HCP EMOH, L.L.C. v. Washington Cty. Bd. of Revision (Slip Opinion) , 155 Ohio St. 3d 378 ( 2018 )


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  • [Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as HCP
    EMOH, L.L.C. v. Washington Cty. Bd. of Revision, Slip Opinion No. 2018-Ohio-4750.]
    NOTICE
    This slip opinion is subject to formal revision before it is published in an
    advance sheet of the Ohio Official Reports. Readers are requested to
    promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
    South Front Street, Columbus, Ohio 43215, of any typographical or other
    formal errors in the opinion, in order that corrections may be made before
    the opinion is published.
    SLIP OPINION NO. 2018-OHIO-4750
    HCP EMOH, L.L.C., APPELLANT, v. WASHINGTON COUNTY BOARD OF
    REVISION ET AL., APPELLEES.
    [Until this opinion appears in the Ohio Official Reports advance sheets, it
    may be cited as HCP EMOH, L.L.C. v. Washington Cty. Bd. of Revision, Slip
    Opinion No. 2018-Ohio-4750.]
    Taxation—Real-property valuation—An appraiser is permitted but not required to
    rely on apartment comparables when valuing an assisted-living facility—
    Board of Tax Appeals (“BTA”) did not abuse its discretion in rejecting
    property owner’s appraisal but did err in adopting county’s appraisal,
    which was based on unreliable data that led appraiser to value the business
    rather than the realty—BTA’s decision vacated and cause remanded to
    BTA.
    (No. 2016-1712—Submitted September 11, 2018—Decided November 30, 2018.)
    APPEAL from the Board of Tax Appeals, No. 2015-700.
    _________________
    SUPREME COURT OF OHIO
    Per Curiam.
    {¶ 1} This case revisits an issue that arises in the context of valuing an
    assisted-living facility—namely, how should an appraiser go about separating the
    facility’s business value from the value of the realty? The Board of Tax Appeals
    (“BTA”) rejected the method espoused by an appraiser for appellant, property
    owner HCP EMOH, L.L.C., who relied on apartment comparables to derive an
    opinion of value for the subject property. The BTA instead adopted the valuation
    reached by an appraiser for appellees, Washington County Board of Revision
    (“BOR”) and Washington County Auditor (collectively, “the county”), who
    eschewed apartment comparables in favor of data from the assisted-living-facility
    market. On appeal, HCP EMOH first argues that the case law requires reliance on
    apartment comparables when valuing an assisted-living facility. It next makes
    several evidentiary arguments; principal among these is the claim that the county’s
    appraiser used unreliable data that led him to value the business rather than the
    realty.
    {¶ 2} HCP EMOH’s first argument is mistaken. The case law permits but
    does not require consideration of apartment comparables. HCP EMOH’s principal
    evidentiary argument does, however, have merit. Because the county’s appraiser
    was not scrupulous in selecting data suitable for a realty-only valuation, we agree
    that the BTA erred in adopting the county’s appraisal. For this reason, we vacate
    the BTA’s decision and remand the case for further proceedings.
    FACTS AND PROCEDURAL BACKGROUND
    {¶ 3} The property at issue is located in Marietta and consists of two parcels
    constituting almost seven acres of land. The property is improved with a one-story
    assisted-living facility that was built in 1997. The facility has 89 units that range
    from 286 to 363 square feet, each of which comes furnished with a kitchenette, a
    shower, and toilet facilities. Common areas make up roughly half of the facility’s
    space and include lounges, multipurpose rooms, dining rooms, a beauty/barber
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    January Term, 2018
    shop, and a commercial kitchen.        The facility provides numerous services,
    including meals, medical assistance, and recreational activities. For tax year 2014,
    the auditor valued the property at $6,042,620. HCP EMOH filed a complaint
    against this valuation, which was heard by the BOR.
    BOR proceedings
    {¶ 4} At the BOR hearing, HCP EMOH presented a memorandum and
    supporting documents that set forth an analysis using the sales-comparison and
    income approaches to value based on apartment data. The memorandum reached a
    valuation of $2,900,000. The BOR rejected this proposed figure and retained the
    auditor’s valuation.
    BTA proceedings
    {¶ 5} HCP EMOH appealed to the BTA, where it presented an appraisal
    report prepared by Richard G. Racek, a certified appraiser. Racek opined that the
    property’s highest and best use, as vacant, is the development of a permitted
    residential use and, as improved, is its continued use in a multifamily capacity.
    Racek applied the sales-comparison and income approaches to value, both drawing
    from apartment data. After reconciling the two approaches, he reached a final
    valuation of $3,550,000. Racek justified his reliance on apartment data rather than
    assisted-living-facility data based on what he viewed as the distortive effects that
    the facility’s services have on the value of the realty. According to Racek,
    including the value of the services in the analysis would generate rental rates of
    $2,000 to $4,000 a month for a conventional apartment complex. He characterized
    such rates as “ludicrous” and maintained that they would not be sustainable in the
    marketplace.
    {¶ 6} For its part, the county presented an appraisal report prepared by Zach
    Bowyer. Bowyer received a temporary Ohio certification to perform appraisal
    work in the case. He opined that the property’s highest and best use, as vacant, is
    the development of a seniors housing property and, as improved, is its existing use
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    as a seniors housing development—specifically, assisted living with memory-care
    services.
    {¶ 7} Bowyer applied both the income and sales-comparison approaches to
    value, but he placed no weight on the sales-comparison approach, instead using it
    only to check the reasonableness of the conclusions he reached after applying the
    income approach. Bowyer stated that for his income-approach analysis, his primary
    criterion was to find comparable properties offering assisted-living and memory-
    care services similar to the subject property. Bowyer began by computing a net
    operating income of $1,094,718 for the going concern (as opposed to the real
    estate). He then strove to isolate the cash flow attributable to the real estate by
    performing what he called a “lease coverage analysis.” As Bowyer explained, the
    “lease coverage analysis is the technique applied to allocate the portion of the
    overall cash flow (net operating income) to the going concern that is attributed to
    the real estate only.”
    {¶ 8} To perform his lease-coverage analysis, Bowyer began by computing
    a market-derived lease-coverage ratio. Generally speaking, the numerator of this
    ratio represents the net operating income for a comparable going concern, and the
    denominator represents the absolute net lease payment associated with that
    comparable. Bowyer explained that an absolute net lease payment indicates a real-
    estate-only lease payment—that is, the rent collected by an owner of real estate. If,
    as here, the net operating income of a particular going concern is known, then the
    lease-coverage ratio can, according to Bowyer, be divided into that net operating
    income to obtain the cash flow attributed to the real estate. Bowyer analogized this
    resultant cash flow to an inferred lease payment.
    {¶ 9} To calculate his lease-coverage ratio, Bowyer evaluated nine market
    transactions for which an actual lease, a Form 10-K, or an appraisal was available
    for review. For each transaction, Bowyer identified the net operating income per
    unit (the numerator) for the going concern and the rent per unit (the denominator)
    4
    January Term, 2018
    under the terms of an absolute net lease. Based on this data, Bowyer derived a
    preliminary lease-coverage ratio of 1.25 and then upwardly adjusted it to 1.29 to
    account for real-estate taxes. He then divided this ratio into the net operating
    income for the going concern to arrive at $848,619, which, he stated, represented
    the cash flow to the real estate only. After applying a realty-only capitalization rate
    of 9.315 percent, Bowyer arrived at a rounded valuation of $9,100,000 for the real
    estate.
    {¶ 10} The BTA adopted Bowyer’s appraisal. It opined that neither this
    court’s lead opinion in Health Care REIT, Inc. v. Cuyahoga Cty. Bd. of Revision,
    
