Donald L. Saunders Trustee, et al v. Board of Assessors of the City of Boston (February 6, 2012)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD


DONALD L. SAUNDERS 			 v. 		 BOARD OF ASSESSORS OF 
TRUSTEES, ET AL	         			 THE CITY OF BOSTON

Docket Nos.: F286812, F286813,
             F291209, F291210,
             F295542, F296898,
             F302800, F302802,
             F307488, F307489
             Fiscal Years 2006-2010

THIRTY 5 NEWBURY STREET TRUST  v.	      BOARD OF ASSESSORS OF 
								 THE CITY OF BOSTON

Docket Nos.: F296899, F302799, 		 Promulgated:
             F307490 				 February 6, 2012
             Fiscal Years 2008-2010
	

	These are appeals filed under the formal procedure pursuant to G.L. c. 58A, § 7 and c. 59, §§ 64 and 65, from the refusal of the Board of Assessors of the City of Boston ("assessors" or "appellee") to abate taxes on certain real estate located in Boston, owned by and assessed to Donald L. Saunders Trustees, et al ("Saunders Trust") and the Thirty 5 Newbury Street Trust ("Thirty 5 Newbury Trust") under G.L. c. 59, §§ 11 and 38.   The Saunders Trust appeals involve fiscal years 2006 through 2010; the Thirty 5 Newbury Trust appeals involve fiscal years 2008 through 2010.  Saunders Trust and Thirty 5 Newbury Trust will be collectively referred to as the "appellants."
	Commissioner Rose heard these appeals.  Chairman Hammond and Commissioners Scharaffa, Egan, and Mulhern joined him in the decisions for the appellee.  
	These findings of fact and report are made pursuant to the appellants' request under G.L. c. 58A, § 13 and 831 CMR 1.32.  

	David G. Saliba, Esq. for the appellants.
	Nicholas P. Ariniello, Esq. for the appellee.


			  
       FINDINGS OF FACT AND REPORT

On the basis of the testimony and evidence entered into the record at the hearing of these appeals, the Appellate Tax Board ("Board") made the following findings of fact. On January 1, 2005, January 1, 2006, January 1, 2007, January 1, 2008, and January 1, 2009, Saunders Trust was the assessed owner of a 5,149 square-foot parcel of land improved with a four-story brick building located at 29-31 Newbury Street in Boston ("29-31 Newbury").  On those same dates, Saunders Trust was the assessed owner of a 2,128 square-foot parcel of land improved with a four-story brick building located at 33 Newbury Street in Boston ("33 Newbury").  A summary of the relevant assessment data for both 29-31 Newbury and 33 Newbury is set forth in the following table:

  Address	 Fiscal 
  Year	 Assessed 
 Value ($)	 Tax Rate 
($/$1,000)	  Total 
  Tax ($)	
29-31 Newbury	  2006	 4,366,000	  30.70	134,036.20	
29-31 Newbury	  2007	 4,979,000	  26.87	133,785.73	
29-31 Newbury	  2008	 6,136,000	  25.92	159,045.12	
29-31 Newbury	  2009	 6,294,000	  27.11	170,630.34	
29-31 Newbury	  2010	 5,768,000	  29.38	169,463.84	
   33 Newbury	  2006	 2,566,000	  30.70	 78,776.20	
   33 Newbury	  2007	 2,906,000	  26.87	 78,084.22	
   33 Newbury	  2008	 3,577,500	  25.92	 92,728.80	
   33 Newbury	  2009	 3,626,000	  27.11	 98,300.86	
   33 Newbury	  2010	 3,364,000	  29.38	 98,834.32	

On January 1, 2007, January 1, 2008, and January 1, 2009, Thirty 5 Newbury Trust was the assessed owner of a 2,218 square-foot parcel of land improved with a four-story brick building located at 35 Newbury Street in Boston.  A summary of the relevant assessment data for 35 Newbury Street is set forth in the following table:
 Fiscal 
  Year	 Assessed 
 Value ($)	 Tax Rate 
($/$1,000)	  Total 
  Tax ($)	
  2008	2,858,000	  25.92	74,079.36	
  2009	2,888,500	  27.11	78,307.24	
  2010	2,680,500	  29.38	78,753.09	









The appellants timely paid the taxes due for each fiscal year without incurring interest.  The following table sets forth the relevant jurisdictional information:





Address	Docket No./
Fiscal Year	 Abatement App. Filed
	Abatement App. Denied	 Petition 
  Filed
	
