ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:

DAVID A. SUESS MARILYN S. MEIGHEN

BENJAMIN A. BLAIR ATTORNEY AT LAW

FAEGRE DRINKER BIDDLE Carmel, IN

& REATH LLP

Indianapolis, IN BRIAN A. CUSIMANO

 ATTORNEY AT LAW

 Indianapolis, IN

______________________________________________________________________

IN THE

INDIANA TAX COURT ______________________________________________________________________

)

SOUTHLAKE INDIANA, LLC, )

)

Petitioner, )

)

v. ) Case No. 18T-TA-00030

) 

LAKE COUNTY ASSESSOR, ) 

)

Respondent. )

______________________________________________________________________

ON APPEAL FROM A FINAL DETERMINATION OF 

THE INDIANA BOARD OF TAX REVIEW 

FOR PUBLICATION

December 8, 2020

WENTWORTH, J.

Southlake Indiana, LLC has appealed the final determination of the Indiana Board 

of Tax Review valuing its real property for the 2011 through 2014 tax years.

1 Upon 

review, the Court affirms in part, and remands in part. 

1 Substantial portions of the administrative record in this case have been designated as 

confidential. Consequently, this opinion will provide only that information necessary for the reader 

to understand its disposition of the issues presented. See IND. ST. ACCESS RULE 9(A)(2)(d) 

(2020).
2

FACTS AND PROCEDURAL HISTORY

Southlake owns the Southlake Mall, a super-regional shopping mall located in 

Hobart, Indiana, that opened in 1974. For purposes of this appeal, the Mall is comprised 

of twelve parcels that make up its land, surface parking lots, and retention ponds; the 

Mall’s inline retail space and attached JCPenney and Dick’s Sporting Goods stores; a 

detached movie theatre, Gander Mountain store, and Firestone store; and several other 

freestanding buildings situated on outparcel lots that are used as restaurants, a jewelry 

store, and a bank. (See generally Pet’r Pet. Jud. Rev. Fin. Determination Ind. Bd. Tax 

Rev. at 3 ¶¶ 11-12; Cert. Admin. R. at 741-42, 1067-1108.)2 

In February of 2014, the Ross Township Assessor issued Form 113 Notices of 

Assessment Change to Southlake that retroactively increased the assessed values of

eight of the twelve parcels from a combined $110,432,100 in 2010 to $239,200,000 for 

each of the 2011, 2012, and 2013 tax years. Southlake appealed those assessment 

increases, as well as the combined $3,690,500 assessment assigned to the remaining 

four parcels for the 2013 tax year. After the Lake County Property Tax Assessment Board 

of Appeals (PTABOA) denied the appeals, Southlake sought relief with the Indiana Board.

While those appeals were pending at the Indiana Board, Southlake filed an appeal 

with the PTABOA challenging the Mall’s 2014 assessed value on all twelve parcels. The 

PTABOA did not act on the 2014 appeals and Southlake subsequently transitioned them 

to the Indiana Board pursuant to Indiana Code § 6-1.1-15-1(o). The Indiana Board 

conducted a hearing on all of Southlake’s appeals in June and July of 2017.

2 The parcels that reflect the Mall’s three other department store anchors, another restaurant, and 

a Kohl’s store, are not included in this appeal. (See Pet’r Pet. Jud. Rev. Fin. Determination Ind. 

Bd. Tax Rev. at 3 ¶¶ 11-12; Cert. Admin. R. at 741.)
3

The Assessor’s Evidentiary Presentation to the Indiana Board

During the Indiana Board hearing, the Lake County Assessor (“Assessor”) 

acknowledged that he bore the burden of proving that the assessment increases were 

correct because the Mall’s assessed value increased by more than 5% between 2010 

and 2011. (See Cert. Admin. R. at 3661-62.) See also IND. CODE § 6-1.1-15-17.2(a), (b) 

(2017) (explaining the burden of proof at the time the Indiana Board conducted its 

hearing). To meet that burden, the Assessor presented an appraisal, completed in 

conformance with the Uniform Standards of Professional Appraisal Practice (USPAP), 

that valued the Mall for each of the years at issue. The Assessor also presented the 

testimony of Mark Kenney, a member of the Appraisal Institute (MAI), who prepared the 

appraisal. 

Kenney’s appraisal used the income capitalization approach to value the Mall. 

(See, e.g., Cert. Admin. R. at 1673, 1801-79, 3760-64.) The income approach, one of 

three generally accepted appraisal techniques for valuing real property, applies to 

“income producing properties that are typically rented[ and] converts an estimate of 

income, or rent, [a] property is expected to produce into value through a mathematical 

process known as capitalization.” 2011 REAL PROPERTY ASSESSMENT MANUAL 

(incorporated by reference at 50 IND. ADMIN. CODE 2.4-1-2 (2011)) at 2. Generally 

speaking, when an appraiser uses this approach to value a property, he first estimates 

the property’s net operating income (“NOI”) by deducting a vacancy and collection loss, 

as well as operating expenses, from its potential gross income. See Appraisal 

Institute, THE APPRAISAL OF REAL ESTATE 478-88 (14th ed. 2013) (explaining, among other 

things, that potential gross income includes rents for space in a property as well as “all
4

other forms of income to the real property – e.g., income from services supplied to the 

tenants, such as secretarial service, switch-board service, antenna connections, storage, 

and garage space, and income from coin-operated equipment and parking fees”)

(emphasis added). The appraiser then selects an appropriate capitalization rate to apply 

against the property’s NOI. See generally id. at 492. 

To estimate potential gross rental income from both the Mall’s inline spaces and 

freestanding buildings on the outparcels, Kenney relied exclusively on their actual 

contract rents that he then averaged within tenant size categories. (See, e.g., Cert. 

Admin. R. at 1801-21 (listing the contract rents per square foot and lease terms for each 

tenant for each of the years at issue), 1825 (concluding to one averaged rental estimate 

for all tenants within specified square footage categories), 1842, 1845, 1848, 1851

(indicating that the averaged values were then used to calculate the Mall’s effective gross 

income (“EGI”) for each of the years at issue), 4135-38, 4153-57.) To estimate the 

potential gross rental income from the JCPenney and Dick’s Sporting Goods stores (as 

well as two restaurants, the movie theatre, and the Firestone store), Kenney relied on 

“comparable department store and ‘big box’ store . . . rents[.]” (See, e.g., Cert. Admin. R. 

at 1822-25, 3848-50, 4091-92, 4117-18.) 

In addition to these rental income estimates, Kenney estimated other forms of 

income to the Mall’s real property, namely the income from “specialty leasing,” i.e., retail 

merchandising units (“RMUs”), kiosks, inline spaces occupied by temporary tenants 

(“TILs”), and “Brand/Media.” (See, e.g., Cert. Admin. R. at 1827-30, 1842, 1845, 1848, 
5

1851, 3851-63, 4158-63.) After conducting a cost-of-occupancy analysis3 to confirm that 

the Mall’s health was consistent with typical industry parameters, Kenney applied a single 

vacancy and collection loss rate to his overall income conclusion to arrive at the Mall’s 

EGI. (See, e.g., Cert. Admin. R. at 1830-33.)

From EGI, Kenney subtracted operating expenses – which he estimated based on 

the property’s actual operating history – to arrive at the Mall’s NOI. (See, e.g., Cert. 

Admin. R. at 1833-36, 1841-52.) Kenney included a management fee in his expense 

estimate (ranging from 3% to 4% of his EGI) as he believed the Mall, if sold, would likely 

be leased and managed by an institutional owner or professional manager. (See, e.g., 

Cert. Admin. R. at 1835-36, 4034.) Kenney testified that while intangible value rarely 

exists in malls, his management fee deduction would adequately account for and remove

the intangible value arising from the Mall’s operation as a going concern. (See, e.g., Cert. 

Admin. R. at 3781-83.) 

Kenney next considered investor surveys and performed a band-of-investment 

analysis to determine that a capitalization rate of approximately 6.45% should be applied 

against his NOI calculation. (See generally Cert. Admin. R. at 1839-79.) After capitalizing 

NOI, Kenney made two final deductions. First, he deducted the amounts reported on the 

Mall’s business tangible personal property tax returns for its furniture, fixtures, and 

equipment (“FF&E”).

