The opinion
Filed 1/31/08 NO. 4-07-0405
IN THE APPELLATE COURT
OF ILLINOIS
FOURTH DISTRICT
BLOOMINGTON PUBLIC SCHOOLS, DISTRICT ) Appeal from
NO. 87, McLean County, Illinois, ) Illinois Property
Petitioner-Appellant, ) Tax Appeal Board
v. ) No. 04-00644-C-3
THE ILLINOIS PROPERTY TAX APPEAL )
BOARD, SEARS STORE No. 2840, and )
THE McLEAN COUNTY BOARD OF REVIEW, )
Respondents-Appellees. )
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JUSTICE McCULLOUGH delivered the opinion of the court:
The petitioner, Bloomington Public Schools, District
No. 87, McLean County, Illinois (School District), appeals the
final administrative decision of the Property Tax Appeal Board of
the State of Illinois (PTAB). In February 2005, the Board of
Review of McLean County found the 2004 assessed value for Sears
Store No. 2840 (Sears) was $1,980,262. The respondent, Sears,
appealed that assessment to PTAB; and in April 2007, PTAB found
the assessed valuation was $1,265,400.
The School District appeals, arguing that (1) PTAB
should have considered the sale of the mall in determining the
fair market value of Sear's property, (2) PTAB should have
considered the value of the land in determining the fair market
value of Sear's property, and (3) PTAB's decision to use the fair
market value found by Sear's appraiser is against the manifest
weight of the evidence. We disagree and affirm.
Because the parties are familiar with the evidence
presented at the June 2006 hearing, we present facts only to the
extent necessary to provide context for the issues.
Evidence showed the Sears property is a one-story
retail store with an attached auto service center. The building
is 117,234 square feet and sits on a 9.19-acre parcel. The land
has been improved with a parking lot, sidewalks, lighting, and
landscaping. The property has been leased to Sears since 1966 as
part of Eastland Mall. In 1996, the lease was changed, allowing
Sears to upgrade and expand the property. The 1996 lease runs
through 2011 with an option of three five-year extensions. The
City of Bloomington township assessor assessed the property for
2004 at $1,980,262. The Board of Review upheld that assessment.
In McLean County, the assessed value is one-third of the fair
cash value. Fair cash value has the same meaning as fair market
value and is defined as "the price a willing buyer would pay a
willing seller for the subject property, there being no collusion
and neither party being under any compulsion." Residential Real
Estate Co. v. Illinois Property Tax Appeal Board, 188 Ill. App.
3d 232, 242, 543 N.E.2d 1358, 1364 (1989). Sears is responsible
for the property taxes.
In April 2007, PTAB issued its written decision. PTAB
concluded the best evidence of Sears' fair market value was the
appraisal submitted by Sears estimating the January 1, 2004, fair
market value at $3.8 million. PTAB stated:
"[PTAB] finds the appellant's appraiser pro-
vided competent, professional, and logical
testimony in support of his appraisal method-
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ology, the data used in the approaches to
value, the adjustment process, and final
value conclusion using two of three tradi-
tional approaches to value. In contrast,
[PTAB] finds the [school district<s]
appraisal prepared a sales-comparison ap-
proach regarding only the subject's vacant
land value within a limited[-]cost approach.
The [school district<s] value conclusion was
based on an alternative use based on a flawed
highest and best use finding. *** [PTAB]
finds the value conclusion detailed by
[Sears] to be a persuasive indicator of the
subject's fair market value. Although some
of the sales used were properties located
outside of Illinois, the appraiser performed
logical adjustments to the comparable anchor
sales for differences to the subject in ar-
riving at the final [fair market] value ***
of $3,750,000. The courts have stated that
where there is credible evidence of compara-
ble sales, these sales are to be given sig-
nificant weight as evidence of market value."
PTAB reduced the assessed value established by the Board of
Review by $714,862.
This appeal followed.
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We review PTAB's decisions under the Administrative
Review Law. 735 ILCS 5/3-101 through 3-113 (West 2006). The
scope of judicial review is limited to determining whether the
findings and orders of PTAB are contrary to the manifest weight
of the evidence, and it is not this court's function to reweigh
the evidence or assess the credibility of the witnesses. Resi-
dential Real Estate Co., 188 Ill. App. 3d at 241, 543 N.E.2d at
1363. We take the findings and conclusions of PTAB on questions
of fact to be prima facie true and correct. Board of Education
of Gibson City-Melvin-Sibley Community Unit School District No. 5
v. Property Tax Appeal Board, 354 Ill. App. 3d 812, 816, 822
N.E.2d 550, 554 (2005) (hereinafter Gibson City).