29-31 Newbury	F286812/FY 06	  2/1/06	  4/28/06	 7/20/06	
29-31 Newbury	F291210/FY 07	  2/1/07	  3/22/07	 6/19/07	
29-31 Newbury	F295542/FY 08	  2/1/08	  3/14/08	 6/03/08	
29-31 Newbury	F302800/FY 09	  2/2/09	  4/01/09	 6/24/09	
29-31 Newbury	F307488/FY 10	  2/1/10	  3/29/10	 6/15/10	
   33 Newbury	F286813/FY 06	  2/1/06	  4/28/06	 6/20/06	
   33 Newbury	F291209/FY 07	  2/1/07	  3/22/07	 6/19/07	
   33 Newbury	F296898/FY 08	  2/1/08	  3/21/08	 6/19/08	
   33 Newbury	F302802/FY 09	  2/2/09	  4/01/09	 6/24/09	
   33 Newbury	F307489/FY 10	  2/1/10	  3/29/10	 6/15/10	
   35 Newbury	F296899/FY 08	  2/1/08	  3/21/08	 6/19/08	
   35 Newbury	F302799/FY 09	  2/2/09	  4/01/09	 6/24/09	
   35 Newbury	F307490/FY 10	  2/1/10	  3/29/10	 6/15/10	

On the basis of the foregoing, the Board found that it had jurisdiction to hear and decide these appeals.  
The hearing of these appeals took place over six days and involved the testimony of five witnesses.  The appellants called two witnesses, Webster A. Collins, a licensed real estate appraiser who is an Executive Vice President and Partner at CB Richard Ellis Partners, Inc., and Annette Born, a real estate broker who has extensive experience with properties located on Newbury Street.  The assessors called three witnesses, Earl Smith, Deputy Director of Valuation for Boston's Assessing Department; Rudolph F. Brown, Jr., Supervisor of Boston's Assessing Department; and Pamela S. McKinney, a licensed real estate appraiser who is the Principal and President of Byrne McKinney & Associates. 
 
		      THE SUBJECT PROPERTIES
The properties at issue, which will hereafter be collectively referred to as the "subject properties," were built around the turn of the twentieth century and were most recently renovated between 2004 and 2008.  Like many of the buildings on Newbury Street, the subject properties are four to five-story brownstone buildings originally constructed as apartment buildings.  The exterior of the subject buildings is brownstone and brick.  Roof cover is slate at the mansard-styled portions of the subject properties' roofs and rubber membrane elsewhere.  Interior finishes include painted sheet rock and textured plaster walls and wood flooring.  The ceilings are a mix of painted sheetrock, textured plaster, and suspended acoustical tiles.  The overall interior condition of the subject properties is good.  
29-31 Newbury and 33 Newbury operate as a single building, with a combined total of 29,411 square feet of mixed-use office and retail space, with one elevator and a number of staircases.  35 Newbury consists of 4,980 square feet of mixed-used office and retail space; it also has an elevator and staircase.  
The subject properties are located in Boston's tony Back Bay neighborhood, approximately one block from the Boston Public Garden.  They are situated at the north end of Newbury Street, which is a high-end shopping district.  For zoning purposes, the subject properties are located in a general business district, which permits a wide range of retail, office, and non-profit uses.  During the fiscal years at issue, the subject properties housed a diverse array of office and retail tenants, all of whom were legally conforming.  The tenants included, but were not limited to, a beauty salon, a restaurant, apparel stores, a jewelry store, an art gallery, an eye-glass store, and offices. 

	    THE APPELLANTS' VALUATION EVIDENCE
 Mr. Collins' Original Appraisal Report
The appellants presented their case primarily through the testimony and self-contained appraisal report of Webster A. Collins, a licensed real estate appraiser whom the Board qualified as an expert in real estate appraisal.
To begin his fee-simple appraisal of the subject properties, Mr. Collins inspected the interior and exterior of each of the subject properties.  He also inspected the interior and exterior of each of his chosen comparable retail properties.  
The first step in Mr. Collins' appraisal was to determine the highest and best use of the subject properties.  Mr. Collins concluded that the highest and best use of the subject properties was their continued use as mixed office and retail space.  
The next step in Mr. Collins' appraisal was the selection of an appropriate valuation methodology.  Mr. Collins considered the three usual approaches to value.  He ruled out the cost approach because that method is more appropriate when valuing newer buildings, and it was Mr. Collins' opinion that it would not be a reliable method with which to value the subject properties, which were more than a century old.  Mr. Collins likewise ruled out the sales-comparison approach because the majority of sales of comparable properties in the relevant time period involved sales of leased-fee interests, whereas the relevant inquiry in these appeals was the fee-simple value of the subject properties.  Mr. Collins ultimately used the income-capitalization approach to value the subject properties because of their long history as income-producing properties.  
To begin his income-capitalization analyses, Mr. Collins selected sixteen purportedly comparable retail leases to assist in estimating market rent for the subject properties' retail spaces.  Fifteen of the leases involved properties located on Newbury Street while one involved a lease on nearby Dartmouth Street.  The following table is a summation of the relevant information pertaining to Mr. Collins' selected comparable retail leases. 
Comp. Lease
Number	 Address	Tenant Name	Entrance/Floor	Lease Area(SF)	Lease Term	Rent ($/PSF)		1	81 Newbury 	Marc Jacobs	Direct Access	3,759	4/04-2/14	70.00-81.89		2	119 Newbury	Laser Skin Care	2nd Floor	1,200	6/06-3/11	49.35-57.73		3	220 Newbury	1154 Lill Studios	Parlor	1,080	2/04-2/09	60.00-70.00		4	286-288 Newbury	Highlights Salon	Lower Level	1,191	7/05-6/10	62.47-79.60		5	286-288 Newbury	Luna Boston	Parlor	1,089	4/04-3/07	72.73		6	299-301 Newbury 	Amnet	Lower Level	1,050	7/04-6/09	36.57		7	299-301 Newbury	Anthony Pino Salon	Upper Level	1,300	4/04-5/09	38.77		8	265-275 Dartmouth	Salon Red	Lower Level	1,632	2/07-1/08	63.59		9	165 Newbury	Kitchen Arts	Lower Level	  415	3/04-4/09	45.00		10	165 Newbury 	Ana Hernandez	Upper Level	  664	6/06-5/11	47.86		11	165 Newbury	Bridget and Scott	Upper Level	  540	3/05-2/08	50.00		12	165 Newbury	Janine, Inc.	Upper Level	  275	2/04-1/09	50.00		13	165 Newbury	Fletcher	Upper Level	  985	5/04-4/09	50.00		14	129 Newbury	Jonathan Adler	Lower Level- 4 steps down	1,400	5/09-
4/14	70.00		15	168 Newbury 	Cotelac	Parlor - 7 steps up	1,000	12/09-
11/14	70.00		16	85-91 Newbury 	Newbury Tailoring	2nd Floor	1,450	9/05-
8/10	41.83		

