IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Missouri River Corp. :

:

v. :

:

Erie County Board of Assessment :

Appeals, Erie County, PA :

:

Interested Parties: :

City of Erie School District, City of :

Erie and Erie County :

:

Parcel No.: 17-040-037.0-210.00 :

Property Address: 1012 W. Bayfront :

Pkwy., City of Erie, Erie County :

:

Appeal of: Missouri River Corp. :

(Sunrise Senior Living, Inc., tenant and :

agent) and NHI-REIT of Bickford, :

(Bickford Master Buckeye, LLC, :

tenant and agent), successor-in-interest :

to Missouri River Corporation : No. 639 C.D. 2019 

Missouri River Corp. :

:

v. :

:

Erie County Board of Assessment :

Appeals, Erie County, PA :

:

City of Erie School District, City of :

Erie and Erie County :

:

Parcel No.: 17-040-037.0-210.00 :

:

Appeal of: Missouri River Corporation : No. 640 C.D. 2019 

and NHI-REIT of Bickford : Argued: February 11, 2020

BEFORE: HONORABLE ANNE E. COVEY, Judge

HONORABLE CHRISTINE FIZZANO CANNON, Judge

HONORABLE ELLEN CEISLER, Judge

OPINION NOT REPORTED
2

MEMORANDUM OPINION BY 

JUDGE COVEY FILED: March 2, 2020

Missouri River Corp. (Sunrise Senior Living, Inc., tenant and agent) 

(Missouri River) and NHI-REIT of Bickford (Bickford Master Buckeye, LLC, tenant 

and agent) (Bickford Master), successor-in-interest to Missouri River Corporation

(Current Owner) (collectively, Taxpayers) appeal from the Erie County (County) 

Common Pleas Court’s (trial court) April 29, 2019 order denying Taxpayers’ appeal

and entering judgment in the City of Erie School District’s (District) favor. There are 

two issues before this Court: (1) whether Taxpayers waived all issues on appeal by 

filing an insufficiently detailed statement of errors complained of on appeal; and (2) 

whether the trial court committed an error of law by including intangible assets and 

other personal property in the fair market value of the Taxpayers’ property. After 

review, we affirm.

The instant matter arises from a tax assessment appeal for property 

located at 1012 West Bayfront Parkway, Erie, Pennsylvania (Property). The Property 

is the situs of a 69-room personal care facility (Facility) that Karrington Operating 

Company, Inc. (Original Lessee) constructed between 1996 and 1998. In 1998, 

Original Lessee negotiated a sale leaseback to Missouri River (1998 Sale Leaseback), 

a real estate investment trust (REIT),

1

and entered into a long-term lease (Original 

Lease) as lessee with Missouri River as lessor that ran through 2018. 

The Original Lease defined “Leased Property” to include “personal 

tangible and intangible property . . . acquired by [Missouri River] pursuant to the 

Purchase Agreement [(Purchase Agreement)].”

2

 Reproduced Record (R.R.) at 567a. 

 

1

See Reproduced Record (R.R.) at 252a.

2 The Original Lease defined the “Purchase Agreement” as “[t]hat certain Agreement of 

Purchase and Sale and Joint Escrow Instructions, dated as of May 12, 1998 . . . providing for 

[Missouri River’s] acquisition of the Leased Property . . . .” R.R. at 573a.
3

In addition, the Original Lease described “Facility” as “[t]hat certain assisted living 

facility which is part of the Leased Property . . . inclusive of the Land, Leased 

Improvements, Fixtures, Personal Property and Intangible Property pertaining to such 

Facility.” R.R. at 570a. Section 6.3 of the Original Lease provided: “Lessee may . . . 

at its expense, install, assemble or place on any parcels of the Land or in any of the 

Leased Improvements, any items of Lessee’s Personal Property,[3] and Lessee 

may, subject to the conditions set forth below, remove the same upon the 

expiration or any prior termination of the Term.” R.R. at 579a (emphasis added). 

Additionally, Section 9.1.4 of the Original Lease declared:

Unless Lessor shall convey any of the Leased Property to

Lessee pursuant to the provisions of this Lease, and subject 

to the provisions of Paragraph 6.3 regarding Lessee’s 

Personal Property, upon the expiration or prior termination 

of the [t]erm, all the Leased [P]roperty, including all 

[f]ixtures and Personal Property located thereon, and 

any [a]lterations, repairs, restorations, additions or 

improvements otherwise made by or for Lessee, shall be 

Lessor’s property and shall be vacated and surrendered 

to Lessor . . . . 

R.R. at 584a (bold and underline emphasis added). Further, the Original Lease stated 

that Missouri River would, at the term’s end or at the earlier termination of the 

Original Lease, own patient and other records. See R.R. at 584a-585a. The Original 

 

3 The Original Lease defines Lessee’s Personal Property as:

All machinery, equipment, furniture, furnishings, moveable walls or 

partitions, computers, or trade fixtures or other personal property, and 

consumable inventory and supplies, owned by Lessee and used or 

useful in Lessee’s business on the Leased Property and located 

thereon, including without limitation, all items of furniture, 

furnishings, equipment, supplies and inventory, except items (i) 

included within the definition of Fixtures; and (ii) personal property 

described in Paragraph 1.1(v) above [(pertaining to personal property 

acquired by Lessor pursuant to the Purchase Agreement)].

