Genzyme Corporation, et al. v. Board of Assessors of the City of Cambridge (May 4, 2011)

 			COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD


GENZYME CORPORATION, et al.          BOARD OF ASSESSORS OF 
                                      THE CITY OF CAMBRIDGE

Docket Nos. F277284, F282964,  	   Promulgated: 
F287968, F294379,		   May 4, 2011           F299101	 	
                                      

These are appeals filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65 from the refusal of the appellee Board of Assessors of the City of Cambridge ("appellee" or "assessors") to abate taxes on real estate located at 500 Kendall Street in Cambridge ("subject property").  The fiscal year 2005 and 2006 appeals were brought under G.L. c. 59, § 59 by Genzyme Corporation ("Genzyme") as a tenant paying rent and under an obligation to pay more than one-half of the taxes assessed.  The fiscal year 2007 through 2009 appeals were brought by BMR-500 Kendall Street, ("BMR-500 Kendall") LLC, which was the assessed owner of the subject property as of January 1, 2006, January 1, 2007, and January 1, 2008.  Genzyme and BMR-500 Kendall will hereafter collectively be referred to as the appellants.  
Commissioner Mulhern heard these appeals, and was joined by Chairman Hammond and Commissioners Scharaffa, Egan, and Rose in the decisions for the appellants in docket numbers F277284, F282964, F287968, and F294379 and in the decision for the appellee in docket number F299101. On its own motion, the Board issued a revised decision for the appellant in Docket No. F282964, which is promulgated simultaneously with these findings.  These findings of fact and report are made at the request of the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.

     John M. Lynch, Esq. and Stephen W. DeCourcey, Esq., for the appellants.
     Anthony M. Ambriano, Esq. for the appellee.

FINDINGS OF FACT AND REPORT
The hearing of these appeals took place over ten days, during which numerous exhibits and the testimony of six witnesses were offered into evidence. The appellants' witnesses were Robert Reardon, Director of Assessment for Cambridge; Lillian Orchard, the commercial review appraiser for the Cambridge Assessing Department; Emmet Logue, President of Hunneman Appraisal & Consulting, Inc. and a licensed real estate appraiser; Joseph P. Flaherty, Executive Vice President of Colliers, Meredith, & Grew, and Steven Moran, Genzyme's Facilities Operations Manager.  The appellee called one witness, Pamela McKinney, President of Byrne McKinney, & Associates and a licensed real estate appraiser.  To assist in the fact-finding process, the Appellate Tax Board ("Board") took a view of the subject property as well as several of the comparable properties selected by the parties' experts.  Based on those views, along with the testimony and exhibits offered at the hearing of these appeals, the Board made the following findings of fact.
	         The Subject Property
	The subject property is a 35,754 square foot parcel of land improved with a 349,325 square foot, 12-story office building, known as Genzyme Center ("Genzyme Center" or "subject building").  It was constructed between 2001 and 2003 to serve as the corporate world headquarters for Genzyme, which has a global work force of approximately 10,000 and is among the world's foremost biotechnology companies. Genzyme Center was designed to meet the green building standards of the U.S. Green Building Council.  That organization has granted Genzyme Center Leadership in Energy and Environmental Design ("LEED") certification at its highest level, the platinum level.  It is one of only 13 buildings in the United States to receive the platinum designation. 
	Genzyme's website contains a narrative describing the inspiration for and design of Genzyme Center, and excerpts from that website were entered into evidence.  According to the narrative, as Genzyme approached its 20th anniversary, it sought to build a new global headquarters building.  Specifically, Genzyme desired "a signature building that would stand as a reflection of its core values and a symbol of its established position . . . a bold building that would make a statement about the values that have driven its success."  Genzyme achieved its goal with the construction of Genzyme Center, which was the winner of the 2008 Boston Society of Architects' prestigious Parker Medal.  The Boston Globe's architecture critic described Genzyme Center as "the best and most delightful office building, bar none, this writer has seen in the Boston area."  
	Genzyme Center features a slab foundation with a steel and reinforced concrete frame.  There are tilt-up insulated glass building sidewalls, with some windows featuring operable sashes to allow for fresh air flow.  The building's roof deck is metal and has a rubber membrane cover.  There are gardens on the roof, which prevent excessive water run-off and absorb heat, as well as 18 different gardens in the building's interior.  
The doors to the building's lobby are full view aluminum framed thermal pane revolving units.  The building also has loading docks with overhead door entry into a modest shipping and receiving area on the ground floor.  Interior finishes include a mix of carpet, hardwoods, concrete pavers, and marmoleum flooring.  Interior walls are either sheetrock or glass while the ceilings are predominantly suspended.  The first floor contains a large lobby with retail space around its perimeter.  The retail area totals 6,325 square feet, and was vacant and in shell condition during the periods at issue.  A large formal staircase leads to the second floor, which houses a concierge and building security.  
Genzyme Center's defining interior feature is its large, floor-to-roof core atrium.  The atrium is an integral part of the building's green design.  Suspended in the atrium is one of the building's signature elements, a chandelier-like series of hanging prisms which distribute natural light throughout the building.  The atrium's large size and penetration through the building's core also promote the circulation of fresh air.  As a result of the atrium at the subject building's core, the upper floors have staggered floor plates, with the center of each floor exposed to the atrium.  The interior wall partitions are glass, allowing maximum light within.  Floor layouts are primarily open space, with private offices around the perimeter of each floor.  Each floor also has a kitchenette and open meeting spaces.  There is a company cafeteria on the 12th floor and an amphitheater on the first floor.  The subject building is serviced by six passenger elevators, two of which are glass-walled and exposed to the atrium.  
Genzyme Center's mechanical systems are considered state of the art and were designed for maximum energy efficiency.  The source of heat for the subject building is steam from a steam plant located adjacent to the subject property.  The heating, cooling and lighting systems operate with sensors to minimize use.  The roof is equipped with solar panels to help reduce electricity usage.  Computer-controlled interior window blinds are located throughout the subject building.  They open by day to maximize the use of natural light and close by night to promote the retention of heat and reduce light pollution.  

All wood used for the flooring in Genzyme Center was procured from within a 500-mile radius, and concrete used in the subject building contains a substantial amount of recycled materials.  Additional green building features include the so-called "smart plumbing" system, which involves low-flow fixtures, waterless urinals, and dual-flush toilets, all of which substantially reduce water use.  
Statements published by Genzyme, which were entered into evidence, assert that the subject building's design, including its atrium, positively impacts the workforce it houses.  According to Genzyme's publications, surveys conducted by Genzyme showed that the vast majority of employees reported that they felt "more alert and productive" while working at Genzyme Center and that the building's open design increased their "sense of connection with colleagues."  
	The subject property is located in Cambridge Research Park ("CRP"), a 1.275 million square-foot mixed-use site that contains six primary development sites.  Several of the sites were still under development and were not completed or occupied as of the relevant dates of assessment.  CRP is located in East Cambridge, in close proximity to Kendall Square.  CRP is a contaminated site, but has been remediated to meet the standards of the Massachusetts Department of Environmental Protection.  As a result, the subject property is subject to an Activity and Use Limitation.  
	CRP is located in a zoning district designated as Office 3A/Planned Unit Development District 3 ("PUD-3").  Development in any PUD-3 area is allowed only by special permit granted by the Planning Board.  A copy of the Planning Board's Final Development Plan Decision ("Decision") granting a special permit ("special permit") for the development of CRP was entered into evidence.  According to the Decision, approval for the development of CRP was predicated on, among other things, the inclusion of retail uses within the development.  This requirement was set to promote the local availability of services and products for people living and working within CRP, which would in turn reduce the overall traffic flow by eliminating the need to procure such products and services off-site.  Lillian Orchard of the Cambridge Assessing Department, who testified at the hearing of these appeals, confirmed in her testimony that Cambridge required the subject property to include retail uses.  To the extent that it is a finding of fact, the Board found that the special permit required the subject property to have a retail component.  
	The subject property is an irregularly shaped parcel and is level at grade with the surrounding streets.  It has frontage on both Kendall and Athenaeum Streets.  Parking for the subject property is located at a nearby underground garage to which the subject property has an easement granting it the right to a number of paid parking spaces.  The subject property is also accessible via public transportation, as it is a few blocks from the Kendall Square MBTA stop and approximately one-half mile from the Lechmere MBTA stop, along with various bus routes.  
Ownership and Jurisdiction
From 2002 through 2005, the subject property was owned by Kendall Square, LLC or its subsidiary, KS Parcel A/D, LLC, and leased in its entirety by Genzyme. The lease for the subject property was originally signed on August 28, 2000, for commencement on December 1, 2002 for a term of 15 years, with options to extend the lease period.  The annual rent paid by Genzyme in accordance with that lease was calculated by dividing the project cost by the total rentable area, and then multiplying that figure by 12%.  Genzyme was also responsible for payment of the real estate taxes.  The lease was subsequently amended in August of 2003.  The terms of the amended lease called for rent to be paid at a rate of approximately $44.00 per square foot for years one through nine of the lease term, increasing to approximately $54.00 per square foot for years ten to 15, with Genzyme again responsible for payment of the real estate taxes.   
In May of 2005, the subject property was sold as part of a multi-property portfolio sale to BMR-500 Kendall for an attributed sale price of $191,960,000.  Accordingly, on January 1, 2004 and January 1, 2005, Genzyme, was a tenant under obligation to pay 50% or more of the property taxes on the subject property, and on January 1, 2006, January 1, 2007, and January 1, 2008, BMR-500 Kendall was the assessed owner of the subject property. 
The following table sets forth the assessed values, tax rates, and total taxes assessed for the subject property for each of the fiscal years at issue.  
Fiscal Year	Assessed Value($)	 Tax Rate ($)/$1,000	 Total Taxes    Assessed ($)	
2005	113,843,100	  18.28	2,143,428.59	
2006	130,793,100	  17.86	2,405,990.13	
2007	130,793,100	  18.30	2,465,264.24	
2008	134,544,100	  17.24	2,389,074.77	
2009	134,456,100	  17.97	2,488,661.40	

The appellants timely paid the taxes assessed without incurring interest.  The following table sets forth additional relevant jurisdictional information.
Fiscal Year	Abatement Apps. Filed	Dates of Denials	Petition Filed with Board	
2005	12/1/04	12/10/04	3/10/05	
2006	11/14/05	12/22/05	3/22/06	
2007	11/20/06	12/14/06	3/14/07	
2008	11/19/07	1/22/08	4/22/08	
2009	11/24/08	12/12/08	3/11/09	

As evidenced by the foregoing, the appellants timely filed their abatement applications with the assessors and also timely filed their petitions with the Board.  Accordingly, the Board found and ruled that it had jurisdiction to hear and decide these appeals.  