After considering his selected comparable leases, Mr. Collins computed retail market rents for each of the subject properties.  The following table substantially reproduces his allocated retail market rents for each of the fiscal years at issue:
 	 
Address	Space - UL & LL 
	     FY 06
 	FY 07
	 FY08
	 FY 09 
	FY 10 
	
29-31, 33
Newbury











35 Newbury         Street	Retail-LL/UL

Retail 2nd Floor

Budden-
Brooks Avg.

Average


Retail- LL

Retail 2nd 
Floor

Retail 3rd
Floor

Average              	     $69.50
    

     $45.00
     

     $25.00



     $46.50  

                                        	$73.00


$45.00  


$26.00


                                $48.00
	











$90.50


$41.00


$41.00

$57.50     	 $81.25


 $45.00


 $26.00


 
 $50.75

 
 $96.00


 $42.00


 $42.00

    $60.00         
	$81.50


$45.00


$28.00



$51.50


$98.00


$44.00


$44.00

$62.00	
							
							
							
							


Because the subject properties also had office space, Mr. Collins next estimated market office rent.  It was Mr. Collins' opinion that the long and narrow office space offered by the subject properties, which was on the upper floors of buildings that were formerly apartment buildings, differed from the type of space offered by more traditional office buildings.  For this reason, Mr. Collins determined that the subject properties' actual office rents provided more probative evidence of market rent than would a comparison of rents from other office buildings.  Thus, he examined the actual office rents at the subject properties.  The following table substantially reproduces the contract rent data examined by Mr. Collins:
    Address
(Newbury Street)	       Tenant	Lease Exp.	   Rent ($/SF)	
   29-31, 33	Atlantic International	  8/07	     25.00	
   29-31, 33	     Wenner Media	  8/05	     44.00	
   29-31, 33	   CM Communications	  8/05	     26.00	
   29-31, 33	Natl. Public Television	  8/07	     23.00	
   29-31, 33	iDine Restaurant Group	  8/08	  27.54-29.22	
      35	     Maggie, Inc. 	  8/05	     26.74	

