TAX COURT OF NEW JERSEY

JOSHUA D. NOVIN Dr. Martin Luther King, Jr. Justice Building

 Judge 495 Dr. Martin Luther King, Jr. Blvd., 4th Floor

Newark, New Jersey 07102

 Tel: (609) 815-2922, Ext. 54680

NOT FOR PUBLICATION WITHOUT THE APPROVAL

OF THE TAX COURT COMMITTEE ON OPINIONS

1

 January 19, 2023 

Lee S. Holtzman, Esq. 

Farhan Ali, Esq. 

McCarter & English, LLP 

Four Gateway Center

100 Mulberry Street 

Newark, New Jersey 07102 

Richard P. DeAngelis, Esq. 

Connell Foley, LLP 

56 Roseland Avenue 

Roseland, New Jersey 07068 

Re: OTR-MCC, LLC v. Parsippany-Troy Hills Township 

Docket Nos. 001742-2009, 001149-2010, 001289-2011, 004558-2012, 

000871-2013, 003789-2014, and 003704-2015 

and

 Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Docket Nos. 004516-2016, 001685-2017, 001124-2018, and 002857-2019 

Dear Mr. Holtzman, Mr. Ali, and Mr. DeAngelis: 

This letter shall constitute the court’s opinion following trial of the local property tax 

appeals instituted by plaintiffs, OTR-MCC, LLC (“OTR-MCC”) and Brookwood MC INV. I & II

% CBRE (“Brookwood”) (OTR-MCC and Brookwood shall be collectively referred to herein as 

“OTR-MCC/Brookwood”). OTR-MCC/Brookwood challenge the 2009, 2010, 2011, 2012, 2013, 

2014, 2015, 2016, 2017, 2018, and 2019 tax year assessments on their improved property located 

in Parsippany-Troy Hills Township (“Parsippany”). 

For the reasons stated more fully below, the court affirms the 2009, 2010, 2013, 2014, 

2015, 2016, 2017, 2018, and 2019 tax year assessments and reduces the 2011 and 2012 tax year 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 2 

assessments. 

I. Procedural History and Findings of Fact 

Pursuant to R. 1:7-4, the court makes the following findings of fact and conclusions of law 

based on the evidence and testimony adduced during trial.1

As of the valuation dates, OTR-MCC/Brookwood was the owner of the real property and 

improvements located at 300 Interpace Parkway and 1 Upper Pond Road, Parsippany-Troy Hills 

Township, Morris County, New Jersey (the “subject property”). The subject property is identified 

on the Parsippany-Troy Hills municipal tax map as Block 136, Lot 43.4. The subject property 

contains approximately 2,028 feet of frontage along Interpace Parkway and 1,124 feet of frontage 

along Upper Pond Road. The subject property is located near the intersection of Interpace Parkway 

and Cherry Hill Road, with nearby access to Routes 80, 46, 202, and 287. 

The subject property is more commonly known as Morris Corporate Center I (“MCC I”) 

and Morris Corporate Center II (“MCC II”).

2

 MCC I and MCC II are two detached Class A, multitenanted office buildings on the Morris Corporate Center campus, containing a total of 

approximately 529,362 square feet of leasable area. MCC I and MCC II each comprise three (3) 

1

 Trial was commenced before Hon. Vito Bianco, J.T.C. However, following the second day of 

trial, Judge Bianco determined that he would be unable to conclude trial and render an opinion in 

the above matters and they were reassigned to the undersigned. With the consent of all counsel, 

the court reviewed the exhibits marked for identification and listened to the testimony elicited 

during the first two days of trial on the court’s audio recording system and reviewed the transcripts. 

2

 Prior to the commencement of trial, OTR-MCC/Brookwood and Parsippany executed a Joint 

Stipulation of Fact. The Joint Stipulation set forth: (i) the subject property’s address as 300 

Interpace Parkway and 1 Upper Pond Road; (ii) the subject property comprises two detached Class 

A office buildings constructed in 1986; (iii) the highest and best use of the subject property is its 

continued use as Class A office space; (iv) the subject property comprises 529,362 square feet of 

leasable area; (v) the subject property’s total tax assessment during each year under appeal is 

$57,660,700; (vi) that OTR-MCC/Brookwood’s proposed expert and Parsippany’s proposed 

expert are qualified as valuation experts; and (vii) the effective tax rates for each year under appeal. 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

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attached office buildings, referred to as pods. MCC I contains pods A, B, and C, while MCC II

contains pods D, E, and F. Pods A, C, D, and F are three-story office buildings constructed over 

a one-story parking garage. Pods B and E are four-story office buildings. The subject property 

contains a total of 1,597 parking spaces, 1,352 are surface parking and 245 are covered parking 

(below the pod buildings). MCC I and MCC II were constructed in 1986 of steel frame and 

masonry/granite panel walls, intermixed with bands of reflective insulated glass windows.3 The 

buildings are situated on an irregularly shaped 30.83-acre site.

MCC I and MCC II feature amenities including renovated multi-story atrium lobbies with 

skylight ceilings, granite tile floors, marble and wood panel covered walls, eight passenger 

elevators, a shared conference center, a three-hole putting green, a one and a half mile 

jogging/walking trail, and an outdoor seating area. MCC I and MCC II are fully sprinklered. MCC 

I and MCC II are surrounded by grassy areas, decorative trees, and shrubs. An oversized retention 

pond featuring fountains and a waterfall element is located between MCC I and MCC II. Each 

floor features men’s and women’s restrooms (renovated in 2005), finished with granite countertops 

and backsplashes, and granite/marble tile flooring. In addition, MCC I and MCC II each contain 

a cafeteria offering on-site catering and a private dining/conference room. There is also a fitness 

facility located on-site. Tenants have access to dry cleaning and shoe-shine services, an ATM, 

and car wash services. MCC I and MCC II also feature an on-site security guard, closed circuit 

television monitors, and a key card access system. MCC I and MCC II are each serviced by loading 

areas with direct access to four freight elevators. 

3

 According to OTR-MCC/Brookwood’s expert (as such term is defined herein), the subject 

property was developed in the 1980’s by SJP Properties and Prudential and was sold in December

1999 to OTR-MCC (the State Teachers Retirement System of Ohio), for $95,000,000. 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

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The buildings’ interior common hallways and tenant offices are generally finished with 

acoustic tile ceilings, painted and vinyl covered drywall, recessed lighting, and wood composite 

flooring or carpeting. Ceramic tile flooring is installed in tenant kitchen areas and tenant 

bathrooms. Each pod floor is serviced by its own central heating and air conditioning unit, located 

on the buildings’ roof. 

The subject property is in Parsippany-Troy Hills Specialized Economic Development area, 

SED-5, with permitted uses including: offices for executive or administrative purposes, scientific 

or research laboratories, fabrication and assembly of products, processing and warehousing 

facilities for finished products, agricultural uses, and mobile food vendor establishments.4 Thus, 

use and operation of the subject property as a Class A, multi-tenanted office building, is a legally

permitted and conforming use.

Conflicting testimony was offered regarding the subject property’s Flood Hazard Zone 

designation. According to OTR-MCC/Brookwood’s expert (as such term is defined herein), the 

subject property is in Flood Zone “C” or an “area[] of minimal flood hazard.”5 However, 

according to Parsippany’s expert (as such term is defined herein), the subject property is located 

in Special Flood Hazard Area “X” or a “[m]oderate flood hazard area[].”6

OTR-MCC/Brookwood timely filed direct appeal complaints with the Tax Court 

challenging the subject property’s 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 

and 2019 tax year assessments. Parsippany filed counterclaims for the 2009, 2010, 2011, 2012, 

4

 OTR-MCC/Brookwood’s expert’s (as such term is defined herein) appraisal reports also 

identified digital storage warehouse as a permitted use in the SED-5 zoning district.

5

 https://www.fema.gov/glossary/flood-zones. 

6

 The subject property’s location in either Flood Zone “C” or Special Flood Hazard Area “X” does 

not impact the court’s determination of the subject property’s true value.
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

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2013, 2014, 2015 2016, 2017, 2018, and 2019 tax years. The matters were tried to conclusion over 

several months. 

During trial, OTR-MCC/Brookwood and Parsippany each offered testimony from New 

Jersey certified general real estate appraisers who were accepted by the court as experts in the field 

of property valuation (the “expert” or “experts”).

7

 Each expert prepared appraisal reports 

expressing their opinions of the subject property’s true or fair market value as of the October 1, 

2008, October 1, 2009, October 1, 2010, October 1, 2011, October 1, 2012, October 1, 2013, 

October 1, 2014, October 1, 2015, October 1, 2016, October 1, 2017, and October 1, 2018 

valuation dates.8

As of each valuation date, the subject property’s local property tax assessments, implied 

equalized values, and the experts’ value conclusions are set forth below: 

Valuation 

date

Local 

property tax 

assessment

Average ratio 

of assessed to 

true value 

Implied 

equalized

value

OTR-MCC/ 

Brookwood’s 

expert

Parsippany’s 

expert

10/1/2008 $57,660,700 76.31% $75,561,132 $46,200,000 $79,450,000 

10/1/2009 $57,660,700 77.19% $74,699,702 $45,700,000 $76,315,000 

10/1/2010 $57,660,700 79.34% $72,675,447 $49,800,000 $83,230,000 

10/1/2011 $57,660,700 80.74% $71,415,284 $47,000,000 $80,265,000 

10/1/2012 $57,660,700 85.61% $67,352,763 $45,100,000 $79,950,000 

10/1/2013 $57,660,700 84.94% $67,884,036 $43,800,000 $76,990,000 

10/1/2014 $57,660,700 84.41% $68,310,271 $41,400,000 $77,905,000 

10/1/2015 $57,660,700 84.40% $68,318,365 $41,300,000 $78,075,000 

10/1/2016 $57,660,700 83.15% $69,345,400 $32,100,000 $80,265,000 

10/1/2017 $57,660,700 83.74% $68,856,819 $31,900,000 $79,650,000 

10/1/2018 $57,660,700 83.40% $69,137,530 $31,700,000 $79,000,000 

7

 OTR-MCC/Brookwood and Parsippany stipulated to each expert’s qualifications. 

8

 OTR-MCC/Brookwood’s expert was initially retained to, and prepared, appraisal reports for the 

subject property for the 2010 to 2016 tax years, dated May 5, 2017 under the Integra Realty 

Resources banner. However, OTR-MCC/Brookwood’s expert subsequently transitioned to a new 

firm, Newmark Knight Frank, and prepared appraisal reports for the subject property for the 2009 

tax year and 2017 to 2019 tax years under their banner. 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 6 

During the valuation periods at issue, OTR-MCC sold the subject property to Brookwood, 

under deed dated April 28, 2014, for reported consideration of $82,400,000. The deed was 

recorded in the Morris County Clerk’s Office in Deed Book 22525, Page 1076. 

Testimony further revealed that on or about December 6, 2019, approximately fourteen 

months after the latest valuation date involved herein, Brookwood entered into a Purchase and Sale 

Agreement with Monarch Owner, LLC to sell the subject property. That sale was reportedly 

consummated for $58,500,000, under deed dated March 9, 2020, and recorded on March 12, 2020 

in the Morris County Clerk’s Office in Deed Book 23730, Page 1717. 

II. Conclusions of Law 

a. Presumption of Validity

“Original assessments and judgments of county boards of taxation are entitled to a 

presumption of validity.” MSGW Real Estate Fund, LLC v. Mountain Lakes Borough, 18 N.J. 

Tax 364, 373 (Tax 1998). “Based on this presumption, the appealing taxpayer has the burden of 

proving that the assessment is erroneous.” Pantasote Co. v. Passaic City, 100 N.J. 408, 413 (1985). 

“The presumption of correctness . . . stands, until sufficient competent evidence to the contrary is 

adduced.” Little Egg Harbor Twp. v. Bonsangue, 316 N.J. Super. 271, 285-86 (App. Div. 1998). 

A taxpayer can only rebut the presumption by introducing “cogent evidence” of true value. 

Pantasote Co., 100 N.J. at 413. That is, evidence “definite, positive and certain in quality and 

quantity to overcome the presumption.” Aetna Life Ins. Co. v. Newark City, 10 N.J. 99, 105 

(1952). Thus, at the close of the proofs by the party challenging the tax assessment, the court must 

be presented with evidence that raises a “debatable question as to the validity of the assessment.” 

MSGW Real Estate Fund, LLC, 18 N.J. Tax at 376. 

Here, at the close of OTR-MCC/Brookwood’s proofs, Parsippany moved to dismiss these 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 7 

matters, under R. 4:37-2(b), arguing that OTR-MCC/Brookwood failed to overcome the 

presumption of validity. Specifically, Parsippany argued that disparities existed in the manner that 

OTR-MCC/Brookwood’s expert calculated the “effective” rent for the subject property and his 

comparable leased properties. Thus, Parsippany charged that OTR-MCC/Brookwood’s expert’s

conclusions of value should be accorded no weight. Additionally, Parsippany asserted that there 

were misstatements and errors contained in OTR-MCC/Brookwood’s expert’s appraisal reports, 

rendering his value conclusions of dubious usefulness. 

Affording OTR-MCC/Brookwood all reasonable and legitimate inferences which could be 

deduced from the evidence presented, the court concluded that OTR-MCC/Brookwood produced 

cogent evidence sufficient to overcome the presumption of validity. See MSGW Real Estate Fund, 

LLC, 18 N.J. Tax at 376 (citing Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520 (1995)). The

court found that the opinions of OTR-MCC/Brookwood’s expert, if accepted as true, raised 

debatable questions as to the validity of the subject property’s local property tax assessments. 

Accordingly, the court denied Parsippany’s motions and placed a statement of reasons on the 

record.