    140 Ohio St. 3d 30
    , 2014-Ohio-2574, 
    14 N.E.3d 1009
    , nor the BTA’s own decisions
    require an appraiser to rely on apartment data in valuing an assisted-living facility.
    Instead, the BTA understood the case law as teaching “that an appraisal that
    properly distinguishes the value accorded to the real property from the value
    attributable to the business operations may be a reliable indication of value.” BTA
    No. 2015-700, 
    2016 WL 6434046
    , *4 (Oct. 26, 2016). While acknowledging that
    Bowyer’s appraisal used the value of the going concern as a starting point, it
    nevertheless found that he “thoroughly and competently accounted for the value
    attributable to the assisted living facility operations to allocate the value attributable
    to the subject real property.” 
    Id. at *5.
    The BTA also found that Bowyer’s list of
    assisted-living-facility comparables was superior to Racek’s list of apartment
    comparables, noting that the subject property’s units lack the amenities found in a
    traditional apartment. 
    Id. HCP EMOH
    filed a motion for reconsideration. The
    BTA denied the motion, and this appeal followed.
    STANDARD OF REVIEW
    {¶ 11} We will affirm a BTA decision that is reasonable and lawful. Satullo
    v. Wilkins, 
    111 Ohio St. 3d 399
    , 2006-Ohio-5856, 
    856 N.E.2d 954
    , ¶ 14. We review
    de novo the BTA’s resolution of legal issues but defer to the BTA’s findings
    concerning the weight of the evidence if there is record support for them. Lunn v.
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    SUPREME COURT OF OHIO
    Lorain Cty. Bd. of Revision, 
    149 Ohio St. 3d 137
    , 2016-Ohio-8075, 
    73 N.E.3d 486
    ,
    ¶ 13.
    DISCUSSION
    {¶ 12} HCP EMOH presents five issues for our consideration. The first
    concerns whether the law requires an appraiser to rely on apartment comparables
    when valuing an assisted-living facility. The second and third relate to the BTA’s
    evaluation of Bowyer’s and Racek’s appraisals. The fourth concerns the BTA’s
    denial of HCP EMOH’s motion for reconsideration. And the fifth is a constitutional
    challenge to the BTA’s decision. We address each issue in turn.
    An appraiser need not rely on apartment comparables when valuing an assisted-
    living facility
    {¶ 13} HCP EMOH argues that the BTA departed from established law
    when it credited Bowyer’s appraisal method, which eschewed reliance on
    conventional apartment buildings as comparables. It stresses Health Care REIT,
    