	In his appraisal report, Mr. Collins noted that there were changes to the rent roll throughout the periods at issue.  Atlantic International renegotiated its rent with a new average rent of $29.00 per square foot.  A different tenant took over the space occupied by Wenner Media, which had been leased at $44.00 per square foot, for a rent of $26.00 per square foot.  Wenner Media in turn leased a smaller space, with a rent of $26.99 per square foot for 2006 and $27.55 per square foot for 2007.  CM Communications renewed its lease in 2005 for a three-year period with a rent of $27.00 per square foot.  Maggie, Inc. renewed its lease for a five-year period with a rent of $28.10 per square foot.  Additionally, in 2008, Third Rock Ventures began occupying any available space at 29-31 and 33 Newbury Street, eventually leasing a total of 8,010 of office space for an effective rent of $32.73 per square foot.  In 2009, Third Rock Ventures leased additional space at 29-31 Newbury and 33 Newbury for an effective rent of $28.32 per square foot.  
Based on this data, Mr. Collins concluded that fair market rent for office space at 29-31 Newbury and 33 Newbury Street was $31.50 per square foot for fiscal years 2006 through 2009 and $34.00 per square foot for fiscal year 2010.  Mr. Collins concluded that fair market rent for office space at 35 Newbury Street was $26.75 for fiscal year 2008; $27.75 for fiscal year 2009; and $28.00 per square foot for fiscal year 2010. 
For both office and retail space, Mr. Collins used a vacancy rate of five percent for each of the fiscal years at issue, which he stated was based on the market data.  
To estimate appropriate operating expenses, Mr. Collins reviewed both the actual operating expenses reported for the subject properties, as well as the reported operating expenses for four other buildings on Newbury Street.  Reported expenses for 29-31 Newbury and 33 Newbury for the years ended December 31, 2004 through December 31, 2008, exclusive of real estate taxes and insurance, ranged from $13.14 to $14.91 per square foot.  Reported expenses for 35 Newbury Street for that same time period, exclusive of real estate taxes and insurance, ranged from $10.92 to $21.29 per square foot.  The four comparison-properties had operating expenses ranging from $7.88 per square foot to $9.76 per square foot.   Mr. Collins stated that because 29-31 and 33 Newbury Street consisted of combined buildings with various staircases and entrances, they had higher operating expenses, particularly for insurance and repairs and maintenance.  Mr. Collins ultimately selected stabilized operating expenses for 29-31 and 33 Newbury Street ranging from $11.14 to $12.95 per square foot and $8.50 to $9.02 per square foot for 35 Newbury Street.  
After determining that professional management fees in the local market ranged from three percent to five percent, Mr. Collins estimated costs for management fees at four percent.  He also estimated $0.30 per square foot for tenant improvements for the office space, but made no such allowance for the retail space because allowances for tenant improvements are typically not made in retail leases.  He also estimated $1.35 per square foot for leasing commissions, which he based on actual commissions paid as reported for the subject properties, and $1.00 per square foot for replacement reserves.    
After incorporating all of this data into his income and expense analyses, Mr. Collins derived a net operating income ("NOI") for each of the subject properties as follows:
  


 Fiscal Year		29-31, 33 Newbury		35 Newbury	
 2006		         $594,223
	 2007                $583,402
       2008                $604,902		       $164,591
       2009                $609,975              $169,987
       2010                $653,404              $197,040

The next step in Mr. Collins' income-capitalization analyses was the selection of appropriate capitalization rates.  To assist in the selection of capitalization rates, Mr. Collins consulted the Korpacz Real Estate Investor Survey ("Korpacz Survey").  According to the Korpacz Survey, non-institutional grade properties in Boston had an average capitalization rate of 8.92 percent in the fourth quarter of 2004; 9.36 percent in the fourth quarter of 2005; 8.79 percent in the fourth quarter of 2006; 8.65 percent in the fourth quarter of 2007; and 9.36 percent in the fourth quarter of 2008.  Mr. Collins also conducted a band-of-investment analysis for each of the fiscal years at issue.  His band-of-investment analyses yielded the following indicated capitalization rates: 9.10 percent for fiscal year 2006; 9.10 percent for fiscal year 2007; 9.4 percent for fiscal year 2008; 9.3 percent for fiscal year 2009; and 10.3 percent for fiscal year 2010.  After considering these sources and other factors, Mr. Collins ultimately selected a capitalization rate of 9.0 percent for fiscal years 2006 through 2009 and a capitalization rate of 9.5 percent for fiscal year 2010.  
To these capitalization rates, Mr. Collins added the applicable tax factors for each of the fiscal years at issue.  After applying his loaded capitalization rates to his NOIs, Mr. Collins arrived at the following estimates of fair cash value in his original appraisal report:
     Address  	         Fiscal Year	      Rounded Fair Cash Value
 29-31 Newbury St.            2006			      $3,390,000
 29-31 Newbury St.	      2007			      $3,435,000
 29-31 Newbury St.	      2008			      $3,595,000
 29-31 Newbury St.	      2009			      $3,590,000
 29-31 Newbury St.	      2010			      $3,615,000

 33 Newbury St.			2006				$1,535,000
 33 Newbury St.			2007				$1,555,000	
 33 Newbury St.			2008				$1,625,000
 33 Newbury St.			2009				$1,620,000
 33 Newbury St.			2010				$1,635,000

 35 Newbury St.		      2008			      $1,420,000
 35 Newbury St.	            2009		            $1,450,000
Newbury St.		      2010			      $1,585,000

 Mr. Collins' Corrected Appraisal Report
On cross-examination during the hearing of these appeals, Mr. Collins admitted to several errors in his appraisal report.  Among the errors in Mr. Collins' original appraisal report was his application of an average retail rent to the entire retail space in each of the subject properties.  Mr. Collins derived his average retail rents by adding together the average rents for each of the three levels of retail space in the subject properties, and then dividing the sum by three.  This approach failed to take into consideration the differing amounts of space at each retail level, and thus, resulted in NOIs which did not accurately reflect the potential income of the subject properties.  
After Mr. Collins acknowledged this error and other errors upon cross-examination, the appellants submitted an 18-page errata sheet with significantly increased estimates of both market rent and fair cash value.  In some instances, Mr. Collins' opinions of value increased by more than twenty percent.  Mr. Collins' revised opinions of fair cash value, as presented in the errata sheet, were as follows:
      Address  	    Fiscal     Rounded Fair      Increase Over Original
  			     Year       Cash Value           Opinion of Value

