I. Fred Dicenso Trust v. Board of Assessors of the Town of Wilmington (April 8, 2009)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD


I. FRED DICENSO TRUST	  v.		BOARD OF ASSESSORS OF
							THE TOWN OF WILMINGTON

Docket Nos. F276917-18(04)		
 F279687-88(05)		
 F283762-63(06)			Promulgated:
  					April 8, 2009


These are appeals 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 in the Town of Wilmington ("Wilmington"), owned by and assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal years 2004, 2005 and 2006 ("fiscal years at issue").  
Commissioner Rose heard these appeals.  Chairman Hammond and Commissioners Egan and Scharaffa joined him in the decisions for the appellee.
These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.

	Paul S. Samson, Esq. and David L. Sterrett, Esq. for the appellant.

	Paul R. DeRensis, Esq. and John Richard Hucksam, Jr., Esq. for the appellee.
FINDINGS OF FACT AND REPORT
On January 1, 2003, January 1, 2004 and January 1, 2005, the I. Fred DiCenso Trust ("Trust" or "appellant") was the assessed owner of two parcels of real property identified as 65 Industrial Way and 80 Industrial Way ("subject properties") located in Wilmington.  The Trust timely paid its taxes without incurring interest.  The following chart details the findings made by the Appellate Tax Board ("Board") with respect to the relevant jurisdictional dates and assessed values for both parcels for each fiscal year at issue.

65 INDUSTRIAL WAY
Valuation date	Assessed value	Date abatement application  filed	Date abatement application denied or deemed denied 	Date petition filed at Board	
01/01/2003	$1,946,000	04/27/2004	07/27/2004	10/25/2004	
01/01/2004	$2,035,900	01/25/2005	03/21/2005	06/15/2005	
01/01/2005	$3,384,800	01/23/2006	04/23/2006	05/17/2006	






80 INDUSTRIAL WAY
Valuation date	Assessed value	Date abatement application  filed	Date abatement application denied or deemed denied 	Date petition filed at Board	
01/01/2003	$4,422,500	04/27/2004	07/27/2004	10/25/2004	
01/01/2004	$4,689,600	01/25/2005	03/21/2005	06/15/2005	
01/01/2005	$7,963,600	01/23/2006	04/23/2006	05/17/2006	

On the basis of the above findings, the Board found and ruled that it had jurisdiction over these appeals.
I. Description of the subject properties.
Sixty-five Industrial Way, identified on the assessors' Map 56 as parcel number 122, contains approximately 4.7 acres of land on the south side of Industrial Way in Wilmington.  The property abuts Interstate Highway Route I-93 to the east, and it has four primary access points from Industrial Way.  The property is irregular in shape, and it has paved parking and landscaped driveways.  The parcel is mostly level with adequate drainage.  Utilities at the site include water, sewer, electricity, gas and telecommunications.
The property is improved with a multi-tenanted, industrial/office and manufacturing building containing a total rentable area of approximately 90,000 square feet.  The building is a one-story structure, which was built in two stages - the first 50,000 square-foot facility was built in 1966 and the 40,000 square-foot addition was built in 1973.  It is constructed of steel frame and concrete slab partially above grade, with a masonry concrete block and brick veneer exterior façade, aluminum frame windows in the office area, and a flat tar and gravel roof.  The building is equipped with 1 drive-in and 8 exterior loading docks.  
The interior of the structure has suspended acoustical tile ceilings with recessed fluorescent lighting in the office area and halogen lighting in the manufacturing and storage areas.  The floors are painted concrete masonry, and they are finished with tile or carpet in the office area.  The walls are painted drywall in the office area and unfinished in the warehouse.  Heating is gas fired throughout, with air conditioning in the office area.  There are adequate restrooms in each tenant area.  There are adequate power, sprinkler, alarm and emergency- lighting systems.  The building is in good physical condition with good manufacturing and office layouts.  The appellant occupies 5,680 square feet of space within the building.
Sixty-five Industrial Way is also improved with a 190-foot telecommunications tower ("cell tower").  The cell tower has at least 10 tenant antenna locations at various heights plus ground-level power, transformer and other equipment located in or near the building.  The tower was transported to the site in pieces and then erected and bolted onto a concrete pad measuring 39 feet by 39 feet by 5 feet thick.  Twenty-two tons of steel underneath the tower secure it onto the concrete pad.  Arthur Kanavos, a trustee of the Trust, testified that the concrete pad is needed to prevent the cell tower from tipping.  The cell tower generates about $249,400 of income annually from the Trust's leasing of antennae to wireless telecommunications providers.  
Eighty Industrial Way, identified on the assessors' Map 56 as parcel number 104, contains about 21.37 acres of land on the north side of Industrial Way.  The property actually consists of two contiguous land parcels - 80 Industrial Way and developable land to the rear having a potential address of 80R Industrial Way.  In addition, the property contains an access and utility easement area.  The improved parcel contains about 13.67 acres, the vacant #80R parcel contains about 6.0 acres, and the westerly easement section contains about 1.7 acres.  The property is an irregular, somewhat L-shaped parcel with two primary access points from Industrial Way.  It has paved parking for approximately 484 cars and landscaped driveways.  The property is set higher than surrounding properties, and the undeveloped portion of the property slopes down to the north and west from the developed portion.  Areas at the westerly boundary include some vegetated wetlands.  Utilities available at the site include water, sewer, electricity, gas and telecommunications.
The property is improved with an industrial building containing a total rentable area of approximately 212,132 square feet.  The structure was built in three stages from 1969 through 1972, with an addition that was built in 2002.  It is a multi-tenanted facility used for warehousing and distribution.  The structure is steel frame and raised concrete slab at the tailgate level.  The façade is masonry, concrete block and brick veneer.  The windows are aluminum frame in the office area, and the roof is flat tar and gravel.  The ceiling is suspended acoustical tile with recessed fluorescent lighting or halogen lighting.  The floors are painted concrete masonry and are finished with tile or carpet in the office area.  The walls are unfinished in the warehouse.  The electrical system is 1000 to 3000 amp, the heating is gas-fired and there is air conditioning in the office area.  There are adequate restrooms in each tenant area.  The building is also equipped with adequate sprinkler, alarm and emergency- lighting systems.  The building is in good physical condition and was completely renovated in 2002 at a cost of $6,000,000.  The building has a good warehouse layout.
Discovery of contamination at the subject properties.