R.R. at 572a.
4

Lease required that, at Missouri River’s request upon the Original Lease’s 

termination or expiration, Original Lessee was to use its best efforts to transfer to 

Missouri River or its nominee, all licenses, operating permits, governmental 

authorizations and all contracts necessary for the Facility’s operation. See R.R. at 

611a.

Original Lessee operated the Facility and made yearly lease payments to 

Missouri River. As of January 31, 2008, the Property’s real estate was assessed for 

$7,400,000. On July 31, 2008, Missouri River filed an appeal with the Erie County 

Board of Property Assessment Appeals (Board) challenging the $7,400,000

assessment. The Board sustained the January 31, 2008 assessment and Taxpayers 

appealed to the trial court. The District intervened. In 2013, while the appeal was 

pending, the County conducted a county-wide reassessment which increased the 

Property’s assessment to $8,062,400. Taxpayers filed a protective appeal and the two 

matters were consolidated for trial. 

On April 30, 2018, the Original Lease between Missouri River and 

Original Lessee expired. That same day, Missouri River sold the Facility to Current 

Owner as part of a portfolio of five assisted living properties.4 The Facility’s 

allocated sale price was $15,768,000. Current Owner leased the Property through 

 

4 Four of the properties in the portfolio were located in Ohio. According to the Real 

Property Conveyance Fee Statements of Value and Receipt, one Ohio property was valued at 

$18,090,000. “Of that, [$]280,000 was paid for items other than real . . . property.” R.R. at 79a; see 

also R.R. at 862a. Another Ohio property was valued at $14,242,500. Of that amount, “the portion 

for items other than real property was [$]190,000.” R.R. at 80a; see also R.R. at 863a. A third 

Ohio property was purchased for $12,075,750, which included $200,000 for items other than real 

property. See R.R. at 80a, 864a. The fourth Ohio property was purchased for $7,323,750 which 

included $170,000 for items other than real property. See R.R. at 80a, 865a. Notably, no similar 

allocation representing the portion of the purchase price for items other than real property was made 

for the Property. See R.R. at 867a.
5

2033 (2018 Lease) to Bickford Master, which subleased the Property to Bickford of 

Erie, LLC (Current Lessee), Bickford Master’s wholly owned subsidiary.5

The 2018 Lease described the leased Property to include “all of the 

[Current Owner’s] right, title and interest in and to all the Land, the Facilities, the 

[furniture, fixtures and equipment (]FF&E[)], [and] all other personal property” 

owned or thereafter acquired by Current Owner and located at the Facility. R.R. at 

711a. Further, the 2018 Lease defined “Facilities” as “the facilities and all land, 

improvements (whether now existing or made during the term of the Lease), FF&E, 

other personal property and intangibles, owned by [Current Owner] as set forth on 

Schedule 1 and located at and used in the operation of [the] Facility.” R.R. at 704a. 

The 2018 Lease also described “Personal Property” to include inventory and records. 

It defined “Inventory” as “the operating supply of consumable supplies, including 

food, drugs, medicines, materials and other supplies used in connection with the 

operation of [the] Facility.” R.R. at 707a. Records are described in the 2018 Lease 

as “electronic, digital or written files and records . . . .” R.R. at 709a. 

On December 19 and 20, 2018, the trial court held a hearing on 

Taxpayers’ appeal. At the hearing, the Board offered County Assessment Director 

Scott Maas’ (Maas) testimony. Maas explained that, according to the County 

Assessment Office, the Property’s assessed value between 2009 and 2012 was 

$7,400,000. After the county-wide reassessment in 2013, the Property’s assessed 

 

5 According to Current Lessee’s co-president, Michael Eby (Eby), the transfer to Current 

Lessee included more than the real estate, such as “the rents -- the rents and the healthcare 

component that the residents pay, and then also the staff costs, food costs that we use. So the net

operating income of the business.” R.R. at 72a. Eby elaborated: “[t]he contracts with the residents 

to provide the services that the seller -- that . . . the previous operator, was currently providing. 

There are the furniture and the fixtures [that] were transferred over. The employees, we assumed 

those. We took all of them -- hired all of them, so.” R.R. at 75a-76a. Eby also described that 

patient records and some food inventory was transferred.
6

value was $8,062,400. Current Lessee’s co-president Michael Eby (Eby) appeared 

for Taxpayers.

Both Taxpayers and the District presented the testimony of certified real 

estate appraisers, who calculated the Property’s fair market value using the cost, 

comparable sales and income approaches. Taxpayers’ valuation expert Mark R. 

Shonberg (Shonberg) valued the Property between $6,190,000 and $6,900,000 for tax 

years 2009 through 2019. Although Shonberg considered all three valuation 

approaches and developed the cost approach and income approach, he reached his 

ultimate valuation opinion based on the cost approach. Shonberg related that, in 

preparing his income approach, he did not use the Property’s yearly lease payments 

because the leases included intangible assets, personal property and business value. 

Shonberg explained that “[t]he primary challenge [in appraising a personal care 

home] is making sure you allocate correctly between real estate and non-real estate

components” because “the real estate and non-real estate aspects are really 

intertwined.” R.R. at 97a. Shonberg expounded:

So personal care homes, they are – they’re residences, but 

they are residences that provide more than shelter. They 

provide meals. They provide varying levels of care. 

So, for instance, . . . [there’s] a trained staff[] in place. 