  29-31 Newbury St.    2006	    $4,085,000	         $695,000
  29-31 Newbury St.    2007	    $4,220,000		   $785,000
  29-31 Newbury St.    2008	    $4,350,000		   $755,000
  29-31 Newbury St.    2009	    $4,530,000             $940,000
  29-31 Newbury St.    2010	    $4,490,000		   $875,000

  33 Newbury St.	     2006       $1,850,000		   $315,000
  33 Newbury St.       2007       $1,910,000		   $355,000
  33 Newbury St.       2008       $1,965,000		   $340,000
  33 Newbury St.       2009       $2,050,000             $430,000
  33 Newbury St.       2010       $2,030,000             $395,000

  35 Newbury St.	     2008	    $1,445,000              $45,000
  35 Newbury St.	     2009	    $1,475,000              $25,000
  35 Newbury St.	     2010       $1,600,000              $15,000

 Additional Evidence Offered by the Appellants 
In addition to Mr. Collins' report and testimony, the appellants offered the testimony of Annette Born, who is a licensed commercial real estate broker.  Ms. Born primarily deals with retail properties and has extensive knowledge of the properties on Newbury Street.  The Board allowed her to testify about retail rentals on Newbury Street based on her personal knowledge.  
Ms. Born described the positive and negative attributes of the subject properties.  She testified that the first block of Newbury Street, where the subject properties are located, is "the Madison Avenue" of Boston, where the "highest and best" retailers are frequently located. Ms. Born additionally testified that among the subject properties' positive features were their glass store fronts and good visibility.  
However, Ms. Born testified that the subject properties had many features that were undesirable to potential retailers.  The primary drawback, according to Ms. Born, was the entrancing at the subject properties.  As described in detail by Mr. Collins, the subject properties did not have direct street-level access, but instead had entrances involving several steps up or down, depending on the particular location.  Interior access in many of the subject properties' spaces was likewise staggered.  Ms. Born testified that these features were not inviting to shoppers, and therefore, were considered drawbacks by potential retail tenants.  
Ms. Born noted that the subject properties' retail spaces were comparatively smaller spaces which were typically more desirable to local retailers.  Ms. Born testified that large, national retailers usually leased larger spaces, and further, that the large national retailers often preferred to have their names on the front of the building.  She stated that it was difficult to accommodate this preference in brownstones like the subject properties, because they typically had curved facades that did not lend themselves to the type of signage desired by the large national retailers.  The evidence largely corroborated Ms. Born's testimony, as it indicated that most of the tenants at the subject property were small, local retailers rather than large national chains.  
One exception noted by Ms. Born was Robert Marc, an eye-glass retailer with outlets in New York.  Ms. Born personally brokered the Robert Marc lease at 35 Newbury Street, and she testified that the terms of its lease, which began with rents of $95.00 per square foot with periodic increases, represented a "good rent," and that she probably could have secured a rent in excess of $100.00 per square foot had there been a direct front entrance to the space, rather than its actual side entrance.  Ms. Born testified that because Robert Marc had been operating in New York, where retail rents are often more expensive, it was willing to pay comparatively high rents.  Ms. Born testified that large national retailers are often willing to pay higher rents than small, local retailers.  



THE ASSESSORS' EVIDENCE
The assessors entered into the record the relevant jurisdictional documents, various deeds, photographs, and several quarterly issues of the Korpacz Survey, along with the testimony of three witnesses: Earl Smith, Acting Deputy Director of Valuation for Boston's Assessing Department; Rudolph F. Brown, Jr., Supervisor of Assistant Assessors for Boston's Assessing Department; and Pamela S. McKinney, a licensed real estate appraiser who is the President and Principal of Byrne McKinney & Associates.  The Board qualified Ms. McKinney as an expert in real estate appraisal.  
Mr. Brown and Mr. Smith testified primarily regarding photographs of the subject property and some of the comparable properties located on Newbury Street which had been taken by the assessors at various points in time.  For her part, Ms. McKinney did not present an appraisal report, but instead testified primarily concerning appraisal practices.  Ms. McKinney testified that mortgage rates are tied to the length of the mortgage term; a shorter mortgage term equates with lower interest rates, and a longer mortgage term equates with higher interest rates. In determining his capitalization rates, Mr. Collins used interest rates derived from the Korpacz Survey, which were based on 25- to 30-year mortgage terms.  However, Mr. Collins did not use 25- to 30-year mortgage terms in his band-of-investment analyses, but instead used a 20-year mortgage term, which he based on the useful economic life of the subject properties.   Mr. Collins therefore used interest rates that were not consistent with the other variables used in his band-of-investment analyses, and this inconsistency generated artificially inflated capitalization rates.