The Property Tax Code requires that the taxing author-
ity assess real-estate taxes at one-third the fair market value
of the subject property. 35 ILCS 200/9-145 (West 2004). The
appraisals presented to PTAB focused on determining the fair
market value of the Sears property through three traditional
methods of valuation. Sears' appraiser used the sales-comparison
and income approaches. The School District's appraiser used the
sales-comparison, income, and cost approaches.
The present case requires this court to first determine
whether PTAB erred in finding the sale of Eastland Mall was not
an arm's-length transaction prior to evaluating whether PTAB
should have given the sale of Eastland Mall weight in determining
the fair market value of the Sears property.
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In deciding to give no weight to the sale of Eastland
Mall, PTAB concluded the sale was not an arm's-length transac-
tion. The School District argued this finding of fact was in
error. The transfer declaration states the beneficial owner of
the property before and after the sale was Eastland Mall, LLC,
with Eastland Member, LLC, being the sole member of Eastland
Mall, LLC. Prior to the sale, Eastland Member, LLC, consisted of
17 members, including Eastland Holding I, LLC. After the sale
there were two members of Eastland Member, LLC. Eastland Holding
I, LLC, was the only member that remained before and after the
sale. However, the membership within Eastland Holding I, LLC,
also changed during the sale. Thus, the School District argued a
transfer of the beneficial ownership of Eastland Mall resulted.
The School District contended Sears had from December 29, 2005
(when the transfer declaration was submitted into evidence),
until the hearing on June 20, 2006, to explain the purchase price
as something other than an arm's-length transaction. Sears did
not do so, and when Sears' witness was asked by PTAB whether he
believed the sale was an arm's-length transaction, he failed to
answer the question. The Sears assessor stated in response that
the deal was made with leases in place as part of a three-mall
transaction.
Mike Ireland, the township assessor for the City of
Bloomington, testified that he believed the sale was at arm's
length. Under the Property Tax Code, assessment officers may use
the information on transfer declarations in properly assessing
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property value. 35 ILCS 200/31-30 (West 2004). Criminal penal-
ties attach for false statements on transfer declarations. 35
ILCS 200/31-50 (West 2004). In this case, the transfer declara-
tion shows a $79,030,000 purchase price and an outstanding
mortgage of $59,400,000 for Eastland Mall's sale. Finally, the
transfer declaration provides that the property was advertised
for sale and that $19,630 in taxes were paid on the sale.
In its written decision, PTAB concluded the Eastland
Mall transaction was not an arm's-length sale for five reasons,
and the sale therefore did not provide evidentiary value in
establishing the correct assessment. First, PTAB found the
transaction was an ownership restructuring, where beneficial
ownership might have been unchanged, rather than a market sale.
The transfer declaration shows the owner before and after the
sale was Eastland Member, LLC. PTAB does not consider the change
of members within Eastland Member, LLC, sufficient evidence of
change in beneficial ownership. Second, PTAB found the sale was
most likely a leased-fee transaction and not a fee-simple trans-
action. Third, PTAB found no evidence explained how the
$79,030,000 sale price was allocated to Eastland Mall. Fourth,
PTAB found the three-mall sale to be a highly complicated trans-
action like that in Town of Cunningham v. Property Tax Appeal
Board, 225 Ill. App. 3d 760, 587 N.E.2d 573 (1992), with little
consideration of fair market value. Finally, PTAB found the
signatures on the second real estate transfer declaration indi-
cated one individual signed as both the buyer and the seller.
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Sears argued that PTAB's conclusion from the evidence
that the sale of Eastland Mall was not an arm's-length transac-
tion, and therefore not indicative of the fair market value of
the property, was not against the manifest weight of the evi-
dence. We agree. PTAB's determination that the sale was not at
arm's length is a question of fact, which we consider prima facie
true and correct. 735 ILCS 5/3-110 (West 2004). While Edward
Salisbury, Sears< appraiser, and Mike Ireland, the township
assessor, had different conclusions regarding whether the
Eastland Mall sale constituted an arm's-length transaction,
PTAB's job is to weigh the evidence and determine the credibility
of the witnesses. Oregon Community Unit School District No. 220
v. Property Tax Appeal Board, 285 Ill. App. 3d 170, 175, 674
N.E.2d 129, 132, (1996). As the record contains evidence to
support PTAB's factual finding, we will not disturb that finding.