4 (See Cert. Admin. R. at 1836-37, 3974-77, 4035.) Second, Kenney 

3 A cost-of-occupancy analysis is “an indicator of the viability of [a] mall, a tenant, or a lease rate”; 

it reflects “total rent and other landlord charges as a ratio of sales per [square foot.]” (Cert. Admin. 

R. at 3504.)

4 Kenney admitted that this deduction would not, however, remove any income attributable to that 

personal property. (See, e.g., Cert. Admin. R. at 4035-36.) 
6

deducted for tenant incentive allowances. (See, e.g., Cert. Admin. R. at 1837-39, 4034-

35.) Kenney’s income approach resulted in the following value conclusions for the Mall: 

2011: $224,273,000 

2012: $239,273,000 

2013: $227,273,000 

2014: $243,273,000 

(Cert. Admin. R. at 3360.)5

Southlake’s Evidentiary Presentation to the Indiana Board

Southlake’s evidentiary presentation to the Indiana Board had three parts. 

Specifically, Southlake presented 1) two independent reviews of Kenney’s appraisal; 2) 

its own USPAP appraisal valuing the Mall for each of the years at issue; and 3) an analysis 

comparing the Mall’s assessed value to those of ten other Indiana malls.

1)

Southlake presented two reviews critiquing Kenney’s appraisal. The first review

was prepared by Alvin Benton, MAI. (See Cert. Admin. R. at 994-1012.) Benton’s primary 

complaint was directed at Kenney’s development of, and conclusions regarding, his rental 

income estimates for the Mall. (See Cert. Admin. R. at 1006-08, 1011.) Specifically, 

Benton asserted that Kenney’s method of averaging actual contract rents to estimate the 

Mall’s potential gross rental income was not “a meaningful analysis” and that he should 

have considered lease data from other malls instead. (See, e.g., Cert. Admin. R. at 4461-

5 Kenney initially valued the Mall at $243,927,000 for 2011; $251,927,000 for 2012; $238,927,000 

for 2013; and $255,927,000 for 2014. (See Cert. Admin. R. at 1675-76.) Subsequently, however, 

Kenney conceded that he made several errors in his appraisal that resulted in an overvaluation 

of the Mall. (See, e.g., Cert. Admin. R. at 3360, 4189-91, 4242-44.) (See also Cert. Admin. R. at 

3507 ¶ 28 n.3, 3513-14 ¶¶ 42-43, 45-46.) The values stated above reflect Kenney’s adjusted 

appraisal values after correcting those errors. (Compare Cert. Admin. R. at 1675-76 with 3360.)
7

62, 4473-87.) Benton also alleged that in estimating the rental income from the anchor 

stores, Kenney relied on property and lease data that was not comparable to the Mall. 

(See Cert. Admin. R. at 4479-83.)

Southlake’s second review was prepared by Dr. Jeffrey Fisher, Professor Emeritus 

at Indiana University’s Kelley School of Business and founder/former director of its Center 

for Real Estate Studies. (Cert. Admin. R. at 1026-45, 4695-97.) Fisher alleged that 

Kenney failed to remove from his final value conclusion for the Mall the non-taxable 

intangible value generated through the Mall’s operation as a going concern. For instance, 

Fisher explained that a mall’s management creates intangible business value by 

developing an appropriate tenant mix that initially – and necessarily – hinges on the 

retention of anchor tenants. (See Cert. Admin. R. at 1026-28, 4711-16 (explaining that if 

a mall does not have anchors, it will not have inline tenants).) Fisher asserted that while 

deducting a management fee, as Kenney did, may have accounted for “maintaining” the 

value of the Mall’s tenant mix, it did not account for – and remove – the value produced 

to create the mix in the first place. (See Cert. Admin. R. at 4715-16.) Fisher also asserted 

that a mall creates value through, among other things, its operating and cross-easement 

agreements, brand name, customer base, and profit centers. (See, e.g., Cert. Admin. R. 

at 1026.) Fisher believed, therefore, that the actual rents paid by the Mall’s inline tenants 

“represent[] more than just payment for space in the [M]all.” (Cert. Admin. R. at 1027, 

4722-25.)

2)

During the Indiana Board hearing, Southlake also offered its own USPAP appraisal 

valuing the Mall for each of the years at issue. In addition, Southlake presented the 
8

testimony of David Lennhoff, MAI, who prepared the appraisal. 

To value the Mall, Lennhoff, like Kenney, used the income capitalization approach. 

(See, e.g., Cert. Admin. R. at 684-85, 739.) Lennhoff’s income approach, however, began 

by determining the Mall’s value as a going concern – a value that reflected not only the 

income from its real property, but also its personal property and intangible assets. (See,

e.g., Cert. Admin. R. at 743, 745-46, 751-53, 804-05, 4821-24.) Lennhoff explained that 

with mall properties, like hotels, one must first start with the going concern – or “total 

assets of the business” (“TAB”) – “because there is no rent for just the real property.” 

(Cert. Admin. R. at 4815.) (See also, e.g., Cert. Admin. R. at 805 (stating “[r]egional 

shopping centers or similar property types almost always trade as going concerns, as 

there is virtually no market for its individual component parts sold separately (real estate, 

and tangible and intangible personal property)”).) To calculate the Mall’s TAB value, 

Lennhoff relied on its actual operating history from 2008 through 2013 to forecast income 

and expenses for each year at issue. (See Cert. Admin. R. at 807, 849, 891, 935.)6 

Because his “[b]ase rent to the TAB reflects contract rent[,]” Lennhoff performed his own 

cost-of-occupancy analysis to “gauge” the economic reasonableness of those rents, 

concluding that they, and thus the Mall’s occupancy costs, were generally within the range 

of other retail properties reported in national and regional surveys. (See Cert. Admin. R. 

at 808, 811-17, 4858-59.) 

Lennhoff then made a series of adjustments to his annual TAB income estimates 

so that they would reflect income from the real property only. (See, e.g., Cert. Admin. R. 

6 The Indiana Board’s final determination examined Kenney’s and Lennhoff’s appraisals with 

respect to their 2011 valuations only, as the methodologies used therein were demonstrative of 

the other years at issue. (See Cert. Admin. R. at 3533 ¶ 108). Going forward, the Court will do 

the same. 
9

at 807-34.) For instance, with respect to his rent estimates for the inline spaces, he 

deducted an amount for tenant incentives and termination fees. (See Cert. Admin. R. at 

809-11.) Lennhoff also reduced his TAB income projection from specialty leasing by 

nearly 50% to account for the fact that while the income from those “license and use fees 

include[s] a real estate component, [it is] business income” not subject to property tax. 

(Compare Cert. Admin. R. at 807 (indicating TAB income projections for “specialty leasing 

[inline],” “specialty leasing,” and “media (marketing)”) with 831-32 (indicating the portion 

of that income Lennhoff believed was attributable to the real property).) Lennhoff similarly 

reduced his TAB income projections from common area maintenance (“CAM”) expense 

reimbursements, less associated management fees, by more than 50% because he 

believed it reflected profits received by the Mall’s management and therefore constituted 

business income as well. (Compare Cert. Admin. R. at 807 with 832-33.) (See also Cert. 

Admin. R. at 5009-11, 5014.) 

From his estimates of income from the real property, Lennhoff deducted operating

expenses – which were based on the Mall’s historical operational expense data – to arrive 

at the property’s NOI. (See, e.g., Cert. Admin. R. at 834-37 (stating, in part, that his 

“operating expenses [are] based primarily on the [Mall’s] historical data[ because] unlike 

rents, which are at least partially a function of the mall enterprise . . . expenses are much 

more closely tied to the real property”), 4893-94.) Like Kenney, Lennhoff deducted a 

management fee as an operating expense. (See, e.g., Cert. Admin. R. at 834-37, 5011-

14.) Lennhoff acknowledged, however, that this was the second deduction he made for 

such a fee. (See Cert. Admin. R. at 5011-12 (noting that he also subtracted a 

management fee from his estimate for CAM expense reimbursement income).) 
10

From NOI, Lennhoff then made deductions to account for the Mall’s “return on and 

of” 1) FF&E; 2) start-up costs; and 3) favorable contracts (i.e., inducements incurred to 

attract and retain anchor tenants). (See Cert. Admin. R. 837-42, 4901-24.) These three 

deductions, Lennhoff asserted, were “necessary to remove income attributable to 

personal property and identifiable intangibles.”7 (Cert. Admin. R. at 838.) 

