Average Ratio Upper Limit Lower Limit 1982 60% 69% 51% 1983 54
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J.C. Penney Co., Inc. v. Lawrence Tp., 8 N.J.Tax 473 (1986) So ordered. 8 N.J.Tax 473 Tax Court of New Jersey Attorneys and Law Firms J.C. PENNEY COMPANY, INC., Plaintiff, *476 John E. Garippa for plaintiff (Garippa & Trevenen, v. attorneys). LAWRENCE TOWNSHIP, Defendant. Robert A. Gladstone for defendant (Schaff, Motiuk, Gladstone, Conley, Moeller & Ligorano, attorneys). September 17, 1986. Opinion SYNOPSIS ANDREW, J.T.C. Owner of department store property sought direct judicial In this case plaintiff, J.C. Penney Company, Inc., seeks a review of township's property tax assessments over three- reduction in its local property tax assessments for tax years year period. The Tax Court, Andrew, J.T.C., held that: (1) 1982 through 1985 inclusive. Plaintiff-taxpayer contends market rent analysis of property owner's expert was sufficient that the assessment for each of the tax years of 1982 and to overcome presumption of correctness attaching to original 1983 is in excess of fair market value, and for all four assessments, though “comparable rentals” on which property tax years plaintiff further asserts that the property is the owner's expert relied were not identical as to age, physical subject of inequality in assessment and seeks application of qualities and location, but (2) property's market rent would an appropriate assessment ratio. At the outset of the trial be set at upper limit of range of adjusted rentals provided by the parties stipulated that the following chapter 123 (N.J.S.A. property owner's expert, as “comparable rentals” on which 54:51A-6) ratios would be applicable in this proceeding: expert relied on in valuing property where generally older, smaller, and less advantageous located. Average Ratio Upper Limit Lower Limit 1982 60% 69% 51% 1983 54% 63% 45% 1984 53.21% 61.19% 45.23% 1985 46.02% 52.92% 39.12% Township and is commonly identified as 4190 Quaker Bridge *477 Mall. It was assessed for each of the tax years in The property involved in this controversy is known and question as follows: designated as Block 47, Lot 82 on the tax map of Lawrence Land $ 738,700 Improvements 5,755,400 Total $6,494,100 Defendant through its expert appraiser, Richard M. Chaiken, Direct review of the assessment for all tax years has been contends that the fair market value of the subject property as sought in this court pursuant to N.J.S.A. 54:3-21. of the pivotal assessment dates was $11,186,000 for 1982, $11,827,000 for 1983, $12,815,000 for 1984 and $14,096,000 Plaintiff through its appraiser, Richard A. Kulman, contends for 1985. It is further defendant's position that plaintiff's that the fair market value of the subject property was property was not the subject of unequal assessment treatment $5,680,000 as of October 1, 1981, $6,090,000 as of October and therefore the assessment for each tax year should be 1, 1982 and $7,685,000 as of October 1, 1983 and October 1, affirmed. 1984. With an application of the appropriate chapter 123 ratio to these values plaintiff asserts that proper assessments would The parties are in substantial agreement regarding the be $3,408,000 for 1982, $3,288,600 for 1983, $4,089,200 for description of the property. The subject is an irregularly- 1984 and $3,536,700 for 1985. shaped parcel of land, stipulated by the parties to be 14.892 © 2011 Thomson Reuters. No claim to original U.S. Government Works. 1 J.C. Penney Co., Inc. v. Lawrence Tp., 8 N.J.Tax 473 (1986) acres in size, which forms an integral part of a “super” Tax 481 (Tax Ct.1983) and need not be repeated here. Suffice regional shopping center known as the Quaker Bridge Mall it to say *478 that the mall constitutes a shopping center located at the intersection of U.S. Route 1 and Quakerbridge of approximately 1,300,000 square feet of building area sited Road in Lawrence Township, midway between Princeton and on a 100-acre tract of land. The four major department Trenton. The mall of which the subject is but a part consists stores located in the complex are Bamberger's, Hahne's, Sears of four major department stores (one of which is the subject) and the subject of this proceeding, J.C. Penney. The J.C. and approximately 125 satellite-retail establishments. Penney department store consists of a two-level structure with a mechanical penthouse constructed in 1976 and contains, The development of the Quaker Bridge Mall was chronicled as stipulated by the parties, 162,571 square feet of space in the comprehensive opinion of former Judge Conley of the distributed as follows: Tax Court in Lawrence Associates v. Lawrence Tp., 5 N.J. first level - 77,055 square feet second level - 75,436 square feet