    140 Ohio St. 3d 30
    , 2014-Ohio-2574, 
    14 N.E.3d 1009
    , in which three justices of this
    court concluded that “an appraiser may rely on apartment comparables when
    valuing an assisted-living facility,” 
    id. at ¶
    44. HCP EMOH also relies on LTC
    Properties, Inc. v. Licking Cty. Bd. of Revision, 
    133 Ohio St. 3d 111
    , 2012-Ohio-
    3930, 
    976 N.E.2d 852
    , in which we endorsed the use of “apartment buildings as a
    point of comparison when valuing the real property of a congregate-care facility
    under the sales-comparison or income-capitalization approaches,” 
    id. at ¶
    21.
    These excerpts notwithstanding, neither Health Care REIT (noncontrolling as it is)
    nor LTC say that an appraiser is required to rely on apartment comparables when
    valuing an assisted-living facility. Instead, these decisions permit reliance on such
    comparables.
    {¶ 14} The guiding principle from the case law is not, as HCP EMOH
    contends, that one category of comparables must be used instead of another.
    Rather, it is that an appraiser must exercise care to isolate the value of the realty
    6
    January Term, 2018
    from the value of the business. That understanding took shape in Dublin Senior
    Community Ltd. Partnership v. Franklin Cty. Bd. of Revision, 
    80 Ohio St. 3d 455
    ,
    