		   The Appellants' Valuation Evidence 

	The appellants subpoenaed Lillian Orchard of the Cambridge Assessing Department to appear and testify. Ms. Orchard prepared the mass appraisal valuation analysis on which the assessors relied in assessing the subject property. She testified that the assessors used the income-capitalization approach to value the subject property.  
For fiscal years 2005, 2006, and 2007, the assessors began with a base rent of $35.00 per square foot for the subject property's office area, but after upward adjustments for such factors as location and condition, they used a rent of $45.15 per square foot, with operating expenses of $8.79 per square foot.  For fiscal years 2008 and 2009, the assessors began with a base rent of $36.00 per square foot, but made adjustments for the factors mentioned above, resulting in a rent of $52.70 per square foot for the office portion of the subject property. They used operating expenses of $9.04 per square foot for fiscal year 2008 and $10.51 per square foot for fiscal year 2009.  
For the subject building's retail area, the assessors used a rent of $16.00 per square foot for fiscal years 2005 through 2007, with operating expenses of $2.66 per square foot.  For fiscal year 2008, the assessors began with a base rent of $18.00 per square foot, but after adjustments, used a rent of $28.51 per square foot, with operating expenses of $3.31 per square foot.  For fiscal year 2009, the assessors began with a base rent of $25.00 per square foot, but after adjustment, they used a rent of $41.25 per square foot, with operating expenses of $5.09 per square foot. 

In addition, Ms. Orchard testified that the assessors used a flat vacancy rate of 5%, which was the vacancy rate used across Cambridge for all of the fiscal years at issue. 
The appellants' case-in-chief relied principally on the testimony and self-contained appraisal report of real estate appraiser Emmet Logue, whom the Board qualified as an expert in real estate valuation.  At the time of hearing, Mr. Logue had nearly 40 years of experience as an appraiser. A Member and Senior Residential Appraiser of the Appraisal Institute, and also a member of the Counselors of Real Estate, Mr. Logue is the President of Hunneman Appraisal and Consulting Company. During his career, Mr. Logue has appraised numerous office towers in Boston.  He also has extensive experience valuing commercial properties in Cambridge.  Mr. Logue has conducted appraisals for industrial and research and development properties and more than 30 office properties in Cambridge, some of which have involved fiscal years overlapping with the fiscal years at issue in these appeals.  
Mr. Logue inspected the interior of the Genzyme Center on September 22, 2009 and also inspected its exterior on numerous occasions.  In addition, to assist in the preparation of his appraisal, Mr. Logue reviewed deeds, site and plot plans, and also consulted with an architect with knowledge of Genzyme Center to assist in estimating its total rentable area.  He also reviewed local zoning requirements and conducted discussions with local brokers and property managers.  
Mr. Logue considered Genzyme Center to be class A office space and in excellent condition.  Based on its size, design, and other salient characteristics, Mr. Logue concluded that the highest and best use of the subject building was its continued use as a single-tenant office building with a small retail component.  In so concluding, Mr. Logue noted that Genzyme Center's large center atrium, its lighting design, and its heating and cooling systems would make it difficult to subdivide for occupancy by multiple tenants.  Further, although it is located in an area occupied by labs and other biotechnology companies, in Mr. Logue's opinion, the subject building was not suited for conversion to lab space because it lacked necessary ventilation and fire protection features and its twelve floors had lower ceiling heights than are generally suitable for housing the mechanical and electrical equipment associated with laboratory operations.  
	

Mr. Logue considered the three basic approaches to value.  Although the subject building was essentially new as of the first date of valuation, the relevant dates of valuation followed periods of declining rents, substantial vacancy, and increasing construction costs, making it difficult to estimate economic obsolescence.  Mr. Logue therefore ruled out the cost reproduction approach, because it was not, in his opinion, likely to yield a reliable estimate of the subject property's fair cash value.  In reaching this conclusion, Mr. Logue noted that the plans and lease terms for the subject property were established in late 2000, which was the peak of the office/lab market in Cambridge.   
Mr. Logue also rejected the sales-comparison approach because he concluded that most of the sales of comparable properties occurring within the relevant time period were sales of properties which were encumbered by leases, and thus involved the transfer of leased-fee interests, rather than fee-simple interests.  Mr. Logue therefore concluded that the sales of those properties were not useful in determining fee-simple values for office properties in Cambridge.  Similarly, Mr. Logue declined to place weight on the actual sale of the subject property, which sold in May of 2005 as part of a multi-property portfolio sale. Mr. Logue ultimately utilized the income-capitalization method to derive estimates of fair cash value for the subject property.  
In applying the income-capitalization methodology, Mr. Logue separately estimated market rents for the retail and office portions of the subject property. To estimate market rent for the 6,325 square feet of retail space at Genzyme Center, Mr. Logue selected seven retail leases from five properties in East Cambridge.  Six of the retail leases he reviewed were signed in 2004 while one was signed in 2005.  They involved spaces ranging in size from 681 to 3,900 square feet, with rents ranging from $20.39 to $33.50 per square foot.  Five of the seven retail leases were triple-net leases.  Based upon these rents, and the limited demand for the retail space at the subject property, Mr. Logue estimated the fair market rent of the subject property's retail space to be $21.00 per square foot, on a triple-net basis.  It was Mr. Logue's opinion that this rent would apply to each of the fiscal years at issue because the retail market in East Cambridge remained fairly stable during that period.  
In order to estimate the market rents for the office portion of the subject property, Mr. Logue selected a total of 27 leases for office properties in East Cambridge which he deemed comparable to the subject property.  Because these appeals span five fiscal years, Mr. Logue separated his market rent data into two groupings.  The first set, which appears in his appraisal report as Table A, contained 14 leases in ten different buildings.  The leases in Mr. Logue's Table A were signed between mid-2003 and late 2006.  The second set, which appears in his appraisal report as Table B, contained 13 leases in nine different buildings.  The leases in Mr. Logue's Table B were signed between mid-2006 and early 2008.  
	The leases contained in Table A involved spaces ranging in size from 8,767 to 73,199 square feet.  The leases in Table B involved spaces ranging in size from 11,008 to 193,800 square feet.  Table A rents ranged from $23.00 to $38.00 per square foot, while Table B rents ranged from $25.96 to $53.00 per square foot.  
Based on his review of market reports, his conversations with brokers and property managers, and his own recent appraisal experience, Mr. Logue formed the opinion that rents in Cambridge declined by 5% between 2004 and 2005, but remained stable between 2005 and 2006.  He further concluded that rents increased by 15% during 2006 and by 20% during 2007, before stabilizing in early 2008.  Mr. Logue therefore adjusted the rent data from his selected comparable leases to account for differences in time.  
After adjustment for time, Mr. Logue's comparable rents ranged from $21.30 to $38.95 per square foot for fiscal year 2005; $20.25 to $37.00 per square foot for fiscal years 2006 and 2007; $28.00 to $42.61 for fiscal year fiscal year 2008; and $33.60 to $51.45 per square foot for fiscal year 2009.  Based on this data, Mr. Logue formed a preliminary opinion of market rent for the subject property in the following amounts: $35.00 per square foot for fiscal year 2005; $33.50 per square foot for fiscal years 2006 and 2007; $39.00 per square foot for fiscal year 2008; and $46.50 per square foot for fiscal year 2009.  
However, Mr. Logue made a final adjustment to these rents to account for Genzyme Center's so-called "add on" factor.  This "add on" factor, according to Mr. Logue, was attributable to Genzyme Center's substantial, 12-story atrium, which rendered much of the building's area unrentable as office space. Mr. Logue opined that, though it had positive aesthetic and functional qualities, the subject building's atrium was a "significant drawback."  After reviewing Building Owners and Managers Association ("BOMA") standards as well as calculations created by an architect familiar with Genzyme Center, Mr. Logue concluded that the disparity between rentable and usable area at Genzyme Center was approximately 30%, in contrast to an average of approximately 10% or less in his selected comparable leases.  In addition, Mr. Logue's discussions with local brokers confirmed that rentable areas in the East Cambridge market generally do not include atrium space.  Accordingly, Mr. Logue decreased his estimates of market rent by 5% to account for this "add on" factor.  Mr. Logue's final estimates for fair market rent for Genzyme Center's office space were: $33.25 per square foot for fiscal year 2005; $32.00 per square foot for fiscal years 2006 and 2007; $37.00 per square foot for fiscal year 2008; and $44.25 per square foot for fiscal year 2009.  
Mr. Logue next focused on choosing appropriate vacancy and rent loss estimates.  To determine these estimates, Mr. Logue consulted market reports, which indicated that East Cambridge office vacancy rates peaked between January 1, 2004 and January 1, 2005, at which time they were as high as 18%.  Mr. Logue further testified that vacancy in the East Cambridge office market began to improve thereafter, with vacancy rates from 6.5% to 8% by January 1, 2008.  Based upon this data, Mr. Logue concluded that appropriate vacancy rates for the subject property were: 14% for fiscal year 2005; 13% for fiscal year 2006; 11% for fiscal year 2007; 10% for fiscal year 2008; and 9% for fiscal year 2009.  
To determine appropriate operating expenses, Mr. Logue reviewed the actual reported expenses for Genzyme Center, including information provided to him by Steven Moran, who was the Facilities Operations Manager for Genzyme, as well as actual reported expenses for several other East Cambridge office properties.  The actual expense figures for Genzyme Center obtained by Mr. Logue were in the $10.00 to $12.00 per square foot range, with the exception of 2004, during which the reported expenses were approximately $7.20 per square foot.  Mr. Logue considered the 2004 expenses anomalous and did not include them in his considerations because, according to his appraisal report, they did not include expenses for housekeeping, janitorial, and landscaping, among other categories.  Mr. Logue stated that Genzyme Center's reported expenses were considerably higher than other class A office properties in Cambridge, which he attributed to its status as a headquarters building and its unique, green design.  
Mr. Logue's assumptions were confirmed by the testimony of Steven Moran, who testified at the hearing of these appeals.  The Board found him to be credible.  Mr. Moran testified that he supervises a team of 11 individuals who collectively maintain and manage three facilities for Genzyme in Cambridge.  Those three facilities include the subject building, an office at 55 Cambridge Parkway, and an office at 675 West Kendall Street, a property which is adjacent to the subject property.  
Mr. Moran testified about the efforts required to clean and maintain Genzyme Center.  Rather than traditional walls, Genzyme Center has many interior windows and glass wall partitions, which allow for the open flow of light and air and which create a more open, accessible atmosphere.  Mr. Moran testified that his staff is responsible for cleaning the interior windows, and at certain points, there are as many as 14 layers of windows from one side of the building to the other. Mr. Moran further testified that cleaning these interior walls and windows involves rappelling down the interior of the building.  Similarly, Mr. Moran stated that his staff is also responsible for cleaning the interior prism chandelier, which requires a staff member to be suspended from the ceiling.  Additionally, Mr. Moran testified that Genzyme Center's 18 interior gardens require considerable maintenance, as do the waterless urinals, which need to be cleaned more extensively on a periodic basis than full-flow fixtures.  
Mr. Moran testified that he provided Mr. Logue with expense figures for the cleaning, maintenance and labor costs attributable to Genzyme Center, which had not been reported by the landlord because the landlord is generally not responsible for those expenses.  Because he concluded that the operating expenses at Genzyme were higher than the operating expenses at most class A office buildings in Cambridge, Mr. Logue adopted expense figures which were more in line with the market.  Those expenses were: $7.00 per square foot for fiscal year 2005; $7.25 per square foot for fiscal year 2006; $7.50 per square foot for fiscal year 2007; $7.75 per square foot for fiscal year 2008; and $8.00 per square foot for fiscal year 2009.  He applied these operating expenses to the office area of the subject building, but not the retail area, because of his assumption that the retail area was leased on a triple-net basis.  

