Strongsville Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 95-2625

• Decision Date: 05 February 1997
• Docket Number: No. 95-2625,95-2625
• Citation: 77 Ohio St.3d 402,674 N.E.2d 696
• Parties: STRONGSVILLE BOARD OF EDUCATION et al., Appellants, v. CUYAHOGA COUNTY BOARD of REVISION; Schurmer Investment Company, Appellee.
• Court: Ohio Supreme Court

Page 402

77 Ohio St.3d 402

674 N.E.2d 696

STRONGSVILLE BOARD OF EDUCATION et al., Appellants, v. CUYAHOGA COUNTY BOARD of REVISION; Schurmer Investment Company, Appellee.

No. 95-2625.

Supreme Court of Ohio.

Submitted Sept. 19, 1996.

Decided Feb. 5, 1997.

Schurmer Investment Company, appellee, owns the Strongsville Towne Centre, a multi-building neighborhood shopping center located at Pearl and Schurmer Roads in Strongsville. (See Appendix.) Towne Centre includes two main buildings to the rear of the property, a smaller strip center to the front of the property, and two sit-down restaurants, also to the front of the property. Each of the main buildings is irregular in shape, and a cross-walk connects them. A grocery store anchors the South building, and a drug store anchors the North building. The front strip center contains five tenant spaces and has its own parking area. The two restaurant buildings are on outlots to the front of the property: one in the center and one on the corner opposite the strip center. Towne Centre does not contain basement space.

The property has three entrances. The main, central entrance is on Pearl Road where Lunn Road terminates. A driveway running from this entrance passes the center, free-standing restaurant and continues between the two main buildings. The property has another entrance off Pearl Road; the driveway from this entrance passes the front strip center and continues into the main parking area. The third entrance is off Schurmer Road, and the driveway from this entrance passes the other free-standing restaurant and continues into the main parking area. The main parking area services the entire Towne Centre.

For the tax year 1991, the Cuyahoga County Auditor valued the property at $7,328,910. Schurmer filed a complaint with the Cuyahoga County Board of Revision ("BOR") claiming the value to be $6,175,000, and the city of Strongsville and the Strongsville Board of Education ("Strongsville"), appellants, filed a counter-complaint, claiming the value to be $9,000,000. The BOR determined the value to be $6,526,770. Schurmer and Strongsville each appealed this decision to the Board of Tax Appeals ("BTA").

Strongsville presented the expert real estate appraisal testimony and report of Sam D. Canitia to the BTA. He testified that the highest and best use of the property was the existing use. He claimed that each building could be sold separately. Canitia, thus, valued each building as a separate economic unit, comparing each unit with smaller comparable properties in the income and market-data approaches. This analysis resulted in a higher per-square-foot value for the property and higher total value. Canitia, consequently, concluded that the true value of the property was $9,000,000.

Schurmer presented the testimony and report of expert real estate appraiser Wesley Baker. Baker testified that the fair market value of the property was $6,800,000. Contrary to Canitia's theory, Baker treated the front strip center and the two main buildings as a single economic unit. Accordingly, he examined larger shopping complexes in his market-data approach. This resulted in a lower per unit value and a lower total value than Canitia's. Baker testified that each building could be sold separately; however, he did not think that such sales would be likely or feasible. Finally, he treated the two restaurants as individual economic units and valued them separately, as had Canitia.

The BTA recognized the significance of delineating the economic units composing the property. It pointed out that "[i]f the separate economic units comprising this tract are not correctly defined they will be improperly compared to other non-like kind properties. * * * Unless the separate economic units from this tract are properly segregated, the resulting comparison will likely lead to an aberration in the final opinion of value." After reviewing Park Ridge Co. v. Franklin Cty. Bd. of Revision (1987), 29 Ohio St.3d 12, 29 OBR 231, 504 N.E.2d 1116, and American Institute of Real Estate Appraisers, The Appraisal of Real Estate (10 Ed. 1992), the BTA ruled that the two restaurants should be valued separately, a point on which the appraisers had agreed.

The BTA then valued the two main buildings as one shopping center. It found:

" * * * The fact that they sit upon separate tax parcels does not effect the unity of purpose. Nor does the fact that they are separated by a service drive. Virtually all such shopping centers require a service drive, and the fact that in this case it happens to bisect the two buildings is of little consequence to the utility of these properties operating as a single shopping center unit. The two buildings are connected by a common walkway. The drug store anchor tenant in one building complements the food store anchor tenant in the other. The parking lot and driveway areas are coordinated in the same manner as any other unified shopping center. We believe these two buildings would be treated as a separate economic unit in the market place by those investors likely to purchase them."

Since Baker had treated these buildings in this manner, and Canitia, who had selected much smaller properties for a comparison, had not, the BTA agreed with Baker. The BTA criticized other elements of Canitia's report, concluding that he had not supported his vacancy rate with market data and that he had not derived his capitalization rate from comparable transactions.

However, the BTA found that the front strip center was not a part of the economic unit composed of the two larger buildings. The BTA found that this center was a separate economic unit or a sub-market of the larger unit. According to Baker's testimony, the smaller building had been operated under separate ownership until 1988 when Schurmer purchased it. Furthermore, it has a self-contained parking area, and its physical appearance and positioning sets it apart from the larger retail center. For these reasons, the BTA found Canitia's approach to be more credible but adopted the 1988 unit sale price in valuing the front strip center.

As for the two restaurant buildings, the BTA gave Baker's valuations more credibility. The BTA grounded this conclusion on Baker's efforts to verify and confirm the market-approach results with a more detailed income-approach analysis.

Consequently, the BTA adopted Baker's valuations for these restaurants. It determined the true value of Towne Centre to be, as of January 1, 1991:

                                 Large shopping center           $5,276,350
                                 Strip center                    $  610,650
                                 Corner restaurant               $  450,000
                                 Center restaurant               $  650,000
                                                                 ----------
                                 Total                           $6,987,000  
                

The cause is now before this court upon an appeal as of right.

Kolick & Kondzer, Daniel J. Kolick and John P. Desimone, Westlake, for appellants.

Fred Siegel Co., L.P.A., and Annrita S. Johnson, Cleveland, for appellee.

PER CURIAM.

Strongsville, first, argues that the BTA should have valued the two main shopping buildings as individual shopping centers. It claims that each building is an economic unit and that the BTA should have sought the highest possible value for the complex. We disagree.

In Park Ridge Co. v. Franklin Cty....