65 Industrial Way
Bayer/Agfa Corporation ("Agfa") was the sole tenant of the building at 65 Industrial Way in 1969 and occupied the property until it terminated its lease in 1992.  After Agfa vacated the property, the Trust began converting the building to multi-tenant industrial flex space, and it applied for a bank loan in 1994 to finance tenant improvements.  In connection with that loan, the Trust retained Joel Loitherstein of Loitherstein Environmental Engineering, Inc. ("LEEI") to conduct an environmental site assessment in order to comply with the bank's due diligence requirements.  At the hearing, Mr. Loitherstein explained that LEEI sampled pre-existing monitoring wells in 1994 and detected a "reportable concentration" of the chemical 1,1-dichloroethene ("DCE"), a by-product of the cleaning solvent known as 1,1,1-trichloroethane ("TCA"), in a monitoring well in the front of the building.  As it was required by Massachusetts Contingency Plan regulations, LEEI notified the Massachusetts Department of Environmental Protection ("DEP") of its findings and installed additional monitoring wells.  
Upon monitoring these wells, LEEI discovered solvent contaminants underneath the building.  Because LEEI detected heightened levels of DCE, it conducted a screening in an attempt to discover the source of the contamination.  Additional monitoring wells detected that an undissolved pure TCA product known as DNAPL was present in the subsurface under the building.  LEEI commenced remediation in 1995, but the remediation was discontinued in November of that same year, because it was reaching a point of diminishing returns.  
The Trust filed suit against Agfa in 1996, seeking damages for the contamination.  The parties reached an agreement known as the Agfa Settlement Agreement on June 25, 2001.  The Agfa Settlement Agreement contains provisions relating to Agfa's continued responsibilities for the contamination at 65 Industrial Way.  The Agfa Settlement Agreement required Agfa to pay $750,000 to the Trust via an environmental escrow account, in exchange for the Trust's agreement to clean up the contamination at 65 Industrial Way at its sole cost and expense in accordance with a Site Closure Plan, which had been negotiated between representatives of Agfa and the appellant.  Agfa also delivered to the Trust environmental remediation "Cost Cap" insurance.  For a premium of $93,246.00, which was paid by Agfa, this insurance provides the Trust with a five year $1,000,000.00 policy for cost of clean-up of onsite contamination at 65 Industrial Way, subject to a deductible of $1,110,424.00, which would be paid by Agfa during the five-year term to the extent that any such deductible was not satisfied by payments from the escrow account.  The Trust agreed to indemnify and hold Agfa harmless from all claims related to the hazardous waste at 65 Industrial Way, including the liability for any failure to clean up the hazardous waste at 65 Industrial Way or any liability concerning the clean-up of the contamination.  
On cross-examination, Mr. Kanavos admitted that, prior to the Settlement Agreement, the Trust had also received money from Agfa related to the contamination at 65 Industrial Way.  
In August, 2000, Mr. Loitherstein filed a Class C Temporary Solution Response Action Outcome ("RAO") with DEP.  Sixty-five Industrial Way had been determined to qualify for a Class C RAO because of the continuing source or sources of contamination at the site.  Pursuant to the Massachusetts Contingency Plan, a temporary solution does not close out a site; instead, it is a determination that while a permanent solution has not yet been achieved, the property is safe for building occupants for a period of five years.  The Class C RAO requires periodic monitoring, annual reports, and other efforts to reach a permanent solution status, including a re-examination every five years.  
In early 2003, one of the tenants, Robert Bury Panels, vacated its 34,360-square-foot space in the building.  The Trust took this space out of service and in May, 2003, LEEI commenced excavation activities in an effort to eliminate the residual source of the contamination.  However, the effort was soon abandoned because it was impacting the structural integrity of the building and the tower, and also because LEEI no longer detected the high amounts of TCA it had previously reported.  Since 2003, LEEI has conducted continuing monitoring at 65 Industrial Way every six months and has filed annual status reports with DEP.  
On September 15, 2005, LEEI filed its five-year evaluation of the Class C RAO and concluded that a permanent solution could not be achieved under current conditions.  Since that date, the subject property has been classified under the Class C RAO, which requires continuing inspections and testing of the property.  Sixty-five Industrial Way has not been designated as a Superfund site and, pursuant to its Class C RAO, it was determined to be safe for occupancy during all fiscal years at issue.  According to the Trust's own expert valuation witness, 65 Industrial Way had an economic occupancy rate of 85% at all material times.  
80 Industrial Way
In 1997, the appellant discovered that Agfa had also used TCA in a degreaser which it had operated at 80 Industrial Way.  Agfa permitted the appellant to conduct a soil gas survey, and permitted the installation of monitoring wells outside the building.  LEEI installed "angle wells" to inspect the groundwater underneath the building and discovered TCA contamination there.  On September 15, 2003, a soil vapor extraction system began operation at the site.  Radio frequency remediation, the primary remediation plan for the site, began operation on December 9, 2003 and continued for three years.  
Unlike the terms for 65 Industrial Way, the terms of the Agfa Settlement Agreement for this property called for Agfa, not the Trust, to be responsible for cleaning up the contamination and performing response actions in accordance with the Site Closure Plan at Agfa's sole cost and expense.  Agfa also indemnified the Trust from any future claims due to the contamination at 80 Industrial Way, except for claims against the Trust by tenants or mortgagees.  The Trust was responsible for all costs and fees arising from its oversight of the response actions.  
Richard J. Hughto, PhD., the environmental consultant for the appellant, testified that, at best, it will take several years, perhaps decades, to clean up the contamination in the 80 Industrial Way plume.  Eighty Industrial Way has not been designated as a Superfund site, and it was determined to be safe for occupancy during all fiscal years at issue.  According to the Trust's own expert valuation witness, 80 Industrial Way had an economic occupancy rate of 80% at all material times.    
The Trust's contentions regarding the effects of contamination at the subject properties.

a. 65 Industrial Way.
Mr. Kanavos testified that leasing the subject properties has been difficult because of the contamination.  He explained that the appellant has had to lease 65 Industrial Way to a "lesser quality" tenant with a "dirty" use, such as Kitchen and Bath Depot, Silversmith Excavating, and Classic Soft Trim.  He also testified that the presence of contamination has led to a protracted leasing timeline for completing investigations and documentation required to lease the subject properties to tenants wary of the risks associated with the contamination.  Mr. Kanavos testified that the Trust has had to give its tenants at the subject properties a higher level of personal service than those provided at its clean properties and has even had to forgive damages and absorb other charges in order to secure a lease renewal.  
 b. 80 Industrial Way.
Mr. Kanavos testified that, after discovering the contamination, the appellant decided to reposition 80 Industrial Way as a warehouse facility, which required substantial renovations (the cost of which the Trust refers to as "repositioning expenses"), including the removal of many partitions in the building, increasing the ceiling size, and adding loading docks.  The appellant claims it was unable to secure financing for these renovations, so it paid for the improvements in cash.  From 2002, after Agfa vacated the property, until early 2004, the Trust spent over $6,000,000 to reposition the property as warehouse space.
The appellant was required to make a 6,150-square-foot room in the 80 Industrial Way facility available for use by Agfa and its environmental consultants for its remediation efforts.  For the remainder of the building, the appellant was able to secure one desirable credit tenant as well as several "dirty-use tenants," including one which uses the building for sheet-metal manufacturing.  Mr. Kanavos testified that, as it does with 65 Industrial Way, the appellant often absorbs many routine repairs and miscellaneous improvements that tenants would normally pay in order to retain its tenants.  He also testified that the appellant is not reimbursed by Agfa for fees paid to its environmental consultants and counsel.  
Finally, the Trust contended that 80 Industrial Way is notorious for its contamination, and that the Trust is unable to secure financing for this property.  To support this contention, appellant submitted Appellant's Exhibit 39, which consisted of a few scrawled lines on paper, with no letterhead and no identification of the author, which simply stated, "Application for financing withdrawn by Borrower due to the fact he has been unable to obtain environmental insurance coverage.  The property is contaminated with waste by the tenant."  The document is dated August 2000, but printing at the top of the page indicates that it was sent via facsimile transmission on January 4, 2007.  
The parties' valuations of the subject properties