    687 N.E.2d 426
    (1997), which addressed the valuation of a congregate-care center.
    The facility charged for such services as food and housekeeping, which were
    assignable as business activities, and it also charged rent for the apartments, which
    was assignable as a real-estate activity. We explained that each type of activity
    occupies its own sphere and “must be kept separate” for the purpose of a real-estate
    valuation. 
    Id. at 460;
    accord Health Care REIT at ¶ 41; LTC at ¶ 21.
    {¶ 15} Based on the case law, we conclude that the BTA did not err simply
    by adopting an appraisal that eschewed reliance on apartment comparables. In
    reaching this conclusion, we draw support from Youngstown Sheet & Tube Co. v.
    Mahoning County Bd. of Revision, 
    66 Ohio St. 2d 398
    , 402, 
    422 N.E.2d 846
    (1981),
    in which we “decline[d] to bind the BTA to a particular method of valuation” and
    thereby avoided interference with the BTA’s responsibilities to weigh evidence and
    make credibility assessments. It follows that any rule requiring the BTA to adopt
    an appraisal backed by apartment comparables would be inconsistent with that
    decision’s logic.
    The BTA erred in adopting Bowyer’s appraisal
    {¶ 16} HCP EMOH next asserts that the BTA erred in adopting Bowyer’s
    appraisal and in rejecting Racek’s appraisal. Turning first to Bowyer’s appraisal,
    HCP EMOH asserts that the “crux of the problem” plaguing his income-approach
    analysis stems from the characteristics of the net leases that he used to calculate his
    lease-coverage ratio. In HCP EMOH’s view, these leases reflect business value,
    not realty value. By relying on these leases, HCP EMOH asserts, Bowyer failed to
    separate business value from realty value.
    {¶ 17} In evaluating this claim, we find the following exchange at the BTA
    hearing instructive:
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    SUPREME COURT OF OHIO
    [HCP EMOH’s counsel:] So let’s talk about these lease
    comparables that you used. First of all, all of the net leases are based
    on a percentage of the net operating income of the business for each
    of the facilities that are included.
    [Bowyer:] Correct.
    {¶ 18} That rental structure does not fare well under Higbee Co. v.
    Cuyahoga Cty. Bd. of Revision, 
    107 Ohio St. 3d 325
    , 2006-Ohio-2, 
    839 N.E.2d 385
    .
    In Higbee, this court faulted a method of valuation that factored in a sales-per-
    square-foot metric because it conflated the value of the business with that of the
    realty. 
    Id. at ¶
    42-44. To explain why, we hypothesized two stores that were
    identical except for their sales volume. Given the stores’ similarities as real estate,
    we concluded that they should have the same realty value. But under a sales-per-
    square-foot metric, that conclusion would not follow. By using that metric, we
    explained, the store with the higher sales would have a higher realty value than the
    store with the lower sales even though both stores were in all other respects alike.
    
    Id. at ¶
    42. In pinpointing the problem with this method, we observed that “[i]f it
    is the real property that is being valued, its valuation cannot be made to vary
    depending on the success or lack thereof of the businesses located on the property.”
    
