board, like the parties' experts, found that the income-capitalization approach provided the most reliable evidence of the subject property's value for fiscal year 2009. However, the Board placed no weight on either experts' opinions of value because they both suffered from the same infirmities.
After determining preliminary fair cash values, both experts deducted the estimated renovation costs to arrive at their final opinions of fair cash value. However, evidence of construction or renovation costs is generally admissible only through the testimony of an architect, contractor, or engineer, and neither party offered such testimony. Moreover, neither party offered documentary evidence to establish the veracity of their estimated expenses. The Board therefore found that there was a lack of evidentiary support in the record for the deductions made by both parties, and accordingly, it placed no weight on their opinions of the subject property's fair cash value for fiscal year 2009.
In sum, the Board found that neither party offered reliable evidence of the subject property's fair cash value for fiscal year 2009. Because there was no evidence to the contrary, the Board relied on the presumptive validity of the assessments and found that the subject property's assessed value for fiscal year 2009 did not exceed its fair cash value.
On the basis of all of the evidence, the Board found that the appellant failed to meet its burden of proving that the assessed value of the subject property exceeded its fair cash value for any of the fiscal years at issue. The Board therefore issued decisions for the appellee in these appeals.

OPINION
Fair cash value is the standard for assessing real property for tax purposes in Massachusetts. See G.L. c. 59, § 38. "Fair cash value is defined as the price on which a willing seller and a willing buyer will agree if both of them are fully informed and under no compulsion . . . . Accordingly, fair cash value means . . . fair market value." Northshore Mall Limited Partnership v. Assessors of Peabody, Mass. ATB Findings of Fact and Reports 2004-195, 246 (citing Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956)).
The appellant has the burden of proving that the property has a lower value than that assessed. "'The burden of proof is upon the petitioner to make out its right as a matter of law to abatement of the tax.'" Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974) (quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922)). "[T]he board is entitled to 'presume that the valuation made by the assessors [is] valid unless the taxpayers . . . prov[e] the contrary.'" General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 598 (1984) (quoting Schlaiker, 363 Mass. at 245).
The ascertainment of a property's highest and best use is a prerequisite to valuation analysis. See Peterson v. Assessors of Boston, 62 Mass. App. Ct. 428, 429 (2004); Irving Saunders Trust v. Board of Assessors of Boston, 26 Mass. App. Ct. 838, 843 (1989). "A property's highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive." Northshore Mall, Mass. ATB Findings of Fact and Reports at 2004-246. In the present appeals, both parties' experts opined that the highest and best use of the subject property was its use as a research and development office property, and the Board so found and ruled.
Generally, real estate valuation experts, the Massachusetts courts, and this Board rely upon three approaches to ascertain the fair cash value of property: income capitalization; sales comparison; and cost. Correia v. New Bedford Redevelopment Authority, 375 Mass. 360, 362 (1978). "The Board is not required to adopt any particular method of valuation." Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447, 449 (1986). In the present appeals, both experts conducted sales-comparison and income-capitalization analyses. Mr. Wolff ultimately relied on the income-capitalization approach to form his final opinions of value. Mr. LaChance, on the other hand, gave weight to both the sales-comparison and income-capitalization approaches to form his opinions of value for fiscal years 2006 and 2007, but relied exclusively on the income-capitalization approach to form his opinion of value for fiscal year 2009.
The income-capitalization method "is frequently applied with respect to income-producing property." Taunton Redev. Assocs. v. Assessors of Taunton, 393 Mass. 293, 295 (1984). However, for fiscal years 2006 and 2007, the subject property was vacant and under renovation. Thus, it was not an income-producing property at that time and there were no actual rents in evidence. In contrast, the evidence showed that there was an active sales market for vacant office properties during the relevant dates of valuation, and accordingly, the Board found and ruled that the sales-comparison approach was the most reliable method with which to value the subject property's fair cash value for fiscal years 2006 and 2007.
Sales of comparable realty in the same geographic area and within a reasonable time of the assessment date generally contain probative evidence for determining the value of the property at issue. Graham v. Assessors of West Tisbury, Mass. ATB Findings of Fact and Reports 2007-321, 400 (citing McCabe v. Chelsea, 265 Mass. 494, 496 (1929)), aff'd, 73 Mass. App. Ct. 1107 (2008). Properties are "comparable" to the subject property when they share "fundamental similarities" with the subject property. Lattuca v. Robsham, 442 Mass. 205, 216 (2004). The appellant bears the burden of "establishing the comparability of . . . properties [used for comparison] to the subject property." Fleet Bank of Mass. v. Assessors of Manchester, Mass. ATB Findings of Fact and Reports 1998-546, 554. Accord New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 470 (1981).
Many of the purportedly comparable sales on which Mr. Wolff relied in his sales-comparison analyses involved the transfer of leased-fee interests, while the question for decision in these appeals was the value of the fee-simple interest of the subject property. See Olympia & York State Street Co. v. Assessors of Boston, 428 Mass. 236, 247 (1998) ("The assessors must determine a fair cash value for the property as a fee simple estate, which is to say, they must value an ownership interest in the land and the building as if no leases were in effect.") Mr. Wolff did not make adjustments for purposes of deriving fee-simple values from the leased-fee sales that he deemed comparable, nor did he provide information about the leases necessary to support reliable adjustments. Knowledge of relevant lease terms and their relationship to the market is essential to estimate a fee-simple value on the basis of leased-fee transactions. See the appraisal institute, the appraisal of real estate (13th ed. 2008) 323. See also Olympia & York State Street Co., 428 Mass. at 248 ("[I]f there is any relationship at all between [leased-fee and fee-simple] values, it must be derived by performing a series of evaluations and computations on the one to reach the other."). Because he failed to provide information about the leases in place at the time of the sale of the leased-fee sales on which he relied, and also failed to make any adjustments to account for the different interests conveyed, the Board found and ruled that Mr. Wolff's sales-comparison analyses provided unreliable evidence of the subject property's fair cash value, and it therefore placed no weight on his opinions of value as derived through those analyses.
In contrast, the Board found and ruled that Mr. LaChance's sales-comparison analyses utilized fee-simple sales of highly comparable properties, and further, that he made appropriate adjustments to account for differences between his selected comparison properties and the subject property. Accordingly, the Board found and ruled that Mr. LaChance's sales-comparison analyses provided the most reliable evidence of the subject property's fair cash value for fiscal years 2006 and 2007. Because the subject property's fair cash values as determined by Mr. LaChance in his sales-comparison analyses - $19,800,000 for fiscal year 2006 and $22,800,000 for fiscal year 2007 - exceeded its assessed values, the Board found and ruled that the subject property was not overvalued for fiscal years 2006 and 2007.
As of the relevant date of assessment for fiscal year 2009, the subject property was occupied by two tenants. Therefore, the Board, like both experts, found and ruled that the income-capitalization approach was the most reliable method with which to value the subject property. However, the Board found and ruled that both experts' income-capitalization analyses incorporated expense estimates which lacked an adequate foundation in the record.
Evidence of construction and renovation costs is generally admissible only through the testimony of an architect, contractor, or engineer, and neither party offered such testimony. "The Courts and this Board have found and ruled consistently that only qualified engineers, architects, or contractors should present cost estimates in most circumstances." Cnossen v. Board of Assessors of Uxbridge, Mass. ATB Findings of Fact and Reports 2002-675, 690 (citing Tiger v. Mystic River Bridge Authority, 329 Mass. 514, 519 (1952) and Maryland Cup Corp. v. Assessors of Wilmington, Mass. ATB Findings of Fact and Reports 1988-169). Further, both experts testified that they based their figures on documented cost estimates, but neither party offered documentary evidence into the record to corroborate the expense information. For these reasons, the Board rejected both experts' opinions of fair cash value for fiscal year 2009.
The mere qualification of a person as an expert does not endow his testimony with any magic qualities. Boston Gas Co., 334 Mass. at 579. In reaching its decisions in these appeals, the Board was not required to believe the testimony of any particular witness or to adopt any particular method of valuation that a witness suggested; the Board could accept those portions of the evidence that the Board determined had more convincing weight. Foxboro Associates v. Assessors of Foxborough, 385 Mass. 679, 682 (1982); New Boston Garden Corp., 383 Mass. at 469. "The credibility of witnesses, the weight of evidence, and the inferences to be drawn from the evidence are matters for the Board." Cummington School of the Arts, Inc. v. Assessors of Cummington, 373 Mass. 597, 605 (1977).
Because neither party presented reliable evidence of the subject property's fair cash value for fiscal year 2009, the Board relied on the presumptive validity of the assessments. See The May Department Store Co. v. Assessors of Newton, Mass. ATB Findings of Fact and Reports 2009-153, 195 ("'[T]he taxpayer loses when the taxpayer and the assessors present the board with equally footless cases.'")(quoting Hampton Assoc. v. Assessors of Northhampton, 52 Mass. App. Ct. 110, 119 (2001)).