	     THE BOARD'S VALUATION FINDINGS 
	On the basis of all of the evidence, including the 18-page errata sheet submitted by the appellants, the Board found that the appellants failed to prove that the assessed values of the subject properties exceeded their fair cash values for the fiscal years at issue.  In support of their position, the appellants primarily relied on the testimony and appraisal report of their expert real estate appraiser, Webster Collins, but the Board found that Mr. Collins' valuation methodology utilized unreliable data that was permeated with errors and inconsistencies.  Even as corrected, neither his testimony nor his appraisal report provided credible evidence of the subject properties' fair cash values.   
	First, the Board found that Mr. Collins' purportedly comparable retail leases were not truly comparable to the subject properties.  None of them was located on the first block of Newbury Street, which Ms. Born testified was "the Madison Avenue" of Boston.  It was not apparent from the record whether Mr. Collins made adjustments to account for this difference in location, and if he did, he failed to explain the basis for those adjustments.  Moreover, Mr. Collins derived his market retail rents from the same set of comparable properties for all five of the fiscal years at issue for 29-31 and 33 Newbury Street and for all three of the fiscal years at issue for 35 Newbury Street, even though the lease commencement dates in his comparable set varied widely.  For example, the Cotelac lease at 168 Newbury Street commenced in December of 2009, which was almost five years after the earliest date of valuation at issue.  From this static set of leases Mr. Collins derived a range of market rents for the fiscal years at issue, but again, he failed to explain whether or how he made adjustments to his comparable rents to account for differences in time.  Because they were not located in the first block of Newbury Street and because there were large variations in time between the relevant dates of valuation and the lease commencement dates of his comparable leases, the Board found that Mr. Collins' comparable leases did not provide reliable evidence of fair market rent for the subject properties.  Further, because Mr. Collins failed to explain whether or how he adjusted his estimates of rent to account for these differences the Board could not determine if any such adjustments were supported by the evidence of record.  The Board found that Mr. Collins' failure to use truly comparable data and his failure to explain his adjustments significantly diminished the probative force of his opinions of fair cash value.   
	Second, the Board found that both the lease data and methodology used by Mr. Collins to form his estimates of market rent were replete with inaccuracies and errors to the point that that his estimates of market rent were of no assistance to the Board.  Mr. Collins displayed a lack of familiarity with both his comparable leases and the subject properties.  At various points in his testimony, Mr. Collins was unclear as to what building the leased space was located in and whether certain of the leases were for first or second floor space.  Compounding his lack of familiarity with the buildings and leases was Mr. Collins' admission on cross-examination that he did not verify any of his chosen comparable leases with either the landlord, tenant, or broker, but instead relied on information obtained by persons within his office, even though he did not acknowledge the assistance of those persons in his appraisal report.  
Additionally, Mr. Collins placed significant reliance on renewed leases and renegotiated rents.  However, lease renewals or extensions negotiated with existing tenants often provide unreliable evidence of market rent; for example, rents may be affected downward by landlords who wish to avoid the potential risk and expense of having to find new tenants or upward by tenants who have an established presence in a particular location or who wish to avoid relocation expenses.  Exacerbating his reliance on these lease renewals was the fact that, in two instances, the data on which he relied was either inaccurate or misleading.  On page 74 of his original appraisal report, Mr. Collins reported an original rent of $130.00 per square foot for the restaurant 29 Newbury Street, which was located on the lower level of 29 Newbury Street, and a renewed rent of $65.00 per square foot.  However, upon cross-examination, Mr. Collins acknowledged that the rent for 29 Newbury Street was not calculated on a per-square-foot basis, but instead was calculated as a percentage of sales.  Further, for the space occupied by Pam Lerner at 31 Newbury Street, Mr. Collins reported an original rent of $103.33 per square foot and a renewed rent of $64.66 per square foot; yet, on cross-examination, Mr. Collins acknowledged that what he had listed as a "lease expiration" date of August of 2007 was in fact the lease renewal date upon which the rent was renewed for $103.33.  This error was not corrected in the 18-page errata submitted by the appellants.  
	Furthermore, in his original appraisal report, Mr. Collins applied an average retail rent to the entire retail area in each of the subject properties.  This methodology failed to take into consideration the different amounts of space at each floor level, even though Mr. Collins himself emphasized that market rent varies greatly depending on floor level.  Thus, Mr. Collins' methodology resulted in NOIs which did not accurately reflect the potential income of each of the subject properties.  Mr. Collins conceded this significant error only upon cross-examination, and he submitted recomputed estimates of market rent and fair cash value which were significantly higher than his original estimates.  Although he acted to correct his error, the Board found that Mr. Collins' failure to recognize the inappropriateness of his approach in the first place, and his admission of this error only upon cross-examination, coupled with the other errors discussed above, called into question the overall reliability of his appraisal.  
	In addition, the capitalization rates selected by Mr. Collins were not supported by reliable, credible evidence.  Mr. Collins claimed to have based his capitalization rates, in part, on rates for non-institutional grade properties in Boston as contained the Korpacz Survey.  However, on cross-examination, Mr. Collins conceded that what had been labeled in his report as data for non-institutional grade properties in Boston was actually the data for national strip shopping centers. The Board found that this discrepancy further undermined the credibility of Mr. Collins' testimony.  Moreover, notwithstanding the fact that strip shopping centers are likely greater investment risks than properties located on the first block of Newbury Street, Mr. Collins nevertheless used even higher rates than those reported by the Korpacz Survey for strip shopping centers.  Thus, the Board found that the data cited by Mr. Collins provided little support for his capitalization rates.
	Similarly, there were significant flaws in Mr. Collins' band-of-investment analyses which the Board found seriously undermined the reliability of these analyses.  Mr. Collins testified that he used mortgage-interest rates derived from the Korpacz Survey, which were based on 25 to 30-year mortgages.  However, Mr. Collins did not use 25 to 30-year terms in his band-of-investment analyses, but instead used a 20-year mortgage term.  Moreover, he selected a 20-year period based on his estimate of the economic useful life of the subject properties, rather than on a loan term, as is done in the Korpacz Survey.  As Ms. McKinney testified, mortgage rates are tied to the length of the mortgage term; a shorter mortgage term equates with lower interest rates, and a longer mortgage term equates with higher interest rates.  Mr. Collins therefore used interest rates that were not consistent with the other variables used in his band-of-investment analyses, and these inconsistencies generated artificially inflated capitalization rates.  Based on these internal inconsistencies, and his misuse of data relating to strip shopping centers, the Board found that Mr. Collins' capitalization rates were unreliable as they were based on inconsistent assumptions and on data that was not relevant to the subject properties.  The Board therefore placed little weight on Mr. Collins' capitalization rates.
	In conclusion, the Board found that key elements of Mr. Collins' income-capitalization analyses - his estimates of market rent and his capitalization rates - were premised on inaccurate, misleading, and unreliable data.  The Board therefore found that his estimates of fair cash value did not provide reliable evidence of the fair cash value of the subject properties.  Furthermore, the record was devoid of credible, persuasive evidence showing that the assessed values of the subject properties exceeded their fair cash values for the fiscal years at issue.  The Board therefore issued decisions for the appellee in these appeals.  

