The Law

Highest Appraisal Accepted by Ron Davis The owners of Iowa retail property will have to accept a tax-related appraisal that is much higher than they contend it should be. The retail property, located in the Des Moines suburb of Urbandale, contains buildings with 415,000 square feet of retail/showroom/warehouse space. And the property tax on such an expansive property became an issue when the county assessor recently valued the property at $26,620,000. In response to that valuation, the property owner argued that the assessed value should be no greater than $8,600,000. That’s because, the property owner added, the “highest and best use” of the site, if sold, would be for industrial purposes. The dispute resulted in independent appraisals. Four appraisers analyzed the property and came up with widely varying valuations. They ranged from $8,890,000 to $21,300,000. And all contended that the basis of their analysis was “what is legally permissible, what is physically possible, what is financial feasible and what ensures maximum profitability.” One appraiser based his estimate on the probability that a large retailer would rather build its own store or buy an adjacent lot to create more parking. His final appraisal was $8,890,000. Another appraiser concluded that the highest and best use of the property would be for industrial—specifically for distribution purposes. His final appraisal was $11,100,000. Another appraiser determined that the highest and best use of the property would be as a “hybrid” of retail, warehouse and distribution. His appraisal was 19,700,000. The final appraiser argued that based on comparable sales, the highest and best use of the property would be, “as it stands,” continued use as a retail warehouse. Otherwise, if vacant, he added, the highest and best use would be as a retail office or service commercial use. His appraisal was $21,300,000. An Iowa district court favored the final appraiser’s reasoning and adopted his estimate of $21,300,000. In so deciding, the court noted the conclusion of the appraiser: “Given the $26 million dollars that was spent to renovate it [the retail property], given its location along this heavy traffic artery with retail properties near it,…given the history of sales of the property, it’s proven as retail warehouse property.” The property owner appealed. The Court of Appeals of Iowa agreed with the lower court, explaining, “The [accepted] appraisal most accurately assessed the value of the property. The appraisal was based on its present use without adding special value or goodwill…. The adjustment of comparable sales most closely aligns with the uniqueness of the property…. Because that assessment is supported by the most persuasive evidence among the four appraisers, the district court’s ruling should not be disturbed.” (Homemakers Plaza, Inc., v. Polk County Board of Review, 2013 WL 105220 [Iowa App.]) Decision: February 2013 Published: March 2013