Wayne J. Griffin, Trustee, Wayne J. Griffin Realty Trust v. Board of Assessors of the Town of Holliston (December 5, 2006)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD




WAYNE J. GRIFFIN, TRUSTEE	  v.	   BOARD OF ASSESSORS OF
WAYNE J. GRIFFIN REALTY TRUST		   THE TOWN OF HOLLISTON


Docket Nos. F272459, F277616		   Promulgated:
							   December 5, 2006


	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 to abate taxes on real estate located in the Town of Holliston, owned by and assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal years 2004 and 2005.
	Commissioner Scharaffa heard these appeals and was joined in the decision for the appellant by Commissioners Egan and Rose.  
	These findings of fact and report are made pursuant to a request by the appellee under G.L. c. 58A, § 13 and 831 CMR 1.32.
		
	Matthew A. Luz, Esq. for the appellant.
	Kathryn Pierce and Philip Waterman, Assistant Assessors, for the appellee.

FINDINGS OF FACT AND REPORT
	On January 1, 2003 and January 1, 2004, the relevant dates of assessment for fiscal years 2004 and 2005 ("fiscal years at issue"), Wayne J. Griffin, Trustee, Wayne J. Griffin Realty Trust ("appellant"), was the assessed owner of the real estate located at 116 Hopping Brook Road in the Town of Holliston ("subject property").  The subject property is a corner lot, irregular in shape, consisting of 2.863 acres of land that slopes down approximately ten feet from front to back.  It is serviced by public water, private sewer, natural gas and electricity.  The subject property is located in the southwestern corner of Holliston, near the Milford town border and is approximately two miles from the Interstate-495 ramps on Route 109.  Specifically, the subject property is within the Hopping Brook Industrial Park along the southern side of Washington Street.  The balance of the neighborhood is predominantly single family residences.
	The parcel is improved with a single-story, masonry structure with a lower level, accessible from the rear.  Originally built in 1984, the structure was expanded in 2000 and now has a gross building area of 39,606 square feet.  The first floor has a reception area, two restrooms, an employee eating area and finished office space.  The lower level also has an employee eating area, two restrooms and finished office space, and in addition has an exercise room.  Approximately ten percent of the lower level is unfinished and used for storage.  The building is currently occupied by the appellant's electrical company, Griffin Electric.  Most of the offices are unfinished and have no windows and are primarily used by electricians to store blueprints.  There is no manufacturing done on the premises.
	For fiscal year 2004, the Board of Assessors of the Town of Holliston ("Assessors") valued the subject property at $2,586,300 and assessed a tax at the rate of $14.83 per thousand in the total amount of $38,354.83.  The appellant timely paid the taxes due without incurring interest.  On January 30, 2004, the appellant filed an Application for Abatement with the assessors, which was deemed denied on April 30, 2004.  On May 6, 2004, the appellant seasonably filed an appeal with the Appellate Tax Board ("Board").  
For fiscal year 2005, the Assessors valued the subject property at $2,586,300 and assessed a tax at the rate of $14.53 per thousand in the total amount of $37,578.94.  The appellant timely paid the taxes due without incurring interest.  On January 4, 2005, the appellant timely filed an Application for Abatement with the assessors, which was deemed denied on April 4, 2005.  On April 5, 2005, the appellant seasonably filed an appeal with the Board.  On the basis of these facts, the Board found that it had jurisdiction to hear and decide these appeals.
	The appellant presented his case through the testimony and appraisal report of Roger J. Marquis, a certified real estate appraiser.  On the basis of his education and experience, the Board qualified Mr. Marquis as an expert real estate valuation witness.  Mr. Marguis used the sales-comparison approach to estimate the value of the subject property at $1,900,000 for the fiscal years at issue and used the income-capitalization approach as a check.
	In his sales-comparison approach, Mr. Marquis relied on three purportedly comparable sales in Holliston and Milford which occurred in early 2002.  Sale number one, located at 29 Everett Road, Holliston, was a two-story masonry building built in 1985 with a gross building area of 51,509 square feet.  This property sold on March 6, 2002 for $2,200,000, or $42.71 per square foot.  Mr. Marquis noted that although this property is classified as manufacturing, it is primarily used as office space.
	Sale number two, located at 100 Jeffrey Ave, Holliston, was a one-story masonry building built in 1986, and has a gross building area of 29,350 square feet.  The property sold on February 20, 2002 for $1,575,000, or $53.66 per square foot.  
Lastly, sale number three was located at 45 Sumner Street, Milford.  This was a two-story masonry building built in 1987, with a gross building area of 26,658 square feet.  This property sold on March 7, 2002 for $1,300,000, or $48.77 per square foot.
	Mr. Marquis noted that no adjustments for age were necessary since all three comparables were built in the mid-1980s, as was the subject property.  Mr. Marquis also concluded that his chosen comparables were similar in land and building size, location and overall condition, and, therefore, no adjustments were required.  Based on these sales, Mr. Marquis chose a value of $48 per square foot, which he applied to the subject property's 39,606 square feet of building area to arrive at his estimate of value of $1,900,000.
	In his income-capitalization approach, Mr. Marquis surveyed the area surrounding the subject property for rentals on similar manufacturing units to determine the appropriate market rents.  He found that rental rates in the area ranged from $4.95 to $6.95 per square foot, depending upon location, condition and accessibility.  Given the subject property's characteristics, Mr. Marquis determined that the appropriate market rent for the subject property was $6.75 per square foot, resulting in a potential gross rental income of $267,341.  He calculated a vacancy and collection loss at twelve percent to derive the subject property's effective gross income ("EGI") of $234,260.
	For operating expenses, Mr. Marguis used major maintenance and reserves at five percent of EGI, legal and audit at one percent of EGI, and, management and miscellaneous at six percent of EGI.  Despite the fact that in calculating the EGI he allowed a twelve percent reduction for vacancy and collection loss, Mr. Marquis allowed a second deduction of $5,000 for unrecovered expenses due to vacancy.  Mr. Marquis' total expense figure was $33,112, leaving a net operating income of $201,148.  Using the mortgage equity technique, Mr. Marquis developed an overall capitalization rate of 10.5 percent, which resulted in an indicated value of $1,916,000. 
	In support of their assessment, the assessors offered into evidence the testimony of Philip Waterman, Assistant Assessor, and also the income-capitalization analysis relied on by the assessors.  Using the income and expense information filed with the assessors, pursuant to  G.L. c. 59, § 38D, by commercial property owners in Holliston, the assessors determined that the market rents for office, light manufacturing/office, and warehouse/office space in Holliston ranged from $7.70 to $17.90, $5.00 to $7.60, and $5.00 to $12.50 per square foot, respectively.  The assessors concluded that a reasonable market rent for the subject property was $8.90.  Applied to the subject property's building area of 39,606 square feet, the assessors calculated a potential gross income of $352,493.  The assessors then allowed for vacancy and collection loss, calculated at 10 percent, to calculate the EGI for the subject property of $317,244.  Next, the assessors deducted operating expenses of ten percent to derive a net operating income of $285,520.  Using a capitalization rate of 10.80 percent, the assessors calculated an indicated value of the subject property for the years at issue of $2,643,700.  The assessors did not provide evidence as to how they determined their vacancy or operating expense deductions, or how they derived their capitalization rate.
The Board found, based on the subject property's current use as owner-occupied office/storage space, and the lack of single-tenant market rents, that the appellant's real estate expert's sales-comparison approach was the most reliable method of valuation.  Moreover, of the three comparables cited by Mr. Marquis, the Board found that comparable sale number one, with a sales price of $42.71 per square foot, was the most probative of the subject property's fair cash value.  Adjusting for differences in building size, the Board found that the subject property had a fair cash value of $51 per square foot for the fiscal years at issue, which calculated to $2,019,906.   
	Based on the evidence presented, the Board found that the appellant met his burden of proving that the subject property was overvalued for the fiscal years at issue.  Accordingly, the Board issued a decision for the appellant and granted abatements in the amounts of $8,399.62 and $8,229.70 for fiscal years 2004 and 2005, respectively.