However, concluding that the presumption of validity has been overcome does not equate 

to a finding by the court that the local property tax assessments are erroneous. Once the 

presumption has been overcome, “the court must then turn to a consideration of the evidence

adduced on behalf of both parties and conclude the matter based on a fair preponderance of the 

evidence.” Ford Motor Co. v. Edison Twp., 127 N.J. 290, 312 (1992). The court must be mindful 

that “although there may have been enough evidence [presented] to overcome the presumption of 

correctness at the close of plaintiff’s case-in-chief, the burden of proof remain[s] on the [party

challenging the tax assessment] . . . to demonstrate that the judgment under review was incorrect.” 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

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Id. at 314-15 (citing Pantasote Co., 100 N.J. at 413). 

b. Highest and Best Use 

“For local property tax assessment purposes, property must be valued at its highest and 

best use.” Entenmann's Inc. v. Totowa Borough, 18 N.J. Tax 540, 545 (Tax 2000). The highest 

and best use analysis is a concept rooted in the market's perceptions of value, because it answers

the inquiry, “[w]hat use would the market make of that property?” Ford Motor Co., 127 N.J. at

302 (citation omitted). To accurately answer that question, an appraiser must conduct “a

comprehensive market analysis to ascertain the supply and demand characteristics of alternative

uses.” Clemente, 27 N.J. Tax at 269. Thus, the highest and best use analysis is the starting point 

in the court’s journey to discern a property’s true or fair market value. See Ford Motor Co. v. 

Edison Twp., 10 N.J. Tax 153, 161 (Tax 1988) (concluding that the highest and best use analysis 

is “the first and most important step in the valuation process”). 

Here, OTR-MCC/Brookwood and Parsippany stipulated that the subject property’s highest 

and best use was its “continued use as an office property.”9 The court finds the parties stipulation 

is reasonable and supported by the evidence. Therefore, the court concludes that the subject 

property’s highest and best use “as improved,” is its continued use as an office building. 

c. Valuation

“There is no single determinative approach to the valuation of real property.” 125 Monitor 

St. LLC v. City of Jersey City, 21 N.J. Tax 232, 237-38 (Tax 2004), aff’d, 23 N.J. Tax 9 (App. 

Div. 2005) (citing Samuel Hird & Sons, Inc., 87 N.J. Super. at 72); see also ITT Continental Baking 

9

 The Joint Stipulation does not identify the subject property’s “as vacant” highest and best use. 

However, based on the testimony and evidence adduced during trial, the court finds that the subject 

property’s “as vacant” highest and best use would be development with an office building. 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

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Co. v. East Brunswick Twp., 1 N.J. Tax 244 (Tax 1980). “There are three traditional appraisal 

methods utilized to predict what a willing buyer would pay a willing seller on a given date, 

applicable to different types of properties: the comparable sales method, capitalization of income 

and cost.” Brown v. Borough of Glen Rock, 19 N.J. Tax 366, 376 (App. Div. 2001) (internal 

citation omitted). “The decision as to which valuation approach should predominate depends upon 

the facts of the particular case and the reaction to these facts by the experts.” Coca-Cola Bottling 

Co. of N.Y. v. Neptune Twp., 8 N.J. Tax 169, 176 (Tax 1986) (citing New Brunswick v. State Div. 

of Tax Appeals, 39 N.J. 537, 544 (1963)); see also WCI-Westinghouse, Inc. v. Edison Twp., 7 N.J. 

Tax 610 (Tax 1985). 

1. Income Capitalization Approach

When a property is income-producing, the income capitalization approach is the “preferred 

method for estimating the value of income producing property.” Forsgate Ventures IX, L.L.C. v. 

Twp. of South Hackensack, 29 N.J. Tax 28, 46 (Tax 2016), aff’d, 31 N.J. Tax 135 (App. Div.

2018). “The income capitalization approach to value consists of methods, techniques, and 

mathematical procedures that an appraiser uses to analyze a property’s capacity to generate 

benefits (i.e., usually the monetary benefits of income and reversion) and convert[s] these benefits 

into an indication of present value.” Appraisal Institute, The Appraisal of Real Estate, 439 (14th

ed. 2013). 

A fundamental tenet of the income capitalization approach is the concept of anticipation, a 

process designed to forecast future economic benefits and convert those benefits into a present 

value estimate. Id. at 440. The income capitalization approach converts the anticipated future 

stream of income and reversionary benefit into a present value. Stated differently, the “value of 

income-producing real estate is based on the income it will produce in the future . . . . the principle
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

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of anticipation, [is] the present worth of future benefits.” First Republic Corp. of Am. v. E. Newark

Borough, 16 N.J. Tax 568, 578 (Tax 1997). Thus, in valuing income-producing property, “[t]he 

ultimate concern is the future . . . , the direction and expected rate of income change are critical to 

the capitalization of income as a valuation approach.” Ibid. 

Here, both OTR-MCC/Brookwood’s expert and Parsippany’s expert concluded, and the 

court agrees, that the income capitalization approach is the most appropriate method to derive the 

subject property’s estimated true or market value.

A. Economic or Market Rent

The first step under the income-capitalization approach is forecasting a property’s potential 

gross income. This requires an appraiser to discern “the economic rent, also known as the ‘market 

rent’ or ‘fair rental value.’” Parkway Vill. Apartments Co. v. Cranford Twp., 108 N.J. 266, 270 

(1987). The term economic or market rent refers to “the most probable rent that a property should 

bring in a competitive and open market reflecting all conditions and restrictions of the lease 

agreement, including permitted uses, use restrictions, expense obligations, term, concessions, 

renewal and purchase options and tenant improvements.” Appraisal Institute, The Dictionary of 

Real Estate Appraisal, 121-22 (5th ed. 2010). The economic or market rent allows an appraiser to

determine the anticipated income stream to be generated from the property and to convert that 

future income stream into a present value. First Republic Corp. of Am., 16 N.J. Tax at 578. 

Here, one of the central issues in dispute revolves around how each expert calculated the

“effective” rent of the subject property’s leases and their comparable leases. Effective rent is an 

analytical tool employed by valuation experts to account for, compare, and contrast lease terms,

step-up provisions, and other financial concessions afforded under comparable leases in the 

marketplace, to assist the expert in developing a credible economic or market rent. In sum, the 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 11 

calculation of “effective” rent is a mechanism that allows an appraiser to consider the step-up rent 

payable under a lease, along with any financial or rent concessions afforded, in attempting to 

compare leases and discern economic or market rent. 

1. OTR-MCC/Brookwood’s expert 

In determining the economic or market rent that should be ascribed to the subject property, 

OTR-MCC/Brookwood’s expert: (i) reviewed the REIS Office Market publication identifying 

asking rents in the Parsippany-Troy Hills office submarket; (ii) examined the subject property’s 

leasing activities from 2006 to 201810; (iii) assembled a “Peer Group (Competitive Set)” of 

approximately thirty-one Class A office buildings in the Parsippany-Troy Hills office submarket; 

and (iv) identified fifty (50) comparable Class A office leases (ten for the 2009 tax year, twenty 

for the 2010 to 2016 tax years, and twenty for the 2017 to 2019 tax years). 

In calculating the “effective” rent per square foot of the subject property’s leases and the 

comparable office leases, OTR-MCC/Brookwood’s expert testified that he 

calculated the average rent over a five-year period for each of the 

leases that I analyzed . . . I thought a five-year period was long 

enough to reflect, you know, free rent that’s usually given at the 

beginning of the lease and any kind of steps that might occur during 

the first five years of the lease term.

A lot of these leases went beyond five years but it’s not proper to go 

too far into the future with averaging a rent . . . what I’m trying to 

do is identify what’s an initial effective rent, that’s from the market 

that an owner or investor would expect to get from the property in 

order so that they can calculate a net income for the property. 

10

 OTR-MCC/Brookwood’s expert grouped the subject property’s forty-seven (47) leases as 

follows: (i) thirteen (13) leases for the 2009 and 2010 tax years; (ii) twelve (12) leases for the 2011, 

2012, and 2013 tax years; (iii) eight (8) leases for the 2014, 2015, and 2016 tax years; and (iv) 

sixteen (16) leases for the 2017, 2018, and 2019 tax years (certain leases were applied to 

overlapping periods). 
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Thus, to determine the “effective” rent of the subject property leases and the comparable 

office leases, OTR-MCC/Brookwood’s expert averaged the annual rent “during the lesser of the 

actual lease term or the first five years of each lease.” For example, if a subject property lease or 

comparable office lease bore a ten-year lease term with an initial rent of $20.00, stepping up $1.00 

per square foot annually to $29.00 per square foot over the lease term, OTR-MCC/Brookwood’s 

expert averaged only the first five years rent, and applied an “effective” rent of $22.00 per square 

foot ($20 + $21 + $22 + $23 + $24 = 110/5 = $22.00), disregarding any rent payable thereafter.

In OTR-MCC/Brookwood’s expert’s opinion, 

[t]ime value of money’s another reason why you wouldn’t want to 

average a rent over a long period of time . . . if I was going to do an 

average over a long period of time, say ten years, I would be giving 

equal weight to the rent paid in year ten versus rent paid in year one 

so it would be improper. You’d get a . . . skewed indication of 

market rent if you go out too far because of the time value of money.

After applying his formula to the subject property’s leases, OTR-MCC/Brookwood’s 

expert concluded that the subject property’s “effective” rents: (i) for the 2009 tax year, ranged 

from $24.73 to $31.80 per square foot, with an average of $26.47;

11 (ii) for the 2010 tax year, 

ranged from $20.30 to $31.80 per square foot, with an average of $27.08;

12 (iii) for the 2011 tax 

year, ranged from $23.32 to $26.23, with an average of $24.91; (iv) for the 2012 tax year, ranged 

from $24.65 to $27.47, with an average of $26.37; (v) for the 2013 tax year, ranged from $25.29 

to $28.75, with an average of $26.97; (vi) for the 2014 tax year, ranged from $26.54 to $28.55, 

with an average of $28.04; (vii) for the 2015 tax year, ranged from $27.52 to $29.50, with an 

11

 OTR-MCC/Brookwood’s expert’s November 18, 2019 appraisal report. 

12

 OTR-MCC/Brookwood’s expert’s May 5, 2017 appraisal report, covering the 2010 to 2016 tax 

years, identifies the range as “subject leases between 2007 & 2010” and having a “date range” of 

1/1/2007 to 12/31/2009. 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

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average of $28.51; (viii) for the 2016 tax year, ranged from $22.88 to $28.24, with an average of 

$25.6913; (ix) for the 2017, 2018, and 2019 tax years, ranged from $22.88 to $28.24, with an 

average of $25.48.14

Next, OTR-MCC/Brookwood’s expert applied his five-year “effective” rent formula to his 

fifty comparable office leases. After calculating the “effective” rent of his comparable leases, 

OTR-MCC/Brookwood’s expert applied adjustments to the “effective” rent of several comparable 

leases to account for perceived differences in expense structure (between 3.5% to 11%) and 

economic characteristics, including inferior or superior concessions, tenant improvement 

allowances, or other economic factors that influenced the rental rate (-15% to 10%). 

After applying the adjustments, OTR-MCC/Brookwood’s expert determined a range of 

adjusted “effective” rents for his comparable office leases of: (i) $24.73 to $30.49 for the 2009 tax 

year, with an average of $27.80; (ii) $20.52 to $30.49 for the 2010, 2011, and 2012 tax years, with 

an average of $25.47; (iii) $18.86 to $26.21 for the 2013, 2014, 2015, and 2016 tax years, with an 

average of $21.97; (iv) $19.34 to $27.41 for the 2017 tax year, with an average of $24.96; (v)

$18.35 to $27.11 for the 2018 tax year, with an average of $23.93; and (vi) $22.68 to $26.34 for 

the 2019 tax year, with an average of $24.99.15

Ultimately, OTR-MCC/Brookwood’s expert ascribed a market or economic rent to the 

subject property’s 529,362 square feet of leasable area of: (i) $27.00 per square foot for the 2009, 

13 As of the date of the May 5, 2017 date of his appraisal report. 

14

 OTR-MCC/Brookwood’s expert’s range and average includes five (5) leases identified for the 

2016 tax year. 

15

 OTR-MCC/Brookwood’s expert’s November 18, 2019 appraisal reports provide a rent range 

for each calendar year. However, OTR-MCC/Brookwood’s expert’s May 5, 2017 appraisal report 

does not provide a range for each calendar year, but rather provides a grouping of the 2010, 2011, 

and 2012 calendar years, and the 2013, 2014, 2015 and 2016 calendar years. 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

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2010, 2011, and 2012 tax years; (ii) $26.00 per square foot for the 2013 and 2014 tax years; and 

(iii) $25.00 per square foot for the 2015, 2016, 2017, 2018, and 2019 tax years. 

2. Parsippany’s expert 

In Parsippany’s expert’s opinion, Parsippany-Troy Hills “is a market unto its own,” thus, 

in formulating his opinion of the subject property’s economic or market rent, Parsippany’s expert

focused his analysis on the subject property leases and comparable leases within the ParsippanyTroy Hills office submarket. In Parsippany’s expert’s opinion, the office campus where the subject 

property is situated 

is the finest campus that Parsippany has, and this [the subject 

property] is the finest building of the four [buildings on the office 

campus] in the context of their quality, construction, and detail went 

into their constructions, the floors are granite, the walls are wood 

paneled sixteen-foot high, the doors are solid core with brass and 

nickel fixtures, . . . it’s an absolute beautiful building, which in large 

part is owing to the fact that their target market is Fortune 500 

companies, large users, so it’s as nice a building and, in my opinion, 

the nicest park that Parsippany has to date. 

Moreover, Parsippany’s expert further expressed that the subject property is “maintained 

impeccably” and “is our [Parsippany’s] best building,” within the Class A buildings in the 

Parsippany-Troy Hills submarket.

Parsippany’s expert further expressed that, in his opinion, the subject property leases offer 

the best indication of the subject property’s market or economic rent because they reflect actual 

lease agreements during the valuation periods at issue. Thus, in arriving at his economic or market 

rent conclusion, Parsippany’s expert attributed the greatest weight to the subject property leases.

In gauging the strength of the Parsippany-Troy Hills office submarket, Parsippany’s expert 

generated two CoStar reports for all classes of buildings in the Parsippany-Troy Hills office 

submarket and reviewed the net absorption rates and vacancy rates for the 2008 through 2018
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years. According to Parsippany’s expert, from 2008 to 2013, the Parsippany-Troy Hills Class A 

office submarket experienced steadily increasing vacancy rates, periods of negative net absorption, 

and thus, declining rental rates.