There’s care and social components to it. There’s the 

meals, wellness visits. There’s housekeeping, personal 

laundry, medication coordination. There’s a number of 

things that are in addition to just the shelter.

R.R. at 97a-98a.

6

 

 

6 Further, Shonberg opined that a sale leaseback is not an accurate indicator of value. 

Specifically, he testified:

[S]ale leasebacks aren’t wonderful to use because they don’t have to 

be related to the market. They’re simply a mutually beneficial 

mechanism.
7

Shonberg justified his disregard of the leases based, in part, on the 

inclusion of FF&E in the Original Lease. However, Shonberg admitted that he did 

not know what specific personal property was included therein. He also 

acknowledged that none of the FF&E present at the Facility in 1998 remained in 

2018, because Original Lessee gradually replaced it through the years, and the FF&E 

value that Original Lessee left at the Property when it ceased operating in 2018 was 

“relatively small.” R.R. at 199a. Ultimately, Shonberg conceded that the FF&E 

 

So if, for instance, [Original Lessee], [its] intent, and this probably 

was [its] intent, was to raise capital to finance [its] expansion, they 

wanted the rent to be as high as possible so [it] could raise as much 

capital as possible so [it] could maximize [its] expansion potential.

So what we see here is that there’s a lease in place because [it]

want[s] to maximize [its] capital that is above market and we can see 

it’s above market because through the 10 years that we know about, 

never once did [its] actual operational revenue to the business even 

cover the lease.

[Trial Court]: If the lease is above market, help me, how does that 

help [Original Lessee]?

[Shonberg]: That helps [Original Lessee] because [it is] getting a big 

chunk of money up front. So that lease --

[Trial Court]: Doesn’t the lease payment go to Missouri River?

[Shonberg]: The lease payment goes to Missouri River, but because of 

the sale leaseback [Original Lessee] got paid a big chunk of money up 

front.

. . . . 

[Shonberg]: And the more [it] inflate[s] [the] lease payment, the 

bigger [it] get[s] paid up front.

[Trial Court]: And [its] lease payment is obviously a deduction for tax 

purposes.

[Shonberg]: Correct. So --

[Trial Court]: So [it] shift[s] revenue that might have been operating 

income to the purchase of the dwelling or of the property.

R.R. at 177a-179a.
8

value “is too small of a number to have a material impact,” R.R. at 200a, and “the 

physical, tangible personal property is not a big deal here. What is a more significant 

component is the intangible personal property.” R.R. at 201a.

Shonberg described the “intangible component” to be “things like the inplace staff. It might be . . . the residents that are in place. The medical record cards 

that are associated with those residents. Things of that nature.” R.R. at 107a. 

Shonberg further detailed the intangible property as “relat[ing] to two different 

factors, certainly the resident base and the medical records, all that stuff[,]” and “[t]he 

employee base, so the workforce in place. So those are probably the two big 

components of intangible property.” R.R. at 192a. According to Shonberg, the 

Original Lease required the intangible assets to be transferred to Missouri River. 

However, to support that contention, Shonberg could point only to paragraph 1.1(v) 

of the Original Lease, see R.R. at 204a, which provided that, under the Original 

Lease, Original Lessee rented from Missouri River: “All personal tangible and

intangible property comprising the ‘Personal Property’ and/or the ‘Intangible 

Property’ acquired by [Missouri River] pursuant to the Purchase Agreement.”

R.R. at 567a (emphasis added). Thus, pursuant to the Original Lease, the only 

intangible property used at the Facility and owned by Missouri River was such 

property that it acquired under the original Purchase Agreement. Neither party 

offered said Purchase Agreement into evidence and it is not a part of the record 

below. 

Further, regarding the purported value of the Facility’s staff, the trial 

court questioned Shonberg:

[Trial Court]: Can’t you look at the employees themselves 

in an individual capacity as [not] having much value 

because they’re always underpaid. So they’re never 

interested in any one employee. And they don’t care as 

long as everyone doesn’t walk out the door or who comes 
9

or who goes, they don’t really care about that, longevity, 

ten[ure], skill set. All they need to know is they got 

bodies there when they buy.

[Shonberg]: They do care to some degree about skill set,

but normally you’re correct.

[Trial Court]: For a few people, perhaps. Generally, 

they’re buying an unskilled labor force that provide 

unskilled services to these residents at somewhere near 

minimum wage or slightly above. And there are few key 

people who know how they operate and want to crack the 

whip and keep things going.

[Shonberg]: Yes, sir.

[Trial Court]: I’m just guessing.

[Shonberg]: That’s mostly correct. And it’s certainly 

mostly a -- I don’t want to say an unskilled labor, but a 

marginally skilled --

[Trial Court]: Even when they employ nurses they try to 

maximize licensed practical nurses as opposed to registered 

nurses. They’re probably generally few and far between.

[Shonberg]: Right.

R.R. at 201a-202a (emphasis added).

7

 Ultimately, Shonberg testified that, in his 

estimation, $8,000,000 of the $15,768,000 sale price represented intangibles.8 See

R.R. at 237a.

Because Shonberg believed that the leases included intangible assets and

personal property – items that are not subject to real estate tax – he settled on the cost 

approach as the appropriate method to determine the Property’s fair market value. 