Next, Lennhoff relied on several investor surveys to substantiate his application of 

an 8% (approximate) capitalization rate to his NOI (less the deductions just described). 

(Cert. Admin. R. at 842-45, 4924-33.) To this indicated value, Lennhoff applied an 

adjustment for stabilized vacancy because the Mall’s actual vacancy was greater than 

what he computed “market vacancy” to be.

8 (See Cert. Admin. R. at 846-47, 4933.) 

Lennhoff also made a “demising” adjustment to account for the pending loss of a Borders 

store and a vacant Big Dollar store space. (See Cert. Admin. R. at 845-48, 975 (indicating 

that the demising adjustment was not made for the 2014 year), 4935-37.) After these 

adjustments, Lennhoff’s income approach resulted in the following value estimates for the 

Mall:

2011: $ 98,300,000 

2012: $114,500,000 

2013: $129,600,000

2014: $146,300,000

7 Residual intangibles, Lennhoff continued, would be “removed by loading the capitalization 

rate[.]” (Cert. Admin. R. at 838.)

8 Specifically, Lennhoff calculated an annual rent loss adjustment by multiplying his concluded 

market rent for the Mall’s inline space by the difference between a stabilized 88% occupied square 

footage and the existing occupied square footage; he then converted that figure to a 9-month 

equivalent and deducted that amount for each year. (See Cert. Admin. R. at 846-49.)
11

(See Cert. Admin. R. at 848, 889, 934, 979.)

3)

Finally, Southlake presented a comparable assessment analysis prepared by 

Benton pursuant to Indiana Code § 6-1.1-15-18, asserting that it conclusively established 

that the Mall was overassessed.

9 In his analysis, Benton selected ten regional or superregional malls, all located in Indiana, each with three or more anchors and at least 

700,000 square feet of gross leasable area. (See Cert. Admin. R. at 1211-1647, 4517-

25.) Benton then developed a list of numerous property and market characteristics that 

he used to determine whether those properties were superior or inferior to the Mall.10 

(See generally Cert. Admin. R. at 4526-48.) After comparing all these properties’ 

assessed values, Benton determined that on a per square foot basis, the Mall was 

assessed at more than three times the median and average of the malls that were 

superior to it. (See Cert. Admin. R. at 1651-58, 1664, 4565-72.) In fact, Benton’s analysis 

revealed that the Mall had the highest assessed value – both on a per square foot and a 

gross basis – of any of those malls, including the exclusive Fashion Mall in Indianapolis. 

(See Cert. Admin. R. at 1651-58.)

The Indiana Board’s Final Determination

On November 21, 2018, the Indiana Board issued its final determination in the 

matter. In that final determination, the Indiana Board made two overarching conclusions. 

9 Indiana Code § 6-1.1-15-18 states that “[t]o accurately determine market value-in-use, a 

taxpayer or an assessing official may . . . in a proceeding concerning property that is not 

residential property, introduce evidence of the assessments of any relevant, comparable 

property.” IND. CODE § 6-1.1-15-18(c) (2017). 

10 The characteristics included, among other things, the age of the mall; date of its last renovation; 

gross leasable area; number, identity, and sizes of the anchors; and demographics of the 

respective trade area. (See generally Cert. Admin. R. at 4526-48.)
12

First, noting that both Kenney and Lennhoff relied on the Mall’s contract rents in their 

income analyses, it concluded that any argument about whose estimates best reflected 

the market was “misplaced” because they were substantially similar. (See Cert. Admin. 

R. at 3535-36 ¶¶ 110-12.) Second, the Indiana Board concluded that Kenney’s approach 

to valuing the Mall, and his rationale supporting that approach, was much more 

understandable than Lennhoff’s. (See, e.g., Cert. Admin. R. at 3522 ¶ 77 (explaining that 

Lennhoff’s “calculation of vacancy for inline space was difficult to follow”), 3524 ¶ 81

(stating “Lennhoff’s explanation of [his] double deduction of the management fee from 

both income and expenses was difficult to follow”), 3535 ¶ 109 (stating “[i]t is very easy 

to understand Kenney’s conclusions[] and how they compare to the [] Mall’s historical 

operations in each category of income or expense”), 3541 ¶ 119 (explaining that 

“Lennhoff’s treatment of . . . [RMUs] was largely opaque”), 3542 ¶ 123 (asserting that 

Kenney’s calculations of CAM income “are transparent [while] Lennhoff’s are not”).) 

In light of those conclusions, the Indiana Board stated:

While Kenney’s analysis of income had . . . flaws, it was largely 

supported by Lennhoff’s income estimates and survey data. The 

appraisers diverged through Lennhoff’s deductions from income, 

particularly in regard to kiosk, TIL[s], and CAM income. These 

deductions[, however,] were conclusory and unsupported. Lennhoff’s 

overall lack of transparency made his analysis less persuasive than 

Kenney’s. . . . After weighing the evidence, the Board must find that 

Kenney presented the more persuasive estimate of NOI for each year 

on appeal.

(Cert. Admin. R. at 3545 ¶ 128.) Nonetheless, the Indiana Board noted that 

[Kenney’s] NOI must be adjusted to deduct Lennhoff’s personal 

property adjustment and utility profits. Lennhoff’s cap rates are best 

supported by the evidence, and these reasonably remove intangibles 

associated with the anchor agreements and business operations. 

Finally, the capitalized income must be adjusted for Kenney’s tenant 

incentive[ deductions], Lennhoff’s stabilization calculations, and 
13

Lennhoff’s excess parcel values.

(Cert. Admin. R. at 3552-53 ¶ 149.) After making these adjustments, the Indiana Board 

valued the Mall as follows: 

2011: $173,497,036

2012: $180,400,178

2013: $179,367,932

2014: $190,620,448

(Cert. Admin. R. at 3553 ¶ 150.)

With respect to Southlake’s comparable assessment analysis, the Indiana Board 

chose to give it little weight given that it had two USPAP appraisals from proven appraisal 

experts. (See Cert. Admin. R. at 3554 ¶ 152.) The Indiana Board explained that this was 

due in part to the fact that neither Kenney nor Lennhoff relied on data from other 

comparable malls in their appraisals.

11 (See Cert. Admin. R. at 3554 ¶ 152.) In any 

event, the Indiana Board explained, the analysis did nothing more than “merely prove[] a 

fact not in dispute: an income approach valuation might reach a different result than a []

cost approach valuation” performed under Indiana’s Assessment Manual and Guidelines. 

(Cert. Admin. R. at 3554 ¶ 152.) Thus, “[w]hile [Indiana Code § 6-1.1-15-18] requires the 

admission and consideration of [the] comparable assessment[ analysis], it does not 

require the Board to give it more weight than a USPAP[-]compliant appraisal.” (See Cert. 

Admin. R. at 3554 ¶ 152.) 

11 While Benton’s comparable assessment analysis tended to focus on the physical attributes that 

distinguished the malls, see supra note 10, the Indiana Board found that given how Kenney and 

Lennhoff approached their valuation assignments, there were two more “critical” factors of 

comparison than assessment values: the malls’ inline sales and their cost-of-occupancy rates. 

(See Cert. Admin. R. at 3554 ¶ 152.)
14

On December 31, 2018, Southlake initiated an original tax appeal. On September 

27, 2019, the Court conducted oral argument on the matter. Additional facts will be 

supplied when necessary.

STANDARD OF REVIEW

The party seeking to overturn an Indiana Board final determination bears the 

burden of demonstrating its invalidity. Osolo Twp. Assessor v. Elkhart Maple Lane 

Assocs., 789 N.E.2d 109, 111 (Ind. Tax Ct. 2003). Consequently, Southlake must 

demonstrate to the Court that the Indiana Board’s final determination in this matter is 

arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

contrary to constitutional right, power, privilege, or immunity; in excess of or short of

statutory jurisdiction, authority, or limitations; without observance of procedure required 

by law; or unsupported by substantial or reliable evidence. IND. CODE § 33-26-6-6(e)(1)-

(5) (2020).

