Tamarack Vill. Shopping Ctr. v. Cnty. of Wash.
| Docket Number | 82-CV-20-2003,82-CV-20-2004 |
| Decision Date | 28 August 2023 |
| Parties | Tamarack Village Shopping Center, LP, Petitioner, v. County of Washington, Respondent. |
| Court | Tax Court of Minnesota |
These consolidated matters came before The Honorable Bradford S Delapena, Judge of the Minnesota Tax Court, on petitioner's motion for amended findings of fact or a new trial.
Larry D. Martin, Attorney at Law, represents petitioner Tamarack Village Shopping Center, LP ("Tamarack").
James Zuleger, Assistant County Attorney, represents respondent Washington County.
ORDER DENYING PETITIONER'S MOTION FOR AMENDED FINDINGS OF FACT OR A NEW TRIAL
These consolidated cases concern the market value as of January 2 2019, of two parcels of real property located in Woodbury, Minnesota, that are part of the Tamarack Village Shopping Center. On March 28, 2023, we filed Findings of Fact, Conclusions of Law, and Order for Judgment concluding that the assessor's estimated market value for the subject property understated its market value as of the assessment date and ordering appropriate tax re-computations. Tamarack Vill. Shopping Ctr., LP v. Cnty. of Washington, Nos. 82-CV-20-2003 &82-CV-20-2004, 2023 WL 2669686 (Minn. T.C. Mar. 28, 2023) (Trial Order). On April 12, 2023, Tamarack filed a motion for amended findings of fact or a new trial, which the County opposes.
The court, having heard and considered the evidence adduced at trial and the arguments of counsel, and upon all the files, records, and proceedings herein, now makes the following:
2. Petitioner's motion for a new trial is denied. IT IS SO ORDERED. THIS IS A FINAL ORDER. LET JUDGMENT BE ENTERED ACCORDINGLY.
MEMORANDUMI. Introduction
Tamarack's post-trial motions raise four issues all pertaining to the income capitalization approach. Briefly, Tamarack contends that the court should have: reduced its market rent estimates to account for (1) certain tenant improvement allowances and (2) free rent; (3) reduced its income approach value indication for the Center parcel to address its recent, above-market vacancy; and (4) used a higher capitalization rate.[1] The County opposes Tamarack's motions arguing that they are procedurally deficient and substantively unsupported.[2] The Trial Order contains detailed findings describing the subject parcels. We set forth below only sufficient facts to contextualize Tamarack's post-trial requests. Likewise, we summarize only pertinent aspects of the Trial Order.
The subject property comprises two contiguous parcels-Center and Main-that constitute a significant portion of the Tamarack Village Shopping Center in Woodbury.[3] Center is improved by a single, good-quality building constructed in 1996,[4] with fourteen tenant spaces and a net rentable area of 43,134 square feet.[5] Main is a far larger parcel that essentially encompasses Center.[6] Main is improved by eight, good-quality buildings constructed in 1996 and 2004,[7] with 47 total tenant spaces and a net rentable area of 471,343 square feet.[8]
The income capitalization approach requires an estimate of market rent. Effective rent is "an analytical tool" used in "markets where [rent] concessions take the form of free rent, above-market tenant improvements, or atypical allowances." Appraisal Institute, The Appraisal of Real Estate 421 (15th ed. 2020) (emphasis added) [hereinafter TARE]. Effective rent refines a market rent estimate by eliminating atypical concessions from nominal rents. Id. at 421-22.
Tamarack's appraiser, Ms. Kelsey K. Malecha, used effective rent-reduced her initial market rent estimates-to account for: (a) certain tenant improvements ("TI") allowances; and (b) free rent.[9] With respect to TI allowances, however, Malecha acknowledged: (1) that only atypical allowances warrant the use of effective rent; and (2) that Tamarack's allowances were not atypical Tamarack, 2023 WL 2669686, at *9 The County's appraiser, Mr Ethan Waytas, concurred that Tamarack was not offering atypical TI allowances [10] and did not reduce his market rent estimates.[11] With respect to free rent, record evidence demonstrates that Tamarack did not offer tenants free rent and that only one of Malecha's numerous rent comparables included free rent. Id. Based on this evidence, the court rejected the use of effective rent to account for either TI allowances or free rent. Id. at *9-10.