The Trust's valuation

The Trust's appraiser, Tyrone Hanlan, prepared appraisal reports and offered testimony concerning the valuation of the subject properties.  The Board qualified Mr. Hanlan as an expert in the field of real estate valuation. 
Mr. Hanlan performed a comparable-sales analysis using ten environmentally impaired properties, which he considered to be comparable to the subject properties.  However, he concluded that site-specific variations were significant enough that they rendered a sales-approach analysis unhelpful.  Mr. Hanlan thus relied upon the income approach to valuing the subject properties.
 65 Industrial Way
Mr. Hanlan determined that the existing rents at 65 Industrial Way, ranging from $5.33 per square foot to $8.50 per square foot, are market rents for the property in its environmentally-impaired condition.  To reach this conclusion, Mr. Hanlan reviewed rents at both clean and contaminated properties, and he also relied upon information provided by Dr. Hughto, Mr. Kanavos and Mr. Loitherstein.  Based on his information, Mr. Hanlan imputed rent to the 5,680-square-foot space occupied by the appellant at $8.50 per square foot.  For calendar years 2004 and 2005, he excluded the 34,360-square-foot space occupied by Robert Bury Panels, which was not leasable at that time because of the environmental remediation work.  Mr. Hanlan then examined the vacancy allowance and used a combined credit loss and vacancy allowance of 15%, which he applied to the actual annual rental income amounts from the subject property.  
Mr. Hanlan next considered operating expenses.  According to the information submitted to the Board, the Board found that the leases for the subject properties were triple-net leases, meaning that tenants were responsible for all operating expenses of the building, excluding those associated with its management and structural maintenance.    Appraisal Institute, The Appraisal of Real Estate (12th ed. 2001) 477.  However, Mr. Hanlan testified that, while the subject leases were triple-net, tenants were not reimbursing expenses in accordance with their leases, and the appellant was not pursuing tenant reimbursements because, as Mr. Kanavos explained, he felt compelled to cater to the tenants in order to secure their lease renewals.  Mr. Hanlan thus included in the appellant's expenses real estate taxes, insurance and utilities, costs which should be borne by the tenant in a triple-net lease.  He also included expenses for environmental cleanup fees, like DEP environmental fees and engineer environmental fees.  
Based on his calculations of rental income and expenses, Mr. Hanlan's conclusions of net-operating income for the subject property were as follows:  -$11,203 in fiscal year 2004; $21,342 in fiscal year 2005; and $31,202 in fiscal year 2006. 
For his capitalization rate, Mr. Hanlan assumed that, with contaminated properties, the loan-to-value ratios and the interest rates are generally different from market rates for clean properties.  He thus assumed that the return on equity sought by investors would be much higher than with clean properties. He consulted the PriceWaterhouseCoopers-Korpacz ("Korpacz") market reports for overall rates for non-institutional grade warehouse properties, and concluded that the Korpacz averages for the fiscal years at issue ranged from 10% as of January 1, 2003 to 9.02% as of January 1, 2005.
However, because the Korpacz rates assumed a clean property, Mr. Hanlan also consulted the Continental Environmental Redevelopment Fund ("CERF"), a quasi-public source of financing for contaminated properties.  CERF's loan-to-value ratios range from 60% to 75%; its interest rates are generally 500 points higher than the current prime rate; CERF charges a 2 percent origination fee; and CERF typically will not finance beyond 2 years.  Mr. Hanlan researched the returns on equity investments for contaminated properties and he concluded that Cherokee Investment Partners LLC ("Cherokee"), a large equity fund investing in environmentally-impaired properties, was a reliable market measure of those returns.  Based on the CERF and Cherokee investment requirements, with consideration of Korpacz's overall rates, Mr. Hanlan ultimately chose a 12% capitalization rate for all three fiscal years at issue.  
Mr. Hanlan applied his capitalization rate to the net-operating-income figures that he calculated to reach the following fair market values based on the income-capitalization approach:  $0 as of January 1, 2003; $177,850, rounded to $180,000 as of January 1, 2004; and $260,017, rounded to $260,000 as of January 1, 2005.  Because Mr. Hanlan's sales-comparison approach did not enable him to derive a specific conclusion of value, the values that he obtained from his income-comparison approach were his final opinions of value. 
Finally, Mr. Hanlan valued the cell tower at 65 Industrial Way.  He used the cell tower's actual rents, and based on an International Right of Way Association ("IRWA") magazine article from September/October 2001, he assumed a vacancy and credit loss rate of 15% and operating expenses of 40% of effective gross income.  After applying a 10% capitalization rate, which he also based on the IRWA article, Mr. Hanlan calculated the rounded value of the cell tower at $1,300,000.  Mr. Hanlan testified that, although he valued the tower, it was his opinion that the tower was personalty, not realty.
 80 Industrial Way
Mr. Hanlan considered many of the same factors in developing a market income and expense statement for the main parcel at 80 Industrial Way that he did for 65 Industrial Way.  However, there were several features of his analysis which differed, based on his opinion that the contamination at 80 Industrial Way was worse, the property was not financeable, and repositioning expenses were required to convert the property to a warehouse use because it is contaminated.  
As with 65 Industrial Way, Mr. Hanlan concluded that the rents at 80 Industrial Way during the fiscal years at issue, which ranged from $5.00 per square foot to $7.75 per square foot, were market rents for the property in its environmentally-impaired condition.  Mr. Hanlan next used a 20% vacancy and credit loss factor, which he applied to those rents.
For operating expenses, Mr. Hanlan included actual expenses for legal and environmental expenses, DEP environmental fees, and engineer environmental fees.  Mr. Hanlan also included repositioning expenses of $6,283,466 as capital expenses.  Mr. Hanlan then amortized short-term improvements over five years and long-term improvements over twenty years.
After considering financing charges from CERF, the Cherokee rate of return and the Korpacz market reports, Mr. Hanlan settled upon a capitalization rate of 14% for fiscal years 2004 and 2005 and a rate of 15% for fiscal year 2006. 
As for the developable land known as 80R Industrial Way, Mr. Hanlan relied on the sales approach to value.  He chose six comparable land sales, discounted them by 10% because of the inferior visibility and accessibility of 80R Industrial Way, and then accounted for the difference in time.  Mr. Hanlan concluded that the market value of the developable property was $5.40 per square foot on January 1, 2003, $6.30 per square foot on January 1, 2004, and $7.20 per square foot on January 1, 2005.
Mr. Hanlan's final opinions of value for the main parcel at 80 Industrial Way were as follows:  $0 as of January 1, 2003; $2,100,000 as of January 1, 2004; and $1,700,000 as of January 1, 2005.  As for the developable land, his final opinions of value were: $354,314, rounded to $350,000 as of January 1, 2003; $419,269, rounded to $425,000 as of January 1, 2004; and $482,326, rounded to $500,000 as of January 1, 2005.  
b. The assessors' valuation
The appellee's appraiser, James Johnston, prepared appraisal reports and offered testimony concerning the valuation of the subject properties.  The Board qualified Mr. Johnston as an expert in the field of real estate valuation. 
65 Industrial Way
Mr. Johnston first performed an income-capitalization analysis to value the subject property.  To determine the gross potential income, he considered the actual rents at 65 Industrial Way, as well as market evidence, which included asking rents for industrial properties in the Wilmington and north suburban Boston area and leases in other properties owned by the appellant in Wilmington.  Mr. Johnston noted that the overall industrial market experienced a decline from calendar years 2002 through 2005.  Mr. Johnston also determined that the market rent should be divided into two categories: large tenants and small tenants.  Based on this review, Mr. Johnston concluded that the applicable market rent for space at 65 Industrial Way was as follows:

Type of space	Sf area	As of 01/03	As of 01/04	As of 01/05	Expenses	
Large	>10,000 sf	$7.00	$6.50	$6.25	Net	
Small	<10,000 sf	$7.50	$7.00	$6.75	Net	
  
Mr. Johnston stated that the appellant failed to provide him with rent rolls.  Therefore, because he did not have the actual vacancy rates, Mr. Johnston estimated the vacancy rates based on the subject property's good location near Interstate-93 and good layout, but with consideration for the declining market over the relevant time period.  Mr. Johnston arrived at a stabilized vacancy rate of 7.5% for all three fiscal years at issue, based on his research of industrial market surveys, namely Costar and Spaulding and Slye.   
Mr. Johnston next used actual operating expenses, as provided by the appellant.  However, the appellant did not provide Mr. Johnston with reimbursements or with actual expenses for management fees, leasing costs, capital improvements and reserves for replacement.  Mr. Johnston made some assumptions based upon his research of industrial market surveys.  In addition, Mr. Johnston referred to the leases as "absolute-net," and he therefore did not include expense categories for real estate taxes, insurance and utilities.  Mr. Johnston also did not include DEP environmental fees and other clean-up fees as expenses, finding that these were accounted for by the Cost Cap insurance and escrow fund. 
For his capitalization rate, Mr. Johnston consulted Korpacz reports, and he also considered the band-of-investment technique of calculating a build-up capitalization rate, which assumes:  a mortgage-loan-to-value ratio of 75% maximum; a holding period of 10 years with amortization at 25 years, payable monthly; mortgage interest at the Treasury rate "plus an appropriate spread"; equity investment of 25% minimum; and equity dividend similar to Korpacz "unleveraged" capitalization rates.  He arrived at the following capitalization rates: 9.5% as of January 1, 2003; 9.25% as of January 1, 2004; and 9.0% as of January 1, 2005.  He then adjusted these capitalization rates by 1% (the "environmental-stigma premium") to account for the stigma attached to contaminated property to arrive at total capitalization rates as follows:  10.5% as of January 1, 2003; 10.25% as of January 1, 2004; and 10.0% as of January 1, 2005.  
Mr. Johnston then applied his capitalization rates to the respective net-operating incomes to arrive at the following rounded values under the income-capitalization approach:  $4,750,000 as of January 1, 2003; $4,470,000 as of January 1, 2004; and $4,360,000 as of January 1, 2005.  
The above estimates do not include the value added by the cell tower, which was valued separately by a telecommunications consultant, Gary McCabe.  Mr. McCabe valued the cell tower using the income-capitalization approach.  For each year at issue, the cell tower's income was reported at $249,400, while its vacancy and expenses were estimated at 25% based on Mr. McCabe's research of the market.  These estimates produced a net income of $187,056 for each year at issue.  Mr. McCabe then applied a capitalization rate of 15%, which included a 12.5% capitalization rate plus a 2.5% tax factor, to the respective net operating income for each year at issue.  This produced a rounded fair cash value of $1,250,000 for each year at issue.  
Based on these figures, Mr. Johnston's conclusion of values under the income-capitalization approach were as follows:
	
As of 01/01/03	
As of 01/01/04	
As of   01/01/05	
Building	$4,750,000	$4,470,000	$4,360,000	
Tower	$1,250,000	$1,250,000	$1,250,000	
Total property	$6,000,000	$5,720,000	$5,610,000	

Mr. Johnston next considered the sales-comparison approach to value.  He analyzed five sales of industrial properties in Wilmington, as summarized below:


Address	

Sale date	Gross leasable area	

Use	

Price psf	
220 Ballardvale	04/01/2002	155,375	Multi-tenant warehouse	$70.15	
25 Industrial Way	11/01/2002	120,000	Single- tenant industrial	$53.15	
500 Research        Drive	04/26/2002	108,765	R&D building	$56.08	
10 Burlington Avenue	04/13/2005	78,200	Vacant industrial	$48.59	
23 Industrial Way	12/22/2003	42,000	Single- tenant industrial	$39.29	

After adjustments for time, location, physical characteristics and condition, Mr. Johnston arrived at a range of $50-$60 per square foot for the subject property, which produced an indicated value range of $4,500,000 to $5,400,000, excluding the cell tower.
Finally, Mr. Johnston used the values derived from the sales-comparison approach as a check on the values derived from the income-capitalization approach.  His final opinion of fair cash value was rounded to:  $6,000,000 as of January 1, 2003; $5,700,000 as of January 1, 2004; and $5,600,000 as of January 1, 2005.  
80 Industrial Way
Mr. Johnston performed an income-capitalization analysis to value the subject property.  To determine the gross potential income, he considered the actual rents at 80 Industrial Way, as well as market evidence, which included asking rents for industrial properties in the Wilmington and north suburban Boston area and leases in other properties owned by the appellant in Wilmington.  Mr. Johnston again noted that the overall industrial market experienced a decline from 2002 through 2005.  Mr. Johnston also determined that the market rent should be divided into two categories: large tenants and small tenants.  Based on this review, Mr. Johnston concluded that the applicable market rent for space at 80 Industrial Way was as follows:


Type of space	
Sf area	As of 01/2003	As of 01/2004	As of 01/2005	Expenses	
Large	>20,000 sf	$6.75	$6.25	$6.00	Net	
Small	<20,000 sf	$7.25	$6.75	$6.50	Net	
  