DISCUSSION AND ANALYSIS

At the outset, the Court notes that Southlake has claimed, as it did before the 

Indiana Board, that the Ross Township Assessor violated Indiana Code § 6-1.1-9-1 when, 

in 2014, she retroactively increased the Mall’s 2011, 2012, and 2013 assessments based 

on Kenney’s appraisal report that valued the Mall for 2011 because she did not (nor could 

have had) the requisite statutory “belief” that the Mall’s 2012 and 2013 assessed values 

were understated. (See Pet’r Br. at 45-48.) See also IND. CODE § 6-1.1-9-1 (2014) 

(stating that an assessing official may increase a property’s assessed value between 

general reassessments when she “believes that any taxable tangible property has been 

omitted from or undervalued on the assessment rolls”) (amended 2017). The Indiana 
15

Board rejected that claim, finding that Kenney’s appraisal report was sufficient for the 

Ross Township Assessor to formulate a belief that the Mall was undervalued. (See Cert. 

Admin. R. at 3502 ¶¶ 14-16.) The Court agrees with – and therefore adopts as its own –

the Indiana Board’s rationale rejecting that claim.

In the remainder of its appeal, Southlake argues that three primary errors in the 

Indiana Board’s final determination necessitate its reversal. (See Oral Arg. Tr. at 5-6.) 

First, it argues that the Indiana Board improperly adopted and used Kenney’s rental 

income estimates to value the Mall because he did nothing to demonstrate that they 

actually reflected the market as required by Indiana law. (See Oral Arg. Tr. at 5-6, 10.) 

Second, Southlake argues that the Indiana Board improperly included in its valuation of 

the Mall the non-taxable value attributable to personal property, business income, and 

intangible assets. (See, e.g., Oral Arg. Tr. at 6, 12, 28.) Finally, Southlake maintains that 

the Indiana Board failed to meaningfully address its comparable assessment analysis that 

clearly demonstrated that the Mall was overassessed. (See Oral Arg. Tr. at 6.)

1. Market Rent

To develop an opinion of value under the income approach, the fee simple interest

in the property must be determined based on an estimate of market rents. See, e.g., 

Shelby Cnty. Assessor v. CVS Pharmacy, Inc. #6637-02, 994 N.E.2d 350, 354 (Ind. Tax 

Ct. 2013); Grant Cnty. Assessor v. Kerasotes Showplace Theatres, LLC, 955 N.E.2d 876, 

881 (Ind. Tax Ct. 2011) (explaining that “‘[a]ny potential value increment in excess of a 

fee simple estate is attributable to the particular lease contract . . . [and] 

constitute[s] contract [rights] rather than real property rights’”) (citation omitted). See also

THE APPRAISAL OF REAL ESTATE at 447, 466 (explaining that in fee simple valuations, 
16

income from rentable space is to be estimated using market rent levels). Contract rents 

may be used, however, when the evidence demonstrates that they reflect the market. 

Southlake Indiana, LLC v. Lake Cnty. Assessor, 135 N.E.3d 692, 697 (Ind. Tax Ct. 2019), 

review denied. 

On appeal, Southlake argues that it was improper for the Indiana Board to adopt 

and use Kenney’s rental income estimates because he did not demonstrate that they

reflected the market. Southlake explains that Kenney simply used contract rents, 

admitting that he did not 1) adjust them to reflect any changes in economic conditions

between lease start dates and the years at issue; 2) adjust them to account for differences 

between the Mall and the other properties he used as comparables; or 3) compare any 

of his conclusions with data from outside the property. (See generally Pet’r Br. at 11-18

(citing, e.g., Cert. Admin. R. at 1801-24, 3826, 3848-49, 4087-93, 4114-20, 4138, 4147-

49, 4153-57).) Southlake argues that these failures rendered Kenney’s estimates 

“useless” and it was therefore improper for the Indiana Board to adopt and use them in 

its valuation of the Mall. (See, e.g., Pet’r Br. at 17.) The Court does not find Southlake’s 

argument persuasive for the following two reasons.

First, based on all of the evidence before it, the Indiana Board could reasonably

conclude that Kenney’s rental income estimates reflected the market. See, e.g., CVS

Corp. (#6698-02) v. Monroe Cnty. Assessor, 83 N.E.3d 1281, 1285-86 (Ind. Tax Ct. 2017)

(explaining that a final determination is supported by substantial and reliable evidence if 

a reasonable person reviewing the administrative record could find enough

relevant evidence to support it). Kenney explained that because super-regional malls are 

markets unto themselves, the contract rents of the tenants within the property are the best 
17

indicators as to what rents are appropriate in that market. (See, e.g., Cert. Admin. R. at 

1801.) Kenney’s rationale is buttressed by the fact that Lennhoff also used the Mall’s 

contract rents as the starting point for his income approach. (See Cert. Admin. R. at 807-

08.) Moreover, both Kenney and Lennhoff relied on a cost-of-occupancy analysis – which 

examines the reasonableness of a property’s rents in connection to its market – as 

support for their rental income estimate conclusions. (Compare, e.g., Cert. Admin. R. at 

811-17 (Lennhoff’s cost-of-occupancy analysis) with 1830-32 (Kenney’s cost-ofoccupancy analysis).) 

Even more importantly, and as the Indiana Board explained in its final 

determination, the evidence demonstrates that “[when] the two appraisals are placed 

side-by-side . . . there is substantial agreement between the appraisers as to [their 

ultimate conclusions of] market rent.” (Cert. Admin. R. at 3536 ¶ 112.) Indeed, in 

comparing Kenney’s and Lennhoff’s overall rental income estimates for the inline space, 

for instance, the difference between the two is not a function of the actual rental income 

per square foot conclusions themselves, but rather is explained by 1) where the two 

appraisers accounted and deducted for tenant improvements,

12 2) a square footage 

discrepancy, and 3) how much kiosk income each appraiser considered to be attributable 

12 Lennhoff adjusted for tenant improvements within his market rent per square foot calculation

(i.e, as an “above-the-NOI line” deduction); whereas, Kenney made a lump-sum adjustment after 

he capitalized NOI (i.e., a “below-the-NOI line” deduction). See supra pp. 5-6, 10. Typically, 

deductions for tenant improvements are made “below-the-line.” See Appraisal Institute, THE 

APPRAISAL OF REAL ESTATE 474-75 (14th ed. 2013).
18

to the real property.

13 (Compare, e.g., Cert. Admin. R. at 819 (Lennhoff’s market rent 

projections for the inline space) with 1842 (Kenney’s).) (See also Cert. Admin. R. at 3536-

37 ¶¶ 113-14, 3540-41 ¶¶ 118-19 (the Indiana Board’s comparison of the two).) But even 

in those instances where Kenney’s and Lennhoff’s rental income per square foot 

conclusions were different, the Indiana Board ultimately found Kenney’s more compelling 

because data in “The Dollars and Cents of Shopping Centers,” a national industry 

publication cited by Lennhoff himself, provided more support for Kenney’s estimates than 

Lennhoff’s. (Compare, e.g., Cert. Admin. R. at 821-23 (Lennhoff’s valuation of the 

JCPenney store), 827-31, 1665-66 (Lennhoff’s valuation of the Dick’s Sporting Goods 

store, the movie theater, and the freestanding buildings situated on outparcel lots), with

1802-05, 1842 (Kenney’s valuation of the same property segments), and 3537-39 ¶¶ 115, 

117 (the Indiana Board’s reconciliation of the competing estimates).) Given the totality of 

this evidence, the Court will not disturb the Indiana Board’s reasonable conclusion that 

Kenney’s income estimates did in fact reflect the market.14 

This first reason neatly segues into the second reason why Southlake’s argument 

is unavailing: it is merely an attempt to have the Court reweigh the evidence in its favor. 

More specifically, Southlake argues that the Indiana Board failed to properly apply Indiana 

13 This difference, as the Indiana Board would ultimately observe, demonstrates the seminal issue 

in this case: whether there is intangible business value present in this property’s income that 

must be extracted. (See Cert. Admin. R. at 3495-96 ¶ 2.) (See also Cert. Admin. R. at 4910

(where Southlake acknowledges that extracting intangible value through an anchor inducement 

deduction is “one of the most substantial issues . . . in this case” (emphasis omitted)).)