    Id. at ¶
    44.
    {¶ 19} The net leases from which Bowyer crafted his lease-coverage ratio
    are problematic in the way that the sales-per-square-foot metric from Higbee was:
    the leases reflect business value, not realty value. While not entitling the lessor to
    a right to receive the business income, Bowyer explained at the BTA hearing, the
    net leases nevertheless reflect the contracting parties’ expectations about “what an
    operating business could achieve.” As he put it, the net leases are “negotiated based
    on how [a] property is expected to perform.” In structuring the leases this way, the
    contracting parties necessarily factored business value into the lease payments.
    8
    January Term, 2018
    {¶ 20} Because Bowyer crafted his lease-coverage ratio from flawed inputs,
    it follows that any subsequent calculations built on the lease-coverage ratio,
    including his final opinion of value, are flawed, too. Given that Bowyer’s analysis
    is tainted, we need not address, as a general matter, whether his lease-coverage
    analysis is a methodologically sound way to achieve a real-estate-only valuation.
    {¶ 21} Our analysis does not deny deference to the BTA’s evidentiary
    determinations. See Musto v. Lorain Cty. Bd. of Revision, 
    148 Ohio St. 3d 456
    ,
    2016-Ohio-8058, 
    71 N.E.3d 279
    , ¶ 32. In adjudging whether the BTA’s decision
    is reasonable and lawful, we must be assured that the BTA’s findings of fact are
    supported by reliable and probative evidence. Polaris Amphitheater Concerts, Inc.
    v. Delaware Cty. Bd. of Revision, 
    118 Ohio St. 3d 330
    , 2008-Ohio-2454, 
    889 N.E.2d 103
    , ¶ 18. “[I]f the record does not support, or if it contradicts, the BTA findings,”
    reversal is warranted. 
    Id. Here, the
    BTA described Bowyer’s net leases as “ ‘real
    estate only’ leases.” 
    2016 WL 6434046
    at *2. But as Bowyer’s testimony makes
    clear, the BTA mischaracterized the structure of those leases. The leases are based
    on expected business performance and have nothing to do with the real estate.
    Because the record contradicts the BTA’s finding, no deference is due.1
    {¶ 22} We next address HCP EMOH’s argument that the BTA erred in
    rejecting Racek’s appraisal. HCP EMOH argues that his appraisal faithfully
    follows Health Care REIT by relying on apartment comparables. But as noted
    above, Health Care REIT is only a lead opinion and, in any event, that opinion
    permits but does not require reliance on apartment comparables.
    {¶ 23} HCP EMOH next touts Racek’s selection of apartment comparables
    and the adjustments made to them, claiming that they constitute probative and
    1. We need not address HCP EMOH’s criticisms of Bowyer’s sales-comparison analysis. Bowyer
    stated that he put no weight on it, instead using it only to check the reasonableness of the conclusions
    he reached after applying the income approach. Both parties agreed at oral argument that his sales-
    comparison analysis had no bearing on the BTA’s analysis. And HCP EMOH’s brief describes
    Bowyer as relying on the income approach to value the property.
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    SUPREME COURT OF OHIO
    competent evidence of value. In evaluating arguments of a fact-bound character,
    we do not sit as a super BTA or try the facts anew. E.g., Olentangy Local Schools
    Bd. of Edn. v. Delaware Cty. Bd. of Revision, 
    153 Ohio St. 3d 241
    , 2017-Ohio-8385,
    
    104 N.E.3d 736
    , ¶ 7. Instead, we grant the BTA “wide discretion in determining
    the weight to be given to the evidence and the credibility of the witnesses that come
    before it.” EOP-BP Tower, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio
    St.3d 1, 2005-Ohio-3096, 
    829 N.E.2d 686
    , ¶ 9. Unless the BTA abuses its
    discretion, its determinations will not be reversed. 
    Id. at ¶
    14.
    {¶ 24} Here, the BTA found “that the properties that Racek utilized for both
    his sales and rental comparables were significantly different from the subject
    property and that the adjustments made were insufficient to account for those
    differences.” 
    2016 WL 6434046
    at *5. For example, it noted the difference in
    amenities between an assisted-living facility and a traditional apartment, with the
    latter typically coming furnished with a full-sized kitchen. This type of evidentiary
    determination falls within the BTA’s core competence as the finder of fact. Meijer
    Stores Ltd. Partnership v. Franklin Cty. Bd. of Revision, 
    122 Ohio St. 3d 447
    , 2009-
    Ohio-3479, 
    912 N.E.2d 560
    , ¶ 20. It follows that the BTA did not abuse its
    discretion in evaluating Racek’s appraisal.
    {¶ 25} To summarize, the BTA erred in adopting Bowyer’s appraisal but
    stayed within the bounds of its discretion in rejecting Racek’s appraisal. Therefore,
    we vacate the BTA’s decision and remand the case for further proceedings. On
    remand, the BTA must determine whether there is sufficient evidence to enable an
    independent valuation. If there is, the BTA must determine an independent value.
    If not, it may reinstate the value initially determined by the auditor. See Apple
    Group Ltd. v. Medina Cty. Bd. of Revision, 
    139 Ohio St. 3d 434
    , 2014-Ohio-2381,
    