Mr. Johnston then analyzed the vacancy allowance.  He noted that the Trust did not provide him with actual vacancy rates.  He referred to the industrial market surveys for vacancy rates for Wilmington.  Based on the property's desirable location near Interstate I-93 and good layout, but with consideration for the declining market over the relevant time period, Mr. Johnston determined that a vacancy allowance of 7.5% for the fiscal years at issue was appropriate. 
Mr. Johnston next used the actual operating expenses that the appellant provided.  Mr. Johnston's report noted that in calendar year 2002, applicable for the January 1, 2003 valuation date for fiscal year 2004, the property was partially demolished, rebuilt and converted to a multiple- tenancy layout.  Therefore, he found that calendar years 2002 and 2003 had irregular expenses and capital charges, and that the calendar year 2004 expenses were more representative.  His report also noted that the leases were "absolute net," requiring the tenants to pay for all real estate taxes, insurance and utilities. However, Mr. Johnston gave allowances for the portion of real estate taxes allocated to vacant space and for tenant improvements ($0.26 per square foot per year), leasing commission ($0.16 per square foot per year), reserves for replacement ($0.10-0.15 per square foot per year), and other non-operating expenses.
For his capitalization rate, Mr. Johnston consulted the Korpacz reports, and he also considered the band-of-investment technique of calculating a built-up capitalization rate, which assumes: a mortgage-loan-to-value ratio of 75% maximum; a holding period of 10 years with amortization at 25 years, payable monthly; mortgage interest at the Treasury rate "plus an appropriate spread"; equity investment of 25% minimum; and equity dividend similar to Korpacz "unleveraged" capitalization rates.  He arrived at the following capitalization rates: 9.0% as of January 1, 2003; 9.0% as of January 1, 2004; and 8.5% as of January 1, 2005.  He then increased these capitalization rates by adding a 1% environmental-stigma premium to arrive at total capitalization rates as follows:  10.0% as of January 1, 2003; 10.0% as of January 1, 2004; and 9.5% as of January 1, 2005.  
Mr. Johnston arrived at the following stabilized values under the income-capitalization approach:  $12,100,000 as of January 1, 2003; $11,200,000 as of January 1, 2004; and $11,200,000 as of January 1, 2005.  His report indicated that his summary reflects the values before adjustments for two specific items: (1) costs for tenant improvements, leasing commissions and "capital needed during calendar 2003 and 2004 to achieve stabilized occupancy," and (2) development of the vacant parcel.  First, the costs for tenant improvements, leasing commissions and capital reserves were $2,248,418 for calendar year 2003 and $34,133 for calendar year 2004.  Second, Mr. Johnston assumed that expansion of the subject property into the six acres of developable land, with a potential for an additional 79,200 square feet of rentable building area, would add a fair cash value to the land of $600,000.  Taking these two adjustments into account, Mr. Johnston arrived at a fair cash value of $10,451,582, rounded to $10,450,000, as of January 1, 2003; $11,765,867, rounded to $11,770,000, as of January 1, 2004; and $11,800,000 as of January 1, 2005.   
Mr. Johnston next considered the sales-comparison approach to value.  He analyzed four sales of industrial properties in Wilmington, as well as one industrial property in Woburn, as summarized below:
Address

	Sale date

	Gross leasable area (sf)	Use

	Price psf

	
220 Ballardvale	04/01/2002	155,375	Multi-tenant warehouse	$70.15	
 25 Industrial           Way	11/01/2002	120,000	Single- tenant industrial	$53.15	
500 Research      Drive	04/26/2002	108,765	R&D building	$56.08	
 10 Burlington      Avenue	04/13/2005	78,200	Vacant industrial	$48.59	
275 Wildwood          Avenue         (Woburn)	08/12/2004	222,000	Single- tenant industrial	$51.80	

After adjustments for time, location, physical characteristics and condition, Mr. Johnston arrived at a range of $50-$60 per square foot for the subject property, which produced an indicated value range of $10,600,000 to $12,700,000.
Mr. Johnston also considered the sales-comparison approach for the six acres of developable land, with potential for 79,200 square feet of rentable space.  He considered five sales of industrial land in Wilmington, as summarized below:


Address	
Sale date	
Acres	
Price per acre	
114 West Street	08/06/2001	3.39	$619,232	
  4 Jewel Drive	07/18/2005	2.01	$246,269	
228 Andover        Street	04/11/2005	7.35	$163,265	
150 Ballardvale     Street	07/15/2004	16.31	$122,662	
Research Drive	08/08/2001	14.61	$ 49,782	