 

7 After Shonberg admitted that Current Lessee changed the Facility’s name, the trial court 

explained with respect to business value: “There’s no good will, so it’s solely the medical records, 

the patients, the employees and the fact that it’s a going concern . . . .” R.R. at 237a.

8 This significant amount is in stark contrast to the estimated intangible values for the Ohio 

properties (which ranged from $170,000 to $280,000). In fact, the $8,000,000 allocation for 

intangibles is almost 30 times the highest such allocation made for items other than real property for 

the four Ohio properties in the 2018 transfer.
10

Using the cost approach, Shonberg calculated the Property’s fair market value by first 

estimating the Property’s land value. Shonberg considered nine sales of comparable 

commercial properties (apartments/hotels). Based thereon, he estimated the land 

value for the relevant years as follows: 2009 - $1,170,000; 2010 - $1,235,000; 2011 -

$1,235,000; 2012 - $1,275,000; 2013 - $1,275,000; 2014 - $1,275,000; 2015 -

$1,300,000; 2016 - $1,300,000; 2017 - $1,300,000; 2018 - $1,300,000; 2019 -

$1,325,000. See R.R. at 426a. With respect to the Property’s 

improvements/buildings, Shonberg determined replacement costs for similarly sized 

buildings and improvements of like utility. Shonberg also calculated the Property’s 

improvements’ yearly depreciation. Shonberg provided the following market values

for the Property from 2009 through 2019:

Tax Year Cost Approach Income Approach Value Conclusion

2009 $6,515,000 $4,550,000 $6,515,000

2010 $6,190,000 $4,310,000 $6,190,000

2011 $6,375,000 $4,710,000 $6,375,000

2012 $6,380,000 $5,310,000 $6,380,000

2013 $6,520,000 $5,440,000 $6,520,000

2014 $6,740,000 $6,280,000 $6,740,000

2015 $6,725,000 $6,040,000 $6,725,000

2016 $6,750,000 $6,520,000 $6,750,000

2017 $6,635,000 $6,620,000 $6,635,000

2018 $6,810,000 $7,380,000 $6,810,000

2019 $6,900,000 $7,840,000 $6,900,000

See R.R. at 487a.
11

Expert appraiser Robert Glowacki (Glowacki) testified for the District 

regarding the Property’s fair market value. Glowacki explained the manner in which 

he performed his analysis:

I developed a sales approach. I developed a cost approach. 

I put basically no weight on those at all. The primary 

reason is you’ve got a property that is encumbered by a 

long-term lease. 

And I think the decisions . . . going back to 1992 of the 

Pennsylvania State Supreme Court, which says when 

you’ve got a property that’s encumbered by a long-term 

lease that the income approach is probably the only -- I can 

quote if you want, but basically the only approach to be

considered for a property that’s encumbered by the longterm lease, so I put basically all my weight on the income 

approach.

R.R. at 251a. Glowacki emphasized that since 1998, the Property has been owned by 

REITs. See R.R. at 252a. He explained that a REIT cannot operate the Facility itself 

and owns the Property as an investment. See R.R. at 252a-254a.

Like Shonberg, Glowacki’s cost approach involved comparable site sales 

analysis. Based thereon, Glowacki estimated the Property’s land value to be 

$960,000 for all relevant years. Glowacki calculated the replacement costs for 

similarly sized buildings and improvements to those on the Property and their 

depreciation. Glowacki’s initial figures were similar to Shonberg’s; however, 

Glowacki added to his cost approach value for each year the difference between the 

depreciated value and his income approach figure for that year. 

Glowacki developed his income approach valuing the Property’s leases.9

Using the actual gross rent paid annually, Glowacki calculated the net rent by making 

 

9 With respect to Shonberg’s assertion that the Original Lease included FF&E and intangible 

property, Glowacki testified that the value of any such property was minimal. Glowacki further

explained:
12

a 2% vacancy and credit loss adjustment, and another 3% reduction for administrative 

and management fees associated with rent collection. Glowacki then applied a 

market based capitalization rate to the net rent to produce his income approach 

indication for each year.

Glowacki valued the Property for the relevant years as follows:

Year Cost Approach10 Income Approach Final Value 

2009 $9,900,000 $9,900,000 $9,900,000

($3,550,000+$6,350,000)

 

Through this whole discovery process, [I raised the issue that] I need 

some clarification as to what is the value of this personal property and 

intangible property composing the personal property. And the 

response from counsel on the other side was there isn’t any value to it.

So I’ve got items that are 20 years old. I’ve got items that have been 

in place after the [Original L]ease that were purchased by the 

operator. They definitely were not included in the [1998 Sale

Leaseback]. And I got a statement from the [Current O]wner saying 

there isn’t any value to any of it. So I didn’t put a lot of weight on 

what the personal or intangibles are.

R.R. at 259a. With respect to patient records, although Section 9.1.4 of the Original Lease provides 

that Missouri River “shall own and may remove . . . all patient records and other records in 

connection with the Facility,” R.R. at 585a, the trial court expressed skepticism, stating:

I got that language. But, you know, there’s a footnote in my head to 

the extent those records might constitute medical records, what -- I 

got a feeling that some HIPPA[, (Health Insurance Portability and 

Accountability Act of 1996 (HIPAA), Pub. L. No. 104-191, 110 Stat. 