Because the subject building was essentially new construction and in excellent condition during the fiscal years at issue, Mr. Logue concluded that $0.25 per square foot was a realistic estimate of replacement reserves, which are amounts allocated for the periodic replacement of items such as roofs, HVAC systems, and the like.  In addition, Mr. Logue allowed $0.60 per square foot for leasing commissions, which in his opinion, were likely to be annualized expenses absorbed by the landlord.  
Although some of Mr. Logue's chosen comparable leases were "as is" leases, most of the leases involved allowances for tenant improvements ("TIs").  The TIs in the Table A leases ranged from $7.00 to $70.00 per square foot, while the TIs in Table B leases ranged from $11.00 to $45.00 per square foot.  Mr. Logue's assumptions for market rent assumed a TI allowance of $15.00 per square foot, amortized at 6% over the lease term, which he assumed was five years.  He further assumed 35% to 50% tenant rollover probability.  With these assumptions, Mr. Logue's calculated TI allowance ranged from $1.25 to $1.75 per square foot. Given the class A quality of the subject property, among other factors, Mr. Logue considered it appropriate to select from the low end of that range, and he therefore applied a TI allowance of $1.25 per square foot for the 343,000 square feet of office space in the subject building.  Mr. Logue did not apply a TI to the retail space because he noted that expenses associated with build-out of retail space are usually borne by the tenant.   
The final step in Mr. Logue's income-capitalization analysis was the selection of appropriate capitalization rates.  To determine appropriate capitalization rates, Mr. Logue first used the mortgage equity technique, from which he derived the following capitalization rates: 7.6% for fiscal year 2005; 7.1% for fiscal year 2006; 6.9% for fiscal year 2007; 6.7% for fiscal year 2008; and 6.6% for fiscal year 2009.  Mr. Logue also consulted the Korpacz Real Estate Investor Survey ("Korpacz Survey") for the fourth quarter immediately preceding each of the relevant valuation dates.  He considered Genzyme Center to be an institutional grade property because of the excellent quality of the building and the strong identity of the East Cambridge office/lab market.  According to the Korpacz Survey, capitalization rates declined steadily during the fiscal years at issue, from an average of 9.26% in the fourth quarter of 2003 to an average of 7.21% in the fourth quarter of 2007.  Based on the market data and his own appraisal experience, Mr. Logue concluded that realistic capitalization rates for the subject property were: 7.75% for fiscal year 2005; 7.25% for fiscal year 2006; 7.00% for fiscal year 2007; 6.75% for fiscal year 2008; and 6.50% for fiscal year 2009.  Mr. Logue noted that these rates were near the low-end of the range of rates suggested by the Korpacz Survey because he took into consideration, among other things, the fact that the net operating incomes which he calculated were capitalized after deductions for leasing commissions and TIs, while the capitalization rates reported in the Korpacz Survey were based on net operating incomes that included leasing commissions and TIs.  To each of these rates, Mr. Logue added tax factors, which he prorated to account for his assumption that 1.81% of the building was occupied by retail space leased on a triple-net basis.  
The pro forma income and expense analyses offered by Mr. Logue are presented in the following tables:






     Logue Income Approach Pro Forma FY 05
Potential Gross Rent:			S.F.      Rent/S.F.     Total
			      Office    343,000      $33.25	   $11,404,750
				Retail	6,325      $21.00       $132,825
Total Floor Area			    349,325

Total Potential Gross Rent          			   $11,537,575

Vacancy and Collection Loss         14%		         ($1,615,261)

Effective Gross Rent	                                  $9,922,315	

Expenses
Operating Expenses		    $7.00	   ($2,401,000)   
Leasing Commissions		    $0.60        ($209,595)
Reserve for Replacement           $0.25         ($87,331)
Tenant Improvements 		    $1.25	     ($428,750)
Total Operating Expenses					   ($3,126,676)

Net Operating Income (NOI)					    $6,795,638

Capitalization
Rate				          7.750%
Tax Factor-$18.28/1000*.9819	    1.795%

Overall Rate                      9.545%

Indicated Value							   $71,195,791

Rounded 								   $71,200,000






      Logue Income Approach Pro Forma FY 06
Potential Gross Rent:			S.F.      Rent/S.F.      Total
			      Office    343,000      $32.00	    $10,976,000
				Retail	6,325      $21.00        $132,825
Total Floor Area			    349,325
Total Potential Gross Rent          			    $11,108,825

Vacancy and Collection Loss         13%		          ($1,444,147)

Effective Gross Rent	                                   $9,664,678

Expenses
Operating Expenses		    $7.25	  ($2,486,750)
Leasing Commissions		    $0.60       ($209,595)
Reserve for Replacement           $0.25        ($87,331)
Tenant Improvements 		    $1.25	    ($428,750)
Total Operating Expenses					    ($3,212,426)

Net Operating Income (NOI)					     $6,452,252

Capitalization
Rate				           7.250%
Tax Factor-$17.86/1000*.9819	     1.735%
Overall Rate                       8.985%

Indicated Value							    $71,808,172

Rounded 								    $71,800,000








     Logue Income Approach Pro Forma FY 07
Potential Gross Rent:			S.F.      Rent/S.F.      Total
			      Office    343,000      $32.00     $10,976,000
				Retail	6,325      $21.00        $132,825
Total Floor Area			    349,325
Total Potential Gross Rent          			    $11,108,825

Vacancy and Collection Loss         11%		          ($1,221,971)

Effective Gross Rent	                                   $9,886,854

Expenses
Operating Expenses		     $7.50	  ($2,572,500)
Leasing Commissions		     $0.60      ($209,595)
Reserve for Replacement            $0.25       ($87,331)
Tenant Improvements 		     $1.25	    ($428,750)

Total Operating Expenses					    ($3,298,176)

Net Operating Income (NOI)					     $6,588,678

Capitalization
Rate					      7.000%
Tax Factor-$18.30/1000*.9819		1.797%
Overall Rate                        8.797%

Indicated Value							    $74,897,921

Rounded 								    $74,900,000
     



   Logue Income Approach Pro Forma FY 08
Potential Gross Rent:			S.F.      Rent/S.F.      Total
			      Office    343,000      $37.00     $12,691,000	
				Retail	6,325      $21.00        $132,825
Total Floor Area			    349,325
Total Potential Gross Rent          			    $12,823,825

Vacancy and Collection Loss         10%		          ($1,282,383)

Effective Gross Rent	                                  $11,541,443

Expenses
Operating Expenses		    $7.75	  ($2,658,250)
Leasing Commissions		    $0.60       ($209,595)
Reserve for Replacement           $0.25        ($87,331)
Tenant Improvements 		    $1.25	    ($428,750)

Total Operating Expenses					    ($3,383,926)

Net Operating Income (NOI)					     $8,157,516

Capitalization
Rate				          6.750%
Tax Factor-$17.24/1000*.9819	    1.693%
Overall Rate                      8.443%

Indicated Value							    $96,621,032

Rounded 								    $96,600,000





      Logue Income Approach Pro Forma FY 09
Potential Gross Rent:			S.F.       Rent/S.F.      Total
			      Office    343,000       $44.25     $15,177,750
				Retail	6,325       $21.00        $132,825
Total Floor Area			    349,325
Total Potential Gross Rent          			     $15,310,575

Vacancy and Collection Loss          9%		           ($1,377,952)