16

 However, in Parsippany’s expert’s opinion, because the 

Parsippany-Troy Hills Class A office submarket generally experienced positive net absorption 

from 2014 through 2018, along with declining vacancy rates, the Parsippany-Troy Hills submarket 

became stronger and experienced a corresponding increase in rental rates. 

Parsippany’s expert identified six subject property leases and seven comparable Class A 

office leases within the Parsippany-Troy Hills Class A office submarket that he opined were the 

most representative of the subject property’s economic or market rent. In grouping his comparable 

office leases, Parsippany’s expert employed: (i) four leases for the 2009, 2012, 2013, 2015, 2016, 

2017, 2018, and 2019 tax years; (ii) five leases for the 2010 and 2014 tax years; and (iii) six leases 

for the 2011 tax year. 

Unlike the approach adopted by OTR-MCC/Brookwood’s expert, in calculating the 

“effective” rent of his thirteen (13) Class A office leases, Parsippany’s expert testified that he 

calculated the rent over the initial term of the lease, ten-year lease, 

ten-year average; a five-year lease, is a five-year average, I don’t 

manipulate or change the terms, that methodology is the most 

widely accepted protocol in analyzing a lease, in my mind, . . . it is 

that marriage, it is that deal between the lessor and the lessee, it is 

an anticipation of debt service payment, . . . the bigger picture is in 

analyzing a rent you have to understand all the parties related to that, 

that a property is sold . . . based on an entire lease term, expectancy 

of revenue, and it’s financed on that basis and it’s sold on that basis, 

so I analyzed it on that basis, so to be consistent with the broader 

16 Absorption rate is defined as “[t]he rate at which properties for sale or lease have been or are 

expected to be successfully marketed, sold or leased in a given area over a duration of time.” The 

Dictionary of Real Estate Appraisal at 1. Thus, a negative net absorption rate would indicate that 

less space was leased than what was vacated/offered in the marketplace. Correspondingly, a 

positive net absorption rate would indicate that more space was leased than what was 

vacated/offered in the marketplace.
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picture of how investment grade [buildings are] transacted, there is 

much more going on than an interpretation, . . . capitalization rates 

are built on that expectancy, in my opinion . . . [it] is the full measure 

of what the investors can reasonably anticipate, not some formulate 

that . . . is not parallel to derivation of capitalization rates, the market 

standing, or the transactions. . . . 

Thus, Parsippany’s expert accounted for any financial or rent concessions and averaged the 

annual rent payable over the actual lease term, without consideration of the length of each lease. 

For example, if a comparably identified office lease bore a ten-year lease term with an initial rent 

of $20.00, stepping up $1.00 per square foot annually to $29.00 per square foot, Parsippany’s 

expert would apply a rent of $24.50 per square foot to the lease ($20 + $21 + $22 + $23 + $24 + 

$25 + $26 + $27 + $28 + $29 = $245/10 = $24.50), the average rent payable over the ten-year lease 

term (in contrast to OTR-MCC/Brookwood’s expert who considered only the first five years of 

the lease and whose “effective” rent would be computed to $22.00 per square foot). 

The unadjusted range of Parsippany’s expert’s thirteen lease rents were: (i) $25.21 to 

$29.60, for the 2009 tax year, with an average of $27.31; (ii) $25.21 to $36.76, for the 2010 tax 

year, with an average of $29.20; (iii) $25.21 to $36.76, for the 2011 tax year, with an average of 

$28.61; (iv) $25.69 to $36.76, for the 2012 tax year, with an average of $30.11; (v) $25.69 to 

$36.76, for the 2013 tax year, with an average of $31.14; (vi) $24.59 to $33.10, for the 2014 tax 

year, with an average of $28.56; (vii) $24.59 to $33.10, for the 2015, 2016, and 2017 tax years, 

with an average of $29.28; (viii) $25.59 to $33.10, for the 2018 tax years, with an average of 

$28.38; and (ix) $24.59 to $28.80, for the 2019 tax year, with an average of $26.57. 

Next, Parsippany’s expert applied adjustments to three of the comparable leases (ranging 

from -5% to 10%) to account for differences in lease type (net and gross versus modified gross). 

The range of adjusted rents for Parsippany’s expert’s thirteen comparable leases were: (i) $25.21 
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to $29.60, for the 2009 tax year, with an average of $27.94; (ii) $25.21 to $36.76, for the 2010 tax 

year, with an average of $29.70;17 (iii) $25.21 to $36.76, for the 2011 tax year, with an average of 

$29.04;18 (iv) $25.69 to $36.76, for the 2012 tax year, with an average of $30.12;

19 (v) $25.69 to 

$36.76, for the 2013 tax year, with an average of $31.14; 20 (vi) $25.69 to $33.10, for the 2014 tax 

year, with an average of $29.06;

21 (vii) $27.05 to $33.10, for the 2015, 2016, and 2017 tax years, 

with an average of $29.90;

22 (viii) $24.10 to $33.10, for the 2018 tax year, with an average of 

$28.67;23 and (ix) $24.10 to $28.80, for the 2019 tax year, with an average of $26.86. 

In arriving at his conclusion of economic or market rent, Parsippany’s expert placed the 

greatest weight on the subject property’s leases because, although all comparable leases were 

similarly located in Class A office buildings in the Parsippany-Troy Hills submarket, he viewed 

the subject property as the “best of the [Class] A” office buildings in the Parsippany-Troy Hills 

17 During cross-examination, Parsippany’s expert acknowledged that the adjusted rent for 

Improved Lease No. 5 should be $34.07 per square foot. Thus, the range of adjusted rents should 

have been $25.21 to $34.07, for the 2010 tax year, with an average of $29.17. 

18 During cross-examination, Parsippany’s expert acknowledged that the adjusted rent for 

Improved Lease No. 5 should be $34.07 per square foot. Thus, the range of adjusted rents should 

have been $25.21 to $34.07, for the 2011 tax year, with an average of $28.59. 

19 During cross-examination, Parsippany’s expert acknowledged that the adjusted rent for 

Improved Lease No. 5 should be $34.07 per square foot. Thus, the range of adjusted rents should 

have been $25.69 to $34.07, for the 2012 tax year, with an average of $29.44. 

20 During cross-examination, Parsippany’s expert acknowledged that the adjusted rent for 

Improved Lease No. 5 should be $34.07 per square foot, and the adjusted rent for Improved Lease 

No. 8 should be $29.88 per square foot. Thus, the range of adjusted rents should have been $25.69 

to $34.07, for the 2013 tax year, with an average of $29.66. 

21 During cross-examination, Parsippany’s expert acknowledged that the adjusted rent for 

Improved Lease No. 8 should be $29.88 per square foot. Thus, the range of adjusted rents should 

have been $25.69 to $30.44, for the 2014 tax year, with an average of $28.41. 

22 During cross-examination, Parsippany’s expert acknowledged that the adjusted rent for 

Improved Lease No. 8 should be $29.88 per square foot. Thus, the range of adjusted rents should 

have been $27.05 to $30.44, for the 2015, 2016, and 2017 tax years, with an average of $29.09. 

23 During cross-examination, Parsippany’s expert acknowledged that the adjusted rent for 

Improved Lease No. 8 should be $29.88 per square foot. Thus, the range of adjusted rents should 

have been $24.10 to $30.44, for the 2018 tax year, with an average of $27.87. 
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submarket. Ultimately, Parsippany’s expert ascribed a market or economic rent to the subject 

property’s 529,362 square feet of leasable area of: (i) $29.00 for the 2009, 2010, and 2011 tax 

years; and (ii) $28.00 for the 2012, 2013, 2014, 2015, 2016, 2017, 2018, and 2019 tax years. 

3. Court’s analysis

At the outset, the court emphasizes that it finds Parsippany’s expert’s testimony that the 

subject property is one of “the finest campus[es] that Parsippany has” to offer, and that the subject 

property is one of the premier Class A office buildings in the Parsippany-Troy Hills marketplace, 

to be credible. The photographic evidence and testimony of both experts revealed that the subject 

property possesses several striking physical attributes, amenities, and features that are unique and 

distinct from other Class A office buildings in the Parsippany-Troy Hills marketplace.

Moreover, the court finds the experts’ testimony that rent step-ups and financial/rent 

concessions were a staple of the Parsippany-Troy Hills Class A office submarket during the tax 

years at issue to be credible. However, the court finds that the methodology employed by both 

experts in calculating “effective” rent suffer from potential pitfalls that may materially impact the 

accuracy, and thus, the credibility of their economic or market rent conclusions. 

As expressed above, the income-capitalization approach is premised on the conversion of 

an anticipated stream of income into a present value. As cogently explained by Judge Crabtree, 

Value is created by the anticipation of future benefits. The value of

income-producing real estate is based on the income it will produce 

in the future. Failure to consider future income contradicts the 

principle of anticipation, i.e., the present worth of future benefits. 

The ultimate concern is the future, and while current income is a 

good starting point, the direction and expected rate of income 

change are critical to the capitalization of income as a valuation 

approach. 

Accordingly, where income changes are known, as is the case with 

step-up leases, those increases in income, to the extent they reflect 
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economic rent, should be reflected in the appraiser's estimate of the 

property's future income. The rationale for the step-up lease is

the landlord's willingness to accept smaller rent in the early years to

assist a tenant in establishing a new business or an old business in a 

new location. The step-up lease may also reflect the owner's 

recognition of tenant expenditures, which are, in effect, amortized

over the early years of the lease when rent payments are smaller.

[First Republic Corp. of Am.,16 N.J. Tax at 578 (internal citations

omitted) (emphasis added).] 

Effective rent is defined as “[t]he rental rate net of financial concessions such as periods of 

free rent during the lease term. . . .” The Appraisal of Real Estate, at 448. Although our courts 

have consistently found that “economic rent [must] reflect[] rent concessions, which are supported 

by comparable leases . . . as well as current leases in the subject property itself,” no rigid formula 

has been adopted delineating how “effective” rent should be calculated. Glen Pointe Associates 

v. Teaneck Twp., 10 N.J. Tax 506, 522 fn3 (Tax 1989), aff’d, 12 N.J. Tax 127 (App. Div. 1991). 

See also Shav Associates v. Middletown Twp., 11 N.J. Tax 569, 579 (Tax 1991) (concluding that 

“[i]t is necessary to consider rent concessions in arriving at economic rent”).

According to one treatise, effective rent “may be calculated in several different ways. It 

may be estimated based on rental income from existing leases at market rates and terms, or rental 

income from leases at market rates and terms, depending on the intended use of the appraisal.” 

Appraisal Institute, The Appraisal of Real Estate, 422 (15th ed. 2020). Therefore, pivotal to either 

method of calculating “effective” rent is the appraiser’s analysis of the marketplace. Only through 

the appraiser’s comprehensive analysis of the leases and marketplace data can he or she discern 

the anticipated income stream and future economic benefit that the property owner reasonably 

expects to derive. 

When the marketplace demands leases contain rent step-ups, rent concessions, or other 
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financial incentives, the valuation expert must account for these factors in attempting to discern 

the economic or market rent because they materially impact the anticipated income stream. Thus, 

the “effective” rent calculation is intended to serve as an analytical tool enabling appraisers to 

weigh, distinguish, differentiate, and reconcile lease terms, step-up provisions, and other financial 

concessions under comparable leases, to assist the appraiser in developing a credible economic or 

market rent. This analysis pays deference to the principal that under the income capitalization 

approach, the present value must account for the future economic benefits to be received by the 

property owner over the anticipated lease term. 

Accordingly, when undertaking an “effective” rent analysis, the valuation expert’s 

investigation must include: (i) an in-depth scrutiny of the comparable and competitive leases in 

the marketplace; (ii) data regarding the typical term of those leases to gauge the anticipated length 

of the income flow; (iii) what, if any, step-up rent is payable under the leases; (iv) an analysis of 

whether the step-up rent accurately reflects market or economic rent; and (v) what are typical and 

atypical financial or rent concessions in the marketplace.

Here, in arriving at his calculation of “effective” rent, OTR-MCC/Brookwood’s expert 

limited his consideration to the rent payable only during the first five years of each lease, without

consideration as to what the market dictated was the average length of Class A office leases in the 

Parsippany-Troy Hills submarket. Moreover, OTR-MCC/Brookwood’s expert testified that “what 

I’m trying to do is identify what’s an initial effective rent, . . .” However, ascertaining the “initial 

effective rent” and arbitrarily limiting the analysis to only the first five years of rent payable 

without consideration of what the marketplace dictates is the reasonable term of a Class A office 

lease, fails to adequately consider the anticipated revenue and the reasonable expectations of 

property owners of Class A office buildings in the Parsippany-Troy Hills submarket. In sum, 
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OTR-MCC/Brookwood’s expert offered no evidence either during trial or in his appraisal reports 

that the five-year period he utilized represented a benchmark for Class A office leases in the 

Parsippany-Troy Hills submarket. 

To the contrary, OTR-MCC/Brookwood’s expert acknowledged that “[a] lot of these 

[comparable] leases went beyond five years but it’s not proper to go too far into the future with 

averaging a rent.” Significantly however, OTR-MCC/Brookwood’s expert later expressed that for 

purposes of amortizing his tenant improvement allowance, a seven-year lease term should be 

applied because, in his opinion, seven years represented the typical length of Class A office leases 

in the northern New Jersey marketplace. Thus, despite opining that the typical length of a Class 

A office lease in the marketplace was seven years, OTR-MCC/Brookwood’s expert elected to 

apply an indiscriminate five-year period in calculating his “effective” rent. Accordingly, the court 

finds OTR-MCC/Brookwood’s expert’s consideration of only the first five years under each 

subject property lease and comparable lease for purposes of his “effective” rent calculation to be 

arbitrary, not appropriately derived from the marketplace, and unreliable. 