1936 (codified as amended in scattered sections of 18, 26, 29, and 42 

U.S.C.)),] lawyer would be in the shorts of a REIT guy and try to 

walk off with those records in short order. I’m assuming that a fight 

broke out, but I’m just not sure that the tenant had any right to give to 

the landlord what the tenant didn’t own.

R.R. at 295a. The trial court elaborated: “[T]he landlord says he gets them, but those records are 

the residents’ records. And to the extent there are medical records, they can’t be bought and sold so 

easily.” R.R. at 296a.

10 The parentheses in this column depict the depreciated value plus the additional value 

Glowacki attributed to the leased fee, which totals Glowacki’s cost approach.
13

2010 $10,025,000 $10,025,000 $10,025,000

($4,000,000+$6,025,000)

2011 $10,500,000 $10,500,000 $10,500,000

($4,600,000+$5,900,000)

2012 $11,050,000 $11,050,000 $11,050,000

($5,150,000+$5,900,000)

2013 $11,250,000 $11,250,000 $11,250,000

($5,650,000+$5,600,000)

2014 $12,200,000 $12,200,000 $12,200,000

($6,150,000+$6,050,000)

2015 $13,100,000 $13,100,000 $13,100,000

($6,350,000+$6,750,000)

2016 $13,200,000 $13,200,000 $13,200,000

($6,600,000+$6,600,000)

2017 $13,800,000 $13,450,000 $13,450,000

($6,650,000+$7,150,000)

2018 $14,150,000 $13,800,000 $13,800,000

($6,850,000+$7,300,000)

2019 (Not provided) $14,150,000 $14,150,000

See R.R. at 921a-925a, 941a.

On April 29, 2019, the Trial Court denied Taxpayers’ appeal, adopting 

Glowacki’s income approach because it was more credible and consistent with 

Pennsylvania stare decisis. Taxpayers appealed to this Court.11

 

11

“This [C]ourt’s review is limited to determining whether the trial court abused its 

discretion, committed an error of law, or rendered a decision unsupported by the evidence.”

Downingtown Area Sch. Dist. v. Chester Cty. Bd. of Assessment Appeals, 131 A.3d 152, 156 n.4 

(Pa. Cmwlth. 2015).
14

I. Waiver

The District argues that, pursuant to Pennsylvania Rule of Appellate 

Procedure (Rule) 1925(b)(4), Taxpayers waived all issues on appeal by filing an 

insufficiently detailed statement of errors complained of on appeal. 

Initially, the Pennsylvania Superior Court has explained:

[W]hen the trial court directs an appellant to file a concise 

statement of [errors] complained of on appeal, any issues 

that are not raised in such a statement will be waived for 

appellate review. Similarly, when issues are too vague for 

the trial court to identify and address, that is the functional 

equivalent of no concise statement at all. Rule 1925 is 

intended to aid trial judges in identifying and focusing upon 

those issues which the parties plan to raise on appeal. Thus, 

Rule 1925 is a crucial component of the appellate process. 

Id. ‘When the trial court has to guess what issues an 

appellant is appealing, that is not enough for meaningful 

review.’ [Commonwealth v. Lemon, . . . 804 A.2d 34, 37 

(Pa. Super. 2002).]

Commonwealth v. Smith, 955 A.2d 391, 393 (Pa. Super. 2008) (citations omitted). 

“Importantly, however, ‘[e]ach error identified in the [Rule 1925(b) s]tatement will 

be deemed to include every subsidiary issue which was raised in the trial court.’ 

Pa.R.A.P. 1925(b)(4)(v). . . .” Desher v. Se. Pa. Transp. Auth., 212 A.3d 1179, 1185 

(Pa. Cmwlth. 2019).

The District contends that Taxpayers’ ambiguous statement of errors 

complained of on appeal hampered the trial court’s ability to address the issues on 

appeal.12 Regarding Taxpayers’ first issue, the District stated: “Each expert 

 

12 Specifically, the District asserted in its brief:

In their [statement of errors] complained of on appeal, [] Taxpayers 

identified two issues. First, Taxpayers claimed the trial court erred by 

finding the District’s appraiser’s testimony to be substantial evidence 

because the appraiser ‘used an improper factor’ when calculating the 

Property’s [fair market value]. Taxpayers did not identify the alleged 

improper factor and provided no additional information regarding this 
15

considered numerous factors in arriving at their value conclusions. To simply allege 

that the District’s expert utilized ‘an improper factor,’ without anything further, 

prevents the trial court from meaningfully addressing this issue.” District’s Br. at 16 

(emphasis added). With respect to Taxpayers’ second issue, the District asserts:

The [Original Lease] and 2018 [L]lease[], with exhibits and 

amendments, are 56 pages and 106 pages, respectively.

Taxpayers argue that, under these leases, the operators

obtained ‘more than just land and buildings.’ ([Taxpayers’ 

Br. at 7]). . . . The Taxpayers’ statement of [errors]

complained of on appeal does not dispute the trial court’s 

conclusion that the economic value of any personal property 

is de minimis; it simply asserts that the trial court’s value

included personal property and intangibles. Taxpayers do 

not identify the specific personal property included in 

the trial court’s value conclusions. This prevented the 

trial court from conducting any meaningful assessment of 

Taxpayers’ claims.

District’s Br. at 17 (emphasis added).

Taxpayers rejoin: “Throughout the trial of this matter, Taxpayers’ 

central contention was that the leases encumbering the Property should not be used to 

value the real estate because the intangible components of the leases could not be 

extracted therefrom.” Taxpayers’ Reply Br. at 4. 