14 The Court acknowledges Southlake’s repeated assertion that Lennhoff’s and Kenney’s income 

estimates were not “substantially similar” because Lennhoff’s estimates still needed to be 

adjusted to remove value attributable to personal property and intangibles. (See Pet’r Br. at 18-

19; Cert. Admin. R. at 879.) Nonetheless, the propriety of those adjustments is also in question

and will be addressed later in the opinion. 
19

Code § 6-1.1-15-17.2, known as the “Burden-Shifting Statute,” because it had to rely on 

Lennhoff’s evidence to find that the Assessor made a prima facie case. (See, e.g., Pet’r 

Br. at 7-9; Pet’r Reply Br. at 1-4; Oral Arg. Tr. at 7-8.) 

The Burden-Shifting Statute has undergone several iterations since its 2009 

enactment, ultimately requiring an assessing official to bear the burden of proving the 

accuracy of an annual assessment increase in excess of 5%. See IND. CODE § 6-1.1-15-

1(p) (2009) (amended 2011); IND. CODE § 6-1.1-15-17 (2011) (repealed 2012); I.C. § 6-

1.1-15-17.2 (2012) (amended 2014). See also Orange Cnty. Assessor v. Stout, 996 

N.E.2d 871, 873-75 (Ind. Tax Ct. 2013) (discussing the history of the burden-shifting 

statute). While in certain circumstances this statute has changed the presumption of 

correctness that typically adheres to an assessed value, it has not tampered with the 

normal ebb and flow of the evidentiary burden that swings from one party to the other 

upon the production of probative evidence. See I.C. § 6-1.1-15-17.2; Stout, 996 N.E.2d 

at 873 n.3 (explaining that the term “burden of proof” incorporates both the burden of 

persuasion and the burden of production and that while the burden of persuasion never 

shifts between parties during the course of litigation, the burden to produce evidence often 

does). Consequently, when the Assessor presented a USPAP appraisal to substantiate

the increase to the Mall’s assessment, he sufficiently shifted the burden of production to 

Southlake. See, e.g., Kooshtard Prop. VI, LLC v. White River Twp. Assessor, 836 N.E.2d 

501, 506 n.6 (Ind. Tax Ct. 2005) (providing that the presentation of a USPAP appraisal is 

the most effective evidentiary method to either substantiate or refute an 

assessment), review denied. Southlake then satisfied its burden of production by 

responding with its own USPAP appraisal. 
20

At that point, having before it two competing USPAP appraisals completed by 

credentialed appraisers, it was the Indiana Board’s duty to review them, determine the 

weight and credibility of each, and resolve any issues involving conflicting evidence. 

See Madison Cnty. Assessor v. Sedd Realty Co., 125 N.E.3d 676, 680 (Ind. Tax Ct. 2019)

(stating that the Indiana Board “‘determine[s] the relevance and weight to be assigned to 

the evidence’” because it is the trier of fact) (citation omitted); Wigwam Holdings LLC v.

Madison Cnty. Assessor, 115 N.E.3d 531, 537 (Ind. Tax. Ct. 2018) (explaining that the 

Indiana Board exercises it discretion in assigning weight to conflicting evidence). To 

require the Indiana Board to determine weight and credibility subject to the rigid and 

formulaic approach advocated by Southlake (i.e., that it should have examined Kenney’s 

appraisal on a “stand-alone” basis) would actually remove the Indiana Board’s ability to 

resolve any issues arising from conflicting evidence. Consequently, the Indiana Board’s 

approach must be more fluid, allowing for the examination of all the evidence before it to 

accomplish its ultimate purpose of determining the property’s value. See, e.g., Marion

Cnty. Assessor v. Gateway Arthur, Inc., 43 N.E.3d 279, 281-82, 284-85 (Ind. Tax Ct.

2015) (explaining that although there may be flaws in an appraisal, they do not render the 

entire appraisal per se invalid); Marion Cnty. Assessor v. Washington Square Mall, LLC, 

46 N.E.3d 1, 14 (Ind. Tax Ct. 2015) (explaining that as Indiana’s property valuation and 

assessment expert, the Indiana Board must ascertain which parts of an appraisal are 

probative to valuing property properly). 

Southlake has not persuaded the Court that the Indiana Board erred when it 

weighed all the evidence presented to it and ultimately determined which evidence it 

found most probative. See Wigwam, 115 N.E.3d at 537 (explaining that when the Indiana 
21

Board exercises its discretion and weighs evidence, the Court will not then reweigh that 

evidence absent an abuse of discretion); Monroe Cnty. Assessor v. SCP 2002 E19 LLC

6697, 77 N.E.3d 270, 273 (Ind. Tax Ct. 2017) (indicating generally that the Court will not 

reweigh evidence unless the Indiana Board’s decision is clearly against the logic and 

effect of the facts and circumstances before it), review denied. Accordingly, the Court will 

not reverse the final determination on this basis.

2. Non-Taxable Property

This Court has previously explained the principle that Indiana’s property tax system 

taxes the value of real property, not the business value, the investment value, or the value 

of contractual rights that may be associated with that real property. Stinson v. Trimas 

Fasteners, Inc., 923 N.E.2d 496, 501 (Ind. Tax Ct. 2010) (concluding, therefore, that 

“market value-in-use, as determined by objectively verifiable market data, is the value of 

a property for its use, not the value of its use”). See also IND. CODE § 6-1.1-1-15 (2011)

(delineating what constitutes “real property” for purposes of property tax assessment). 

On appeal, Southlake maintains that the final determination is contrary to law because it 

violates this principle by valuing the property without removing a) business income 

generated by or through the Mall’s RMUs, Brand/Media, Central Plant and CAM 

reimbursements, and b) the intangible value arising from the Mall’s start-up costs and 

anchor inducements. (See, e.g., Pet’r Br. at 20-24, 30-37; Oral Arg. Tr. at 41-53.) 

a. Business Income

As earlier indicated, when Kenney made his overall income projection for the Mall, 

he included “specialty leasing” income, i.e., income from RMUs, kiosks, TILs, and 

Brand/Media, as well as revenues generated through its Central Plant and CAM 
22

reimbursements. (See, e.g., Cert. Admin. R. at 1826, 1842, 1845, 1848, 1851.) Kenney 

believed that all of this income was attributable to the Mall’s real property because it was 

generated from the occupancy and use of its retail space. (See, e.g., Cert. Admin. R. at 

1826, 3851-63.) The Indiana Board agreed. (See generally Cert. Admin. R. at 3540-42 

¶¶ 118-22.) On appeal, Southlake argues, however, that the Indiana Board erred 

specifically regarding the income from RMUs, Brand/Media, Central Plant

reimbursements, and CAM reimbursements. (See Pet’r Br. at 20-24; Oral Arg. Tr. at 28.) 

1) Retail Merchandising Units

Determining whether income is attributable to real property can be a matter of 

conflict between appraisers. See THE APPRAISAL OF REAL ESTATE at 478 (acknowledging, 

for instance, that depending on its source, “service-derived income may or may not be 

attributable to the real property”). Consequently, when the Indiana Board must resolve 

conflicting opinions regarding the source of income, its resolution is generally the result 

of how effectively a party has persuaded it that its opinion is more credible and reliable 

than that of the other party. See Trimas Fasteners, 923 N.E.2d at 502. 

In this case, Kenney and Lennhoff provided the Indiana Board with conflicting 

opinions regarding the source of the RMU income. While Kenney admitted that the RMUs 

themselves were personal property, he testified that the source of their income was from 

the use of the space in the Mall on which they were located. (See Cert. Admin. R. at 

3852-53, 3861.) In contrast, Lennhoff believed that the source of that income was 

attributable to the payment of a “license” and therefore constituted business income as 

opposed to real property income. (See Cert. Admin. R. at 831, 4965-67.) 

The Indiana Board weighed the competing opinions and concluded that Kenney’s 
23

was more persuasive. (See Cert. Admin. R. at 3541-42 ¶ 121.) As support for its 

conclusion, the Indiana Board noted that while the RMU income may not have been listed

on the Mall’s rent rolls, the Mall reported the income on its income statements as “leasing”

revenue. (See Cert. Admin. R. at 3540-41 ¶ 118.) (See also Cert. Admin. R. at 2388-

2435, 4440-42.) Moreover, there is evidence in the administrative record that indicates 

that a license is different than a lease simply because a “license is a temporary, a more

short-term [contract], and it’s revocable[.]” (See Cert. Admin. R. at 4440-42.) From this

evidence, the Indiana Board inferred that the income from RMUs was really no different 

than the rental income received from the Mall’s inline tenants because both were simply 

leasing space, the RMU tenants in the Mall’s concourse and the inline tenants in the inline 

space. (See Cert. Admin. R. at 3540-42 ¶¶ 118, 121.) Because this evidence reasonably 

supports the Indiana Board’s conclusion that RMU income was attributable to the Mall’s 

real property, the Court will not disturb that conclusion.