Similarly, the court finds Parsippany’s expert’s method of calculating the “effective” rent 

by averaging the rent over the entire lease term also unreliable. Parsippany’s expert seemingly 

gave no consideration to whether the proffered lease terms exceeded marketplace norms, offering 

no analysis of what the typical length of a Class A office lease was in the Parsippany-Troy Hills 

submarket during the periods at issue. Thus, the court questions whether the rent step-ups 

contained under those leases accurately reflected economic or market rent, or merely represented 

the property owner’s best guess of what economic or market rent may be fifteen or twenty years 

into the future. Averaging the rent payable in the twentieth year of a lease with the rent payable 

in the first year of a lease without consideration to whether the length of that lease is atypical in 
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the marketplace, will produce an inaccurate representation of the future return that a property 

owner reasonably anticipates from their investment. Accordingly, the court finds Parsippany’s 

expert’s formula for calculating “effective” rent over the entire term of the subject property leases 

and comparable leases unreliable.

Rather, the court finds that the calculation of “effective” rent must be harmonious and coexist with the appraisers’ review and analysis of data in the marketplace. For example, if the 

marketplace data discloses that Class A building property owners reasonably anticipate an income 

stream to be generated from their leases over ten years, with rent concessions and tenant 

improvement allowances amortized over that same ten-year period, then the “effective” rent 

calculation should account for the rent step-ups and financial or rent concessions afforded over the 

ten-year lease term. However, if the analysis of the marketplace data discloses that Class A 

building property owners reasonably anticipate a ten-year income stream, but the proposed 

comparable lease is for a term of twenty years, then averaging the rent over only the first five years 

or averaging the rent over the entire twenty-year term will artificially inflate or deflate the 

“effective” rent and, correspondingly, the concluded economic or market rent ascribed thereto. 

The court agrees with OTR-MCC/Brookwood’s expert’s conclusion that “you wouldn’t 

want to average a rent over a long period of time,” because that would afford equal weight to the 

rent payable during the first month of the lease as it would to rent payable in the one-hundred-andeightieth month under the lease. However, for substantially the same reasons that is why the 

calculation of “effective” rent must not be arbitrarily or blindly applied. The court finds that the 

calculation of “effective” rent herein should not be manipulated or affected by the appraisers’ 

artificial application of limited evaluation periods, or the selection of leases that are predominantly 

shorter or longer than the average term of Class A office leases in the marketplace. Rather, the 
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court concludes that the calculation of “effective” rent must be harmonious with the appraisers’ 

analysis of the marketplace data and what the reasonable expectations of Class A property owners 

are in the Parsippany-Troy Hills submarket.

Here, the court’s review of OTR-MCC/Brookwood’s expert’s forty-seven subject property 

leases and fifty comparable leases demonstrated the following average lease term: 

2009 2010 2011 to 2013 2014 to 2016 2017 to 2019

Subject property leases 74 months 79.92 months 65.33 months 82.5 months 76.5 months

Comparable leases 101 months 88.5 months 98.57 months 71.29 months 110.4 months

Moreover, the court’s review of Parsippany’s expert’s six subject property leases and seven 

comparable leases revealed an average lease term of 104.31 months.

The foregoing data demonstrates to the court that owners of Class A office buildings in the 

Parsippany-Troy Hills office submarket reasonably anticipated an income stream and amortization 

of financial concessions under their leases ranging from 65.33 months (6 years, 3 months) to 

110.40 months (9 years, 4 months), or between one to four years longer than the five-year formula 

applied by OTR-MCC/Brookwood’s expert in calculating his “effective” rent. 

Accordingly, the court finds that during all tax years at issue, property owners of Class A 

office buildings in the Parsippany-Troy Hills submarket reasonably anticipated an eight-year 

revenue stream and, correspondingly, would include rent step-ups and amortize financial/rent 

concessions, over the same eight-year time-period. Therefore, the court finds that the market data 

and evidence demonstrate that in calculating the “effective” rent, an eight-year period should be 

employed. 

However, because the trial record does not contain evidence of the step-up rent payable 

under OTR-MCC/Brookwood’s expert’s comparable office leases, the court is unable to determine 

the “effective” rent under those leases based on an eight-year calculation period. Moreover, the 
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court finds Parsippany’s expert’s seven comparable office leases to be unreliable.

24 Therefore, the 

court excludes from consideration OTR-MCC/Brookwood’s expert’s fifty non-subject property 

comparable leases and Parsippany’s expert’s seven non-subject property comparable leases in 

determining the subject property’s economic or market rent. 

Importantly, the court finds credible Parsippany’s expert’s conclusion that the subject 

property’s leases offer the best indication and evidence of the subject property’s economic or 

market rent for all tax years at issue. Here, OTR-MCC/Brookwood’s expert identified forty-seven 

subject property new and renewal leases executed between 2006 and 2018. In addition, 

Parsippany’s expert identified six subject property new and renewal leases entered between 2008 

and 2018. 

Therefore, the court finds that an abundance of credible market data exists in the trial record 

enabling the court to calculate the “effective” rent of the subject property leases over an eight-year 

period, and to arrive at a determination of the subject property’s economic or market rent. The 

court further emphasizes that consideration of only the subject property leases alleviates the need 

24 Parsippany’s expert’s Improved Lease No. 1 charged flat rent of $25.21 per square foot over 

the lease term and Improved Lease No. 5 charged flat rent of $36.76 per square foot over the lease 

term. However, Parsippany’s expert admitted during cross-examination that he failed to consider 

the impact of either below-market or above-market tenant improvement allowances. Because the 

court has no information regarding the tenant improvement allowances for these properties, the

court accords no weight to their rents in discerning the subject property’s economic or market rent. 

In addition, Parsippany’s expert’s Improved Lease No. 2, Improved Lease No. 10 and Improved 

Lease No. 11 were “Net” and “Gross” lease arrangements, requiring adjustments to account for 

the different lease types. However, effective cross-examination disclosed that with respect to 

Improved Lease No. 10, Parsippany’s expert’s adjustments did not accurately account for 

differences between a modified gross lease and net lease. Moreover, effective cross-examination 

further disclosed that with respect to Improved Lease No. 11, the tenant was responsible for certain 

operating costs, shell rent, and tenant improvement rent, not accounted for by Parsippany’s expert. 

Accordingly, the court accords no weight to Parsippany’s expert’s Improved Lease No. 10 and 

Improved Lease No. 11 in discerning the subject property’s economic or market rent.
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to attempt to quantify and apply adjustments to account for differing lease types, varying lease 

terms, or economic conditions that may or may not have played a role in the rents payable 

thereunder. 

The court’s review and analysis of the “effective” rent of the subject property’s forty-seven 

new and renewal leases, based on an average eight-year term, disclosed the following: 25 (i) for the 

2009 and 2010 tax years, the “effective” rent for the thirteen leases, including financial/rent 

concessions, ranged from $26.00 to $32.00 per square foot, with a mean of $28.16;26 (ii) for the 

2011, 2012, and 2013 tax years, the “effective” rent for the twelve leases, including financial/rent 

concessions, ranged from $21.53 to $28.75 per square foot, with a mean of $26.16;27 (iii) for the 

2014, 2015, and 2016 tax years, the “effective” rent for the eleven leases, including financial/rent 

concessions, ranged from $25.72 to $29.71 per square foot, with a mean of $27.25;28 and (iv) for 

the 2017, 2018, and 2019 tax years, the “effective” rent for the eleven leases, including 

financial/rent concessions, ranged from $26.10 to $28.74 per square foot, with a mean of $26.75.29 

The court highlights that the subject property’s leases experienced the steepest decline in rental 

rates in 2011, 2012, and 2013. However, as credibly testified by Parsippany’s expert, vacancy 

rates began to subside and the subject property’s economic or market rents began to experience a 

rebound with the improving economy. 

Accordingly, the court finds that the subject property should be ascribed a market or 

25

 To calculate the “effective” rent on the eight-year average lease term, the court reviewed OTRMCC/Brookwood’s expert’s appraisal reports (Leased Status of Property) and the addendum 

thereto containing the subject property rent rolls. In addition, the court reviewed the addendum to 

Parsippany’s expert’s appraisal report containing the subject property’s rent rolls. 

26 Leases executed between 9/1/2006 to 11/24/2008. 

27 Leases executed between 12/17/2009 to 1/1/2012. 

28

 Leases executed between 2/15/2013 to 9/1/2015. 

29 Leases executed between 1/1/2017 to 12/1/2018. 
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economic rent of: (i) $28.00 for the 2009 and 2010 tax years; (ii) $26.25 for the 2011, 2012, and 

2013 tax years; (iii) $27.25 for the 2014, 2015, and 2016 tax years; and (iv) $27.00 for the 2017, 

2018, and 2019 tax years. 

B. Tenant electricity

The subject property is leased on a modified gross basis, plus tenant electric basis. Thus, 

OTR-MCC/Brookwood is responsible for the operating expenses of the subject property except 

for tenant electric. Each tenant pays or reimburses OTR-MCC/Brookwood for their electricity 

expenses on a per square foot basis. 

Here, the experts agreed that the market rate of reimbursed tenant electricity was $1.50 per 

square foot for all tax years. However, they applied the reimbursed tenant electricity on their 

reconstructed operating statements in different manners. 

OTR-MCC/Brookwood’s expert deducted $1.50 per square foot from his concluded 

stabilized utility expense to account for the offsetting tenant reimbursed electricity that would be 

paid to the property owner. For example, if the stabilized utility expense for the subject property 

was $3.00 per square foot, OTR-MCC/Brookwood’s expert deducted reimbursed tenant electricity 

of $1.50 per square foot to arrive at a net stabilized utility expense of $1.50 per square foot ($3.00 

- $1.50 = $1.50 net stabilized utility expense). Conversely, Parsippany’s expert added $1.50 per 

square foot of tenant reimbursed electricity income in deriving the subject property’s potential 

gross income. Accordingly, Parsippany’s expert made no adjustment to his stabilized utility 

expense to account for the reimbursed tenant electricity. 

The court’s research discloses that both methods of characterizing tenant reimbursed 

electricity are appropriate, and that the choice of approach is purely stylistic. Accordingly, for 

purposes of simplicity and clarity in generating the reconstructed operating statements, the court 
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will deduct from its concluded stabilized utility expense the reimbursed tenant electricity of $1.50 

per square foot, thereby producing a net stabilized utility expense. 

C. Vacancy and Collection Loss

In arriving at his vacancy and collection loss rates, OTR-MCC/Brookwood’s expert

consulted REIS Office Market Reports publications, reviewed the subject property’s vacancy rates, 

surveyed vacancy rates from a “Peer Group” of office buildings in the Parsippany-Troy Hills 

submarket he assembled, and reviewed CoStar office reports. 

First, OTR-MCC/Brookwood’s expert reviewed the REIS Office Market Reports which 

revealed that absorption was negative in 2009, 2010, 2012, 2016, and 2017, reflecting a declining 

market, but positive in 2011, 2013, 2015, and 2018, reflecting an improving market. According 

to OTR-MCC/Brookwood’s expert, the REIS Office Market Reports further revealed vacancy 

rates for Class A office buildings in the Parsippany-Troy Hills submarket ranged from 17.11% to 

30.03% during the tax years at issue. 

Next, OTR-MCC/Brookwood’s expert reviewed the subject property’s vacancy rates, 

concluding that the subject property experienced vacancy rates between 17.96% to 36.10%, with 

an average of 27.37%, from 2007 to 2018. In OTR-MCC/Brookwood’s expert’s opinion, the 

subject property has experienced “unusually high vacancy” rates in the market. 

OTR-MCC/Brookwood’s expert then identified a “Peer Group (Competitive Set)” of 

thirty-one Class A multi-tenanted office buildings in the Parsippany-Troy Hills office submarket. 

According to OTR-MCC/Brookwood’s expert, those buildings reported vacancy rates averaging: 

(i) 21.70% for the 2009 tax year; (ii) 25% for the 2010 tax year; (iii) 23.2% for the 2011 tax year; 

(iv) 23.6% for the 2012 tax year; (v) 23.2% for the 2013 tax year; (vi) 26.7% for the 2014 tax year; 

(vii) 26.4% for the 2015 tax year; (viii) 25% for the 2016 tax year; (ix) 28.95% for the 2017 tax 
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year; (x) 32.91% for the 2018 tax year; and (xi) 28.47% for the 2019 tax year. 

In arriving at his vacancy and collection loss rates, OTR-MCC/Brookwood’s expert

particularly focused on the vacancy rates of eight office buildings in the Morris Corporate Center, 

adjacent to the subject property, including Morris Corporate Center III (400 Interpace Parkway, 

Buildings A, B, C, & D) and Morris Corporate Center IV (369-379-389-399 Interpace Parkway). 

The vacancy rates for those eight buildings ranged from: (i) 0% to 88.20%, with a median of 32.4% 

and mean of 39.34%, for the 2009 tax year; (ii) 0% to 90.3%, with a median of 30.9% and mean 

of 42.4%, for the 2010 tax year; (iii) 0% to 90.3%, with a median of 26.5% and mean of 39.2%, 

for the 2011 tax year; (iv) 0% to 86.5%, with a median of 24.3% and mean of 38.6%, for the 2012 

tax year; (v) 0% to 86.5%, with a median of 24.3% and mean of 38.6%, for the 2013 tax year; (vi) 

0% to 95.1%, with a median of 18.65% and mean of 38.5%, for the 2014 tax year; (vii) 0% to 

95.1%, with a median of 13.8% and mean of 35.1%, for the 2015 tax year; (viii) 0% to 100%, with 

a median of 22.9% and mean of 36.91%, for the 2017 tax year; (ix) 0% to 100%, with a median of 

42.4% and mean of 47.36%, for the 2018 tax year; and (x) 0% to 100%, with a median of 12.4% 

and mean of 31.89%, for the 2019 tax year.30

Finally, OTR-MCC/Brookwood’s expert testified that he also considered CoStar office 

reports for the Parsippany-Troy Hills office submarket which includes Boonton, Cedar Knolls, 

Lake Hiawatha, Montville, Morris Plains, Mountain Lakes, Parsippany, Pine Brook, Towaco, and 

Whippany. According to OTR-MCC/Brookwood’s expert, the CoStar office reports revealed 

vacancy rates for all building classes of 14.6% to 25.9% during the tax years at issue. 