 

purported improper factor. Second, they argued the trial court erred 

by ‘including value attributed to personal property and intangibles’ in 

the Property’s [fair market value]. Once again, Taxpayers did not 

identify the specifics of this alleged error and did not identify that 

personal property or intangible property allegedly included in the trial 

court’s value conclusions.

In its Rule 1925(a) Opinion, the trial court found that [] Taxpayers 

waived any issues on appeal by failing to specify the alleged improper 

factor or specific personal property and intangibles included in its 

value conclusions.

District’s Br. at 15-16. 
16

Before the trial court, Taxpayers argued that the Property’s fair market 

value should not include consideration of the Leases because the Leases included 

elements that were not subject to real estate tax. Taxpayers offered expert testimony 

in support thereof. Thus, at trial, Taxpayers clearly identified the issues that were 

before the trial court, and generally referenced those very issues in their Rule 1925(b) 

statement. Consequently, “the language of Appellant’s Rule 1925(b) statement is not 

vague; it is appropriately concise, given the mandate that the statement ‘should not be 

redundant or provide lengthy explanations as to any error.’ Pa.R.A.P. 

1925(b)(4)(iv).” Desher, 212 A.3d at 1185. Accordingly, Taxpayers did not waive 

their issues on appeal.

II. Fair Market Valuation

Taxpayers argue that the trial court erred by including intangible assets 

and other personal property in its fair market value determination. 

The law is well established:

In a tax assessment appeal, the trial court proceeds de novo. 

Once the taxing authority’s assessment is admitted into the 

record, it has made the prima facie case on the assessment.

The burden then shifts to the appellant to present sufficient, 

competent, and credible evidence to overcome the taxing 

authority’s prima facie case. 

The [Consolidated County Assessment Law (]Assessment 

Law[)13] requires that real property be assessed at its ‘actual 

value.’ 53 Pa.C.S. § 8842. The actual value is a parcel’s 

fair market value, which has been defined as ‘the price 

which a purchaser, willing but not obliged to buy, would 

pay an owner, willing but not obliged to sell, taking into 

consideration all uses to which the property is adapted and 

might in reason be applied.’ Harley-Davidson Motor Co[.]

v. Springettsbury T[wp.], . . . 124 A.3d 270, 279 ([Pa.]

2015). The Assessment Law authorizes three approaches to 

 

13 53 Pa.C.S. §§ 8801-8868.
17

a valuation: (i) the cost approach;[14](ii) the comparable 

sales approach;[15]and (iii) the income approach,[16] which 

divides a subject property’s annual net rental income by an 

investment rate of return. A trial court has discretion to 

decide which method of valuation is most appropriate for a 

given property. 

When determining fair market value, the property tax 

assessment ‘must include all relevant factors having a 

bearing on that value.’ Harley-Davidson, 124 A.3d at 283.

The assessment must include ‘the entire property and not 

merely its constituent elements.’ Tech One [Assocs. v. Bd. 

of Prop. Assessment, Appeals & Review of Allegheny Cty.], 

53 A.3d [685,] 700 [(Pa. 2012)]. The property must be 

valued based upon its current use even where an appraiser 

opines that the highest and best use of the property is 

different. 

Erie-W. Pa. Port Auth. v. Erie Cty. Bd. of Assessment Appeals, 213 A.3d 1041, 1048-

49 (Pa. Cmwlth. 2019) (citations omitted). Importantly, “non-real estate elements 

must be separately valued because they are not subject to real estate taxes[,]” and 

“they must be . . . backed out of the fair sale price to establish the fair market value 

for real estate tax purposes.” Grand Prix Harrisburg, LLC v. Dauphin Cty. Bd. of 

Assessment Appeals, 51 A.3d 275, 277-78 (Pa. Cmwlth. 2012).

The actual or fair market value, while not easily 

ascertained, is fixed by the opinions of competent witnesses 

as to what the property is worth on the market at a fair sale. 

Many factors should be taken into account by the expert 

witness in arriving at his estimate of value.

 

14 Section 8842(b)(1)(iii)(A) of the Assessment Law describes the cost approach as 

“reproduction or replacement, as applicable, less depreciation and all forms of obsolescence.” 53 

Pa.C.S. § 8842(b)(1)(iii)(A).

15

“The comparable sales approach compares the subject property to similar properties with 

consideration given to size, age, physical condition, location, and other factors.” Aetna Life Ins. Co. 

v. Montgomery Cty. Bd. of Assessment Appeals, 111 A.3d 267, 278 (Pa. Cmwlth. 2015).

16

“The income approach or capitalization method is used to appraise income[-]producing 

real estate by dividing the annual net rental income (gross income minus expenses) expected from 

the property by the investment rate of return (the capitalization or ‘cap’ rate) for that property.” 

Cedarbrook Realty, Inc. v. Cheltenham Twp., 611 A.2d 335, 339 n.4 (Pa. Cmwlth. 1992).
18

Buhl Found. v. Bd. of Prop. Assessment, Appeals & Review of Allegheny Cty., 180 

A.2d 900, 902 (Pa. 1962) (citation omitted).

17

 However, “if an expert uses an 

improper factor when fixing the fair market value of real estate, his opinion is not 

substantial evidence that can support a finding of value.” Aetna Life Ins. Co. v. 