Gibson City, 354 Ill. App. 3d at 816, 822 N.E.2d at 554.
We return to the question of whether PTAB erred in its
decision not to give any weight to the sale of Eastland Mall.
The Illinois Supreme Court has held that a contemporaneous sale
of the subject property between parties dealing at arm's length
is relevant to the question of fair market value. People ex rel.
Korzen v. Belt Ry. Co. of Chicago, 37 Ill. 2d 158, 161, 226
N.E.2d 265, 267 (1967). "However, the sale price of property
does not necessarily establish its value without further informa-
tion on the relationship of the buyer and seller and other
circumstances." Residential Real Estate, 188 Ill. App. 3d at
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242, 543 N.E.2d at 1364. The record shows little evidence
regarding the sales contract and how the sales price was allo-
cated among the three malls sold. Where sufficient evidence of
comparable sales was presented by both Salisbury for Sears and
the School District's appraiser, Brian Finch, PTAB properly
concluded that no weight should be given to the sale of Eastland
Mall in determining the fair market value of the Sears property.
The School District next argued PTAB should have
considered the land value in determining the Sears property's
fair market value. Finch prepared an appraisal based on both the
traditional income approach and the sales-comparison approach.
He used sales comparison to assess the property's value in two
ways, as compared with sales of anchor stores and as compared to
local sales of land. Both the income approach and the comparable
sales of anchor stores produced fair market values similar to
those of Sears< appraisal.
When the School District's appraisal valued the under-
lying land through comparable local sales, Finch found it to be
considerably higher than the income approach and comparable sales
of anchor stores. In valuing the land, the School District's
appraiser compared seven local sales to the subject property. He
opined the first comparable sale was the best evidence of the
subject property's value. It was similar to the subject property
in that it was (1) similar in size, (2) located less than a mile
from the subject property, (3) located on a corner like the
subject property, (4) similarly exposed to Veteran's Parkway, and
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(5) sold approximately five months prior to the valuation date.
It sold for $13.96 per square foot. Finch valued the land at $14
per square foot for a total fair market value of $5,604,000.
Finch then used the cost method to appraise the value
of the improvements on the site. He used a nationally recognized
cost service and determined the 38-year-old building was nearing
the end of its economic life of 50 years. He applied a straight-
line rate of depreciation and found the improvements should be
valued at $485,585. He added the depreciated value of the
building improvements to the estimated land value for a value of
$6.09 million. Finch's report states, "While the cost approach
indicated a higher value, its dependence on mathematical calcula-
tion to some extent yields an unreliable result. With overall
depreciation estimated at over 96%, common sense suggests the
improvements are essentially fully depreciated, given the prop-
erty age." He concluded the market value for a typical buyer was
land value plus some minor value for site improvements for an
estimated fair market value of $5.7 million.
The School District supports the argument that the
subject property is at least worth the value of the underlying
land pursuant to the Illinois Supreme Court holding in Spring-
field Marine Bank v. Property Tax Appeal Board, 44 Ill. 2d 428,
256 N.E.2d 334 (1970). The School District contends that under
Springfield Marine Bank, a property-tax assessment should not be
reduced based on the income actually earned from the lease but
should be based on the earning capacity of the "'tract or lot of
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real property.<" Springfield Marine Bank, 44 Ill. 2d at 430, 256
N.E.2d at 336.
PTAB looked to the highest-and-best-use concept to
decide which appraiser testified to the best evidence of the
subject's fair market value. PTAB found the School District's
appraisal determined the highest and best use as vacant was for
retail development. As improved, the highest and best use is not
as an anchor store. PTAB found the report to be flawed regarding
the property's highest and best use. Finch's appraisal applied
the four tests for highest and best use (physically possible,
legally permissible, financially feasible, most productive) only
as if the property were vacant. PTAB found that Finch's ap-
praisal failed to fully analyze and perform the four tests. PTAB
was unpersuaded that the building was near the end of its eco-
nomic life as it had been expanded and remodeled between 1997 and
1999. PTAB found the property should be valued as an anchor
store for Eastland Mall under Illinois v. Illinois Central R.R.