Effective Gross Rent	                                   $13,932,623

Expenses
Operating Expenses		     $8.00	   ($2,744,000)
Leasing Commissions		     $0.60       ($209,595)
Reserve for Replacement            $0.25        ($87,331)
Tenant Improvements 		     $1.25	     ($428,750)

Total Operating Expenses					     ($3,469,676)

Net Operating Income (NOI)					     $10,462,947

Capitalization
Rate				           6.500%
Tax Factor-$17.97/1000*.9819	     1.764%
Overall Rate                       8.264%

Indicated Value							    $126,601,483		
Rounded 								    $126,600,000

As set forth in the above tables, Mr. Logue's final opinion of the subject property's fair market value for the fiscal years at issue was: $71,200,000 for fiscal year 2005; $71,800,000 for fiscal year 2006; $74,900,000 for fiscal year 2007; $96,600,000 for fiscal year 2008; and $126,600,000 for fiscal year 2009. 
The appellants also offered the testimony of Joseph Flaherty, a commercial real estate broker with extensive experience in, and knowledge of, the Cambridge office market.  Mr. Flaherty, who testified not as an expert witness but as a fact witness, largely corroborated Mr. Logue's testimony that office vacancy rates in Cambridge were extremely high in 2004 and well into 2005, but slowly improved thereafter and continued to improve through January 1, 2008.  Likewise, Mr. Flaherty corroborated Mr. Logue's testimony that office rents in Cambridge declined in 2004 and 2005, before stabilizing and then increasing through the remainder of the periods at issue.  
		     The Appellee's Valuation Evidence 

	The assessors presented the testimony and self-contained appraisal report of Pamela McKinney, a licensed appraiser who is the President of Byrne McKinney & Associates.  Ms. McKinney is a Member of the Appraisal Institute and also a Member of the Counselors of Real Estate.  At the time of the hearing of these appeals, Ms. McKinney had approximately thirty years of appraisal experience.  Ms. McKinney has worked for clients in both the public and private sectors, and her diverse appraisal experience includes the appraisal of numerous class A office towers, shopping malls, hotels, apartment buildings, and even the Tobin Bridge.  The Board qualified Ms. McKinney as an expert in real estate valuation.  
	To assist in her appraisal, Ms. McKinney inspected the subject property on June 18, 2009.  Ms. McKinney also reviewed a variety of materials, including relevant market data, deeds, building plans, and information gathered from Genzyme's filings with various governmental entities, as well as Genzyme's website and that of the architects of the Genzyme Center, Behnisch, Behnisch and Partner.  
	Like Mr. Logue, Ms. McKinney considered Genzyme Center to be class A office property in excellent condition. Ms. McKinney considered the highest and best use of the subject property to be its continued use as a single-tenant office building.  Unlike Mr. Logue, Ms. McKinney opined that the continued use of the retail component of the subject property did not accord with its highest and best use.  Rather, she stated that the retail space should be reconfigured and adapted to office uses.  
	Ms. McKinney considered the three basic approaches to value.  Like Mr. Logue, Ms. McKinney relied on the income-capitalization approach to determine the fair cash value of the subject property.  Although she did not conduct full cost reproduction or sales-comparison analyses, Ms. McKinney did reference local building sales and the project costs for Genzyme Center to check the reliability of the values which she determined using her income-capitalization approach.  
	To begin her income-capitalization analysis, Ms. McKinney selected a number of leases from office and lab properties in East Cambridge and elsewhere in Cambridge.  To determine fair market rent for fiscal year 2005, Ms. McKinney selected ten commercial leases in nine different buildings in Cambridge.  The leases were signed between early 2003 and mid-2004, and were for spaces ranging in size from 21,550 to 98,738 square feet.  The average rents in these ten leases ranged from $22.88 to $34.60 per square foot.  While some of the leases allowed for TIs, others did not.  Where applicable, the TIs ranged from $5.00 to $40.00 per square foot.  It was Ms. McKinney's opinion that TI allowances for the subject property would be comparatively high because of its corporate world headquarters character.  Accordingly, for each of the fiscal years at issue, she made adjustments to her selected rents to reflect her assumption of a $50 per square foot TI allowance, amortized over a ten-year lease period.  After making this adjustment, and considering all of the relevant information, Ms. McKinney estimated the fair market rent for Genzyme Center to be $40.00 per square foot for fiscal year 2005. 
	To determine fair market rent for fiscal year 2006, Ms. McKinney selected ten commercial leases from nine different buildings in Cambridge.  The leases, which were signed between mid-2004 and mid-2005, were for spaces ranging in size from 19,312 to 124,758 square feet, and had average rents ranging from $29.00 to $36.00 per square foot.  TI allowances, where applicable, ranged from $30.00 to $45.00 per square foot.  Based on this information, and after making an adjustment to account for TI, Ms. McKinney estimated the fair market rent for Genzyme Center to be $40.00 per square foot for fiscal year 2006.  	
To determine fair market rent for fiscal year 2007, Ms. McKinney selected six commercial leases from five different buildings in Cambridge.  The leases were signed between mid-2005 and early 2006, and were for spaces ranging in size from 17,705 to 81,500 square feet.  The average rents ranged from $29.46 to $37.00 per square foot, and the TIs, where applicable, ranged from $20.00 to $70.00 per square foot.  Based upon this information, and after making an adjustment to account for TI, Ms. McKinney estimated the fair market rent for Genzyme Center to be $40.00 per square foot for fiscal year 2007.
	To determine fair market rent for fiscal year 2008, Ms. McKinney selected ten commercial leases from six different buildings in Cambridge.  The leases were signed between mid-2006 and mid-2007, and were for spaces ranging in size from 17,705 to 124,758 square feet.  The average rents ranged from $15.83 to $41.04 per square foot, and the TI allowances, where applicable, ranged from $5.00 to $75.00 per square foot.  Based on this information, and after making an adjustment to account for TI, Ms. McKinney estimated the fair market rent for the Genzyme Center to be $45.00 per square foot for fiscal year 2008. 
	Finally, to determine fair market rent for fiscal year 2009, Ms. McKinney selected thirteen commercial leases from twelve different buildings in Cambridge.  The leases were signed between mid-2007 and mid-2008 and were for spaces ranging in size from 17,949 to 182,000 square feet.  The average rents ranged from $29.00 to $68.00 per square foot and the TI allowances, where applicable, ranged from $5.00 to $60.00 per square foot.  Based upon this information, and after making an adjustment to account for TI, Ms. McKinney estimated the fair market rent for Genzyme Center to be $50.00 per square foot for fiscal year 2009.  
	Unlike Mr. Logue, Ms. McKinney made no adjustment to account for Genzyme Center's large atrium.  Further, Ms. McKinney applied the fair market rents derived from her analysis to all of the subject buildings' 349,325 square feet because she considered its highest and best use to be office space without a retail component.  However, she did make an allowance for extraordinary capital expenses - the cost to convert the space from retail to office - by deducting $300,000 from her initial estimates of the subject property's fair cash value for each of the fiscal years at issue.  
	The next step in Ms. McKinney's income-capitalization analysis was the determination of appropriate vacancy rates.  Publications created by CoStar, Inc., an entity which compiles data for the leasing industry, indicated that direct vacancy rates in class A office properties in East Cambridge ranged from 16.2% and 17.4% during the fourth quarters of 2003, 2004, and 2005, but declined to 11.4% by the fourth quarter of 2006 and further decreased to 8.4% by the fourth quarter of 2007.  Despite these rates, Ms. McKinney considered it appropriate to use a vacancy and rent loss rate of 5%, due to the excellent quality and condition of the subject property and its character as a single-tenant, headquarters building, for which vacancy rates are likely to be lower.  
	Ms. McKinney next considered operating expenses.  To determine appropriate operating expenses, Ms. McKinney reviewed the actual operating expenses reported for the subject property by its owner pursuant to requests made by the assessors under G.L. c. 59, § 38D ("§ 38D"), as well as BOMA statistics.  The actual expenses reported on the § 38D responses ranged from a low of $4.79 per square foot for calendar year 2004 to a high of $6.63 per square foot for calendar year 2007.  Because of the subject buildings' unique, green operating systems, Ms. McKinney considered it appropriate to rely upon the actual operating expenses.  However, like Mr. Logue, she opined that the 2004 calendar year expenses were anomalous, and she therefore adjusted them to account for anomalies.  Ms. McKinney also made modest adjustments to the reported operating expenses to better reflect the subject building's "expense curve."  Ultimately, Ms. McKinney selected operating expenses of: $6.00 per square foot for fiscal year 2005; $6.18 per square foot for fiscal year 2006; $6.37 per square foot for fiscal year 2007; $6.63 per square foot for fiscal year 2008; and $6.83 per square foot for fiscal year 2009.
	It was Ms. McKinney's opinion that leasing commissions, replacement reserves, and TI allowances should not be deducted from operating income for purposes of a fee-simple valuation, and she therefore made no deductions for these items in her valuation analyses.  
	The final step in Ms. McKinney's income-capitalization analysis was the selection of capitalization rates, which she determined by consulting several sources and using a variety of methodologies.  Ms. McKinney conducted a band of investment analysis to determine capitalization rates.  Her band of investment analyses yielded the following capitalization rates: 7.76% for fiscal year 2005; 7.15% for fiscal year 2006; 6.86% for fiscal year 2007; 6.87% for fiscal year 2008; and 6.86% for fiscal year 2009.  Ms. McKinney also consulted data published by Real Capital Analytics and the Korpacz Survey, which indicated that capitalization rates declined during the fiscal years at issue.  Rates published by Real Capital Analytics, for example, ranged from 7.64% to 8.9% in the quarters immediately preceding and following January 1, 2004, but declined to a range between 5.54% and 7.5% in the quarters immediately before and after January 1, 2008.  Similarly, the Korpacz Survey reported rates ranging from 6.0% to 11.25% for the quarters immediately before and after January 1, 2004, but reported rates ranging from 4.0% to 10.25% for the quarters immediately prior to and following January 1, 2008.  In addition, to assist in the selection of appropriate capitalization rates, Ms. McKinney analyzed local building sales.  Ms. McKinney's local building sale analysis yielded a range of rates - generally between 6.2% and 8.7% - which varied very little over the fiscal years at issue.  Ultimately, Ms. McKinney selected the following capitalization rates: 8.0% for fiscal year 2005; 7.5% for fiscal year 2006; 7.0% for fiscal year 2007; 6.5% for fiscal year 2008; and 6.5% for fiscal year 2009.  Ms. McKinney also added tax factors to each of her selected capitalization rates.
The pro forma income and expense analyses offered by Ms. McKinney are summarized in the following tables:









McKinney Income Approach Pro Forma FY 05 
    			               Area/S.F.   Rent/S.F.      Total
Potential Gross Rent 		    349,325	    $40.00     $13,973,000

Vacancy and Collection Loss			      5%	     ($698,650)

Effective Gross Rent				    $38.00     $13,274,350		
Total Operating Expenses			     $6.00	   ($2,095,950)					
Net Operating Income 				    $32.00     $11,178,400			
Capitalization
Rate						8%
Tax Factor 					1.828%
Combined Rate		            9.828%

Stabilized Value							  $113,740,334
Rounded Value							  $113,700,000
    









McKinney Income Approach Pro Forma FY 06 
			                Area/S.F.   Rent/S.F.      Total
Potential Gross Rent 		    349,325	    $40.00      $13,973,000

Vacancy and Collection Loss				5%	      ($698,650)

Effective Gross Rent				    $38.00      $13,274,350		
Total Operating Expenses			     $6.18      ($2,158,829)				
Net Operating Income 				    $31.82      $11,115,522			
Capitalization
Rate						7.5%
Tax Factor			            1.786%
Combined Rate		            9.286%

Stabilized Value							   $119,701,933
Rounded Value							   $119,700,000	    
   











   McKinney Income Approach Pro Forma FY 07
			                Area/S.F.    Rent/S.F.     Total
Potential Gross Rent 		    349,325		$40.00    $13,973,000

Vacancy and Collection Loss				  5%	      ($698,650)

Effective Gross Rent					$38.00    $13,274,350		
Total Operating Expenses				 $6.37    ($2,225,200)		
Net Operating Income 				      $31.63    $11,049,150			
Capitalization
Rate					     7.0%
Tax Factor 				     1.830%
Combined Rate		           8.830%

Stabilized Value							   $125,131,934
Rounded Value							   $125,100,000	
   









   McKinney Income Approach Pro Forma FY 08
			               Area/S.F.     Rent/S.F.      Total
Potential Gross Rent 		   349,325	      $45.00     $15,719,625

Vacancy and Collection Loss   			  5%	       ($785,981)

Effective Gross Rent					$42.75     $14,933,644	

Total Operating Expenses				 $6.63     ($2,316,025)		
Net Operating Income 				      $36.12     $12,617,619		
Capitalization
Rate						6.5%
Tax Factor			            1.724%
Combined Rate		            8.224%

Stabilized Value							    $153,424,356
Rounded Value							    $153,400,000









McKinney Income Approach Pro Forma FY 09
			               Area/S.F.    Rent/S.F.     Total
Potential Gross Rent 		    349,325	     $50.00     $17,466,250

Vacancy and Collection Loss				 5%	      ($873,313)

Effective Gross Rent				     $47.50     $16,592,938
						
Total Operating Expenses				$6.83     ($2,385,890)	

Net Operating Income 				     $40.67     $14,207,048	

Capitalization
Market Rate					6.5%
Tax Factor 					1.797%
Combined Rate		            8.297%