30

 Although OTR-MCC/Brookwood’s expert’s report (Exhibits P-1(b) and P-3) state that the “Peer 

Group (Competitive Set)” is for the “2010-2016 Tax Years,” he included only six years of data 

(3rd Quarters 2009 to 2014) and did not include the 3rd Quarter 2015 data, which would encompass 

the 2016 tax year. 
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In OTR-MCC/Brookwood’s expert’s opinion, the Parsippany-Troy Hills office submarket

was “weak” during all tax years at issue. Therefore, he concluded that a vacancy and collection 

loss allowance of 25% should be applied to the subject property’s potential gross income for the 

2009, 2010, 2011, 2012, 2013, 2014, 2015, and 2016 tax years; and a vacancy allowance of 30% 

should be applied to the subject property’s potential gross income for the 2017, 2018, and 2019 

tax years.

Similarly, in arriving at his vacancy and collection loss rates, Parsippany’s expert 

assembled and analyzed two CoStar building vacancy reports, reviewed the subject property’s rent 

rolls and “operational history,” including its reported vacancy rates, and consulted Cushman & 

Wakefield’s Marketbeat Northern New Jersey Office reports.

Parsippany’s expert’s first CoStar building vacancy report examined what he termed as the 

“gross inventory” in the Parsippany-Troy Hills office submarket during each tax year. This report 

comprised 394 to 409 office buildings in the Parsippany-Troy Hills submarket, composed of all

office building classes, and 19,974,530 to 21,749,067 square feet of office space. According to 

Parsippany’s expert, this report revealed vacancy rates for all office building classes ranged from 

15.7% to 22.5% during the tax years at issue. 

In Parsippany’s expert’s opinion, “structural changes in the economy” were being 

experienced due to the 2008 recession, resulting in a conspicuous increase in office building 

availability and vacancy rates from 2009 to 2013. However, according to Parsippany’s expert, 

office building availability and vacancy rates peaked by mid-year 2013 and, as market conditions 

improved, there was a pronounced decline in vacancy rates in the ensuing years because “the 

market was adjusting.” 

Parsippany’s expert’s second CoStar building vacancy report examined the vacancy rates 
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of between 282 to 290 office buildings located within a 3-mile radius of the subject property, 

including Parsippany, Morris Plains, portions of Denville, and Mountain Lakes. This report again 

included all office building classes and comprised between 16,322,739 to 17,206,063 square feet 

of office space. In Parsippany’s expert’s opinion, the 3-mile radius represents the geographical 

boundaries that a prospective tenant will select in attempting to locate a suitable property. 

According to Parsippany’s expert, the second CoStar report revealed vacancy rates within a 3-mile 

radius of the subject property ranging from 17.4% to 22.7% during the tax years at issue. 

Additionally, Parsippany’s expert review of the subject property’s rent rolls and 

“operational history” disclosed that the subject property experienced vacancy rates ranging from 

16.97% to 36.10%, and averaging 25.47%, from 2008 to 2018. 

Finally, Parsippany’s expert consulted and analyzed Cushman & Wakefield’s Marketbeat 

Northern New Jersey Office reports. His review of that publication disclosed that of the 

approximately 12,187,171 to 13,011,532 square feet of office space in the Parsippany-Troy Hills 

submarket surveyed by Cushman & Wakefield, the direct vacancy rates ranged from 15.6% to

23.9%, and the overall vacancy rates ranged from 20.8% to 28.1% for all office building classes

for the 2010 to 2018 tax years.31

Accordingly, in Parsippany’s expert’s opinion, a vacancy and collection loss allowance of 

15% should be applied to the subject property’s potential gross income for all tax years at issue. 

The court recognizes that OTR-MCC/Brookwood’s expert concluded that the eight Class 

A buildings comprising the Morris Corporate Center office park offered the most meaningful 

31 According to Parsippany’s expert, the direct vacancy rate represents office space that was

physically vacant and available for lease, and the overall vacancy rate represents occupied office 

space being marketed for lease at later time.
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insight on the issue of the subject property’s vacancy and collection loss. However, the court

emphasizes that its own review of that data discloses notable anomalies exist, resulting in great 

variation between the reported vacancy rates for those eight buildings, from 0% to 100%, during 

the tax years at issue. For example, Morris Corporate Center III - Building A, comprising 114,984 

square feet, experienced a vacancy rate of approximately 89% for the 2009, 2010, and 2011 tax 

years, but thereafter experienced a 0% vacancy rate for the 2012, 2013, 2014, 2015, 2017, 2018, 

and 2019 tax years. Similarly, the data reveals that Morris Corporate Center III - Building B, 

comprising 151,950 square feet, experienced a vacancy rate of 0% for the 2009, 2010, 2011, 2012, 

2013, 2014, 2015, 2017, and 2019 tax years, however reported a 79.8% vacancy rate for the 2018 

tax year. Moreover, Morris Corporate Center IV – 369 Interpace Parkway, comprising 188,021 

square feet, reported vacancy rates of 76.9% to 100% during all tax years at issue. These wide 

disparities may be attributable to what Parsippany’s expert explained was the loss of their “target 

market” tenants, a single, large-scale user of the property. However, these wide variations and 

inconsistencies may also be attributable to other factors such as the disparate ages of the buildings, 

the condition of the buildings, or the quality of the management.

32 Without an adequate 

understanding of what role, if any, these factors played in the vacancy rates of the other office 

buildings in the Morris Corporate Center campus, the court cannot say that their vacancy rates 

offer meaningful evidence of the subject property’s vacancy and collection loss rates. 

Accordingly, after thoroughly considering the experts’ testimony and reviewing the data

presented, the court concludes that the following stabilized vacancy and collection loss allowances 

32 According to OTR-MCC/Brookwood’s expert, the subject property was constructed in 1986 

and Morris Corporate Center III, Buildings A, B, C, and D were constructed in 1990, four years 

after the subject property. Conversely, construction of Morris Corporate Center IV was completed 

in 1999 and 2000, approximately thirteen to fourteen years after the subject property. 
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should be applied: (i) eighteen (18%) percent, for the 2009 and 2010 tax years; (ii) twenty-two

(22%) percent, for the 2011, 2012, 2013, 2014, 2015, and 2016 tax years; and (iii) twenty percent 

(20%), for the 2017, 2018, and 2019 tax years. The court finds that the foregoing vacancy and 

collection loss rates recognize, as Parsippany’s expert credibly testified, the impact of the 2008 

recession and the “structural changes” being experienced in the Parsippany-Troy Hills office 

submarket. As office leases expired in 2009, 2010, and 2011, more and more of those spaces often 

became vacant, correspondingly causing economic and market rents to decline. As our country 

emerged from the recession, vacancy rates began to decline, and economic and market rents began 

to rise. As the graph contained in Parsippany’s expert’s appraisal report demonstrates, vacancy 

rates in the Parsippany-Troy Hills submarket saw their most pronounced increased from 2010 into 

2011, peaking in mid-2013 before slowly declining and plateauing in late 2016. 

D. Stabilized expenses

Once economic or market rent, potential gross income, tenant reimbursed electricity, and 

the vacancy and collection loss rates have been determined, the next step under the income 

capitalization approach is discerning the stabilized expenses to be deducted from the effective 

gross income. 

OTR-MCC/Brookwoo d’s expert and Parsippany’s expert agreed that a stabilized leasing 

commission expense of 5% of effective gross income was appropriate. The court finds the experts’ 

opinions that a leasing commission expense of 5% of effective gross income is reasonable and 

supported by the evidence. 

1. OTR-MCC/Brookwood’s expert 

To determine the stabilized operating expenses to be applied to the subject property’s 

effective gross income, OTR-MCC/Brookwood’s expert reviewed the subject property’s historical 
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operating expenses, building expense data from several comparable office buildings located 

throughout northern New Jersey,

33 and industry publications (Building Owners and Managers 

Association).34

According to OTR-MCC/Brookwood’s expert, the subject property experienced: (i) 

insurance expenses of $0.12 to $0.31 per square foot; (ii) utility expenses (net) of $0.00 to $1.54 

per square foot; (iii) repair and maintenance expenses of $2.22 to $3.79 per square foot; (iv) 

cleaning and janitorial expenses of $0.77 to $1.46 per square foot; and (v) general/administrative 

expenses of $0.02 to $0.87 per square foot, during all tax years at issue. 

Moreover, OTR-MCC/Brookwood’s expert’s review of the comparable northern New 

Jersey office buildings disclosed: (i) insurance expenses from $0.10 to $0.55 per square foot; (ii) 

utility expenses (net) of $0.58 to $3.22 per square foot; (iii) repair and maintenance expenses of 

$1.57 to $3.83 per square foot; (iv) cleaning and janitorial expenses of $0.77 to $1.99 per square 

foot; and (v) general/administrative expenses of $0.00 to $1.29 per square foot, during all tax years 

at issue. 

Further, OTR-MCC/Brookwood’s expert’s review of BOMA’s Experience Exchange 

Report for the Morristown, New Jersey market disclosed: (i) insurance expenses averaged $0.17 

to $0.42 per square foot; (ii) utility expenses (gross) averaged $1.47 to $2.77 per square foot; (iii) 

repair and maintenance expenses averaged $2.17 to $3.68 per square foot; (iv) cleaning and 

janitorial expenses averaged $1.07 to $1.85 per square foot; and (v) general/administrative 

33 Approximately twenty-five to twenty-six office buildings. 

34 The court highlights that although OTR-MCC/Brookwood’s expert’s appraisal reports 

summarized what he opined were the average and median expenses reported each year under the 

BOMA reports, the BOMA reports included in the addendum to the appraisal reports were 

illegible. Therefore, the court was unable to independently verify the accuracy and integrity of the 

reported information. 
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expenses averaged $0.66 to $1.32 per square foot, during all tax years at issue. 

After reviewing the foregoing data, OTR-MCC/Brookwood’s expert concluded that the 

following stabilized expenses should be applied: (i) a general administrative fee of $0.50 per 

square foot; (ii) a management fee of 3% of effective gross income; (iii) a utility expense (net) of 

$1.00 to $1.50 per square foot; (iv) structural/replacement reserves of 1% of effective gross 

income; (v) insurance expenses of $0.25 to $0.30 per square foot; (vi) repair and maintenance 

expenses of $2.75 to $3.00 per square foot; and (vii) cleaning/janitorial expenses of $1.15 to $1.30 

per square foot, during the tax years at issue. 

2. Parsippany’s expert 

To determine his stabilized operating expenses, Parsippany’s expert similarly reviewed the 

subject property’s historical operating expenses and building expense data from three Class A 

office buildings within the Parsippany-Troy Hills submarket. 

According to Parsippany’s expert, the subject property experienced: (i) insurance expenses 

of $0.00 to $0.31 per square foot; (ii) utility expenses (gross) of $0.00 to $4.41 per square foot; 

(iii) repair and maintenance expenses of $1.65 to $8.09 per square foot; (iv) management expenses 

of $0.00 to $0.38 per square foot; and (v) general/administrative expenses of $0.03 to $1.21 per 

square foot, during all tax years at issue. In Parsippany’s expert’s opinion, the cleaning and 

janitorial expense should be included under the repair and maintenance category. 

Moreover, Parsippany’s expert’s review of the operating expenses of the three Class A 

office buildings in the Parsippany-Troy Hills submarket disclosed: (i) insurance expenses from 

$0.23 to $0.42 per square foot; (ii) utility expenses (gross) of $2.45 to $3.82 per square foot; (iii) 

repair and maintenance expenses (gross) of $2.48 to $4.07 per square foot; (iv) 
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general/administrative expenses (including professional fees) of $0.59 to $0.82 per square foot;

35

and (v) management fee expenses of $0.38 to $0.92 per square foot, during all tax years at issue. 

After reviewing the foregoing data, Parsippany’s expert concluded that: (i) an

administration/management fee of 5% of effective gross income; (ii) utility expenses (gross) of 

$3.00 per square foot; (iii) structural/replacement reserves of $0.35 per square foot; (iv) insurance 

expenses of $0.20 per square foot; and (v) repair and maintenance expenses of $2.50 per square 

foot should be applied to the subject property’s effective gross income, during all tax years at issue.

3. Court’s analysis

After considering the experts’ testimony and the evidence presented in these matters, and 

analyzing the subject property’s historical operating expenses, the court finds that the following 

stabilized expenses should be attributable to the subject property: (i) an insurance expense of $0.21 

per square foot; (ii) utility expenses (net of tenant reimbursed electricity) of $1.50 per square foot; 

(iii) cleaning and janitorial expenses of $1.25 per square foot; (iv) repair and maintenance expenses 

of $2.25 per square foot; (v) management and general administrative expenses of 5% of effective 

gross income; and (vi) replacement reserves of 1% of effective gross income, during all tax years. 

Here, the evidence disclosed that the subject property has traditionally incurred insurance 

expenses ranging from $0.13 to $0.31 during the tax years at issue, with an average insurance 

expense of approximately $0.21 per square foot. Moreover, the court’s examination of the 

insurance expenses of the comparable buildings within the Parsippany-Troy Hills and Morris 

County office market identified by OTR-MCC/Brookwood’s expert, disclose an insurance 

expense range of $0.13 to $0.41, with an average of $0.22. Accordingly, the court finds that a 

35

 No general/administrative expenses were reported for Parsippany’s expert’s comparable office 

building at 7 Century Drive, Parsippany, New Jersey. 
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stabilized insurance expense of $0.21 per square foot is reasonable and supported by the market 

data.

The court highlights that the experts’ restatement of the subject property’s historical utility 

expenses (net of tenant reimbursed electricity) is disparate. According to OTRMCC/Brookwood’s expert, the utility expenses (net of tenant reimbursed electricity) ranged from 

$0.02 to $1.54 during the tax years at issue, with an average of approximately $0.64 per square 

foot. Conversely, Parsippany’s expert expressed that the utility expenses (net of tenant reimbursed 

electricity) ranged from $0.21 to $2.91 during the tax years at issue, with an average of 

approximately $1.87 per square foot. Because the court cannot accurately reconcile these 

disparities, the court places no weight on the subject property’s historical utility expenses. Rather,

the court places the greatest weight and emphasis on the utility expenses of the comparable office 

buildings in the Parsippany-Troy Hills and Morris County office markets that were identified by 

the experts. The court’s review of the data offered by OTR-MCC/Brookwood’s expert discloses 

a utility expense range (net of $1.50 tenant reimbursed electricity) of $0.58 to $2.12, with an 

average of $1.30. Moreover, the court’s review of the data from Parsippany’s expert reveals a 

utility expense range (net of $1.50 tenant reimbursed electricity) of $0.95 to $2.32, with an average 

of approximately $1.40 per square foot. Moreover, the court’s review of the BOMA national data 

(averaging all tax years at issue), disclosed an average utility expense of $2.04. Accordingly, the 

court finds that a stabilized utility expense of $1.50 per square foot (net of $1.50 tenant reimbursed 

electricity), for all tax years at issue, is reasonable and supported by the market data. 