Co., 27 Ill. 64 (1861) (property should be valued for the pur-
poses for which it was constructed and not for any other purpose
for which it might be used). PTAB found Finch did not demon-
strate financial feasibility to redevelop the parcel; he took no
consideration of the cost to acquire the lease or reconfigure or
demolish the building. PTAB found these costs must be accounted
for since any potential buyer of the parcel would heavily weigh
those factors. PTAB, citing In re Rosewell, 120 Ill. App. 3d
369, 458 N.E.2d 121 (1983), found Finch's land values to be
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speculative as neither Eastland Mall nor Sears had any future
plans to demolish or redevelop the property. In Rosewell, 120
Ill. App. 3d at 375, 458 N.E.2d at 126, the court noted, "Values
which are future in character may not be taken into consideration
*** where they are so elusive and difficult of ascertainment that
they have not affected the present market value of the property."
PTAB concluded Finch's proposed highest and best use as vacant
land was not reasonable, probable, or proximate. PTAB gave
little weight to Finch's assessment of fair market value. PTAB
concluded because the School District's $5.7 million estimated
fair market value was less than the $5,946,733 township assess-
ment, both the School District and Sears' estimated fair market
value supported a reduction in the assessed valuation.
Sears argues that PTAB's conclusion that the land-only
value of the property was not determinative of the fair market
value was not against the manifest weight of the evidence. PTAB
could rely on Salisbury's testimony over that of Finch under
Gibson City, 354 Ill. App. 3d at 816, 822 N.E.2d at 554. Salis-
bury testified that the land-only value was not determinative of
the highest and best use; that is, the analysis should consider
the potential uses of the property and its current use and not
the land value as vacant. Sears argues Finch admitted his land-
value assessment relied on speculative future events which, under
Rosewell, should not affect the market value of the property.
Sears argues the decision in Board of Review of Macon
County v. Property Tax Appeal Board, 295 Ill. App. 3d 242, 692
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N.E.2d 417 (1998), supports PTAB's decision. In that case, the
fair market value of the taxpayer's industrial complex was at
issue. The Board of Review's appraiser valued each of three
office buildings separately as part of the highest-and-best-use
analysis, concluding the three buildings should be subdivided and
sold separately from the remainder of the property. Board of
Review of Macon County, 295 Ill. App. 3d at 246, 692 N.E.2d at
420. This court held that PTAB's decision rejecting those
conclusions was not against the manifest weight of the evidence
and was supported by competent evidence, where the Board of
Review's appraiser "did not give sufficient consideration to the
costs that would be incurred by separating these three buildings
for sale and the difficulty any buyer would have with filling
these buildings *** with tenants because of the size of these
buildings." Board of Review of Macon County, 295 Ill. App. 3d at
248, 692 N.E.2d at 421-22. Sears argues Finch acknowledged there
would be costs to demolishing or modifying the property that he
did not consider in his appraisal. Finch admitted the mall owner
would be reluctant to demolish part of the existing mall and
develop it into something other than an anchor store.
Sears argues the record contains evidence to support
PTAB's giving little weight to Finch's land-only value. Four of
the seven land sales were well below Finch's $14-per-square-foot
estimate. Sales six and seven were the most similar properties
because they were acquired by Eastland Mall, yet Finch gave them
the least weight. Finch relied on properties with zoning and
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size differences. Finally, Sears argues Springfield Marine Bank
does not require PTAB to give more weight to the land value. In
this case, the long-term lease is not a low rental income where
the rental value of the property has increased significantly.
Sears points out Springfield Marine Bank does not hold that a
flawed land-only valuation of an improved property is determina-
tive of the property's fair market value.
In its reply brief, the School District states Finch
did not prepare a land-only appraisal or speculate as to future
uses of the property. His appraisal began with the value of the
land as though vacant using the sales-comparison approach. He
used all three traditional approaches to estimate fair market
value and found only the cost approach resulted in a fair market
value that would take into account the value of the land.
Because of the age of the building, Finch depreciated over 96% of
the cost of the improvements. He used the ordinary and customary
technique to conclude the fair market value of the Sears property
was worth $5.7 million. The School District argues that his
approach is supported by the Appraisal Institute and that Finch
reached a sensible conclusion using all three traditional ap-
proaches to value.