Stabilized Value							    $171,231,141
Rounded Value							    $171,200,000

	For each of the fiscal years at issue, Ms. McKinney deducted $300,000 from her rounded values to account for the extraordinary capital expenses associated with converting Genzyme Center's existing retail area to office space.  After this deduction, Ms. McKinney's final opinions of fair cash value for the subject property were: $113,400,000 for fiscal year 2005; $119,400,000 for fiscal year 2006; $124,800,000 for fiscal year 2007; $153,100,000 for fiscal year 2008; and $170,900,000 for fiscal year 2009.  
		   The Board's Valuation Findings	
On the basis of all of the evidence, the Board found that the appellants met their burden of proving that the subject property was overvalued for each of the fiscal years at issue, with the exception of 2009.  In making this finding, the Board agreed with Mr. Logue, who opined that the subject property's highest and best use was its continued use as a single-tenant, class A office building with a small retail component.  A property's highest and best use must be, among other things, legally permissible.  The evidence showed that the special permit required the properties in CRP to include retail space.  Ms. McKinney's conclusion that the highest and best use of the subject property was exclusively office space failed to take into consideration the applicable legal restrictions and therefore was not consistent with the principles governing the determination of highest and best use.  Accordingly, the Board rejected Ms. McKinney's opinion of highest and best use and, on the basis of all of the evidence, found that the highest and best use of the subject property was its continued use as a single-tenant office building with a small retail component.  
The Board, like the parties, found that the income-capitalization approach was the most reliable method with which to value the subject property.  It is the preferred method for valuing income-producing properties such as the subject property.  Moreover, the Board concluded that the other two valuation methodologies were less likely to yield reliable estimates of the subject building's fair market value.  The evidence indicated that most of the local sales of comparable office properties which occurred during the relevant period involved the transfer of leased-fee interests, and as such, the Board concluded that they would not provide reliable indicia of the fee-simple value of the subject property.  Similarly, the sale of the subject property in 2005 was part of a portfolio sale involving multiple properties, and therefore, did not provide reliable evidence of the subject building's individual fair cash value.  The Board therefore found that the sales-comparison approach was not likely to provide a reliable indication of the subject property's fair market value.  
Further, although the subject building was new construction as of the relevant dates of valuation, as Mr. Logue indicated, there was substantial fluctuation in the market between the commencement of Genzyme Center's construction and the relevant dates of valuation.  Accordingly, the Board found that the cost-reproduction methodology was not likely to yield a reliable indication of the subject property's fair cash value.  Therefore, the Board used the income-capitalization methodology to determine the fair cash value of the subject property.
A major discrepancy between the experts was the treatment of the space consumed by the subject building's sizeable atrium.  Mr. Logue acknowledged that the atrium was an "attractive and desirable feature from the standpoint of natural light, air circulation, aesthetics and other green building elements."  Nevertheless, he concluded that the atrium was a "significant drawback" because of the resultant amount of non-useable space, and accordingly, he discounted his market rents by 5%, the so-called "add on" factor.  Ms. McKinney, on the other hand, did not apply an "add on" factor or otherwise reduce her rents to account for the area consumed by the subject property's atrium.  
On the basis of all of the evidence, the Board agreed with Ms. McKinney's approach on this point.  First, it was noteworthy that the lease for the subject property included the atrium space in the total square footage.  Further, it was undisputed that the atrium was a key feature in the building's green design.  The atrium's floor-to-roof penetration facilitated the circulation of air and its elaborate hanging prisms facilitated the distribution of natural light.   Genzyme's own promotional materials touted the subject building's merits, many of which flow from its core atrium.  Moreover, the Board found that the large and dramatic atrium provided the building with its stately world headquarters presence, which is precisely what Genzyme desired when it set out to construct the subject building.  While vertical penetrations may be negative factors in multi-tenant office properties, the Board found that Genzyme Center's atrium served several useful purposes.  For these reasons, the Board disagreed with Mr. Logue's conclusion that the subject building's atrium was a "drawback."  It therefore declined to adopt his "add on" factor.  
The Board found, however, that the appellants' estimates of market rent were more reliable than the rent estimates offered by the appellee for numerous reasons.  First, Mr. Logue's rent estimates were derived from properties more comparable to the subject property than the properties on which Ms. McKinney relied in her income-capitalization analysis.  All of the properties selected by Mr. Logue were located in the East Cambridge area, in close proximity to Genzyme Center, while several of the properties selected by Ms. McKinney were located elsewhere in Cambridge, such as in Harvard Square or the Alewife area.  Further, all of Mr. Logue's leases were leases for class A office space, while Ms. McKinney selected several leases for laboratory space.  Additionally, some of Ms. McKinney's leases were signed many months, and in one case, a full year, from the relevant date of valuation, but Ms. McKinney made no adjustments to her estimates of market rent to account for differences in time, while Mr. Logue made adjustments to account for differences in time where appropriate.  For all of these reasons, the Board placed more weight on Mr. Logue's estimates of market rent because Mr. Logue based those rents on properties more comparable to the subject property and, further, he made appropriate adjustments to account for differences from the subject property.   
Second, there were several indicia in the record that the rents used by the assessors and Ms. McKinney were overstated.   First, the rents used by both Ms. McKinney and the assessors were significantly greater than the actual rents at One Memorial Drive and 675 West Kendall Street.  The former is a class A office building in East Cambridge with stunning views of the Charles River and the Boston skyline.  Both Mr. Logue and Mr. Flaherty extolled the virtues of the building located at One Memorial Drive, including its views.  Ms. McKinney testified that One Memorial Drive is an "excellent" building, and that, of all of her comparable lease properties, it contained the "attributes . . . most in line with" the subject property.  The former property contains office, lab and retail space and is located directly adjacent to the subject property.  The evidence contained data from two leases at One Memorial Drive, which were entered into in late 2004 and early 2005, with rents ranging from $30.42 to $32.75 per square foot.  Also in 2005, Genzyme itself entered into a sub-lease for 65,070 square feet of class A office space at 675 West Kendall Street for $35.00 per square foot.  By contrast, Ms. McKinney's estimate of the subject property's market rent for fiscal year 2006 was $40.00 per square foot, while the assessors used a rent of $45.15 per square foot for that year.  The Board found that the record did not support such increased rents for Genzyme Center, and further found this disparity in rents to be a persuasive indicator that the rents used by Ms. McKinney and the assessors were overstated.  
On the basis of all of the evidence, the Board found that Mr. Logue's rent estimates provided persuasive evidence of fair market rent for Genzyme Center, and it therefore gave more weight to his opinion of fair market rent.  Both experts utilized some of the same leases as comparable leases, and, placing particular reliance on these overlapping leases, the Board found the following fair market rents for the subject property's office area: $37.50 for fiscal year 2005; $37.00 for fiscal year 2006; $37.00 for fiscal year 2007; $42.00 for fiscal year 2008; and $46.50 for fiscal year 2009.  
Because the Board, like Mr. Logue, considered the subject property's highest and best use to be its continued use as a single-tenant office building with a small retail component, the Board made a separate finding of fair market rent for the subject building's retail area.  The Board found Mr. Logue's retail rent of $21.00 per square foot on a triple-net basis to be supported by the market data entered into evidence, and it therefore adopted that rent for each of the fiscal years at issue.
The experts differed significantly in their selection of appropriate vacancy rates.  Mr. Logue utilized vacancy rates which largely tracked prevailing commercial vacancy rates in Cambridge during the relevant time periods.  Ms. McKinney used a lower vacancy rate of 5% across the board, which she believed was realistic for a single-tenant, world headquarters type of property.  The assessors also used a 5% vacancy rate for each of the fiscal years at issue.  The Board agreed with the assessors and Ms. McKinney as to vacancy rates.  The Board found that the subject building's character as a single-tenant, world headquarters office property made it likely to have lower vacancy rates than the properties from which Mr. Logue derived his vacancy estimates, many of which were multi-tenant properties.  Indeed, with the exception of the retail area, the subject building was fully occupied during the fiscal years at issue.  The Board therefore adopted the 5% vacancy rate used by Ms. McKinney and the assessors for the subject building's office areas.  However, the retail portion of the subject property was 100% vacant during the fiscal years at issue.  The Board therefore found it appropriate to use market vacancy rates for that area, and further, it found that Mr. Logue's vacancy rates were supported by the evidence.  The Board therefore adopted those rates, which were: 14% for fiscal year 2005; 13% for fiscal year 2006; 11% for fiscal year 2007; 10% for fiscal year 2008; and 9% for fiscal year 2009.  
Though there was a significant dispute between the experts as to the determination of appropriate operating expenses, there was little discrepancy between the expense figures used by them.  Both experts purported to rely, at least in part, on the actual operating expenses reported for Genzyme Center.  However, there was a dispute as to exactly what the actual operating expenses were.  Ms. McKinney relied on the expense figures reported by the owner of the subject building in the responses it filed with the assessors pursuant to § 38D.  The expenses reported by the owner ranged from a low of $4.79 per square foot for calendar year 2004 to a high of $6.63 for calendar year 2007.  Ms. McKinney made only minor adjustments to the reported expenses, ultimately utilizing operating expenses ranging from a low of $6.00 per square foot for fiscal year 2005 to a high of $6.83 per square foot for fiscal year 2009.  Mr. Logue also purported to rely on the subject building's actual operating expenses.   However, the expenses obtained by Mr. Logue included information provided to him by Mr. Moran, and, ranging from $10.00 to $12.00 per square foot, were higher than the expenses reported by the subject building's owner in the § 38D responses.   Mr. Logue opined that the subject building's actual expenses were significantly higher than average operating expenses in comparable office properties in Cambridge.  Accordingly, Mr. Logue selected operating expenses which were lower than the actual expenses reported to him for the subject property.  Mr. Logue's operating expenses were: $7.00 per square foot for fiscal year 2005, with annual increases of $0.25, ending with expenses of $8.00 per square foot in fiscal year 2009.   The assessors for their part calculated expenses as a percentage of income, but the percentages used by them for the subject property's office areas translated into operating expenses of $8.79 per square foot for fiscal years 2005 through 2007; $9.04 per square foot for fiscal year 2008; and $10.51 per square foot for fiscal year 2009.  
On the basis of all of the evidence, the Board found that Mr. Logue's expenses were the most reliable estimates of the subject building's operating expenses.  The expenses used by Ms. McKinney were lower than the expenses used by the assessors and were also lower than the median operating expenses reflected in the BOMA statistics offered into evidence.  Moreover, the subject building is a trophy- caliber property with a substantial amount of open space, qualities which the Board found made it likely to have higher than average cleaning costs.  Additionally, the Board found credible Mr. Moran's testimony that Genzyme's unique green design and systems actually increased certain expenses because they required additional labor to clean and maintain.  Because it found that they were better supported by the evidence, the Board adopted Mr. Logue's operating expense figures of $7.00 for fiscal year 2005, $7.25 for fiscal year 2006, $7.50 for fiscal year 2007, $7.75 for fiscal year 2008, and $8.00 for fiscal year 2009.  The Board applied these expenses to only the office areas of the subject building, and not to the retail area, because operating expenses in retail leases are typically borne by the tenants.  
It was Ms. McKinney's opinion that leasing commissions, replacement reserves, and TI allowances should not be deducted from potential gross income for purposes of a fee-simple valuation, and she therefore made no deductions for these items in her valuation analyses.  Mr. Logue, on the other hand, adopted leasing commissions in the amount of $0.60 per square foot, replacement reserves of $0.25 per square foot, and TI in the amount of $1.25 per square foot for each of the fiscal years at issue.   On the basis of all of the evidence, the Board found it appropriate to make allowances for these items, consistent with market practices.  However, because of the subject building's single-tenant layout, class A status, and its excellent condition, the Board found that comparatively minimal deductions for these items were appropriate.  The Board therefore deducted leasing commissions in the amount of $0.40 per square foot, replacement reserves in the amount of $0.20 per square foot, and TIs in the amount of $1.00 per square foot.  The Board applied the leasing commission and replacement reserve figures to the whole building, but applied the TI deduction to only the office areas, not the retail area, because, as Mr. Logue testified, expenses associated with the build out of retail space are usually borne by the tenants.  
Lastly, the experts differed very little in their selection of capitalization rates.  Ms. McKinney adopted capitalization rates ranging from 6.5% to 8.0%, while Mr. Logue's selected rates ranged from 6.5% to 7.75%.  The assessors, on the other hand, used higher rates, ranging from 7.2% to 8.88%, before the addition of a tax factor.  The Board found that both Mr. Logue's and Ms. McKinney's capitalization rates were generally supported by the evidence.  Considering that it adopted allowances for leasing commissions, replacement reserves, and TIs, the Board found that capitalization rates on the lower end of the range were warranted.  The Board therefore adopted Mr. Logue's selected capitalization rates of 7.75% for fiscal year 2005; 7.25% for fiscal year 2006; 7.0% for fiscal year 2007; and 6.5% for fiscal year 2009.  For fiscal year 2008, the Board adopted Ms. McKinney's selected capitalization rate of 6.5%, which was slightly lower than Mr. Logue's rate of 6.75% for fiscal year 2008.  To these rates the Board added applicable tax factors, which were prorated to apply to only the office areas of the subject property. 
On the basis of these subsidiary findings, the Board found the fair cash value of the subject property to be $98,271,000 for fiscal year 2005; $101,429,000 for fiscal year 2006; $102,871,000 for fiscal year 2007; $129,310,000 for fiscal year 2008; and $144,921,000 for fiscal year 2009. The following tables set forth the Board's valuation findings for each of the fiscal years at issue. 














Board Income Approach Valuation Analysis FY 05
Potential Gross Rent:			S.F.     Rent/S.F.     Total
			      Office    343,000     $37.50	  $12,862,500
				Retail	6,325     $21.00       $132,825
Total Floor Area			    349,325
Total Potential Gross 
Rent          			      			  $12,995,325

Vacancy and Collection  Office	5%			    ($643,125)
Loss    		      Retail     14%			     ($18,595.50)

Effective Gross Rent	                                $12,333,604.50	

Expenses
Operating Expenses		    343,000	     $7.00	  ($2,401,000)
Leasing Commissions		    349,325	     $0.40      ($139,730)
Reserve for Replacement           349,325      $0.20	     ($69,865)
Tenant Improvements 		    343,000	     $1.00	    ($343,000)

Total Operating Expenses					  ($2,953,595)

Net Operating Income (NOI)					   $9,380,009.50

Capitalization
Rate					      7.750%
Tax Factor-$18.28/1000*.9819		1.795%
Overall Rate                        9.545%

Indicated Value							  $98,271,445.78
Rounded Fair Cash Value						  $98,271,000	 






Board Income Approach Valuation Analysis FY 06
Potential Gross Rent:			S.F.     Rent/S.F.     Total
			      Office    343,000     $37.00	  $12,691,000
				Retail	6,325     $21.00       $132,825
Total Floor Area			    349,325
Total Potential Gross 
Rent          			      			  $12,823,825

Vacancy and Collection  Office	5%			    ($634,550)
Loss    		      Retail     13%				(17,267.24)

Effective Gross Rent	                                $12,172,007.75

Expenses
Operating Expenses		    343,000	     $7.25	   ($2,486,750)
Leasing Commissions		    349,325	     $0.40       ($139,730)
Reserve for Replacement           349,325      $0.20	      ($69,865)
Tenant Improvements 		    343,000	     $1.00	     ($343,000)

Total Operating Expenses					   ($3,039,345)

Net Operating Income (NOI)					    $9,132,662.75

Capitalization
Rate					      7.25%
Tax Factor-$17.86/1000*.9819		1.7537%
Overall Rate               		9.004%        

Indicated Value							  $101,428,951 
Rounded Fair Cash Value						  $101,429,000







Board Income Approach Valuation Analysis FY 07
Potential Gross Rent:			S.F.    Rent/S.F.     Total
			      Office    343,000    $37.00    $12,691,000
				Retail	6,325    $21.00       $132,825
Total Floor Area			    349,325
Total Potential Gross 
Rent          			      			 $12,823,825

Vacancy and Collection  Office	5%			   ($634,550)
Loss    		      Retail     11%			    ($14,610.75)