				         
OPINION
The assessors are required to assess real estate at its fair cash value. 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.  Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).  
"‛The burden of proof is upon the petitioner to make out his right as [a] matter of law to [an] 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, 365 Mass. at 245). 
In appeals before this Board, a taxpayer "'may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors' method of valuation, or by introducing affirmative evidence of value which undermines the assessors' valuation.'"  General Electric Co., 393 Mass. at 600 (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)). In the present appeals, the evidence offered by the appellants failed to persuade the Board that the subject properties were overvalued.  
 The appellants relied primarily on the testimony and appraisal report of their expert real estate appraiser, Webster Collins.  However, the Board found that the numerous errors permeating his appraisal report seriously undermined the reliability of his opinions of fair cash value.  
For example, though the subject properties were located on the first block of Newbury Street, which the appellants' own witness described as "the Madison Avenue" of Boston, none of Mr. Collins' purportedly comparable leases involved buildings located on that block.  Despite this obvious difference, it was not apparent from the record whether Mr. Collins made adjustments to account for differences in location.  See Antonino & Dimare v. Assessors of Shutesbury, Mass. ATB Findings of Fact and Reports 2008-54, 62 ("differences in location and area influences in particular mean that adjustments are needed before values can be extrapolated").  If he did in fact make adjustments to account for differences in location, he failed to explain the basis for those adjustments, and thus, there was no evidence in the record with which the Board could determine whether the adjustments were appropriate.  Similarly, Mr. Collins derived his market retail rents from the same set of comparable properties for all five of the fiscal years at issue for 29-31 and 33 Newbury Street and for all three of the fiscal years at issue for 35 Newbury Street.  Although Mr. Collins ultimately derived a range of rents for the fiscal years at issue, he completely failed to explain how he adjusted for differences in time.  See The May Department Store Co. d/b/a Filene's 79 v. Assessors of Newton, Mass. ATB Findings of Fact and Reports 2009-153, 180 ("[F]ailure to communicate and demonstrate that [an expert appraiser] ha[s] appropriately considered [an] adjustment for all of his purportedly comparable properties . . . taint[s] his adjusted market rents and also detracts from his opinion . . . of value.").  The Board found and ruled that Mr. Collins' failure to address these obvious differences or to provide any basis for his adjustments detracted from the reliability of his market rent estimates, and ultimately, his opinions of fair cash value.  
Moreover, in determining his estimates of market rent, Mr. Collins placed significant reliance on lease renewals within the subject properties.  However, lease renewals or extensions with existing tenants should be "used with caution . . . a landlord may offer existing tenants lower rent to avoid vacancies and the expense of obtaining new tenants."  Appraisal Institute, The Appraisal of Real estate (13th ed., 2008) 472.  Further, some of the lease information on which Mr. Collins based his conclusions was incorrect.  What had been reported in his appraisal report as a "lease expiration" date of August of 2007 for the Pam Lerner space at 31 Newbury Street was in fact the lease renewal date.  That rent was renewed at $103.33 per square foot, although Mr. Collins had reported it as renewed at $64.66 per square foot.  Similarly, Mr. Collins reported both original and renewed per-square-foot rents for the space at 29 Newbury Street occupied by the restaurant 29 Newbury, but he failed to acknowledge in his appraisal report that the rent for that space was not calculated on a per-square-foot basis, but instead was calculated as a percentage of sales.  The Board thus found and ruled that Mr. Collins' estimates of market rent were premised in part on misleading, inaccurate, and unreliable data, and therefore, it placed little weight on those estimates.  
In addition, in his original appraisal report, Mr. Collins applied an average retail rent to the entire retail area in each of the subject properties.  This methodology failed to take into consideration the different amounts of space at each floor level, even though Mr. Collins himself emphasized that market rent varies greatly depending on floor level.  See, e.g., Olympia & York State Street Co. v. Assessors of Boston, Mass. ATB Findings of Fact and Reports 1997-1133, 1148-49, aff'd, 428 Mass. 236 (1998) (applying varying rates of market rent for office space on different floors within a building to the total square footage on those floors).  Thus, Mr. Collins' methodology resulted in NOIs which did not accurately reflect the potential income of each of the subject properties.  Mr. Collins conceded this significant error only upon cross-examination, and he submitted recomputed estimates of market rent and fair cash value which were significantly higher than his original estimates.  The Board found and ruled that Mr. Collins' failure to recognize the error of his approach in the first place, coupled with the other errors discussed above, called into question the reliability of his appraisal in general. See The May Department Store Co., Mass. ATB Findings of Fact and Reports 2009 at 174.  
	Lastly, the Board found and ruled that there was little support in the record for Mr. Collins' selected capitalization rates.  In particular, they appeared to have been based in part upon data for national strip shopping centers, which have different investment characteristics than the subject properties.  In addition, Mr. Collins used interest rates that were not consistent with the other variables used in his band-of-investment analyses, and these inconsistencies generated artificially inflated capitalization rates.  Based on this internal inconsistency, and his misuse of data relating to strip shopping centers, the Board found that Mr. Collins' capitalizations rates were unreliable as they were based on inconsistent assumptions and on data that was not relevant to the subject properties.  The Board therefore placed little weight on Mr. Collins' capitalization rates.