15 

2) Brand/Media

Southlake also complains on appeal that because Kenney was unable to provide 

definitive testimony regarding the nature of “Brand/Media” income, the Indiana Board 

could not have made any determination that it in fact constituted real property income. 

(See Pet’r Br. at 20-22.) In other words, Southlake argues that the Indiana Board should 

have found that the Assessor failed to present substantial and reliable evidence that this 

15 The Indiana Board noted, however, that the actual value of the RMUs themselves had to be 

extracted from the overall valuation of the Mall. (See Cert. Admin. R. at 3541-42 ¶ 121.) To that 

end, it determined that Lennhoff’s method of extracting both a return on and of the RMUs from 

the Mall’s NOI was more appropriate than Kenney’s deduction of the RMUs’ depreciated value 

(indicated on the Mall’s personal property tax returns) after capitalizing the Mall’s NOI. (See Cert. 

Admin. R. at 3541-42 ¶ 121.) (Compare also Cert. Admin. R. at 1826, 1842-43, 2436-54, 3862 

(Kenney’s method) with 879, 881-82, 4898-4904 (Lennhoff’s method).)
24

income was attributable to real property. (See Pet’r Br. at 20-22.) 

In its final determination, the Indiana Board concluded that “Brand/Media” income 

was attributable to the real property because it was income received for the use of Mall 

space for advertising purposes. (See Cert. Admin. R. at 3523 ¶ 79 n.19.) The testimony 

of the Mall’s general manager during the administrative hearing reasonably supports that 

conclusion. (See, e.g., Cert. Admin. R. at 4442 (explaining that “Brand/Media” entry on 

the Mall’s income statements reflected income received for the “hanging [of] banners . . . 

[or placing] stickers on the doors at entranceways advertising a movie or a grand opening 

of a store”). As a result, the Court will not disturb this finding either.16

3) Central Plant Reimbursements

In its final determination, the Indiana Board found that the Mall “charged [tenants] 

a flat 15% fee on both electricity and water for each year under appeal” and to the extent 

that fee exceeded actual cost, it was a profit to the Mall that should be extracted from the 

valuation analysis as business income.17 (Cert. Admin. R. at 3547 ¶ 134.) Neither 

Southlake nor the Assessor contest this decision. (See Pet’r Br. at 22; Br. Amicus Curiae 

16 Southlake has asserted that if the income from the RMUs and Brand/Media is considered to be 

real property income, the Indiana Board erred in adopting Kenney’s estimates because he “simply 

transferred [them as ] line-items from [Southlake’s] financials” without any corroborating support 

that they reflected the “market.” (Pet’r Br. at 20-21 (citing Cert. Admin. R. at 3844, 4158-63).) But

see supra pp. 15-18 (explaining that Kenney’s income estimates reflected the market).

17 “Some regional shopping centers purchase electricity on a wholesale basis and resell it to the 

tenants on a retail basis, keeping the difference as a profit. If this is the case, [an] appraiser 

should consider whether the profit component represents income to the business or income to 

the real property.” THE APPRAISAL OF REAL ESTATE at 482.
25

(“Resp’t Br.”) at 19-31.)18

Nonetheless, Southlake maintains on appeal that the Indiana Board failed to apply 

its determination to the profits generated through the Mall’s Central Plant. (Pet’r Br. at 

22.) (See also Cert. Admin. R. at 3859-60 (indicating that “Central Plant” refers generally 

to the Mall’s heating and cooling systems).) Southlake explains that 

[t]he Board never explains why it is appropriate to remove profits from 

electricity and water utilities, but not other utilities like Central Plant. 

[In fact, t]he Board simply ignores Central Plant in its analysis. There 

is no legitimate basis for excluding [] profits from electricity and water, 

while failing to exclude profits . . . attributable to Central Plant.

(Pet’r Br. at 22 (citations omitted).) 

The administrative record in this case reveals that the Mall has been reimbursed

more than 100% for its Central Plant expenses. (See, e.g., Cert. Admin. R. at 1829

(Kenney’s acknowledgment that the Central Plant generated a profit), 2416, 2426, 2435

(Southlake’s income statements reflecting Central Plant expense recovery ratios).) Given 

that there is no discussion whatsoever in the final determination regarding the Central 

Plant or its profits, the Court remands this issue to the Indiana Board for its consideration.

4) Common Area Maintenance Reimbursements

Kenney’s income analysis also indicated that the Mall’s CAM revenues exceeded 

its actual cost. (See, e.g., Cert. Admin. R. at 1842.) Southlake argues that as a result, 

Kenney – and thus the Indiana Board – improperly included the CAM profits in the Mall’s 

NOI because it was business income. (See Pet’r Br. at 22-23.)

18 The Lake County Board of Commissioners initially filed, but subsequently withdrew, its 

appearance in this matter as amicus curiae. Thereafter, the brief it filed was adopted by the Court 

as the brief for the Lake County Assessor. Southlake Indiana, LLC v. Lake Cnty. Assessor, Case 

No. 18T-TA-00030 (Ind. Tax Ct. July 23, 2019) (order adopting amicus curiae brief as that of the 

Assessor).
26

The Indiana Board’s analysis with respect to CAM profits is as follows:

CAM charges are common in commercial leases and often include 

administrative charges that are above the actual expenses. The 

Board does not find that an overall CAM profit center deduction should 

be made, and in any event, there is no expert testimony as to what a 

market CAM profit would be.

(Cert. Admin. R. at 3547 ¶ 133 (citation omitted).) For purposes of this Court’s review, 

however, this analysis is insufficient. Indeed, it provides no reasoning, or refers to any 

evidence, that tells the Court why a CAM profit center deduction is not appropriate. (But

see Cert. Admin. R. at 4087 (where Kenney himself acknowledges that any mark-up on 

CAM expense reimbursements should be excluded from income as profit).) Moreover, 

the Indiana Board’s indication that it needed further market data before it could address 

the issue is inconsistent with how it extracted utility profits from NOI when addressing the 

corresponding Central Plant issue (i.e., reimbursement exceeds cost). Accordingly, the 

Court remands the issue to the Indiana Board for its consideration. 

b. Intangible Value

Determining whether a property’s income incorporates intangible value and, if so, 

how to best quantify that value, “has been highly controversial among real property 

appraisers, particularly over the past 30 years.”19 See THE APPRAISAL OF REAL ESTATE at 

19 For instance, in as early as 1997, the Iowa Supreme Court rejected the business enterprise 

valuation theory (or the TAB value method as it is referred to in this case) as a generally 

recognized appraisal method. See Merle Hay Mall v. City of Des Moines Bd. of Rev., 564 N.W.2d 

419, 424 (Iowa 1997). The Court discounted the method because it was not only used almost 

exclusively in tax assessment cases (as opposed to, for example, mall appraisals for the purpose 

of obtaining mortgages), but also because it “was designed in the late 1980s by a group of 

shopping mall owners in cooperation with real estate appraisers and real estate professors in a 

group called ‘SCAN’ (shopping center assessment network)” for the purpose of counteracting the 

“dramatic rise in the sale prices of shopping malls.” Id.
27

703-15. Accordingly, “[i]t is important for all involved in this form of valuation work to 

understand the history and intensity of the debate and to understand the various 

alternative methodologies advocated by real property appraisers regarding how 

intangible assets should be accounted for in the valuation process.” Id. at 710-11

(discussing four of those methodologies, two that are advanced in this case). In any 

event, all the intangible valuation methodologies “have both theoretical and empirical 

aspects[:] . . . [t]hey are made for stated reasons, and they rest on particular data. In 

order for any [one of those methodologies] to have persuasive force in a factual finding 

of value, it should rest on cogent reasoning and be founded on reliable data.” 