Montgomery Cty. Bd. of Assessment Appeals, 111 A.3d 267, 279 (Pa. Cmwlth. 2015).

The Pennsylvania Supreme Court has explained that there are

two basic principles applicable to valuing real property 

which is subject to a long-term lease: First, the ‘economic 

reality’ of the existence of the lease must be considered 

by an appraiser in establishing the market value of 

property encumbered by a lease, since it will be a factor 

which affects the price which a purchaser of the property is 

willing to pay. Second, when the property generates 

income, the capitalization of income approach is an 

appropriate method to use to ascertain its value, and, in 

applying that method, the contract rent received under 

the lease is the relevant income stream which is to be 

capitalized, even if it is below prevailing market rental 

rates.

Tech One Assocs., 53 A.3d at 703 (emphasis added). Thus, “when real estate is 

subject to a long-term lease, the portions of the property subject to a leasehold 

interest cannot be disregarded in valuing the property. Rather, the ‘economic reality’

of the lease must be considered in establishing the market value of the property.” In 

re Consol. Appeals of Chester-Upland Sch. Dist., 200 A.3d 1052, 1059 (Pa. Cmwlth. 

2018) (citation omitted), appeal granted, In re Chester-Upland Sch. Dist., 216 A.3d 

1031 (Pa. 2019); see also Downingtown Area Sch. Dist. v. Chester Cty. Bd. of 

Assessment Appeals, 131 A.3d 152 (Pa. Cmwlth. 2015). “[O]nce [an] expert 

testifie[s] that he took the leases ‘into consideration but did not make an adjustment, 

this failure to make an adjustment, if anything, goes to the weight of his testimony 

 

17 Buhl was superseded by statute as stated in Grand Prix.
19

and not its competency.’” Aetna Life, 111 A.3d at 280 (quoting In re Appeal of Prop.

of Cynwyd Invs., 679 A.2d 304, 309 (Pa. Cmwlth. 1996)).

“[I]t is well[]settled that all matters of credibility and evidentiary weight 

are within the exclusive province of the trial court and that these determinations are 

binding on this Court absent an error of law.” RAS Dev. Corp. v. Fayette Cty. Bd. of 

Assessment Appeals, 704 A.2d 1130, 1137 (Pa. Cmwlth. 1997). “Nevertheless, as 

fact-finder, ‘the trial court must state the basis and reasons for its decision.’” Aetna 

Life, 111 A.3d at 279 (quoting Green v. Schuylkill Cty. Bd. of Assessment Appeals,

772 A.2d 419, 433 (Pa. 2001)). “The function of the trial court in a tax assessment 

matter is not to independently value the property, but to weigh the conflicting 

testimony and values expressed by the experts and, based on the credibility of their 

opinions, arrive at a valuation.” Downingtown, 131 A.3d at 157.

Further,

although it is the role of the trial court to determine the 

credibility and weight of the evidence before it, our 

[S]upreme [C]ourt has noted that there is a difference 

between credibility as a matter of personal veracity and as a 

matter of substantive reasonableness.

The language chosen by the trial court . . .

implies that its evaluation of the expert’s 

testimony involved a credibility determination. 

In this regard, it is important to distinguish 

between credibility as a matter of personal 

veracity and as a matter of the substantive 

reasonableness of a witness’s testimony. 

While the trial court’s determinations 

concerning the former are unreviewable by an 

appellate court, the same is not true of the 

latter. See McKnight [Shopping Ctr., Inc. v. 

Bd. of Prop[.] Assessment, Appeals and Review 

of Allegheny C[ty.]], . . . 209 A.2d [389,] 392 

[(Pa. 1965)] (rejecting the trial court’s 

conclusion that expert testimony was not 
20

credible, where such conclusion rested on an 

incorrect factual assumption). . . .

Koppel Steel Corp. v. Bd. of Assessment Appeals of Beaver Cty., 849 A.2d 303, 305-

06 (Pa. Cmwlth. 2004) (footnote omitted) (quoting Green, 772 A.2d at 434 n.11); see 

also Masalehdan v. Allegheny Cty. Bd. of Prop. Assessment, Appeals & Review, 931 

A.2d 122 (Pa. Cmwlth. 2007). Accordingly, “[i]f the trial court rejects an expert’s 

testimony for specified reasons, an appellate court may review the validity of those 

reasons.” Aetna Life, 111 A.3d at 279. 

Here, the trial court found both experts credible. However, the trial 

court rejected the substantive reasonableness of Shonberg’s opinion on fair market 

value. Regarding the competing expert opinions, the trial court explained:

Although [the trial court] found neither expert’s approach to 

valuation perfect, in the end, [the trial court] found 

Glowacki’s calculation of fair market value based on the 

income approach more credible. [The trial court] found 

Shon[]berg’s explanation of the recent $15,768,000 sale as 

attributable in large part to the non-real estate aspects of the 

[P]roperty, hard to swallow, particularly since the deed (and 

transfer taxes paid thereon) does not except out any amount 

for intangibles.

In accordance with Tech One Associates . . ., in order to 

determine the market value of property, the leased fee and 

the leasehold must be considered. [The trial court] 

decline[s] Shonberg’s analysis under the cost approach 

because he did not consider the value of the leased fee and 

leasehold interests.

Furthermore, as suggested by the court in Downingtown . . . 