Effective Gross Rent	                               $12,174,664.25

Expenses
Operating Expenses		    343,000	   $7.50	 ($2,572,500)
Leasing Commissions		    349,325	   $0.40       ($139,730)
Reserve for Replacement           349,325    $0.20	    ($69,865)
Tenant Improvements 		    343,000	   $1.00	   ($343,000)

Total Operating Expenses					 ($3,125,095)

Net Operating Income (NOI)					  $9,049,569.25

Capitalization
Rate					      7.00%
Tax Factor-$18.30/1000*.9819		1.797%
Overall Rate                        8.797%

Indicated Value							$102,871,083.89
Rounded Fair Cash Value					      $102,871,000









Board Income Approach Valuation Analysis FY 08
Potential Gross Rent:			S.F.     Rent/S.F.     Total
			      Office    343,000     $42.00    $14,406,000
				Retail	6,325     $21.00       $132,825
Total Floor Area			    349,325
Total Potential Gross 
Rent          			      			  $14,538,825

Vacancy and Collection  Office	5%			    ($720,300)
Loss    		      Retail     10%			     ($13,282.50)

Effective Gross Rent	                               ($13,805,242.50)

Expenses
Operating Expenses		    343,000	    $7.75	   ($2,658,250)
Leasing Commissions		    349,325	    $0.40        ($139,730)
Reserve for Replacement           349,325     $0.20	      ($69,865)
Tenant Improvements 		    343,000	    $1.00	     ($343,000)

Total Operating Expenses					   ($3,210,845)

Net Operating Income (NOI)					   $10,594,397.50

Capitalization
Rate					      6.5%
Tax Factor-$17.24/1000*.9819		1.693%
Overall Rate                        8.193%

Indicated Value							  $129,310,356.40 
Rounded Fair Cash Value						  $129,310,000






Board Income Approach Valuation Analysis FY 09
Potential Gross Rent:			S.F.     Rent/S.F.     Total
			      Office    343,000     $46.50    $15,949,500
				Retail	6,325     $21.00       $132,825
Total Floor Area			    349,325
Total Potential Gross 
Rent          			      			  $16,082,325

Vacancy and Collection  Office	5%			    ($797,475)
Loss    		      Retail     	9%			     ($11,954.25)

Effective Gross Rent	                                $15,272,895.75

Expenses
Operating Expenses		    343,000	    $8.00	   $2,744,000
Leasing Commissions		    349,325	    $0.40        $139,730
Reserve for Replacement           349,325     $0.20	      $69,865
Tenant Improvements 		    343,000	    $1.00	     $343,000

Total Operating Expenses					   $3,296,595

Net Operating Income (NOI)					  $11,976,300.75

Capitalization
Rate					      6.50%
Tax Factor-$17.64/1000*.9819		1.693%
Overall Rate                        8.193%

Indicated Value							 $144,921,354.67
Rounded Fair Cash Value						 $144,921,000

For fiscal years 2005 through 2008, the Board found that the appellants met their burden of proving that the assessed value of the subject property exceeded its fair cash value.  Accordingly, the Board issued decisions for the appellants in docket numbers F277284, F282964, F287968, and F294379, and ordered abatements as follows:
Fiscal   Year	Assessed  Value ($)	Fair Cash Value ($)	Over-valuation ($)	Tax Rate ($/$1,000)	Abatement ($)	
2005	113,843,100	98,271,000	15,572,100	18.28	293,197.73	
2006	130,793,100	101,429,000	29,364,100	17.86	540,172.11	
2007	130,793,100	102,871,000	27,922,100	18.30	526,303.66	
2008	134,544,100	129,310,000	5,234,100	17.24	 92,942.96	

For fiscal year 2009, the Board found that the fair cash value of the subject property was $144,921,000, an amount which exceeded its assessed value of $134,456,100.  The Board therefore issued a decision for the appellee in docket number F299101.  

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)), aff'd 63 Mass. App. Ct. 1116 (2005).  
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. 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 Limited Partnership, Mass. ATB Findings of Fact and Report at 2004-246. The Board agreed with the expert witnesses that, because of its design and layout, the subject building was best suited to use by a single-tenant.  Further, the Board found that the special permit required the subject building to have dedicated retail space.  Accordingly, the Board found and ruled that the highest and best use of the subject property was its continued use as a single-tenant office building with a small retail component.  
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 of reproduction.  Correia v. New Bedford Redevelopment Authority, 375 Mass. 360, 362 (1978).  In the present appeals, the Board found and ruled that the cost reproduction approach was not likely to yield a reliable indication of the subject property's fair market value, given the fluctuation in the market from the commencement of the subject building's construction through the fiscal years at issue.  See Vertex Pharmaceuticals, Inc., v. Assessors of Cambridge, Mass. ATB Findings of Fact and Reports at 2009-1090, 1121. ("Market conditions during the relevant assessment periods . . . made the cost approach an unreliable valuation method.").  Similarly, although sales of property generally "furnish strong evidence of market value," Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 682 (1982), the evidence showed that sales of office properties in the vicinity of the subject property during the relevant time period involved the transfer of leased-fee interests, while the question for decision in these appeals is the value of the fee-simple interest. 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.")  As it has in past appeals, the Board found and ruled that such leased-fee sales did not provide probative evidence of fee-simple value. Id.  Further, the actual sale of the subject property in 2005 did not provide reliable evidence of its individual fair cash value because it was sold in a portfolio sale involving multiple properties.  See Vertex Pharmaceuticals, Inc., Mass. ATB Findings of Fact and Reports at 2008-1136 (citing Northshore Mall Limited Partnership, Mass. ATB Findings of Fact and Reports at 2004-249) ("[T]he most recent sales of the subject properties were part of a portfolio sale of multiple properties and did not present reliable evidence of the fair cash value of the subject properties individually.")  The Board therefore found and ruled that the sales-comparison approach was not a reliable method with which to determine the market value of the subject property.  
When reliable sales data are not available and when the subject is income-producing property, the use of the income-capitalization approach is appropriate. Assessors of Weymouth v. Tammy Brook Co., 368 Mass. 807, 881 (1975); Assessors of Lynnfield v. New England Oyster House, 362 Mass. 696, 701-702 (1972); Assessors of Quincy v. Boston Consolidated Gas Co., 309 Mass. 60, 67 (1941).  Here, both experts and the assessors used the income-capitalization approach to determine the fair market value of the subject property.  The Board agreed with the parties that the subject property's fair cash value could most reliably be estimated by using the income-capitalization approach, and the Board therefore adopted that approach. 
"[T]he direct capitalization of income method analyzes the property's capacity to generate income over a one-year period and converts the capacity into an indication of fair cash value by capitalizing the income at a rate determined to be appropriate for the investment risk involved." Olympia & York State Street Co., 428 Mass. at 239. The task of valuing a property based on this methodology requires that "appraisers analyze competitive facilities and determine market rents, market vacancy and credit loss rates, market expenses, market capitalization rates, and general market conditions." Olympia & York State Street Co., 428 Mass. at 239.
To provide probative evidence of market rent, leases must be from properties similar in location and other qualities to the subject property, and must be signed reasonably close in time to the relevant date of assessment.  All of Mr. Logue's selected leases were leases for class A office space in East Cambridge, like the subject property.  Where appropriate, Mr. Logue made adjustments to account for differences in time from the relevant date of assessment.  In contrast, Ms. McKinney selected a number of leases from properties that were not in the immediate vicinity of the subject property.  Further, unlike Mr. Logue, Ms. McKinney failed to adjust her comparable lease data for time, despite differences between the dates of execution of her chosen leases and the relevant dates of valuation.  Moreover, several of Ms. McKinney's selected leases were leases for lab space, rather than class A office space.  The Board therefore found and ruled that Ms. McKinney's estimates of rent were less persuasive as they were based in part on leases from properties not particularly comparable to the subject property, and, further, she failed to make adjustments to account for critical differences where appropriate.  See State Mutual Life Assurance Co. of America v. Assessors of Worcester, Mass. ATB Findings of Fact and Reports 1986-151, 164, aff'd 25 Mass. App. Ct. 1114 (1988) ("failure to properly adjust for the obvious differences in the properties [make] imputation of a market rent from the 'comparables' to the subject property devoid of probative worth.").
 	In addition, the rents adopted by both the assessors and Ms. McKinney were significantly higher than actual rents at One Memorial Drive, a class A office property in East Cambridge, which several witnesses testified was an excellent building with spectacular skyline and river views.  For example, the market rent used by the assessors for fiscal year 2006 exceeded the actual rent in one lease at One Memorial Drive by approximately 50%, and the Board found that the record did not support such an increased rent for Genzyme Center.  Likewise, the rents adopted by Ms. McKinney and the assessors far exceeded the actual rent paid by Genzyme for class A office space at 675 West Kendall Street, a building located adjacent to the subject property.  The Board found this evidence to be an indication that the rents used by the assessors and Ms. McKinney exceeded the fair market rents for the subject property.  
Because they were better supported by the evidence, the Board placed greater weight on Mr. Logue's estimates of market rent.  However, the Board did not adopt Mr. Logue's estimates of market rent across the board.  "That a person qualifies as an expert does not endow his testimony with magic qualities." Boston Gas Co., 334 Mass. at 579. The Board is "not required to accept the opinion expressed . . . by [an] expert witness,'" and, further, it is "entitled to "'accept such portions of the evidence as appeared to have the more convincing weight.'" Foxboro Associates, 385 Mass. at 683; Medical Malpractice Underwriting Ass'n of Massachusetts v. Commissioner of Insurance, 395 Mass. 43, 56 (1985)(citations omitted). After considering all of the evidence, placing particular reliance on the leases chosen by Mr. Logue and Ms. McKinney which overlapped, the Board formed its own estimates of market rent for the subject property.
	Ms. McKinney and the assessors used a vacancy rate of 5% for each of the years at issue, while Mr. Logue's vacancy rates were nearly two to three times that rate.  Mr. Logue's rates were based on vacancy and availability rates in Cambridge during the relevant time periods.  Although commercial vacancy rates in Cambridge may have been greater than 5%, the Board found and ruled that the vacancy rate used by Ms. McKinney and the assessors was more appropriate for the subject property.  
As an initial matter, the subject property was fully occupied during each of the fiscal years at issue.  Genzyme's 15-year lease for the subject property commenced in 2002 and included options to renew.  The Board found and ruled that the subject property was unlikely to experience collection loss or significant periods of vacancy during the fiscal years at issue.  In addition, in determining an appropriate vacancy rate, the Board considered the subject property's characteristics as a single-tenant, world headquarters trophy-caliber building.  As it has in past appeals, the Board concluded that such buildings are less likely to experience tenant turnover or prolonged periods of vacancy.  New England Tel. & Tel. Co. v. Assessors of Framingham, Mass. ATB Findings of Fact and Reports 1988-95, 108 (adopting a 2% vacancy rate for an owner-occupied building built to the owner's specifications); State Mutual Life Assurance Co. of America, Mass. ATB Findings of Fact and Reports at 1986-173 (finding that a low vacancy rate was appropriate for an opulent corporate headquarters building).  The Board found and ruled that the use of a lower vacancy rate, which more "closely corresponded with the actual experience" of the subject property was appropriate, and it therefore declined to apply Mr. Logue's vacancy rates to the subject building's office areas.  Olympia & York State. St. Co., 428 Mass. at 242.  The Board did, however, adopt Mr. Logue's vacancy rates for the retail portion of the subject property, which remained vacant during the fiscal years at issue. 