    12 N.E.3d 1188
    , ¶ 16; Groveport Madison Local Schools Bd. of Edn. v. Franklin
    Cty. Bd. of Revision, __ Ohio St.3d __, 2018-Ohio-4286, __ N.E.3d __, ¶ 11-15
    (collecting cases).
    10
    January Term, 2018
    HCP EMOH’s other arguments need not be addressed
    {¶ 26} Because we order vacatur and remand, we need not address HCP
    EMOH’s arguments concerning the BTA’s denial of its motion for reconsideration
    and the BTA’s alleged violation of Article XII, Section 2 of the Ohio Constitution.
    CONCLUSION
    {¶ 27} For the foregoing reasons, we vacate the BTA’s decision and remand
    the case to the BTA for further proceedings.
    Decision vacated
    and cause remanded.
    O’CONNOR, C.J., and O’DONNELL, KENNEDY, and BROWN, JJ., concur.
    DEWINE, J., dissents, with an opinion joined by FRENCH and DEGENARO,
    JJ.
    SUSAN D. BROWN, J., of the Tenth District Court of Appeals, sitting for
    FISCHER, J.
    _________________
    DEWINE, J., dissenting.
    {¶ 28} The majority reverses the decision of the Board of Tax Appeals
    (“BTA”) based on an isolated snippet of an expert’s testimony without considering
    the expert’s testimony as a whole. In the process, it fails to accord the factual
    findings and credibility determinations of the BTA the deference that they are
    ordinarily given by this court. In view of the entire record before us and the
    deference due the finder of fact, the decision of the BTA should be affirmed.
    Because the majority sees it otherwise, I respectfully dissent.
    {¶ 29} The scope of our review in tax appeals is limited.            We grant
    deference to the BTA’s factual determinations and credibility assessments. Accel,
    Inc. v. Testa, 
    152 Ohio St. 3d 262
    , 2017-Ohio-8798, 
    95 N.E.3d 345
    , ¶ 16. “When
    it reviews appraisals, the BTA is vested with wide discretion in determining the
    weight to be given to the evidence and the credibility of the witnesses that come
    11
    SUPREME COURT OF OHIO
    before it.” EOP-BP Tower, L.C.C. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio
    St.3d 1, 2005-Ohio-3096, 
    829 N.E.2d 686
    , ¶ 9.
    {¶ 30} The majority is correct in rejecting HCP EMOH’s argument that
    when valuing an assisted-living facility, an appraiser may use only apartment
    complexes for comparison. Comparables other than apartment complexes may be
    used, so long as an appraiser “exercise[s] care to isolate the value of the realty from
    the value of the business.” Majority opinion at ¶ 14. The appraiser who testified
    on behalf of the county, Zach Bowyer, represented that he did exactly that. Bowyer
    testified that he evaluated nine assisted-living facilities to come up with a “lease
    coverage ratio.” The ratio was derived by dividing the facilities’ net operating
    incomes by the net lease payments for the properties. By applying the lease-
    coverage ratio to HCP EMOH’s net operating income, Bowyer explained, he was
    able to isolate the amount of cash flow attributable to the real estate only—an
    amount that he capitalized to arrive at his valuation for the property.
    {¶ 31} The BTA concluded after hearing Bowyer’s testimony that
    “although he utilized the value of the going concern as the starting place for his
    analysis, Bowyer thoroughly and competently accounted for the value attributable
    to the assisted living facility operations to allocate the value attributable to the
    subject real property.” BTA No. 2015-700, 
    2016 WL 6434046
    , *5 (Oct. 26, 2016).
    {¶ 32} But the majority determines that the BTA’s unequivocal conclusion
    was not supported by reliable and probative evidence. Specifically, the majority
    finds that the BTA’s characterization of the net leases used by Bowyer to derive the
    ratio as “ ‘real estate only’ leases,” 
    id. at *2,
    was contradicted by the record. And
    because the majority determines, contrary to the BTA’s finding, that the leases were
    not “real estate only” leases, it concludes that Bowyer’s approach fails under the
    reasoning we used in Higbee Co. v. Cuyahoga Cty. Bd. of Revision, 
    107 Ohio St. 3d 325
    , 2006-Ohio-2, 
    839 N.E.2d 385
    .
    12
    January Term, 2018
    {¶ 33} To justify its conclusion, the majority zeroes in on a single exchange