Considering differences in time, location, size, and other factors of these sales, and considering other land sales, Mr. Johnston concluded that the developable land added $100,000 of value per acre, for a total fair cash value of $600,000.   
Finally, Mr. Johnston reconciled the above data by concluding that the figures derived from the sales-comparison approach supported the figures derived from the income-capitalization approach.  His final opinion of fair cash value was:  $10,450,000 as of January 1, 2003; $11,770,000 as of January 1, 2004; and $11,800,000 as of January 1, 2005.  The actual assessments were: $4,422,500 for fiscal year 2004; $4,689,600 for fiscal year 2005; and $7,963,600 for fiscal year 2006. 
The parties' arguments.  
The appellant's contentions
The appellant contended that, during the fiscal years at issue, the contamination adversely affected its ability to lease the subject properties.  The appellant argued that it takes longer to find a tenant and that the timetable for leasing is extended because of the additional legal paperwork associated with leasing contaminated property, which ultimately increases the costs of the lease.  Moreover, the appellant continued, once leased, the Trust was required to give a higher level of service in order to obtain a renewal from an existing tenant, including overlooking tenant damages and providing maintenance and repairs that are normally the obligation of the tenant.
The Trust outlined what it considered to be the impact of the contamination at 65 Industrial Way on each of the valuation dates.  On January 1, 2003, the appellant contended that a prospective buyer would be confronted with the prospect that Robert Bury Panels was going to move out in early 2003, and 34,360 square feet, about a third of the leasable space, would be taken out of service for excavation work to investigate and remediate the residual contamination source.  However, as the appellant's expert, Mr. Hanlan, admitted by assigning a 15% vacancy rate to this property, the 34,360 square-foot space was nonetheless considered by the appellant to be leasable space, which was not taken out of service permanently because of contamination issues.  
On January 1, 2004, a potential buyer would know that the excavation work failed to locate and remove the residual source of contamination, and that 65 Industrial Way would retain its temporary solution status indefinitely, which would require periodic monitoring.  However, as the Trust acknowledged, although the contamination plume was larger than had been previously delineated, experts agreed that the contamination from 65 Industrial Way did not migrate to the Revay well, the source of water for the Town.  Finally, appellant argued that on January 1, 2005, a potential buyer would know that the Robert Bury Panel space was still vacant, and that a permanent solution could not be obtained for the subject property, so a Class C RAO would apply indefinitely.
The Trust next outlined what it considered to be the impact of the contamination at 80 Industrial Way on each of the valuation dates.  As of January 1, 2003, the plume of contamination had not yet been defined, and no remediation had been conducted.  The appellant acknowledged that under the Agfa Settlement Agreement, the clean-up expenses were to be borne by Agfa, but pointed out that the Trust indemnified Agfa against all claims related to the hazardous waste at 65 Industrial Way, including the liability for any failure to clean up the hazardous waste at 65 Industrial Way or any liability concerning the clean-up of the contamination.  About 6,150 square feet of the subject property, roughly 7% of the 90,000 square foot leasable space, had been taken out of service for use by Agfa as the remediation room.  Appellant also contended that no financing was available and no environmental insurance was available.  On January 1, 2004, a prospective buyer would know that RF remediation, a new technology, had commenced on December 9, 2003.  The Trust acknowledged that repositioning was nearly complete, with only $34,133 of the work remaining.  On January 1, 2005, the delineation of the plume remained constant.  The Town of Reading had sued Agfa, claiming that the contamination at 80 Industrial Way had polluted the Revay well.  No remediation of the contaminated wells had been conducted.  The Trust had, however, completed the repositioning of the building into 214,000 square feet of warehouse space.
Based on its rendition of the facts, the Trust contended that its expert, Mr. Hanlan, correctly valued the subject properties, including a value of $0 for both properties for fiscal year 2004, and the conclusion that the cell tower was personalty.
	b. The appellee's contentions.  
The appellee, however, contended that Mr. Hanlan's appraisal was defective in several key respects.  In the area of expenses, the appellee noted that Mr. Hanlan applied his 15% and 20% vacancy factors to actual rent figures, which already included the actual vacancies, thereby inflating the vacancy expense.  The appellee also criticized Mr. Hanlan's method of deducting several expenses, even though the leases were triple-net leases.  Finally, the appellee criticized Mr. Hanlan's deduction for environmental expenses, noting that these were paid by Agfa as required under the Agfa Settlement Agreement.  
The appellee also maintained that Mr. Hanlan's calculations of his capitalization rates were based on the erroneous assumptions that no guarantee or insurance was available to the appellant or prospective buyers.  However, according to the Agfa Settlement Agreement, it was undisputed that environmental insurance was in place for 65 Industrial Way, and Agfa had provided the appellant and its successors and assigns with indemnification from liability related to the releases for both properties.  The appellee also criticized Mr. Hanlan's assumption that the subject properties could not be financed and sold.  Several of Mr. Hanlan's comparable environmental sale properties were financed and sold, including: 90 Industrial Way; 23 Industrial Way; and 33 Manning Road.  As the appellee pointed out, Mr. Hanlan's report acknowledged that "all sale transactions noted herein involved mortgage financing, however not all appear to involve conventional lending sources."  Moreover, Mr. Hanlan also admitted in his report that the appellant was able to obtain financing for 65 Industrial Way with a conventional lender.  
The appellee also contended that the 190-foot cell tower should be valued as real property, because it is bolted with 22 tons of steel to a large 39-foot by 39-foot, 5-foot thick concrete foundation which is buried in the ground and, therefore, affixed to the subject property.  The appellee argued that the cell tower is similar to other towers which the Board has found to be real property.  Finally, the cell tower is leased property, producing $249,400 of annual income.
With respect to Mr. Hanlan's capitalization rate for 80 Industrial Way, the appellee maintained that the appellant failed to demonstrate concerted efforts to obtain financing for that property.  The appellee criticized the appellant's lack of substantial evidence, pointing out that the appellant's only evidence, the hand-written notation concerning financing, lacked much information, including any letterhead, identification of the author, and an explanation beyond the simplistic "Application for financing withdrawn by Borrower due to the fact he has been unable to obtain environmental insurance coverage.  The property is contaminated with waste by the tenant."  Moreover, the facsimile transmission date of January 4, 2007 calls into question the letter's date of August 2000.  The appellee also pointed out that Mr. Kanavos was unable to state with certainty when he spoke with Bank North regarding efforts to obtain financing.
The appellee also contended that the appellant has mischaracterized several aspects of the releases of hazardous materials at the subject properties.  For example, the appellee argued that the fact that no remediation other than passive soil vapor extraction has occurred at 65 Industrial Way since 2003 indicates that the appellant has aggrandized the seriousness of the contamination.  The appellee also maintained that the Town of Reading has sued Agfa, not the appellant, for the contamination of the wells.  
Moreover, Michael Webster, an environmental consultant who testified on behalf of the appellee, testified that his review of DEP documents indicated that remedial activities at 65 Industrial Way had been completed.  Mr. Webster also testified that several of the contaminated properties with which he had been involved as an environmental consultant had been financed and/or sold, including: a property in Sharon, which had been sold sometime around late 2004 or early 2005 at which volatile organic compounds had entered bedrock and migrated into an aquifer for wells for the Town of Sharon; a property in Chelmsford involving volatile organic compounds in groundwater at greater than 1% solubility, which had been refinanced in 2001; and a facility in Waltham where DNAPL had been detected, which was sold in 2001. 
VI. The Board's ultimate findings.  
On the basis of the evidence before it, the Board made the following ultimate findings of fact.
	a. Cell tower.
The Board found that, while the cell tower was able to be disassembled and removed, its secure attachment by 22 tons of steel to a 39-foot by 39-foot by 5-foot underground concrete pad provided a high degree of permanence with respect to its surroundings.  Therefore, as explained more fully in the Opinion, the Board found that the assessors properly classified the cell tower as realty.
	b. 65 and 80 Industrial Way.
The Board found several flaws with the appellant's method of valuing the subject properties.  First, in his appraisal, Mr. Hanlan applied his 15% and 20% vacancy factors to the actual rents of the subject properties, which already included actual vacancies.  The Board found that this calculation resulted in grossly inflated, and therefore inaccurate, vacancy factors and distorted effective gross incomes.  
Second, Mr. Hanlan improperly deducted expenses including real estate taxes, utilities and repairs for the subject properties.  The triple-net leases in effect at the subject properties during the fiscal years at issue specified that these expenses were the responsibility of the tenant.  Mr. Kanavos' testimony that the appellant had to forgive damages and bear the cost of other tenant responsibilities was not substantiated and, therefore, not sufficient to meet the burden of proving that significant expenses, which were the responsibility of the tenants under the operative leases, should properly be used to reduce the subject properties' net operating incomes.
Third, Mr. Hanlan deducted for certain environmental expenses which were to be borne by Agfa, not the appellant, as part of the negotiated and approved Agfa Settlement Agreement.  
Fourth, Mr. Hanlan claimed in his reports that "[a]s of the dates of valuation there was no Guarantee or Insurance Plan available to the owner or buyers."  However, according to the Agfa Settlement Agreement, environmental insurance was in place for 65 Industrial Way on the valuation dates, and Agfa had provided the Trust and its successors and assigns with indemnification from liability related to Agfa's response actions at 80 Industrial Way.  
Fifth, although Mr. Hanlan also assumed that the properties could not be financed or sold, even his reports state that several of what he classified as "environmental sale properties," supposedly comparable to the subject properties, were financed and sold, including: 90 Industrial Way; 23 Industrial Way; and 33 Manning Road.  The Trust's claims were also contradicted by the testimony of Mr. Webster, who testified that several of the contaminated properties with which he had been involved had been financed and/or sold.  The Board also agreed with the appellee's contentions that the Trust's evidence concerning its inability to finance 80 Industrial Way, including the hand-written notation, failed to prove that the Trust actively attempted to secure financing for that property.  
Sixth, the Board made the following findings with respect to the contamination at the subject properties:  DEP documents indicated that remedial activities at 65 Industrial Way had been completed; neither property had been designated as a Superfund site; both properties were at least 80% occupied; and other contaminated properties owned by the Trust had been financed and sold.  Based on these findings, the Board found that Mr. Hanlan had overstated the financial effects of the contamination.
The credibility of Mr. Hanlan's approach was seriously undercut by his assertion that the subject properties had no value for fiscal year 2004.  According to Mr. Hanlan's own evidence, the subject properties had a market occupancy rate of at least 80% on the relevant valuation dates, while the cell tower at 65 Industrial Way was producing about $249,400 in annual gross income.  Mr. Hanlan also failed to take into account the full potential of the developable land at 80 Industrial Way, which, according to Mr. Johnston's credible report, included sufficient space for the construction of an approximately 79,000-square-foot building.  Finally, the Trust's claim of no value was made all the more implausible based on the fact that the Trust had incurred significant expenses, including about $6,000,000 to completely renovate 65 Industrial Way in 2002 and substantial repositioning expenses of over $6,000,000 for 80 Industrial Way between 2002 until early 2004.
For fiscal years 2005 and 2006, the Board found that the flaws in Mr. Hanlan's methodology, particularly his deductions of several expenses not warranted in a triple-net lease, rendered his appraisal report patently unreliable and therefore, not persuasive evidence that the subject properties were over-valued.
Based on all of the evidence, the Board found that the appellant failed to meet its burden of proving that the subject properties were overvalued for the fiscal years at issue.  Accordingly, the Board issued decisions for the appellee in these appeals.     