The principal difference between the experts’ opinions and calculations of the stabilized 

repair and maintenance expenses and cleaning and janitorial expenses centers around whether 

cleaning and janitorial expenses should be included or excluded from the repair and maintenance 
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expenses. In OTR-MCC/Brookwood’s expert’s opinion, the cleaning and janitorial expenses 

should be segregated from the repair and maintenance expenses and afforded its own expense 

category on the reconstructed operating statement. Conversely, in Parsippany’s expert’s opinion, 

the stabilized repair and maintenance expenses include “all repairs and maintenance, annual 

service contracts, [and] ground care costs” associated with the property. Thus, he concluded that 

cleaning and janitorial services do not need to be afforded a separate stabilized entry on the 

reconstructed operating statements.

Although the court recognizes that cleaning and janitorial expenses may constitute a 

subcategory of the larger repair and maintenance expenses category, the court could not identify 

any legal precedent or standard that requires cleaning and janitorial services be included or 

excluded from the repair and maintenance expenses category. Rather, the inclusion of cleaning 

and janitorial expenses under the repair and maintenance expenses category, or the itemization of 

cleaning and janitorial expenses as a separate expense line item, is purely stylistic. However, the 

court emphasizes that when cleaning and janitorial expenses are to be itemized separately from 

repair and maintenance expenses, it is imperative that the appraiser have knowledge about whether 

the reported repair and maintenance expenses include or exclude the cleaning and janitorial 

expenses, to ensure that a proper comparison is made between the comparable properties and 

published market data. 

Here, the court’s review of the subject property’s historical income and expense statements, 

contained in the addendum to OTR-MCC/Brookwood’s expert’s appraisal reports (pages 60 to 

106), reveals that the subject property has segregated and historically incurred unreimbursed 

cleaning and janitorial expenses. Those cleaning and janitorial expenses ranged from $1.02 to 

$1.46 during the 2008 to 2013 tax years, with an average of approximately $1.27 per square foot; 
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and ranged from $0.77 to $1.47 during the 2014 to 2018 tax years, with an average of 

approximately $1.18 per square foot. Moreover, the court’s examination of the cleaning and 

janitorial expenses of the comparable office buildings in the Parsippany-Troy Hills and Morris 

County office market identified by OTR-MCC/Brookwood’s expert disclosed a cleaning and 

janitorial expense range of $0.65 to $2.03 per square foot, with an average of $1.33 per square 

foot. 

After reviewing the foregoing information offered by OTR-MCC/Brookwood’s expert and 

Parsippany’s expert, the court finds that market data supports the conclusion that a stabilized 

cleaning and janitorial expense of $1.25 per square foot is reasonable and should be applied for all 

tax years under appeal.

Turning to the larger category of repair and maintenance expenses, the court’s review of 

the expense statements for the three comparable Parsippany-Troy Hills office buildings identified 

by Parsippany’s expert demonstrates maintenance and repair expenses (net of a $1.25 cleaning and 

janitorial expense) ranged from $1.23 to $2.82 per square foot, with an average of $1.73 per square 

foot.36 Conversely, the court’s review of OTR-MCC/Brookwood’s expert’s comparable office 

buildings in the Parsippany and Morris County markets demonstrates that maintenance and repair 

expenses ranged from $1.78 to $4.10 per square foot, with an average of $2.57 per square foot.37 

Accordingly, the court finds that a stabilized repair and maintenance expense (net of $1.25 cleaning 

36

 Because Parsippany’s expert classified cleaning and janitorial expenses as part of repair and 

maintenance expenses, it was necessary for the court to deduct from Parsippany’s expert’s 

proffered repair and maintenance expenses the court’s concluded $1.25 cleaning and janitorial 

expenses. 

37 The court highlights that excluding the 200 Kimball Drive, Parsippany comparable property, 

whose expenses generally were the highest of those within the Morris County market surveyed by 

OTR-MCC/Brookwood’s expert, the average repair and maintenance expenses were $2.35 per 

square foot. 
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and janitorial expenses) of $2.25 per square foot is reasonable and supported by the market data

for all tax years. 

The principal difference between the experts’ opinion and calculation of management fees 

centers around whether general and administrative expenses should be included in the management 

fee or segregated from the management fee. In OTR-MCC/Brookwood’s expert’s opinion, general 

and administrative expenses are separate and distinct from management fees and should be 

afforded a separate stabilized expense deduction. Accordingly, OTR-MCC/Brookwood’s expert 

stabilized general and administrative expenses at $0.50 per square foot and stabilized management 

fees at 3% of effective gross income. Conversely, in Parsippany’s expert’s opinion, general and 

administrative expenses should be included as a subcategory of the management expenses. 

Accordingly, Parsippany’s expert deducted management expenses of 5% of effective gross 

income.

OTR-MCC/Brookwood’s expert provided management expenses from several other 

properties in northern New Jersey. The court’s review of the management expenses of the office 

buildings within the Parsippany-Troy Hills and Morris County markets disclose a range of 

management expenses of 2.33% to 3.13%, with an average management expense of 2.95% of 

effective gross income, excluding administrative expenses. Conversely, Parsippany’s expert 

offered evidence of management fees from three multi-tenanted Class A buildings in the 

Parsippany-Troy Hills submarket disclosing management/administrative/other expenses ranging 

from $0.95 to $1.36 per square foot, with an average management/administrative/other expense of 

approximately $1.10 per square foot. 

Here, the court finds Parsippany’s expert’s testimony more credible and reasonable on the 

issue, that general and administrative costs are incurred and associated with the management and 
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operation of a Class A multi-tenanted office building in the Parsippany-Troy Hills submarket. 

Therefore, they should be encompassed in the stabilized management expenses of the subject 

property. Accordingly, the court will apply a stabilized management expense of 5% of the 

effective gross income and will not separately itemize a general and administrative expense. 

Finally, OTR-MCC/Brookwood’s expert stabilized replacement reserves at 1% of effective 

gross income, or, based on his calculated effective gross income, approximately $0.18 to $0.20 per 

square foot. Conversely, Parsippany’s expert stabilized replacement reserves at $0.35 per square 

foot, or approximately 1.35% to 1.4% of his calculated effective gross income. The court finds 

OTR-MCC/Brookwood’s testimony more reasonable and credible on this issue. Accordingly, the 

court will apply a stabilized replacement reserve expense of 1% of effective gross income.

E. Tenant improvement allowance

“In certain real estate markets, space is rented to a new tenant only after substantial interior 

improvements are made.” Hull Junction Holding Corp., 16 N.J. Tax at 106 (quoting Appraisal 

Institute, The Appraisal of Real Estate, 450 (10th ed. 1992)). When these improvements are 

incurred at the landlord’s expense and are necessary to realize market rent, they are referred to as 

tenant improvement allowances. The cost of the tenant improvement allowance is often built into 

the rental rate and amortized by the landlord over the lease term. The Appraisal of Real Estate, at 

474 (14th ed. 2013). 

In the opinion of both experts, tenant improvement allowances are an annually reoccurring 

expense for owners of Class A multi-tenanted office buildings in the Parsippany-Troy Hills 

submarket. Accordingly, each expert calculated a stabilized tenant improvement allowance and 

deducted such amount from the subject property’s effective gross income. 

To compute his tenant improvement allowance, OTR-MCC/Brookwood’s expert examined 
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the subject property’s new and renewal leases; new and renewal leases for ten comparable 

properties for the 2009 tax year; new and renewal lease for twenty comparable properties for the 

2010 to 2016 tax years; and new and renewal leases for twenty comparable properties for the 2017 

to 2019 tax years; market participant surveys; and survey data promulgated by PwC of the National 

Suburban Office Market. 

Significantly, after analyzing the subject property leases and comparable leases, OTRMCC/Brookwood’s expert opined that Class A offices in the Parsippany-Troy Hills submarket 

lease for a “typical 84-month term.”38 Thus, OTR-MCC/Brookwood’s expert concluded that a 

seven-year amortization term should be applied in computing the tenant improvement allowance. 

OTR-MCC/Brookwood’s expert’s examination disclosed the following range of tenant 

improvement allowances in the marketplace: 

Tax years Lease type Subject property Comparable 

properties

Market 

participants

Korpacz/PwC

2009 New leases $1.00 to $34.14, 

$12.68 avg.

$15.00 to $36.55, 

$24.57 avg.

$20.00 to 

$30.00

$0.00 to $50.00, 

$22.98 avg.

Renewal leases $9.54 to $16.00, 

$12.68 avg.

$25.00 to $30.00, 

$23.13 avg.

$0.00 to 

$10.00

$0.00 to $20.00, 

$8.50 avg.

2010-

2016

New leases $1.00 to $45.13, 

$25.06 avg.

$20.00 to $66.78, 

$34.38 avg.

$20.00 to 

$30.00

$0.00 to $80.00, 

$28.93 to $31.96 avg.

Renewal leases $0.00 to $45.00, 

$10.93 avg.

$1.93 to $20.00, 

$10.66 avg.

$0.00 to 

$10.00

$0.00 to $25.00, 

$11.86 to $13.93 avg.

2017-

2019

New leases $5.00 to $55.00, 

$35.58 avg.

$25.00 to $70.16, 

$46.53 avg.

$30.00 to 

$50.00

$0.00 to $100.00, 

$31.25 to $39.58 avg.

Renewal leases $5.00 to $50.00, 

$17.85 avg.

$6.11 to $15.00, 

$11.07 avg.

$10.00 to 

$20.00

$0.00 to $40.00, 

$13.57 to $17.92 avg.

After reviewing the above information, OTR-MCC/Brookwood’s expert concluded the 

following tenant improvement allowances: (i) $30.00 per square foot for new leases and $10.00 

38 For the 2009 tax year, the comparable new leases average term were 103 months; and the 

comparable renewal leases average term were 97 months. For the 2010 to 2016 tax years, the 

comparable new leases average term were 89 months; and the comparable renewal leases average 

term were 67 months. For the 2017 to 2019 tax years, the comparable new leases average term 

were 120 months; and the comparable renewal leases average term were 67 months. 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 42 

per square foot for renewal leases for the 2009 to 2016 tax years; and (ii) $35.00 per square foot 

for new leases and $15.00 per square foot for renewal leases for the 2017 to 2019 tax years. 

Next, because a combination of new and existing tenants each receive improvement 

allowances, OTR-MCC/Brookwood’s expert endeavored to ascertain the probability of lease 

renewals in the marketplace. He examined PwC surveys of the National Suburban Office Market

disclosing a renewal probability range of: (i) 65% to 75% for the 2009 tax year; (ii) 50% to 70% 

for the 2010 tax year; (iii) 50% to 75% for the 2011 to 2016 tax years; (iv) 50% to 75% for the 

2017 tax year; and (v) 50% to 70% for the 2017 and 2018 tax years. Accordingly, OTRMCC/Brookwood’s expert assumed a 40% renewal probability for new leases and a 60% renewal 

probability for existing leases for all tax years at issue.

OTR-MCC/Brookwood’s expert then multiplied his concluded tenant improvement 

allowance by the renewal probability to determine a weighted average and divided that weighted 

average by his concluded seven-year average lease term to determine a stabilized annual tenant 

improvement allowance. OTR-MCC/Brookwood’s expert’s calculation is as follows:

2009 to 2016 tax years 

Lease type TI Allowance Renewal

probability 

Weighted

average

Avg. lease 

term

Stabilized

allowance

New $30.00 psf 40% $12.00 psf 7 years $1.71 psf 

Renewal $10.00 psf 60% $6.00 psf 7 years $0.86 psf 

Aaaaaaaaaa aaaaaaaaaaa aaaaaaaaaa aaaaaaaaa TOTAL $2.60 psf 

2017 to 2019 tax years 

Lease type TI Allowance Renewal

probability 

Weighted

average

Avg. lease 

term

Stabilized

allowance

New $35.00 psf 40% $14.00 psf 7 years $2.00 psf 

Renewal $15.00 psf 60% $9.00 psf 7 years $1.29 psf 

Aaaaaaaaaa aaaaaaaaaaa aaaaaaaaaa aaaaaaaaa TOTAL $3.30 PSF

OTR-MCC/Brookwood’s expert then applied his concluded stabilized allowances to the 

subject property’s 529,362 square feet of leasable area to compute the following tenant 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 43 

improvement allowances: (i) $1,376,341 (529,362 x $2.60 psf = $1,376,341) for the 2009 to 2016 

tax years; and (ii) $1,746,895 (529,362 x $3.30 psf = $1,746,895) for the 2017 to 2019 tax years. 

OTR-MCC/Brookwood’s expert then deducted his computed tenant improvement allowance from 

the subject property’s effective gross income for each year under appeal. 

Similarly, to compute his tenant improvement allowance, Parsippany’s expert examined 

the subject property’s leases and Class A office lease work letters for tenant improvement 

allowances in the Parsippany-Troy Hills office submarket. Based on his examination of the 

marketplace, Parsippany’s expert concluded that tenant improvement allowances ranged from 

$10.00 to $15.00 per square foot during the tax years at issue. Ultimately, Parsippany’s expert 

concluded that a $15.00 per square foot tenant improvement allowance was reasonable for all years 

under appeal. In addition, in Parsippany’s expert’s opinion, tenant improvements have a ten-year

life expectancy and leases generally experience a 75% renewal rate. Accordingly, Parsippany’s 

expert concluded that a stabilized tenant improvement allowance of $2.50 per square foot should 

be applied to the subject property’s 529,362 square feet of leasable area. In sum, Parsippany’s 

expert deducted a tenant improvement allowance of $1,323,405 (529,362 x $2.50 psf = 

$1,323,405) for each year under appeal. 

