Senpike Mall Co. v. Assessor

• Decision Date: 04 March 1988
• Citation: 525 N.Y.S.2d 104,136 A.D.2d 19
• Parties: Matter of The SENPIKE MALL COMPANY, and The Stop and Shop Company, Inc., Bradlees, Respondents, v. The ASSESSOR, The Board of Assessors and The Board of Assessment Review of the Town of New Hartford and the Town of New Hartford, Appellants, and The New Hartford Central School District, Appellant-Intervenor.
• Court: New York Supreme Court — Appellate Division

Page 104

525 N.Y.S.2d 104

136 A.D.2d 19

Matter of The SENPIKE MALL COMPANY, and The Stop and Shop

Company, Inc., Bradlees, Respondents, v. The ASSESSOR, The Board of Assessors and The Board of

Assessment Review of the Town of New Hartford and

the Town of New Hartford, Appellants,

and

The New Hartford Central School District, Appellant-Intervenor.

Supreme Court, Appellate Division,

Fourth Department.

March 4, 1988.

Longeretta, Giruzzi & Zamorski, Utica, Attorneys for appellants.

Tabner and Laudato, Albany, for appellant-intervenor; John Tabner, of counsel.

Siegel, Genchel & Peddy, P.C., Garden City, and Lombardi, Devorsetz, Stinziano & Smith, Syracuse, for respondents; Sidney Devorsetz, of counsel.

Before DOERR, J.P., and BOOMER, GREEN and DAVIS, JJ.

BOOMER, Justice.

Petitioners, the owners of a regional shopping mall in the Town of New Hartford, brought this proceeding pursuant to Real Property Tax Law, article 7, to reduce the assessments upon their property. After a trial, the Judicial Hearing Officer reduced the assessments from $4,566,400 for the tax years 1982 through 1984 to $3,179,750 for 1982, $3,284,250 for 1983, and $3,372,500 for 1984. On appeal the assessors of the Town and the School District raise several issues, all but one of which may be briefly addressed.

The decision of the Federal Court involving the value of the property in 1982 does not collaterally estop the owners from establishing a different value in this proceeding. In that action ( Interstate Properties v. Pyramid of Utica, 581 F.Supp. 982), the District Court, based upon the testimony of a real estate appraiser, determined that the value of the mall in 1982 for mortgage purposes was $55,000,000 and, accordingly, it determined that the mortgage loan made by the Teachers Insurance and Annuity Fund was excessive and ordered the owners to return a portion of the loan. The appraiser in that case had testified that, in valuing the mall for mortgage purposes, he considered its value subject to the existing financing. With the existing financing, he concluded, the property was worth $55,000,000, but without that favorable financing, it would be worth only $43,000,000.

Although the Federal Court, in determining the value of the property for mortgage loan purposes, valued the property subject to existing financing, the rule is otherwise in determini value for assessment purposes. In tax certiorari proceedings, the property must be valued without regard to its existing mortgage financing ( Matter of Mid-Island Shopping Plaza v. Podeyn, 25 Misc.2d 972, 989, 204 N.Y.S.2d 11, affd. 14 A.D.2d 571, 218 N.Y.S.2d 249, affd. 10 N.Y.2d 966, 224 N.Y.S.2d 283, 180 N.E.2d 63). Since the issue in the Federal action was not the same as the issue presented here, the principle of collateral estoppel does not apply.

The Judicial Hearing Officer properly declined to give great weight to the principal amounts of the mortgage loans and to the fire insurance coverage on the property ( see, Farash v. Smith, 59 N.Y.2d 952, 955, 466 N.Y.S.2d 308, 453 N.E.2d 537; People ex rel. Parklin Operating Corp. v. Miller, 287 N.Y. 126, 38 N.E.2d 465; Matter of River House Co. v. Assessor of City of Binghamton, 56 A.D.2d 980, 393 N.Y.S.2d 125, lv. denied 42 N.Y.2d 811, 399 N.Y.S.2d 1027, 369 N.E.2d 1193).

The assessors contend that, in using the income approach in valuating the property, the owners' appraiser improperly excluded from his estimate of gross income certain payments made by the tenants for the use of the fixtures and equipment paid for and installed by the owner. These payments were properly excluded in estimating the value for assessment purposes because the items installed were not taxable as part of the realty.

There is no merit to the assessors' contention that the hearing officer should have relied upon the market data approach submitted by the assessors' appraiser rather than upon the income approach. The hearing officer properly rejected the market data approach submitted on behalf of the assessors because he found that none of the sales relied upon by the appraiser were sufficiently comparable to the subject property to serve as a reliable guide to its value. In the case of income producing properties, particularly shopping malls where investors are interested in net income, "the capitalization of income approach is usually a sure guide to value" ( Roosevelt Nassau Operating Corp. v. Board of Assessors of County of Nassau, 68 Misc.2d 183, 188, 326 N.Y.S.2d 628, affd. 41 A.D.2d 647, 340 N.Y.S.2d 871, appeal dismissed, 33 N.Y.2d 825, 350 N.Y.S.2d 1028, 305 N.E.2d 923, lv. denied 34 N.Y.2d 514, 354 N.Y.S.2d 1026, 310 N.E.2d 549, and cases cited therein).

The issue requiring more extended analysis concerns the proper treatment of the real estate taxes. The assessors contend that the owners' appraiser and the hearing officer, in their income approach, improperly used the "assessor's formula" and thus erroneously took credit for taxes paid by the tenants.

The income approach to valuation is based on the premise that income producing property derives its value from the net income it is able to produce. In estimating the value by this method, the appraiser estimates the fair market rental of the property, deducts...