, [the trial court] believe[s] that the income approach is 

the best method of calculating the actual value of this 

type of income producing property. As previously noted, 

employment of this method should include a consideration 

of both the landlord’s leased fee and the tenant’s leasehold 

interest. . . . To examine a property in its unencumbered 

form is to ignore the economic realities of commercial 

real estate transactions. Similarly, [the trial court] 

cannot simply ignore the fact that the current lease nets 
21

the owner of the subject property approximately 1 

million dollars per year in rental income. To the extent 

that [Taxpayers] argue[] that there are elements in the leases 

that are extraneous to the real estate, [the trial court] find[s]

the economic value of those intangibles de minim[i]s. 

Although teasing out the real estate and intangible aspects 

of the business is murky science at best, [the trial court] 

cannot simply don blinders, as Shonberg advocates, and 

ignore the fact that the lease enhances the fair market 

value of the [P]roperty.

R.R. at 5a-6a (emphasis added; citations and footnotes omitted).

The trial court exercised its discretion to determine the appropriate 

valuation method for the Property. Here, Missouri River and Current Owner, two 

real estate investment trusts holding the Property as an income-producing investment, 

have been the only Property owners since 1998. See R.R. at 252a. This Court has 

explained that “[t]he income approach is the most appropriate method for 

appraising a property typically purchased as an investment . . . , because such a 

property is valued by a purchaser for its ability to produce income.” In re Appeal of 

V.V.P. P’ship, 647 A.2d 990, 992-93 (Pa. Cmwlth. 1994) (emphasis added); see also

1198 Butler St. Assocs. v. Bd. of Assessment Appeals, Cty. of Northampton, 946 A.2d 

1131 (Pa. Cmwlth. 2008). 

Relative to the personal property and intangibles, Shonberg conceded 

that the FF&E’s value is de minimis, and acknowledged that the Facility’s staff was

also of limited monetary value. Shonberg and Taxpayers did not provide a 

justification or a legal basis for considering the residents as intangible property. As 

the trial court noted, “[n]obody owns the residents. They’re free to come and go as 

they want.” R.R. at 288a. Finally, Taxpayers did not address the trial court’s 

concerns regarding ownership of resident medical records. Given these 

considerations, substantial evidence supported the trial court’s finding that the value 

of the FF&E and intangibles was de minimis. Accordingly, the trial court did not err 
22

when it gave greater weight18 to and credited Glowacki’s income approach which 

reflected the Property’s income-producing nature.

For all of the above reasons, the trial court’s order is affirmed.19

___________________________

ANNE E. COVEY, Judge

 

18 Although Shonberg testified that he considered the leases and, thus, his testimony was 

competent, his failure to make adjustments for the leases goes to the weight of his testimony, and 

“the trial court has exclusive province over all matters of credibility and evidentiary weight.” Aetna 

Life, 111 A.3d at 279.

19 Relying solely on Section 8854(a)(6) of the Assessment Law, 53 Pa.C.S. § 8854(a)(6), 

Taxpayers also assert in their Reply Brief that the Board’s brief to this Court, which incorporates by 

reference the District’s brief, violates the Board’s statutory duty to defend its assessment. That 

Section pertains to appeals to the courts of common pleas and provides that a tax board:

shall have the power and duty to present a prima facie case in 

support of its assessment, to cross-examine witnesses, to discredit or 

impeach any evidence presented by the taxable person, to prosecute 

or defend an appeal in any appellate court and to take any other 

necessary steps to defend its valuation and assessment.

53 Pa.C.S. § 8854(a)(6) (emphasis added). 

Notably, Section 8854(b) of the Assessment Law, addresses appeals to this Court, and 

simply provides: “The [B]oard, or any party to the appeal to the court of common pleas, may appeal 

from the judgment, order or decree of the court of common pleas.” 53 Pa.C.S. § 8854(b). At the 

trial court’s hearing, the Board offered Maas’ testimony to support its assessed value for the 

Property. The trial court ultimately adopted Glowacki’s higher assessed value as the Property’s fair 

market value. Presumably, the Board agreed with the trial court’s decision and, therefore, 

incorporated by reference the District’s argument in requesting this Court affirm the trial court’s 

order. This Court discerns the Board did not err by doing so.
IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Missouri River Corp. :

:

v. :

:

Erie County Board of Assessment :

Appeals, Erie County, PA :

Interested Parties: :

City of Erie School District, City of :

Erie and Erie County :

Parcel No.: 17-040-037.0-210.00 :

Property Address: 1012 W. Bayfront :

Pkwy., City of Erie, Erie County :

Appeal of: Missouri River Corp. :

(Sunrise Senior Living, Inc., tenant and :

agent) and NHI-REIT of Bickford, :

(Bickford Master Buckeye, LLC, :

tenant and agent), successor-in-interest :

to Missouri River Corporation : No. 639 C.D. 2019 

Missouri River Corp. :

:

v. :

:

Erie County Board of Assessment :

Appeals, Erie County, PA :

City of Erie School District, City of :

Erie and Erie County :

Parcel No.: 17-040-037.0-210.00 :

Appeal of: Missouri River Corporation : No. 640 C.D. 2019 

and NHI-REIT of Bickford :

O R D E R

AND NOW, this 2

nd day of March, 2020, the Erie County Common 

Pleas Court’s April 29, 2019 order is affirmed.

___________________________

ANNE E. COVEY, Judge