OPINION
I.  The assessors properly characterized the cell tower at 
    65 Industrial Way as real property.

General Laws c. 59, § 2A provides, in pertinent part, that "[r]eal property for the purpose of taxation shall include all land within the commonwealth and all buildings and other things thereon or affixed thereto, unless otherwise exempted from taxation under other provisions of the law." (emphasis added). 
In two recent decisions, the Board has held that cell towers are properly treated as real estate for tax purposes and the income from leasing the towers is properly considered as part of the real estate's income to be capitalized.  In New England Telephone & Telegraph Company v. Assessors of Cambridge, Mass. ATB Findings of Fact and Reports 2000-568, 592, the Board found that in his valuation of the real estate at issue, the expert appraiser's "assignment of rents to the [cell] towers on the roof, were all well-supported by the evidence."  In Lyman v. Assessors of Cambridge, Mass. ATB Findings of Fact and Reports 1998-257, 283, the Board criticized the appellant's expert's real estate valuation analysis as "flawed because he . . . ignored actual rents received from other portions of the property, as well as income from the radio tower."  
Cases addressing the taxability of towers indicate that consideration of the tower's permanence will prescribe a finding of realty.  For example, in Assessors of Wilmington v. Avco Corp., 357 Mass. 704, 706 (1970), the Court found that towers bolted or otherwise attached to concrete foundations, which were "braced by guy wires" and "attached to concrete anchors buried in the ground," were erected or affixed to real estate and thus properly taxable as part of the real estate.  The fact that the 190-foot cell tower in the instant appeal could theoretically be dissembled and removed does not lead to the conclusion that the tower must be treated as personalty for property tax purposes.  See, e.g, Kabat v. Assessors of Cummington, Mass. ATB Findings of Fact and Reports 2008-397, 404 (ruling that a mobile home was properly treated as real estate) (citing Ellis v. Assessors of Achushnet, 358 Mass. 473, 475 (1970) (mobile home properly classified as real property despite its mobility), Franklin v. Metcalfe, 307 Mass. 386, 388-89 (1940) (movable lunch cart, standing on its own wheels, resting "up against" but not attached to the wall of an adjacent building, and which "may be removed at any time by the lessees" from its four cement pole abutments, was nonetheless properly classified as real property), and Hasco Associates v. Assessors of Wareham, Mass. ATB Findings of Fact and Reports 2000-178, 183 (finding that "rectangular eight-foot-by-forty-foot edifices with walls, floors and weather-proof roofs, weighing between six to eight thousand pounds and leased to customers as shelters for the storage of property" were properly treated as realty)).  
The cell tower's attachment to its realty is comparable to the attachment of the silos to their surroundings in New England Milling Co., Inc. v. Assessors of Ayer, Mass. ATB Findings of Fact and Reports 1998-625.  In that appeal, the silos were about 128 feet in height and from thirty to sixty-five feet in diameter, with underground foundations at least five feet below ground, walls about one to two-feet thick, and constructed of concrete reinforced with rebar.  Id. at 630.  They were mounted on underground concrete "footings which were 13 feet wide, 2-plus feet thick and the bottoms of which were five and one-half feet below ground."  Id. at 636.  The Board found that the silos were permanent structures intended to be firmly affixed to their surrounding real estate and therefore, taxable as real estate.  Id. at 645.  See also Boston Edison Co. v. Board of Assessors of the City of Boston, Mass. ATB Findings of Fact and Reports 1986-251, aff'd, 402 Mass. 1 (1988) (finding that because its generator was "physically and functionally incorporated into the real estate on which it is situated," it was properly classified as real estate subject to local property taxation).  
In the instant appeal, the Board found that the cell tower, although theoretically able to be dissembled and removed, was nonetheless intended to be permanently situated upon the subject property, as indicated by its attachment by concrete foundations and guy wires.  The Board thus found that the cell tower was akin to the structures, such as towers, silos and generators, which the Board has previously found to be real estate.  Therefore, the Board found and ruled that the assessors properly classified the cell tower as realty and, accordingly, properly included its value in the assessment of 65 Industrial Way.  
The appellant failed to meet its burden of proving that the subject properties were assessed for more than their fair cash value.