OPINION
The assessors are required to assess real estate at its "fair cash value." G.L. c. 59, § 38.  Fair cash value is defined as the price on which a willing seller and a willing buyer will agree if both of them are fully informed and under no compulsion. Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).  
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).  "The Board is not required to adopt any particular method of valuation."  Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447, 449 (1986).  Regardless of which method is employed to determine fair cash value, the Board must determine the highest price which a hypothetical willing buyer would pay to a hypothetical willing seller in an assumed free and open market.  Irving Saunders Trust v. Board of Assessors of Boston, 26 Mass. App. Ct. 838, 845 (1989).  The validity of a final estimate of market value depends to a great extent on how well it can be supported by market data.  The Appraisal Institute, THE APPRAISAL OF REAL ESTATE 134 (12th Ed., 2001). 
The Board is entitled to presume that the assessment is valid until the taxpayer sustains his or her burden of proving otherwise.  Schlaiker v. Board of Assessors of Great Barrington, 365 Mass. 243, 245 (1974).  Accordingly, the burden of proof is upon the taxpayer to make out his or her right as a matter of law to an abatement of the tax.  Id. The taxpayer must demonstrate that the assessed valuation of his or her property was improper.  See Foxboro Associates, 385 Mass. at 691.  In appeals before this Board, a taxpayer "may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors' method of valuation, or by introducing affirmative evidence of value which undermines the assessors' valuation."  General Electric Co., 393 Mass. at 600, (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).  
In reaching its opinion of value, the Board can "accept such portions of the evidence as appear[s] to have the more convincing weight.  The market value of the property [can] not be proved with mathematical certainty and must ultimately rest in the realm of opinion, estimate, and judgment . . . .  The board [can] select the various elements of value as shown by the record and from them form . . . its own independent judgment."  Assessors of Quincy v. Boston Consolidated Gas Company, 309 Mass. 60, 72 (1941).  See also North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass. 296, 300 (1984); New Boston Garden, 383 Mass. at 473; Jordan Marsh Co. v. Assessors of Malden, 359 Mass. 106, 110 (1971).  "The  credibility of witnesses, the weight of evidence, the inferences to be drawn from the evidence are matters for the Board."  Cummington School of the Arts, Inc. v. Assessors of  Cummington, 373 Mass. 597, 605 (1977).
The Board applied these principles in reaching its determination that the appellant met its burden of showing that the subject property was overvalued for the fiscal years at issue. 
On the basis of the evidence presented, the Board determined that the fair cash value of the subject property for the fiscal years at issue was $2,019,906.  Accordingly, the Board issued a decision for the appellant in these appeals and granted abatements in the amounts of $8,399.62 and $8,229.70, for fiscal years 2004 and 2005, respectively.

					APPELLATE TAX BOARD


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




A true copy,

Attest:	____________________________
		Assistant Clerk of the Board

ATB 2006-877