The School District argues the Sears appraisal is
flawed because Salisbury intentionally left out the cost approach
to value and did not value the land. Both Salisbury and Finch
reached similar results using the income and sales-comparison
approaches. Finch continued by comparing those results to the
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land value and found the land value far exceeded the results of
both the income and sales approaches while Salisbury was unaware
that his result could not be reconciled with the value of the
land based on sales comparisons or the cost approach. The School
District argues PTAB's analysis of Finch's determination of land
value is not consistent with the facts set forth in the record.
Finch supplied comparable land sales and opined as to the value
of the land, and Salisbury did neither. Finch reviewed seven
sales in close proximity to Sears. He concluded the first
comparable sale was the best indicator of the subject property's
land value because it was near in time, similar in size, close in
distance, and similar in its location on a corner lot on Vet-
eran's Parkway. The School District argues PTAB's preference for
comparable land sales six and seven is without basis in fact.
PTAB states these sales illustrate the owner of Eastland Mall
prefers to purchase lots adjacent to the mall for less than other
parcels located along Veteran's Parkway. The School District
argues the value is based on what any willing buyer would pay any
willing seller for the land, not what Eastland Mall prefers to
purchase. In sales comparison number one, there is a willing
buyer and willing seller. PTAB also preferred comparable sales
five, six, and seven because their zoning is similar to the
subject property. The School District argues no evidence on
record showed Sears' zoning is better or worse than the zoning
for comparable sale one. Finch stated in his report that the
zoning for land sale numbers six and seven is more restrictive
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than for the subject property and that land sale numbers five,
six, and seven are inferior because they are not located on
Veteran's Parkway and are considerably smaller in size.
We find while PTAB did misconstrue both Finch's report
and his testimony, PTAB's decision is sound. It is appropriate
for PTAB to give little weight to the comparable sales of land.
Sears does not own the building or the 9.19-acre parcel; thus,
the most weight should be given to the income approach. The rent
paid by Sears to Eastland Mall, while it is less than the rent
paid by smaller stores within the mall, is comparable to rents
paid by other anchor stores and is not below market-rate rents as
was the case in Springfield Marine Bank. Both Salisbury and
Finch arrive at values based on the income approach that support
a reduction in the subject property's assessed value. Finch
finds the fair market value of Sears to be a maximum of
$4,494,438, and Salisbury finds the fair market value to be $3.8
million.
The School District argues PTAB's decision is against
the manifest weight of the evidence and the Board of Review's
opinion of value is supported by the evidence and should be
affirmed. This case presents five opinions of the Sears prop-
erty's fair market value, four supporting the Board of Review's
assessment and Sears' approach, which does not. PTAB chose to
follow Sears' appraisal, which left out a land valuation and a
cost approach, resulting in an appraisal almost $2 million less
than the land value, nearly $9 million less than the mortgage
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debt allocated to the subject property, and over $13 million less
than the purchase price of Eastland Mall allocated to the subject
property. The fair market value reached through the income
approach was based on discounted anchor store rents and on
Springfield Marine Bank holding an owner still has to pay tax on
the earning capacity of the property. Sears' comparable-sales
approach was based on sales of anchor stores either vacant and/or
in bankruptcy. Sears' appraisal did not make adjustments for the
fact the subject property is in an excellent location with
virtually no vacancy in the area.
Sears argues PTAB's decision was not against the
manifest weight of the evidence. Under Winnebago County Board of
Review v. Property Tax Appeal Board, 313 Ill. App. 3d 179, 184,
728 N.E.2d 1256, 1260 (2000), reduced fair market value "within
the range of experts' valuation figures for the properties the
PTAB deemed most suitable for comparison" is not against the
manifest weight of the evidence. This court found it appropriate
in Board of Review of Macon County for PTAB to determine which
expert appraiser's approach to value was most persuasive and to
rely on that. Board of Review of Macon County, 295 Ill. App. 3d
at 247, 692 N.E.2d at 421. This court also found PTAB's decision
as to the fair market value of the property was supported by the
taxpayer's expert appraiser's sales-comparison approach to value
and was not against the manifest weight of the evidence. Board
of Review of Macon County, 295 Ill. App. 3d at 248, 692 N.E.2d at
421.
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PTAB's findings are supported by substantial competent
evidence, and its decision is not against the manifest weight of
the evidence.
For the reasons stated, we affirm the Property Tax
Appeal Board's judgment.
Affirmed.
MYERSCOUGH and TURNER, JJ., concur.
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