penthouse - 10,080 square feet the three traditional valuation methodologies may be the most reliable under the circumstances. The reproduction cost Also involved in this proceeding is a free-standing automotive method of valuation produces a significant indication of value repair building, constructed in 1976, and identified by the when the improvements are new and physical, functional and parties as a tire, battery and accessories structure (hereinafter economic depreciation are objectively measurable. American TBA). This is a one-story masonry and steel improvement Institute of Real Estate Appraisers, The Appraisal of Real consisting of a store and a 12-bay garage. The parties Estate (8 ed. 1983) 444. The cost methodology may result stipulated that the area of this building was 14,344 square feet. in serious error when depreciation in all forms is not objectively measurable. Therefore, most courts have utilized The experts are in agreement that the highest and best use of this method as the only approach in those limited instances the subject property is its present use as a department store in which no other method of valuation would yield an and automotive center in a super regional shopping mall. The economically realistic value. 1 Bonbright, Valuation of site is zoned S-C, shopping center commercial district, and Property, 175-176. This pragmatic position is reflected in the present use is in conformity with Lawrence Township's the modern appraisal practice of relegating the cost approach zoning requirements. It should be noted that the township to a secondary role because cost may not effectively reflect zoning ordinance permits only three shopping centers, one of market conditions. O'Flaherty, “Cost Approach to Value,” which is the Quaker Bridge complex, in the entire township. Friedman, Encyclopedia of Real Estate Appraising (3 ed. Plaintiff's expert, Kulman, predicated his estimates of value 1978) 66-67. for the four tax years in question essentially upon an In this case the parties at the outset of the trial agreed to income approach to value because, in his opinion, a potential submit each expert's cost approach analysis based solely on purchaser would buy a facility such as the subject for the information contained in each expert's appraisal report. the income produced. Although Kulman employed a cost There was no direct testimony nor cross-examination on any approach, his emphasis was clearly on his income analysis. aspect of either expert's cost approach analysis. Presumably He did not utilize a direct sales comparison approach this was done because the parties recognized that the approach because he could not find any verifiable arm's-length sales of that would be of preponderant influence in this case was the department stores. income approach to value. This is evidenced by the fact that Defendant's expert, Chaiken, also relied predominantly upon each expert concluded his final estimate of value at the same an economic analysis even though he, as did Kulman, value estimate derived through that expert's income approach. employed a cost approach. Similarly, Chaiken did not develop The appraisal reports of both appraisers demonstrated that a a direct *479 sales comparison approach because of a lack of typical investor would only be interested in the value result useful market data upon which to predicate such an analysis. produced by an income approach. 1 The resolution of a local property tax case requires, in My review of the cost approach analysis of each expert leads many instances, a determination of which one or more of me to the conclusion that the cost approach is not a reliable *480 indicator of value and is of little utility in this case. © 2011 Thomson Reuters. No claim to original U.S. Government Works. 2 J.C. Penney Co., Inc. v. Lawrence Tp., 8 N.J.Tax 473 (1986) For example, Kulman's depreciation analysis was grounded Since the department store portion of the subject is on the difference between “the net rental the property would owner-occupied, plaintiff's expert, Kulman, ascribed a fair have to obtain to justify the cost of construction” and his market rental derived from his examination of 14 allegedly estimation of the fair market net rental the property could comparable rental properties in what he considered to be actually command in the market. The difficulty with this type the subject's competitive area. He explained that, in his of analysis is that it is grounded upon the expert's estimation search for comparable market rentals, he could not find any of fair market rental which is precisely at issue in the expert's timely rentals by traditional department stores within a super economic approach. The cost analysis adds nothing to the regional mall.