    between Bowyer and HCP EMOH’s counsel at the BTA hearing. When asked
    whether the net leases were “based on a percentage of the net operating income of
    the business for each of the facilities,” Bowyer answered, “Correct.” But this
    isolated snippet from the hearing transcript ought to be considered in the context of
    Bowyer’s entire testimony.
    {¶ 34} During direct examination, Bowyer described the leases he used to
    derive the lease-coverage ratio as “absolute net” leases—that is, “the landlord owns
    the real estate and they collect rent from the tenant for operating their business out
    of the real estate.” Bowyer continued, “So this is simply, you know, absolute net
    real-estate only, lease transactions.”
    {¶ 35} Later in cross-examination—after the snippet of testimony on which
    the majority hangs its hat—Bowyer again made clear that the leases reflected the
    real-estate value, not the business value. He analogized the leases he had used to
    the rent collected by an owner of an industrial building:
    [Bowyer:] * * * And there’s a completely separate owner of
    that real estate that owns the warehouse and the real estate, and they
    lease the building to [the company operating a business] to conduct
    their business out of.
    However, they have no ownership or any involvement unless
    they’re getting a percentage rent or an overage rent or something
    like that, which they typically don’t, and it’s not going to be the case
    here, but they get a rent that represents the ownership of their real
    estate.
    Q. Except in this case it’s not based—your scenario would
    be based on the business of—the net operating income of [the
    company operating a business] in that—
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    SUPREME COURT OF OHIO
    A. But the owner of the real estate is getting none of that
    business money.
    Q. Okay. But in this scenario, they are.
    A. No, they’re not.
    Q. They have to be, because the bottom line is everything is
    derived from the income and the expenses of the business.
    A. No, that is not accurate.
    (Emphasis added.)
    {¶ 36} And once more during redirect examination, Bowyer made explicit
    that the leases were “rent only” leases:
    Q. * * * One final question. These leases on page 79, and I
    think this is pretty clear already, but let’s just make sure, these do
    not include any [furniture, fixtures, and equipment].
    A. Correct.
    Q. Okay. And these would not include any income from the
    business that the tenant generates.
    A. Absolutely not.
    (Emphasis added.)
    {¶ 37} To the extent that parts of Bowyer’s testimony conflicted, it was the
    BTA’s role, not ours, to determine whether his explanation was credible. The BTA
    credited his explanation, finding that “Bowyer’s appraisal is a more reliable
    indication of value for the subject property” than the appraisal of HCP EMOH’s
    expert. 
    2016 WL 6434046
    at *5.
    {¶ 38} Given the BTA’s findings, the approach used by Bowyer was not
    fatally flawed like the one we analyzed in Higbee, 
    107 Ohio St. 3d 325
    , 2006-Ohio-
    14
    January Term, 2018
    2, 
    839 N.E.2d 385
    . Rather than factoring in the business’s value, as the appraiser
    did in Higbee, 
    id. at ¶
    41 and 44, Bowyer took pains to isolate the real-estate value
    from the business value.
    {¶ 39} The BTA’s finding regarding the leases was amply supported by the
    record. I would afford our customary deference to the BTA’s findings and affirm
    its decision.
    FRENCH and DEGENARO, JJ., concur in the foregoing opinion.
    _________________
    Vorys, Sater, Seymour & Pease, L.L.P, Karen H. Bauernschmidt, and
    Nicholas M.J. Ray, for appellant.
    Rich & Gillis Law Group, L.L.C., and Kelley A. Gorry, for appellees.
    Joseph T. Deters, Hamilton County Prosecuting Attorney, and Thomas J.
    Scheve and Jay R. Wampler, Assistant Prosecuting Attorneys, urging affirmance
    for amicus curiae, Hamilton County Auditor.
    _________________
    15
    

Document Info

Docket Number: 2016-1712

Citation Numbers: 2018 Ohio 4750, 121 N.E.3d 370, 155 Ohio St. 3d 378

Judges: Per Curiam

Filed Date: 11/30/2018

Precedential Status: Precedential

Modified Date: 1/12/2023