Chesapeake Hotel LP v. Saddle Brook Twp., 22 N.J. Tax 525, 532 (N.J. Tax Ct. 2005).

Kenney believed that shopping malls rarely present intangible value. (See Cert. 

Admin. R. at 3775-82.) (See also Cert. Admin. R. at 2583 (explaining in part that, unlike 

hotel properties where the value of the real property is often based on the revenue of the 

business occupying the property, the value of retail properties is measured by the rent for 

the real property).) He asserted, however, that expensing a management fee as he did 

would adequately account for and remove any intangible value that may be present in the 

Mall’s income. Kenney believed that his view was consistent with the Rushmore Method, 

also known as the Management Fee Method, which posits that 
28

any intangible value arising from a [going concern] can be measured 

by capitalizing the management fee necessary to compensate a third 

party to run the business. . . . If the goal is to exclude intangible value 

from an estimate of real property value, the management fee 

approach can be applied by including a [going concern] management 

fee as an operating expense. . . . Theoretically, under this method,

any value arising from the management of the business has been 

excluded.20

(Cert. Admin. R. at 2542, 2553-56 (quoting INT’L ASS’N ASSESSING OFF. SPECIAL COMM. ON 

INTANGIBLES, UNDERSTANDING INTANGIBLE ASSETS AND REAL ESTATE: A GUIDE FOR 

PROPERTY VALUATION PROFESSIONALS at 12-13, 2006), 3781-83.) See also THE APPRAISAL 

OF REAL ESTATE at 712. 

Lennhoff, on the other hand, asserted that a management fee expense would not 

remove all intangible value present because a “management fee is an ongoing operating 

expense to keep the property operational, but the start-up cost[s and anchor inducements 

are] the initial investment to get it up [and running]” and, for an older mall, additional 

anchor inducements may be necessary to keep it running. (Cert. Admin. R. at 839, 841, 

4909-10, 4912.) Consequently, Lennhoff asserted that additional deductions beyond a 

management fee expense must be made to remove the intangible value created through 

20 Southlake provided testimony regarding “the ongoing debate” whether the Rushmore Method, 

which was originally developed within the context of hotel valuations, applies to other types of 

properties. (See Cert. Admin. R. at 4574, 4577, 4803-04.) Contrary to Southlake’s belief, 

juxtaposing opposing arguments is simply not enough to demonstrate that the Rushmore Method

cannot be used with respect to retail property valuations. See, e.g., THE APPRAISAL OF REAL 

ESTATE at 712 (recognizing that appraisers do use the management fee method to quantify the 

value of intangible assets inherent in non-hotel property types that incur business management 

fees). 

In addition, Southlake argues that both Benton and Lennhoff alleged at the administrative 

hearing that Kenney’s Rushmore Method was inconsistent with the Rushmore Method. (See Pet’r 

Br. at 37.) Their allegations, (see Cert. Admin. R. at 4578, 4803), however, did nothing to 

demonstrate to the Indiana Board how Kenney’s Rushmore Method was inconsistent. See Louis

D. Realty Corp. v. Indiana State Bd. of Tax Comm’rs, 743 N.E.2d 379, 384 (Ind. Tax Ct. 2001)

(stating that “[a]llegations, unsupported by factual evidence, remain mere allegations”) (citation

omitted), review denied. 
29

those start-up costs and anchor inducements. (See generally Cert. Admin. R. at 839-42.)

To that end, Lennhoff estimated the Mall’s start-up costs and anchor inducements 

“[b]ased on [those incurred at] several other malls [that he had] appraised,” amortized 

them over a 15 year period (which he believed was the typical term of an anchor 

agreement) and solved for an annual deduction. (See Cert. Admin. R. at 839-42.)

The Indiana Board rejected both of Lennhoff’s deductions. (See generally Cert. 

Admin. R. at 3548-51 ¶¶ 137-44.) Southlake argues on appeal that in rejecting those 

deductions, the Indiana Board committed reversible error because Lennhoff was the only 

appraiser who took the steps to remove the income created by those specific intangible 

assets and the Assessor did not provide any “contradictory evidence.” (See Pet’r Br. at 

31, 35-36; Pet’r Reply Br. at 17.) Southlake, however, misapprehends why the Indiana 

Board rejected Lennhoff’s deductions: it did not find Lennhoff’s theories persuasive in the 

first place.

1) Start-Up Cost Deductions

During the Indiana Board hearing, Lennhoff explained that the buyer of a vacant 

mall property would have to incur start-up costs to get it up to a stabilized operational 

level; conversely, if the buyer was looking at an operating mall, those costs have already 

been incurred. (See Cert. Admin. R. at 4905-07.) Lennhoff theorized that the buyer in 

the latter example will ultimately pay a premium for the property that is already operating, 

explaining that the current owner expects a return on and of his initial outlay, and the 

prospective buyer does not have to incur those expenses himself. (See Cert. Admin. R. 

at 839-40, 1181, 1195.) That “premium,” he concluded, represents intangible value that 

must be deducted from the going concern value of the property. In its final determination, 
30

however, the Indiana Board found that the methodology Lennhoff used to calculate the 

amount of his deduction failed to provide “logical or even cogent” support for his 

deduction. (See Cert. Admin. R. at 3548 ¶ 137.) 

As the Indiana Board explained, Lennhoff relied on the cost approach to calculate 

the amount of his deduction. First, he looked at start-up costs for other mall properties 

that he had appraised, determining they reflected approximately 2% of their overall 

valuations under the cost approach; he concluded to an equivalent deduction for the Mall 

from a “rough,” “loosey-goosey” cost approach calculation. (See generally Cert. Admin. 

R. at 839-40, 4905-10.) The Indiana Board noted, however, that Lennhoff had also 

testified that the cost approach had no applicability in valuing the Mall because “‘no buyer 

would care what it costs to build this thing.’” (Cert. Admin. R. at 3548 ¶ 137.) (See also

Cert. Admin. R. at 4842-43.) For the Indiana Board, this contradiction weakened the 

credibility of Lennhoff’s position, raising the question that if market participants do not 

care about the costs incurred to build the property, why would they care about the costs 

that were incurred to open the Mall? (See Cert. Admin. R. at 3548 ¶ 137.) 

To the extent Lennhoff did not clarify that disconnect for the Indiana Board, he was 

unsuccessful in convincing it of the soundness of his theory for the need to remove startup costs. See French Lick Twp. Tr. Assessor v. Kimball Int’l, Inc., 865 N.E.2d 732, 739 

(Ind. Tax Ct. 2007) (indicating that a party must make the Indiana Board, as the finder of 

fact, understand its evidence in order for the evidence to be considered probative; “in 

other words, the [party] must make its evidence work for it”). The Indiana Board’s 
31

conclusion that it was unnecessary to deduct start-up costs was therefore reasonable, 

particularly in light of the fact that the Mall opened in 1974.21

On appeal, Southlake has done little more than restate Lennhoff’s position 

presumably with the hope that the Court will come to a different conclusion. (See, e.g., 

Pet’r Br. at 31-35.) The Court declines Southlake’s invitation and affirms the Indiana 

Board’s final determination on this issue. 

2) Anchor Inducement Deductions

Lennhoff also explained during the Indiana Board hearing that when a mall 

property is in its initial stages of development, the owner must induce potential anchor 

tenants to locate there. (Cert. Admin. R. at 4910-12.) Lennhoff stated in his appraisal 

report that a “mall owner needs the anchors in order to attract the mall business, which 

results in [inline] store rents well above what would otherwise be achievable without the 

anchors.” (Cert. Admin. R. at 840.) (See also Cert. Admin. R. at 4711-17 (Dr. Fisher’s 

testimony that the Mall’s contracts with the anchors enabled it to develop an inline tenant 

roster at certain “rent-points”).) Those inducements, typically in the form of land gifts, 

nominal-rent leases, or construction allowances, are embodied in a “favorable” 

contract/operating agreement. (Cert. Admin. R. at 840, 4912-13.) Lennhoff theorized 

that because the Mall’s favorable contract “put the anchors in there” at its expense to 

develop a stream of inline revenue that would provide it with both a return on and of its 

investment, the contract represented an intangible asset that should be extracted from 

21 Lennhoff explains that start-up costs “include the initial marketing and grand opening event, or 

for older malls, the marketing program each time the property is repositioned.” (Cert. Admin. R. 

at 839.) While Lennhoff’s appraisal states that the Mall was renovated in 2006, (Cert. Admin. R. 

at 784), it is not readily apparent to the Court whether a “repositioning” is different than a 

“renovation.”
32

the value of the Mall as a going concern. (See Cert. Admin. R. at 4912-16.) 