Here, based on the testimony and evidence presented, the court finds OTRMCC/Brookwood’s expert’s supporting market data and formula for discerning a stabilized tenant 

improvement allowance to be more reliable and credible. However, the court finds that OTRMCC/Brookwood’s expert’s finding that Class A offices in the Parsippany-Troy Hills submarket 

lease for a “typical 84-month term” is inconsistent with the evidence and market data. As recited 

above, the court’s review of the subject property leases and the comparable Class A office leases 

produced by the experts revealed that Class A office lease terms average approximately eight 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 44 

years. Accordingly, in determining the stabilized tenant improvement allowance expense, the 

court will employ an eight-year average lease term and amortization period resulting in a $2.25 

per square foot tenant improvement allowance for the 2009 to 2016 tax years and a $2.88 per 

square foot tenant improvement allowance for the 2017 to 2019 tax years, computed as follows: 

2009 to 2016 tax years 

Lease type TI Allowance Renewal

probability 

Weighted

Average

Avg. lease 

term

Stabilized

allowance

New $30.00 psf 40% $12.00 psf 8 years $1.50 psf 

Renewal $10.00 psf 60% $6.00 psf 8 years $0.75 psf 

Aaaaaaaaaa aaaaaaaaaaa aaaaaaaaaa aaaaaaaaa TOTAL $2.25 psf 

2017 to 2019 tax years 

Lease type TI Allowance Renewal

probability 

Weighted

Average

Avg. lease 

term

Stabilized

allowance

New $35.00 psf 40% $14.00 psf 8 years $1.75 psf 

Renewal $15.00 psf 60% $9.00 psf 8 years $1.13 psf 

Aaaaaaaaaa aaaaaaaaaaa aaaaaaaaaa aaaaaaaaa TOTAL $2.88 PSF

F. Capitalization Rate

The direct capitalization technique is used “to convert an estimate of a single year’s income 

expectancy into an indication of value in one direct step, either by dividing the net income estimate 

by an appropriate capitalization rate or by multiplying the income estimate by an appropriate 

factor.” The Appraisal of Real Estate at 491; Hull Junction Holding Corp., 16 N.J. Tax at 80-81. 

Thus, the capitalization rate is the device that converts a property’s net operating income into an 

estimate of value.

Here, in deriving their capitalization rates, OTR-MCC/Brookwood’s expert and 

Parsippany’s expert reviewed data, including investor surveys and published capitalization rates,

however, they primarily relied on the Band of Investment technique.39 The Band of Investment 

39 “[T]he Tax Court has accepted, and the Supreme Court has sanctioned, the use of data collected 

and published by the American Council of Life Insurance.” Hull Junction Holding Corp., 16 N.J. 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 45 

technique “is a form of ‘direct capitalization’ which is used ‘to convert a single year’s income 

estimate into a value indication.’ The technique includes both a mortgage and an equity 

component.” Hull Junction Holding Corp., 16 N.J. Tax. at 80-81 (quoting Appraisal Institute, The 

Appraisal of Real Estate, 467 (10th ed 1992)). When employing the “Band of Investment 

technique, it is incumbent upon the appraiser to support the various components of the 

capitalization rate analysis by furnishing ‘reliable market data . . . to the court as the basis for the 

expert’s opinion so that the court may evaluate the opinion.’” Id. at 82 (quoting Glen Wall Assocs., 

99 N.J. 265, 279-80 (1985)). 

OTR-MCC/Brookwood’s expert consulted Korpacz/PwC National Suburban Office 

investor surveys, Viewpoint National Suburban Office investor surveys, American Council of Life 

Insurers (“ACLI”) Investment Bulletins,

40 NKF Financing Rate surveys, Integra Realty Resources 

Financing Rate surveys, and RealtyRates.com investor surveys to derive his mortgage interest 

rates, loan-to-value ratios, amortization terms, and equity dividend rates.41

Similarly, Parsippany’s expert consulted Korpacz/PwC National Suburban Office investor 

surveys (including the Korpacz Dividend Indicator and PwC Yield Indicator), American Council 

of Life Insurers (“ACLI”) Investment Bulletins, and RealtyRates.com investor surveys to derive 

his mortgage interest rates, loan-to-value ratios, amortization terms, and equity dividend rates. 

Tax at 82-83. “Relevant data is also collected and published by . . . Korpacz [PWC] Real Estate 

Investor Survey.” Id. at 83. By scrutinizing and “analyzing this data in toto, the court can make a 

reasoned determination as to the accuracy and reliability of the mortgage interest rates, mortgage 

constants, loan-to-value ratios, and equity dividend rates used by the appraisers.” Ibid. 

40 The ACLI Bulletins reproduced by OTR-MCC/Brookwood’s expert and contained in the 

Addendum to his appraisal reports were barely legible. 

41

 OTR-MCC/Brookwood’s expert relied on the Viewpoint National Suburban Office investor 

surveys for only the 2010 to 2016 tax years, NKF Financing Rate surveys only for the 2009 tax 

year, and Integra Realty Resources Financing Rate surveys only for the 2010 to 2016 tax years. 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 46 

The following charts detail the Band of Investment components and the concluded 

capitalization rates of the experts: 

10/1/2008 10/1/2009 10/1/2010 10/1/2011 10/1/2012 10/1/2013 

OTR-MCC/ 

Brookwood’s

expert

Int.: 7.50% 

LTV: 60%

Amort.: 30 yr

Eq. div.: 10% 

CAP: 9.00% 

Int.: 7.50% 

LTV: 60%

Amort.: 30 yr

Eq. div.: 10% 

CAP: 9.00% 

Int.: 5.00%

LTV: 55% 

Amort.: 30 yr

Eq. div.: 10% 

CAP: 8.00% 

Int.: 4.50% 

LTV: 60%

Amort.: 30 yr

Eq. div.: 12% 

CAP: 8.50%

Int.: 4.00% 

LTV: 55% 

Amort.: 25 yr

Eq. div.: 11% 

CAP: 8.00% 

Int.: 4.50% 

LTV: 55% 

Amort.: 30 yr

Eq. div.: 11% 

CAP: 8.25%

Parsippany’s 

expert

Int.: 7.00% 

LTV: 70% 

Amort.: 25 yr

Eq. div.: 7%

CAP: 8.04% 

Int.: 7.00% 

LTV: 70% 

Amort.: 25 yr

Eq. div.: 8% 

CAP: 8.34% 

Int.: 5.25% 

LTV: 75%

Amort.: 25 yr

Eq. div.: 8% 

CAP: 7.39% 

Int.: 5.00% 

LTV: 75%

Amort.: 25 yr

Eq. div.: 7.5% 

CAP: 7.15% 

Int.: 5.00% 

LTV: 75%

Amort.: 25 yr

Eq. div.: 7%

CAP: 7.02% 

Int.: 5.50%

LTV: 75%

Amort.: 25 yr

Eq. div.: 7.25% 

CAP: 7.34% 

10/1/2014 10/1/2015 10/1/2016 10/1/2017 10/1/2018 

OTR-MCC/

Brookwood’s

expert

Int.: 4.00% 

LTV: 55% 

Amort.: 30 yr

Eq. div.: 11% 

CAP: 8.00% 

Int.: 4.00% 

LTV: 55% 

Amort.: 30 yr

Eq. div.: 11% 

CAP: 8.00% 

Int.: 4.00%

LTV: 55% 

Amort.: 30 yr

Eq. div.: 11% 

CAP: 8.00% 

Int.: 4.00% 

LTV: 55% 

Amort.: 30 yr

Eq. div.: 11% 

CAP: 8.00%

Int.: 4.00% 

LTV: 55% 

Amort.: 30 yr

Eq. div.: 11% 

CAP: 8.00% 

Parsippany’s 

expert

Int.: 5.25%

LTV: 70% 

Amort.: 25 yr

Eq. div.: 7.25% 

CAP: 7.21% 

Int.: 5.25% 

LTV: 70% 

Amort.: 25 yr

Eq. div.: 7%

CAP: 7.13% 

Int.: 5.00%

LTV: 70% 

Amort.: 25 yr

Eq. div.: 6.5% 

CAP: 6.86% 

Int.: 5.00% 

LTV: 70% 

Amort.: 25 yr

Eq. div.: 6.5% 

CAP: 6.86% 

Int.: 5.00% 

LTV: 70% 

Amort.: 25 yr

Eq. div.: 6.5% 

CAP: 6.86% 

At the outset, the court emphasizes that the PwC investor surveys and the capitalization 

rate information contained therein are not based on actual sale transactions. Rather, they represent 

the opinions of investors, in national and select regional markets, regarding their investment 

expectations for hypothetical transactions. As succinctly stated in The Appraisal of Real Estate, 

when developing a capitalization rate, published surveys are an adequate source of “support rather 

than as primary evidence of a capitalization rate.” Id. at 466 (emphasis added). Accordingly, the 

court accords the investor surveys little weight in attempting to discern the capitalization rates to 

be applied to the subject property. 

Rather, the court concludes that the Band of Investment technique provides the most 

accurate and reliable method of deriving a capitalization rate because it is not polluted or impacted 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 47 

by questions of how potential survey recipients perceived hypothetical transactional questions or 

how a market perceives an annually reoccurring operating expense. 

The court’s analysis of the ACLI tables for fixed rate mortgages for office buildings 

disclosed that during the tax years at issue mortgage interest rates ranged from 3.54% to 7.15%42

and loan-to-value ratios ranged from 53.13% to 64.2%. In addition, the court’s analysis of the 

ACLI tables for fixed rate commercial mortgages in the Middle Atlantic region, and more 

specifically, New Jersey, similarly disclosed that during the tax years at issue mortgage interest 

rates ranged from 3.66% to 7.87%43 and loan-to-value ratios ranged from 56.7% to 64.9%.

44

 

Moreover, as recited above, the court finds Parsippany’s expert’s characterization of the subject 

property as one of “the finest campus[es] that Parsippany has” to offer and one of the premier 

Class A office buildings in the Parsippany-Troy Hills marketplace to be accurate. Thus, the court 

finds that the subject property’s caliber would place it in the lower range of the mortgage interest 

rates and would place it in the higher range of the loan-to-value ratios. Accordingly, based on the 

experts’ testimony and the court’s review of the above information, the court concludes that the 

following interest rates and loan-to-value ratios should apply to the subject property: 

2009 2010 2011 2012 2013

Interest rate 6.875% 6.875% 5.00% 5.00% 4.25%

Loan-to-value ratio 65% 65%. 65% 65% 65%

2014 2015 2016 2017 2018 2019

Interest rate 4.25% 4.125% 4.125% 4.0% 4.0% 4.0% 

Loan-to-value ratio 65% 65% 65% 65% 65% 65%

42 (i) 6.32% to 7.15%, from 2009 to 2010; (ii) 4.60% to 5.04%, from 2011 to 2012; (iii) 3.91% to 

4.25%, from 2013 to 2016; and (iv) 3.54% to 4.33%, from 2017 to 2019. 

43 (i) 6.00% to 7.87%, from 2009 to 2010; (ii) 5.02% to 5.46%, from 2011 to 2012; (iii) 3.66% to 

4.52%, from 2013 to 2016; and (iv) 3.49% to 4.00%, from 2017 to 2019. 

44

 OTR-MCC/Brookwood’s expert’s appraisal reports state that the NKF Financing Rate Survey 

is “included in addendum D on pages 188-194.” However, the court’s review of pages 188-194 

of the addendum disclosed Korpacz/PwC National Suburban Office Market publications. 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 48 

In addition, given the subject property’s character, quality, and situs in the ParsippanyTroy Hills Class A office submarket, the court finds that Parsippany’s expert’s application of a 25-

year loan amortization term is more credible and reasonable. 

Finally, the court finds that the 10% and 11% equity dividend rates proposed by OTRMCC/Brookwood’s expert were not aligned with the reasonable investment expectations of 

investors in Class A multi-tenanted office buildings during the tax years at issue. The court 

emphasizes that the RealtyRates.com equity rates relied on, in part, by OTR-MCC/Brookwood’s 

expert to generate his equity dividend rates contain no property classification detail or geographical 

reference. Thus, the reported equity dividend rates could be generated entirely from owners of 

Class B, C, or D buildings in Florida. Accordingly, the court does not find the RealtyRates.com 

equity dividend rates probative and credible evidence of equity dividend rates for a multi-tenanted 

Class A office building in northern New Jersey. 

Here, the court’s review of the Korpacz/PwC Dividend Indicator discloses dividend rates 

ranging from 6.13% to 8.49% during the tax years at issue. Moreover, the market data disclosed 

that United States 10-year treasury bonds during the tax years at issue yielded 1.63% to 3.77%. 

Moreover, Equity REIT’s reported dividend yields of 3.53% to 5.09% during the tax years at 

issue.45 In addition, OTR-MCC/Brookwood’s expert’s Viewpoint National Suburban Office 

investor surveys disclosed rates ranging from 8.30% to 8.76% for the 2013 through 2015 tax years. 