The mere qualification of a person as an expert does not endow his testimony with any determinative weight.  Boston Gas Co., 334 Mass. at 579.  "The board [is] not required to believe the testimony of any particular witness."  Assessors of Boston v. Boston Consolidated Gas Co., 309 Mass. 60, 72 (1941); see also North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass. 296, 300 (1984); New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 473 (1981); Jordan Marsh Co. v. Assessors of Malden, 359 Mass. 106, 110 (1971). Having found and ruled that key elements of Mr. Collins' income-capitalization analyses, in particular, his market rents and his capitalization rates, were premised upon unreliable data, the Board found and ruled that Mr. Collins' estimates of fair cash value did not provide reliable evidence of the fair cash value of the subject properties.  
Furthermore, the record was devoid of credible, persuasive evidence showing that the assessed values of the subject properties exceeded their fair cash values for the fiscal years at issue.  The Board therefore found and ruled that the appellants failed to meet their burden of proving that the assessed values of the subject properties exceeded their fair cash values for 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

 Saunders Trust and Thirty 5 Newbury Trust are related trusts owned by the Saunders family.  
 Under G.L. c. 59, § 59, the appellants' Application for Abatement would have been due on February 1, 2009.  However, February 1, 2009 was a Sunday.  When the last day of a filing period falls on a Sunday or a legal holiday, the filing is still considered timely if it is made on the following business day.  G.L. c. 4, § 9.
 See footnote two.
 See footnote two.  
 According to Mr. Collins, space on Newbury Street is classified in part by its access or entrancing characteristics, with three main categories of access: lower level, which is typically four to seven steps below street level and features a half of a storefront; direct access, which offers a grand entrance directly at street level and a full or even two-story storefront; and upper or parlor level, which is typically five to eight steps above street level and offers a bay window storefront.  Upper level would also include spaces that are located on higher floors within a building and are not accessed directly from the exterior of the building.   
 Although fiscal year 2008 was included in these appeals for 29-31 and 33 Newbury Street, Mr. Collins' allocated retail market rent chart did not include data for 29-31 and 33 Newbury Street for that year.  He ultimately used an average retail rent of $48.50 per square foot in his original valuation analysis for those properties.  
 Buddenbrooks was a tenant located on the upper floors of 29-31 Newbury Street.  It appeared from the record that Buddenbrooks, a bookseller, was a unique business and its space was a hybrid of retail and office space.  

ATB 2012-36