The principal issue in these appeals is whether the appellant met its burden of proving that the subject properties were overvalued in fiscal years 2004, 2005 and 2006.  The Board relied upon the following principles in deciding these appeals. 
Assessors are required to assess real estate at its fair cash value as of the first day of January preceding the fiscal year at issue.  G.L. c. 59, §§ 11 and 38.  The fair cash value of a property is defined as the price upon which a willing buyer and a willing seller would agree if both 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 determine the fair cash value of property: income capitalization, sales comparison, and cost reproduction.  Correia v. New Bedford Redevelopment Authority, 375 Mass. 360, 362 (1978).  "The [B]oard is not required to adopt any particular method of valuation."  Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447, 449 (1986).  In these appeals, the experts agreed, and the Board ruled, that neither the sales-comparison nor the cost approach were appropriate under the circumstances.  The use of the income-capitalization approach is appropriate when reliable sales data are not available.  Assessors of Weymouth v. Tammy Brook Co., 368 Mass. 810, 811 (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).  It is also an appropriate technique to use for valuing income-producing property.  Boston Consolidated Gas, 309 Mass. at 64-65.  In these appeals, the Board, like the parties, relied on the income-capitalization approach.  
The income stream used in the income-capitalization method must reflect the property's earning capacity or economic rental value.  Pepsi-Cola Bottling Co., 397 Mass. at 451.  Imputing rental income to the subject property based on fair market rentals from comparable properties is evidence of value if, once adjusted, they are indicative of the subject property's earning capacity.  See Correia v. New Bedford Redevelopment Auth., 5 Mass. App. Ct. 289, 293-94 (1977), rev'd on other grounds, 375 Mass. 360 (1978); Library Services, Inc. v. Malden Redevelopment Auth., 9 Mass. App. Ct. 877, 879 (1980)(rescript).  Actual rents from the subject property are also probative in this regard if they reflect the subject's true earning capacity.   Pepsi Cola Bottling Co., 397 Mass. at 451; Irving Saunders Trust v. Board of Assessors of Boston, 26 Mass. App. Ct. 838, 842 (1989).  After accounting for vacancy and rent losses, which also must be market-based, the net operating income is obtained by deducting the landlord's appropriate expenses.  Olympia & York State Street Co. v. Assessors of Boston, 428 Mass. 236, 239, 241-42 (1998), General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 610 (1984).  The expenses should also reflect the market.  Olympia & York State Street Co., 428 Mass. at 239, 243, General Electric Co., 393 Mass. at 610.
While the appellant introduced sufficient evidence to prove some negative effect on the subject properties' values caused by environmental contamination, the appellant failed to meet its burden of proving that the subject assessments failed to account for that effect.  As explained in the Findings, the Board found and ruled that the appellant's expert's methodology was fatally flawed in several key respects, including Mr. Hanlan's application of a vacancy factor to rental income figures, which already included actual vacancy; his improper deduction of tenant expenses where the leases were triple-net; and his deduction of environmental costs, which were not the Trust's legal responsibility to bear according to the Agfa Settlement Agreement.  
Traditional appraisal techniques, if appropriately modified to account for the effects of environmental contamination, are satisfactory for determining a property's fair market value.  23 West Bacon Corporation v. Assessors of Plainville, Mass. ATB Findings of Fact and Reports 2000-678, 708.  The presence of environmental contamination and the concomitant costs of governmentally mandated monitoring may reduce the fair market value of the property even though the property remains capable of being used as intended.  See Woburn Services, Inc. v. Assessors of Woburn, Mass. ATB Findings of Fact and Reports 1996-553, 574 (citing, inter alia, Bisson v. Eck, 40 Mass. App. Ct. 942 (1996)).  Accordingly, the effects on value caused by environmental contamination must be recognized by this Board when proven.  Id. 
As Mr. Johnston testified, an acceptable means of taking contamination into account is by upwardly adjusting the capitalization rate.  See, e.g., Woburn Services, Mass. ATB Findings of Fact and Reports at 1996-574.  The capitalization rate applied should reflect the return on investment necessary to attract investment capital.  Taunton Redevelopment Association v. Assessors of Taunton, 393 Mass. 293, 295 (1984).  The Board has previously ruled that a 1% adjustment to the capitalization rate sufficiently accounted for the presence of contamination.  See Wayland Business Center Holdings, LLC, et al. v. Assessors of Wayland, Mass. ATB Findings of Fact and Reports 2005-557, 588 (ruling that "[t]he added investment risk caused by the notoriety and widespread publicity concerning the stigma relating to the subject property's environmental contamination was adequately addressed by increasing by 1.0% the overall capitalization rate for this property . . . .); see also Lyman v. Assessors of Cambridge, Mass. ATB Findings of Fact and Reports 1998-257, 295-96 (citing Woburn Services, Mass. ATB Findings of Fact and Reports at 1996-184, 185).  In the instant appeals, where neither of the subject properties had been designated as Superfund sites, and both properties were substantially occupied by tenants, the Board found that the effects of the contamination were adequately addressed by adding the 1% environmental-stigma premium.
As detailed in the Findings, Mr. Hanlan made erroneous assumptions, including the lack of a guarantee or insurance for the subject properties, and the Trust's inability to secure financing, that affected his income-capitalization analysis of the subject properties.  Moreover, his claim that the subject properties were worthless for fiscal year 2004 adversely affected Mr. Hanlan's credibility, considering: that the properties were substantially leased; that the Trust had made significant outlays, including renovations and repositioning expenses over $6,000,000; that the cell tower was generating about $249,400 in annual income for 65 Industrial Way; and that the expansion land at 80 Industrial Way had the potential for construction of an additional approximately 79,000 square feet of leasable office space.  Based on the evidence presented, the Board found and ruled that Mr. Hanlan's opinion of value, as reflected in his report, was so seriously flawed that it lacked any probative value.  See Chatham Investment Trust of Newton v. Assessors of Newton, Mass. ATB Findings of Fact and Reports 2007-298, 310.
"'The burden of proof is upon the petitioner to make out its right as [a] matter of law to abatement of the tax.'"  Schlaiker v. 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 the assessed valuations placed on the subject properties were improper.  See Foxboro Associates, 385 Mass. at 691.  The assessments are presumed valid until the taxpayer sustains its burden of proving otherwise.  Schlaiker, 365 Mass. at 245.  
Accordingly, because the appellant failed to either present persuasive evidence that the assessors overvalued the subject properties or to demonstrate any errors in the assessors' valuation methods, the Board found and ruled that the appellant failed to meet its burden of proving that the subject properties were overvalued in the fiscal years at issue.  Therefore, the Board decided these appeals for the appellee.
						APPELLATE TAX BOARD

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

A true copy,

Attest: _______________________
         Clerk of the Board

 The actual tax bill for fiscal year 2004 was sent on April 1, 2004 and was due, as was the abatement application, on Monday, May 3, 2004.  See G.L. c. 59, § 59.
 See note 1, infra.
 Eighty-R Industrial Way, was undeveloped through January 2005, and therefore at all times relevant to this appeal.
 Counsel for the appellee asked Mr. Kanavos if the Trust had received a sum of $600,000 from Agfa.  Mr. Kanavos did not confirm this amount, instead admitting that the Trust had "receive[d] some monies, yes."
  310 CMR 40.0000 et seq.
 Mr. Hanlan testified that in choosing this rate, he assumed that 65 Industrial Way was financeable.  He explained that he failed to realize that the lender required cross-capitalization with 42 Industrial Way, another property owned by the appellant.  
 About 10% of this area consists of office space, as opposed to warehouse space.
 About 35% of this area consists of office space, as opposed to warehouse space.
 An "absolute net lease" is defined as "[a] lease in which the tenant pays all expenses including structural maintenance and repairs; usually a long-term lease to a credit tenant."  Appraisal Institute, The Dictionary of Real Estate Appraisal (4th ed. 2002) 2.  
 The Board assumed that Mr. Johnston was referring to capital reserves.
  See note 8 supra.
  Mr. Johnston referred to the leases as "absolute-net leases," but as explained infra, the Board found that the leases were triple-net leases.
 While the additional 79,000-square-foot building at 80R Industrial Drive was constructed subsequent to the relevant times for these appeals, the Board nonetheless found that its construction bolstered Mr. Johnston's opinion concerning the value of the developable land at 80 Industrial Way during the relevant times for these appeals.
 The Supreme Judicial Court "upheld the board's decision in major respects," but remanded for further hearing on three issues unrelated to the facts of these appeals.  Boston Edison, 402 Mass. at 20.
 While Mr. Johnston did perform a sales-comparison analysis, he relied on his income-capitalization analysis as his primary valuation method and only used the sales-comparison analysis as a check for his income-capitalization analysis. 

ATB 2009-320