Further, the Board declined to apply Mr. Logue's 5% "add on" factor, which supposedly accounted for the reduction in the subject building's usable area created by its large core atrium.  The Board disagreed with Mr. Logue's conclusion that the subject building's atrium was a "significant drawback."  The Board found the facts of the present appeals analogous to those in State Mutual Life Assurance Co. of America, Mass. ATB Findings of Fact and Reports at 1986-151.  In that appeal, a large corporation approaching a milestone anniversary sought to build a new headquarters building which would "allow employees the easiest practical access to those with whom they work most closely" and provide working conditions which facilitated maximum "workflow, communications, light and comfort."  Id. at 1986-156.   To that end, the company commenced the construction of an opulent, multi-story office building, the interior design of which featured multiple lobbies as well as large open areas, aimed at facilitating "rapid workflow and management communication."  Id.  In that case, the Board found and ruled that, as indicated by industry publications, calculations based on "usable office space" were "not helpful in determining the value of a single tenant or owner-occupied corporate headquarters."  Id. at 1986-160.  The Board found and ruled in that case that the building's design made it well-suited to its purpose as a corporate headquarters building.  Id. at 1986-162.   Likewise, in the present appeals, the Board found and ruled that Genzyme Center's large atrium was not only essential to the building's green design, but also added considerably to its stately, world headquarters ambience.  The Board found that, rather than a "drawback," the subject property's large atrium was a feature which made the building well-suited to its use as a corporate world headquarters.  For these reasons, the Board declined to apply Mr. Logue's "add on" factor.  
With respect to expenses, the evidence showed that the operating expenses used by Ms. McKinney were understated.  Ms. McKinney's operating expense estimates were lower than the expenses used by the assessors and were also lower than the median market expenses reported by BOMA.  Further, the expenses used by Ms. McKinney were reported by the subject building's owner and did not take into consideration many of the expenses for which Genzyme was responsible, including significant cleaning and maintenance expenses resulting from Genzyme Center's unique green design.   Mr. Logue's expense estimates adequately accounted for these additional costs and also took into account the relevant market data.  Because they were supported by the market data and by credible, testimonial evidence, the Board adopted Mr. Logue's estimated operating expenses.
The Board also adopted Mr. Logue's approach in allowing for TIs, replacement reserves and leasing commissions "above the line", i.e. before arriving at net operating income, because evidence of the relevant market data indicated that making allowances for these items was the prevailing practice in Cambridge during the relevant time periods.  As explained in The Appraisal of real estate, "[t]enant improvements are driven by the market-i.e., they are only done if the market dictates it."  Id. at 480.  It is appropriate to make "above-the-line" allowances for items like TIs, replacement reserves, and leasing commissions where market data so warrant, and the Board found and ruled that they did so in the present appeals. See Olympia & York State Street Co., 428 Mass. at 243. See also Cambridge Park 125 Realty Corp. v. Assessors of Cambridge, Mass. ATB Findings of Fact and Reports 2008-746, 791,  aff'd, 74 Mass. App. Ct. 1119 (2009).  Although the Board adopted Mr. Logue's approach in this respect, it did not adopt his estimates for TIs, replacement reserves, and leasing commissions, which it found were overstated.  Given the age and excellent condition of the subject property, and its single-tenant, world headquarters characteristics, the Board found that more conservative estimates for TIs, replacement reserves, and leasing commissions were appropriate.  The Board therefore selected its own lower allowances for these items.  
The capitalization rates selected by the experts were close and, in some cases, identical, and the Board found their selected capitalization rates to be generally supported by the market data.  Mr. Logue's range of rates was slightly lower than the range of rates selected by Ms. McKinney.  Considering that it adopted allowances for leasing commissions, replacement reserves, and TIs "above the line," the Board found and ruled that capitalization rates on the lower end of the range were warranted.  See Cambridge Park 125 Realty Corp., Mass. ATB Findings of Fact and Reports at 2008-779-81.  The Board therefore adopted Mr. Logue's selected capitalization rates, with the exception of fiscal year 2008.  Ms. McKinney's selected rate of 6.5% for fiscal year 2008 was slightly lower than Mr. Logue's rate of 6.75%, and accordingly, the Board adopted Ms. McKinney's capitalization rate for that year.  
In reaching its opinion of fair cash value 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 an expert witness suggested.  Rather, the Board could accept those portions of the evidence that the Board determined had more convincing weight.  Foxboro Associates, 385 Mass. at 683; New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456, 473 (1981); New England Oyster House, Inc., 362 Mass. at 702.  In evaluating the evidence before it, the Board selected among the various elements of value and formed its own independent judgment of fair cash value.  General Electric v. Assessors of Lynn, 393 Mass. 591, 605 (1984); North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass. 296, 300 (1984). Moreover, 'the board is entitled to, and did, give weight to the view of the subject property . . . in determining the fair cash value of the real estate.'" Antonino v. Assessors of Shutesbury, Mass. ATB Findings of Fact and Reports 2008-54, 2008-71 (citation omitted.)  
The Board need not specify the exact manner in which it arrived at its valuation.  Jordan Marsh v. Assessors of Malden, 359 Mass. 106, 110 (1971).  The fair cash value of property cannot be proven with "mathematical certainty and must ultimately rest in the realm of opinion, estimate and judgment."  Assessors of Quincy, 309 Mass. at 72.  "The credibility of witnesses, the weight of the evidence, and 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).  "The essential requirement is that the Board exercise judgment." New Boston Garden, 383 Mass. at 473.
"'The burden of proof is upon the [appellant] to make out its right as a matter of law to abatement of the tax.'"  Schlaiker v. Board of Assessors of Great Barrington, 365 Mass. 243, 245 (1974), quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922).  The appellant must show that it has complied with the statutory prerequisites to its appeal, Cohen v. Assessors of Boston, 344 Mass. 268, 271 (1962), and that the assessed valuation of its property was improper.  See Foxboro Associates, 385 Mass. at 691.  The assessment is presumed valid until the taxpayer sustains its burden of proving otherwise.  Schlaiker, 365 Mass. at 245.  
The Board applied these principles in reaching its conclusion that the appellants met their burden of proving that the subject property was overvalued for each of the fiscal years at issue, with the exception of 2009. Accordingly, the Board issued decisions for the appellants in docket numbers F277284, F282964, F287968, and F294379 and granted abatements as follows:
Fiscal   Year	Assessed  Value ($)	Fair Cash Value ($)	Over-valuation ($)	Tax Rate ($/$1,000)	Abatement ($)	
2005	113,843,100	98,271,000	15,572,100	18.28	293,197.73	
2006	130,793,100	101,429,000	29,364,100	17.86	540,172.11	
2007	130,793,100	102,871,000	27,922,100	18.30	526,303.66	
2008	134,544,100	129,310,000	5,234,100	17.24	 92,942.96	

Lastly, for fiscal year 2009, the Board found that the fair cash value of the subject property was $144,921,000.  As this amount was greater than its assessed value of $134,456,100, the Board decided the fiscal year 2009 appeal for the appellee. Accordingly, the Board issued a decision for the appellee in docket number F299101.   

     APPELLATE TAX BOARD

				 By:	_________________________________
					Thomas W. Hammond, Jr., Chairman



A true copy,

Attest: ____________________________
	        Clerk of the Board

 Genzyme Corporation was the appellant in Docket Nos. F277284 and F282964.  BMR-500 Kendall Street, LLC was the appellant in Docket Nos. F287968, F294379 and F299101.
 These amounts include a 3% Community Preservation Act Surcharge.  
 The assessors calculated expenses as a percentage of income for each of the fiscal years at issue.  The expense amounts stated above are those percentages expressed as dollar-per-square foot values.  
 The highest actual rent was $36.50, but this rent was part of a ten-year lease with graduated rents, the average of which was $33.50.  
  A "triple-net lease" is a leasing arrangement under which the tenant bears responsibility for all operating expenses except structural repairs.  See Appraisal Institute, The Appraisal of real estate 451 (13th ed. 2008). "Triple net" terms operate to increase the effective rent a tenant is obligated to pay. Id.  
 The evidence showed that the landlord was responsible for the maintenance and cleaning of a limited number of items, including, but not limited to, the building's exterior windows.  
 The abatement amounts include a 3% Community Preservation Act Surcharge. 

 In addition to its "monumental" size, the building at issue in State Mutual Life Assurance Co. of America featured a pink granite exterior, imported wood paneling, plush carpeting, and marble walls and floors, along with such niceties as "a meditation room."  Id. at 1986-154-58.  
 The abatement amounts include a 3% Community Preservation Act Surcharge. 

ATB 2011-280