The Indiana Board concluded, however, that there were several flaws with 

Lennhoff’s anchor inducement deduction theory and method of quantification that 

undermined its credibility. First, the Indiana Board explained, “[r]ent from real property, 

and by extension the value associated with that income stream, is a real property right 

and benefit.” (Cert. Admin. R. at 3532 ¶ 105.) See also, e.g., THE APPRAISAL OF REAL 

ESTATE at 4-5 (explaining that “[r]eal property includes the interests, benefits, and rights 

inherent in the ownership of physical real estate” and one of the rights of a property owner 

is to lease his property). Accordingly, the Indiana Board concluded that the Mall’s ability 

to collect rental income from the inline tenants as a result of the anchor inducements was 

not attributable to an intangible asset, but was attributable to the real property itself. (See

Cert. Admin. R. at 3549 ¶ 140.) The Court finds this is a reasonable conclusion.

Second, the Indiana Board found that Lennhoff’s claim that the anchor inducement 

expense needed to be deducted from the Mall’s income ignored that the anchors’ reduced 

rents were likely accounted for by the higher inline store rents. (See Cert. Admin. R. at 

3549-50 ¶ 141 (stating that “[t]he [M]all is simply trading its lost (market) rent from the 

anchors for higher rent from the inline stores”).) As a result, the Indiana Board implied

that Lennhoff’s deduction for a return on and of favorable contracts amounted to a 

“double-dip.” (See Cert. Admin. R. at 3549-50 ¶ 141.) The Court finds this too was a 

reasonable conclusion. See, e.g., THE APPRAISAL OF REAL ESTATE at 714-15 (noting that 

within the appraisal industry criticism has been “leveled at the deductions for a return on 

the various components of the going concern[ because they] create an opportunity for 

double-counting”). See also RRI Acquisition Co. v. Supervisor of Assessments of Howard 
33

Cnty., No. 03-RP-HO-0055, 2006 WL 925212 at *5 (Md. Tax Feb. 10, 2006) (faulting 

Lennhoff’s similar adjustments in the context of a hotel valuation, stating “the real estate 

market simply does not understand or address intangibles in the way [] Lennhoff 

suggests. To accept [his] approach would be to in effect turn expenses into intangible 

assets for the purpose of deducting value from the return of value on real property”).

Finally, the Indiana Board explained that in quantifying the value to be accorded to 

the Mall’s favorable contracts, Lennhoff again looked at “other malls [he had] appraised” 

to estimate what a prospective buyer would pay to induce anchors to locate at the 

property, and then amortized those amounts over a period of 15 years to arrive at an 

annual deduction. (See Cert. Admin. R. at 3551 ¶ 143 (referring to Cert. Admin. R. at 

840-42).) But in examining his data, the Indiana Board noted the huge variances in what 

he reported a mall might pay to induce its anchors. (Compare Cert. Admin. R. at 841 with

3551 ¶ 143 (demonstrating that four different malls across the country paid anywhere 

between $1 million and $28 million in inducements to Macy’s).) The Indiana Board 

concluded that because Lennhoff provided no analysis or explanation regarding 1) why 

there were such large variances, 2) how much of an impact on inline tenants was 

expected from those anchor inducements, and 3) what inducements were even at issue 

in this case, he failed to persuade it that his quantification was accurate. (See Cert. 

Admin. R. at 3550 ¶¶ 142-43.) Based on this rationale, the Court cannot say that the 

Indiana Board erred in this decision.

Here, the Indiana Board took a position that was supported by the evidence in the 

administrative record, but contradicted Lennhoff’s opinion. Generally speaking, 

[t]here is . . . no rule of law which requires controlling effect or 

influence to be given to, and the [trier of fact is] not required to accept 
34

in the place of [its] own judgment[], the opinion testimony 

of expert witnesses, merely because of the special knowledge of the 

witnesses concerning the matters upon which they give their 

testimony. Expert opinions are not ordinarily conclusive in the sense 

that they must be accepted as true on the subject of their testimony, 

but are generally regarded as purely advisory in character; the [trier of 

fact] may place whatever weight [it] choose[s] upon such testimony 

and may reject it, if [it] find[s] that it is inconsistent with the facts in the 

case or otherwise unreasonable. The weight given to expert testimony 

is for the trier of the facts, who is not required to give 

it controlling influence. 

Ferdinand Furniture Co. v. Anderson, 399 N.E.2d 799, 807 (Ind. Ct. App. 1980) (internal 

quotation marks and citations omitted). The Indiana Board was not bound to agree with 

Lennhoff’s theoretical expert opinion regarding the presence and quantification of 

intangible value in the Mall. Accordingly, there was nothing impermissible about the 

Indiana Board’s failure to accept Lennhoff's opinion regarding deductions for intangible

assets. 

3. Disparate Assessments

Finally, Southlake maintains that the Indiana Board abused its discretion by failing 

to meaningfully address the discrepancy between the Mall’s assessment and the 

assessments of the other malls included in Benton’s comparable assessment analysis. 

(See Pet’r Br. at 44; Oral Arg. Tr. at 6, 41, 53.) More specifically, it asserts that because 

the Indiana Board “heavily criticize[d]” both Kenney’s and Lennhoff’s appraisals, Benton’s 

comparable assessment analysis “should [have] be[en] given more weight, at the very 

least[.]” (Oral Arg. Tr. at 54-55.) The Court disagrees.

As the trier of fact, the Indiana Board is afforded great discretion in determining the

relevance and weight of the evidence before it. Sedd Realty, 125 N.E.3d at 680; Wigwam, 

115 N.E.3d at 537. The Indiana Board explained that it did not reject Benton’s 
35

comparable assessment analysis outright; rather, it gave it little weight in comparison to 

the other probative evidence before it – two USPAP appraisals – that it concluded 

provided a better measure for determining the Mall’s market value-in-use. The Court 

finds that this conclusion was neither against the logic of the facts and circumstances 

before the Indiana Board nor was it contrary to law. See Kooshtard Prop. VI, 836 N.E.2d 

at 506 n.6 (stating that a USPAP appraisal is the most effective evidentiary method to 

demonstrate a property’s value). Moreover, while Benton’s comparable assessment 

analysis may have indicated a “discrepancy” within mall assessments throughout Indiana, 

it is not wholly dissimilar to Southlake’s other evidence. That evidence provides 1) that 

the cost approach – which was presumably used to determine the assessed valuations 

of the malls reported in Benton’s comparable assessment analysis – was not an 

appropriate approach to use in valuing the Mall and 2) that Lennhoff’s appraisal values

for the Mall were still substantially higher than the assessed values of the other malls 

(except for one located in Fort Wayne) – including the Fashion Mall in Indianapolis. (See

generally Cert. Admin. R. at 848, 889, 934, 979, 1652, 1654, 1656, 1658, 4842-43.) 

Consequently, in light of all the evidence, the Indiana Board did not act improperly when 

it chose to give Benton’s comparable assessment analysis less weight than Southlake 

would have liked.

CONCLUSION

When there are competing opinions about how a property should be valued, the 

Indiana Board must determine which opinion is more probative. On appeal, this 

Court will not substitute its judgment for that of the Indiana Board simply because it or
36

one of the parties might disagree with the decision. See Grider v. Dep’t of Local Gov’t

Fin., 799 N.E.2d 1239, 1243 (Ind. Tax Ct. 2003).

In its appeal, Southlake has largely asked the Court to reweigh the evidence, to 

find Lennhoff’s point of view more credible than Kenney’s, and to reduce its assessment 

accordingly. But Southlake’s disagreement with how the Indiana Board weighed the 

evidence does not demonstrate that the Indiana Board’s final determination is 

unsupported by the evidence. 

For the above stated reasons, the Indiana Board’s final determination is 

AFFIRMED in part and REMANDED in part. On remand, the Indiana Board is instructed 

to decide the issues regarding the Central Plant reimbursements and CAM 

reimbursements and adjust its final value conclusions as necessary.