In conclusion, on the basis of all of the evidence, the Board found and ruled that the appellant failed to meet its burden of proving that the assessed value of the subject property exceeded its fair cash value for any of the fiscal years at issue. Accordingly, the Board issued decisions for the appellee in these appeals.
THE APPELLATE TAX BOARD

By: _____ ____
Thomas W. Hammond, Jr., Chairman

A true copy,

Attest: ______ _______
Clerk of the Board

For fiscal year 2006, the assessors granted a partial abatement to the appellant, reducing the original assessed value of $17,445,300 to $15,883,600, which decreased the total taxes due from $230,020.19 to $208,392.83
Mr. Wolff's estimated cost of renovations for fiscal year 2009 reflected the fact that the renovations were closer to completion on January 1, 2008 than they were during the other fiscal years at issue in these appeals.
"NNN" is an abbreviation for triple-net lease.
The Board noted that Mr. Wolff's total operating expenses exceeded the sum of his estimated replacement reserve allowance and management fees by $1.00, which the Board attributed to rounding. Because it was a de minimis amount, the Board found that it did not materially affect Mr. Wolff's analysis.
Mr. Wolff calculated this amount by taking the tax rate of $14.07 per thousand dollars of value and multiplying it by 20%, which represents the taxes that would not be reimbursed by tenants due to vacancy.
"GR" refers to a modified gross lease, under which tenants are responsible for all operating expenses except for electricity.
Mr. LaChance used the subject buildings' net rentable area of 291,424 square feet for his valuation analyses, rather than its gross building area of 303,715 square feet, which was the figure that Mr. Wolff used in his valuation analyses.
Mr. LaChance included "recoveries," or recovered expenses, in his estimated gross income. He calculated the recoveries by taking the estimated operating expenses for each fiscal year and multiplying that figure by 89% of the subject buildings' net rentable area, or 259,367, to account for his projected vacancy rate of 11%.

	ATB 2012-1191

USAA Properties IV, Inc. v. Board of Assessors of the Town of Chelmsford (December 5, 2012)

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