Center and Main have enjoyed historically high occupancy,[12] with the following recent vacancy figures: [13]
Center
Main
Overall
January 1, 2016
6.49%
0.86%
January 1, 2017
10.49%
January 1, 2018
10.49%
2.14%
2.84%
January 1, 2019
16.89%
2.14%
Although Ms. Malecha used a 5% vacancy rate to value both Center and Main,[14] the court adopted the more conservative 6% figure used by Mr. Waytas. [15] Tamarack, 2023 WL 2669686, at *13.
Mr Waytas did not adjust his income approach indication for Center to address its recent above-market 17% vacancy. Finding nothing about the property itself to suggest that Center could not perform at market occupancy,[16] Waytas considered Center's recent vacancy jump a routine market fluctuation possibly affected by management decisions.[17]
The court found "no justification for deviating from the market vacancy rate when valuing ... Center, and that a stabilization adjustment for Center is unwarranted." Tamarack, 2023 WL 2669686, at *12. We thus adopted Mr. Waytas's approach and "decline[d] to make a lump-sum stabilization adjustment akin to Ms. Malecha's." Id. at *13.
D. Capitalization Rate
Ms. Malecha used a 6.75% capitalization rate to value both properties,18[] whereas Mr. Waytas used a 7.00% rate.19[] The court "adopt[ed] Mr. Waytas's slightly more conservative 7.00% rate." Id. at *14-15.
II. Legal Standards
Tamarack has filed two post-trial motions, one for amended findings of fact and one for a new trial. The former asserts that "that there is insufficient evidence to support the Court's findings"; the latter, that "the verdict, decision, or report is not justified by the evidence."[20] Both motions thus challenge the evidentiary basis for the court's decision. As relevant here, the controlling standards are as follows.
The Minnesota Rules of Civil Procedure "govern the procedures in the Tax Court, where practicable." Minn. Stat. § 271.06, subd. 7 (2022). Under those rules, on proper motion, a trial court may "amend its findings or make additional findings." Minn. R. Civ. P. 52.02; see also Minn. Stat. § 271.08, subd. 1 (2022) (). A motion for amended findings permits the trial court to review its own discretion, Johnson v. Johnson, 563 N.W.2d 77, 78 (Minn.App. 1997); that is, "to review all of the evidence and all of [its] findings" and to revise its findings in a manner either favorable or unfavorable to the moving party. McCauley v. Michael, 256 N.W.2d 491, 500 (Minn. 1977).
A motion alleging that the trial court's findings are not supported by the record must "show that there is no substantial evidence reasonably tending to sustain the trial court's findings." Nielsen v. City of Saint Paul, 252 Minn. 12, 29, 88 N.W.2d 853, 864 (1958). Accordingly, a trial court "is required to strike out a finding of fact only when the finding has no sufficient support in the evidence." Kehrer v. Seeman, 182 Minn. 596, 602, 235 N.W. 386, 389 (1931).
Procedurally, a motion for amended findings must be based on the files and exhibits in the case, not on evidence that is not part of the record. Zander v. Zander, 720 N.W.2d 360, 364 (Minn.App. 2006). The moving party "should address the record evidence, explain why the record does not support the district court's findings, and explain why the proposed findings are appropriate." Lewis v. Lewis, 572 N.W.2d 313, 316 (Minn.App. 1997), abrogated on other grounds by Madson v. Minn. Mining &Mfg. Co., 612 N.W.2d 168, 171-72 (Minn. 2000).
"The rules of civil procedure do not authorize a motion for 'reconsideration' ...." Carter v. Anderson, 554 N.W.2d 110, 113 (Minn.App. 1996). Consequently, a motion styled as one for amended findings, but that is in substance a motion for reconsideration, will be denied as improper. Lewis, 572 N.W.2d at 316 ().
"[A] motion for a new trial gives a district court the opportunity to correct errors without subjecting the parties to the expense and inconvenience associated with an appeal." Clifford v. Geritom Med, Inc., 681 N.W.2d 680, 686 (Minn. 2004). A court may grant a new trial where "[t]he verdict, decision, or report is not justified by the evidence ..." Minn. R. Civ. P. 59.01(g).
III. Motion for Amended Findings
Tamarack contends that we must reduce anticipated rental revenue for the subject property to exclude amounts representing amortized repayments of tenant improvement allowances for leases commencing after the valuation date; in other words, that we must use effective rent for such TI allowances.21[] We understand the theory as follows:
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