Accordingly, based on the court’s review of the alternate investment data offered by the 

experts, the yield rates for United States 10-year treasury bonds, the Viewpoint National Suburban 

Office investor surveys, and the Equity REIT’s dividend yields, the court concludes that 

45 As reported in the PwC Real Estate Investor Surveys relied on by both experts and which 

identified the National Association of Real Estate Investment Trusts as the data source.
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 49 

Parsippany’s expert’s proposed equity dividend rates, as modified below, are more closely aligned 

with the reasonable expectations of investors during the tax years at issue. Therefore, the court 

will apply the following equity dividend rates to the subject property: 

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

7.50% 7.50% 8.00% 8.00% 7.50% 7.50% 7.25% 7.25% 7.00% 7.00% 7.00% 

Thus, using the Band of Investment technique, the base capitalization rates would be

calculated as follows: 

2009 to 2010 2011 to 2012 

Interest rate 6.875% Interest rate 5.00% 

Amortization period 25 years Amortization period 25 years 

Mortgage constant 8.386 Mortgage constant 7.015 

Mortgage component 65% x 8.386 = 5.451 Mortgage component 65% x 7.015 = 4.559 

Equity divided rate 7.50% Equity divided rate 8.00% 

Equity component 35% x 7.50 = 2.625 Equity component 35% x 8.00 = 2.80 

Base Capitalization Rate 8.08% Base Capitalization Rate 7.36% 

 2013 to 2014 2015 to 2016 

Interest rate 4.25% Interest rate 4.125% 

Amortization period 25 years Amortization period 25 years 

Mortgage constant 6.501 Mortgage constant 6.417 

Mortgage component 65% x 6.501 = 4.226 Mortgage component 65% x 6.417 = 4.171 

Equity divided rate 7.50% Equity divided rate 7.25% 

Equity component 35% x 7.50 = 2.625 Equity component 35% x 7.25 = 2.537 

Base Capitalization Rate 6.85% Base Capitalization Rate 6.71%

 2017 to 2019 

Interest rate 4.00% 

Amortization period 25 years 

Mortgage constant 6.334 

Mortgage component 65% x 6.334 = 4.117 

Equity divided rate 7.00% 

Equity component 35% x 7.00 = 2.45 

Base Capitalization Rate 6.57% 

However, after determining the base capitalization rate, a tax factor must be “loaded” or 

added to each base capitalization rate to derive an overall capitalization rate. The tax factor 

represents the real estate taxes payable by OTR-MCC/Brookwood. 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 50 

Both experts concluded that the effective tax rate that should be applied to the base 

capitalization rate was: (i) 1.809% for the 2009 tax year; (ii) 1.914% for the 2010 tax year; (iii) 

2.012% for the 2011 tax year; (iv) 2.095% for the 2012 tax year; (v) 2.261% for the 2013 tax year; 

(vi) 2.298% for the 2014 tax year; (vii) 2.315% for the 2015 tax year; (viii) 2.374% for the 2016 

tax year; (ix) 2.385% for the 2017 tax year; (x) 2.456% for the 2018 tax year; and (xi) 2.533% for 

the 2019 tax year. 

Accordingly, for the reasons set forth above and employing the income-capitalization 

approach, the court finds the true or fair market value of the subject property to be as follows: 

2009 Tax Year

INCOME: 

Office $28.00 PSF @ 529,362 sq. ft. $14,822,136

TOTAL: POTENTIAL GROSS INCOME $14,822,136

LESS: Vacancy & Collection Loss @ 18% PGI ($ 2,667,984) 

TOTAL: EFFECTIVE GROSS INCOME $12,154,152

STABILIZED EXPENSES: 

Insurance @ $0.21 x 529,362 sq. ft. $ 111,166

Utilities (net) @ $1.50 x 529,362 sq. ft. $ 794,043

Repairs & Maintenance @ $2.25 x 529,362 sq. ft. $1,191,065

Cleaning/Janitorial @ $1.25 x 529,362 sq. ft. $ 661,703

Management/General/Admin. @ 5% of EGI $ 607,708

Replacement Reserves @ 1% of EGI $ 121,542

Leasing Commissions @ 5% of EGI $ 607,708

Tenant Imp. Allowance @ $2.25 x 529,362 sq. ft. $1,191,065 

TOTAL: STABILIZED EXPENSES ($ 5,286,000) 

NET OPERATING INCOME $ 6,868,152

Base Capitalization Rate: 8.08% 

Plus: Effective Tax Rate: 1.81% 

TOTAL CAPITALIZATION RATE: 9.89% 

INDICATED VALUE: $69,445,420

CONCLUDED VALUE: $69,400,000
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 51 

2010 Tax Year

INCOME: 

Office $28.00 PSF @ 529,362 sq. ft. $14,822,136

TOTAL: POTENTIAL GROSS INCOME $14,822,136

LESS: Vacancy & Collection Loss @ 18% PGI ($ 2,667,984) 

TOTAL: EFFECTIVE GROSS INCOME $12,154,152

STABILIZED EXPENSES: 

Insurance @ $0.21 x 529,362 sq. ft. $ 111,166

Utilities (net) @ $1.50 x 529,362 sq. ft. $ 794,043

Repairs & Maintenance @ $2.25 x 529,362 sq. ft. $1,191,065

Cleaning/Janitorial @ $1.25 x 529,362 sq. ft. $ 661,703

Management/General/Admin. @ 5% of EGI $ 607,708

Replacement Reserves @ 1% of EGI $ 121,542

Leasing Commissions @ 5% of EGI $ 607,708

Tenant Imp. Allowance @ $2.25 x 529,362 sq. ft. $1,191,065 

TOTAL: STABILIZED EXPENSES ($ 5,286,000) 

NET OPERATING INCOME $ 6,868,152

Base Capitalization Rate: 8.08% 

Plus: Effective Tax Rate: 1.914% 

TOTAL CAPITALIZATION RATE: 9.99% 

INDICATED VALUE: $68,750,270

CONCLUDED VALUE: $68,800,000

2011 Tax Year

INCOME: 

Office $26.25 PSF @ 529,362 sq. ft. $13,895,753

TOTAL: POTENTIAL GROSS INCOME $13,895,753

LESS: Vacancy & Collection Loss @ 22% PGI ($ 3,057,066)

TOTAL: EFFECTIVE GROSS INCOME $10,838,687

STABILIZED EXPENSES: 

Insurance @ $0.21 x 529,362 sq. ft. $ 111,166

Utilities (net) @ $1.50 x 529,362 sq. ft. $ 794,043

Repairs & Maintenance @ $2.25 x 529,362 sq. ft. $1,191,065

Cleaning/Janitorial @ $1.25 x 529,362 sq. ft. $ 661,703

Management/General/Admin. @ 5% of EGI $ 541,934 

Replacement Reserves @ 1% of EGI $ 108,387

Leasing Commissions @ 5% of EGI $ 541,934 

Tenant Imp. Allowance @ $2.25 x 529,362 sq. ft. $1,191,065 

TOTAL: STABILIZED EXPENSES ($ 5,141,297) 

NET OPERATING INCOME $ 5,697,390

Base Capitalization Rate: 7.36

Plus: Effective Tax Rate: 2.012% 

TOTAL CAPITALIZATION RATE: 9.37% 

INDICATED VALUE: $60,804,589

CONCLUDED VALUE: $60,800,000
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 52 

2012 Tax Year

INCOME: 

Office $26.25 PSF @ 529,362 sq. ft. $13,895,753

TOTAL: POTENTIAL GROSS INCOME $13,895,753

LESS: Vacancy & Collection Loss @ 22% PGI ($ 3,057,066)

TOTAL: EFFECTIVE GROSS INCOME $10,838,687

STABILIZED EXPENSES: 

Insurance @ $0.21 x 529,362 sq. ft. $ 111,166

Utilities (net) @ $1.50 x 529,362 sq. ft. $ 794,043

Repairs & Maintenance @ $2.25 x 529,362 sq. ft. $1,191,065

Cleaning/Janitorial @ $1.25 x 529,362 sq. ft. $ 661,703

Management/General/Admin. @ 5% of EGI $ 541,934 

Replacement Reserves @ 1% of EGI $ 108,387

Leasing Commissions @ 5% of EGI $ 541,934

Tenant Imp. Allowance @ $2.25 x 529,362 sq. ft. $1,191,065 

TOTAL: STABILIZED EXPENSES ($ 5,141,297) 

NET OPERATING INCOME $ 5,697,390

Base Capitalization Rate: 7.36% 

Plus: Effective Tax Rate: 2.095%

TOTAL CAPITALIZATION RATE: 9.46% 

INDICATED VALUE: $60,226,110

CONCLUDED VALUE: $60,200,000

2013 Tax Year

INCOME: 

Office $26.25 PSF @ 529,362 sq. ft. $13,895,753

TOTAL: POTENTIAL GROSS INCOME $13,895,753

LESS: Vacancy & Collection Loss @ 22% PGI ($ 3,057,066)

TOTAL: EFFECTIVE GROSS INCOME $10,838,687

STABILIZED EXPENSES: 

Insurance @ $0.21 x 529,362 sq. ft. $ 111,166

Utilities (net) @ $1.50 x 529,362 sq. ft. $ 794,043

Repairs & Maintenance @ $2.25 x 529,362 sq. ft. $1,191,065

Cleaning/Janitorial @ $1.25 x 529,362 sq. ft. $ 661,703

Management/General/Admin. @ 5% of EGI $ 541,934 

Replacement Reserves @ 1% of EGI $ 108,387

Leasing Commissions @ 5% of EGI $ 541,934

Tenant Imp. Allowance @ $2.25 x 529,362 sq. ft. $1,191,065 

TOTAL: STABILIZED EXPENSES ($ 5,141,297) 

NET OPERATING INCOME $ 5,697,390

Base Capitalization Rate: 6.85% 

Plus: Effective Tax Rate: 2.261% 

TOTAL CAPITALIZATION RATE: 9.11% 

INDICATED VALUE: $62,539,956

CONCLUDED VALUE: $62,500,000
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 53 

2014 Tax Year

INCOME: 

Office $27.25 PSF @ 529,362 sq. ft. $14,425,115

TOTAL: POTENTIAL GROSS INCOME $14,425,115

LESS: Vacancy & Collection Loss @ 22% PGI ($ 3,173,525) 

TOTAL: EFFECTIVE GROSS INCOME $11,251,590

STABILIZED EXPENSES: 

Insurance @ $0.21 x 529,362 sq. ft. $ 111,166

Utilities (net) @ $1.50 x 529,362 sq. ft. $ 794,043

Repairs & Maintenance @ $2.25 x 529,362 sq. ft. $1,191,065

Cleaning/Janitorial @ $1.25 x 529,362 sq. ft. $ 661,703

Management/General/Admin. @ 5% of EGI $ 562,580

Replacement Reserves @ 1% of EGI $ 112,516

Leasing Commissions @ 5% of EGI $ 562,580

Tenant Imp. Allowance @ $2.25 x 529,362 sq. ft. $1,191,065 

TOTAL: STABILIZED EXPENSES ($ 5,186,718) 

NET OPERATING INCOME $ 6,064,872

Base Capitalization Rate: 6.85% 

Plus: Effective Tax Rate: 2.298%

TOTAL CAPITALIZATION RATE: 9.15% 

INDICATED VALUE: $66,282,754

CONCLUDED VALUE: $66,300,000

2015 Tax Year

INCOME: 

Office $27.25 PSF @ 529,362 sq. ft. $14,425,115

TOTAL: POTENTIAL GROSS INCOME $14,425,115

LESS: Vacancy & Collection Loss @ 22% PGI ($ 3,173,525) 

TOTAL: EFFECTIVE GROSS INCOME $11,251,590

STABILIZED EXPENSES: 

Insurance @ $0.21 x 529,362 sq. ft. $ 111,166

Utilities (net) @ $1.50 x 529,362 sq. ft. $ 794,043

Repairs & Maintenance @ $2.25 x 529,362 sq. ft. $1,191,065

Cleaning/Janitorial @ $1.25 x 529,362 sq. ft. $ 661,703

Management/General/Admin. @ 5% of EGI $ 562,580

Replacement Reserves @ 1% of EGI $ 112,516

Leasing Commissions @ 5% of EGI $ 562,580

Tenant Imp. Allowance @ $2.25 x 529,362 sq. ft. $1,191,065 

TOTAL: STABILIZED EXPENSES ($ 5,186,718) 

NET OPERATING INCOME $ 6,064,872

Base Capitalization Rate: 6.71% 

Plus: Effective Tax Rate: 2.315%

TOTAL CAPITALIZATION RATE: 9.03% 

INDICATED VALUE: $67,163,588

CONCLUDED VALUE: $67,200,000
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 54 

2016 Tax Year

INCOME: 

Office $27.25 PSF @ 529,362 sq. ft. $14,425,115

TOTAL: POTENTIAL GROSS INCOME $14,425,115

LESS: Vacancy & Collection Loss @ 22% PGI ($ 3,173,525) 

TOTAL: EFFECTIVE GROSS INCOME $11,251,590

STABILIZED EXPENSES: 

Insurance @ $0.21 x 529,362 sq. ft. $ 111,166

Utilities (net) @ $1.50 x 529,362 sq. ft. $ 794,043

Repairs & Maintenance @ $2.25 x 529,362 sq. ft. $1,191,065

Cleaning/Janitorial @ $1.25 x 529,362 sq. ft. $ 661,703

Management/General/Admin. @ 5% of EGI $ 562,580

Replacement Reserves @ 1% of EGI $ 112,516

Leasing Commissions @ 5% of EGI $ 562,580

Tenant Imp. Allowance @ $2.25 x 529,362 sq. ft. $1,191,065 

TOTAL: STABILIZED EXPENSES ($ 5,186,718) 

NET OPERATING INCOME $ 6,064,872

Base Capitalization Rate: 6.71% 

Plus: Effective Tax Rate: 2.374%

TOTAL CAPITALIZATION RATE: 9.08% 

INDICATED VALUE: $66,793,745

CONCLUDED VALUE: $66,800,000

2017 Tax Year

INCOME: 

Office $27.00 PSF @ 529,362 sq. ft. $14,292,774

TOTAL: POTENTIAL GROSS INCOME $14,292,774

LESS: Vacancy & Collection Loss @ 20% PGI ($ 2,858,555) 

TOTAL: EFFECTIVE GROSS INCOME $11,434,219

STABILIZED EXPENSES: 

Insurance @ $0.21 x 529,362 sq. ft. $ 111,166

Utilities (net) @ $1.50 x 529,362 sq. ft. $ 794,043

Repairs & Maintenance @ $2.25 x 529,362 sq. ft. $1,191,065

Cleaning/Janitorial @ $1.25 x 529,362 sq. ft. $ 661,703

Management/General/Admin. @ 5% of EGI $ 571,711

Replacement Reserves @ 1% of EGI $ 114,342

Leasing Commissions @ 5% of EGI $ 571,711 

Tenant Imp. Allowance @ $2.88 x 529,362 sq. ft. $1,524,563 

TOTAL: STABILIZED EXPENSES ($ 5,540,304) 

NET OPERATING INCOME $ 5,893,915

Base Capitalization Rate: 6.57% 

Plus: Effective Tax Rate: 2.385% 

TOTAL CAPITALIZATION RATE: 8.96% 

INDICATED VALUE: $65,780,301

CONCLUDED VALUE: $65,800,000
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 55 

2018 Tax Year

INCOME: 

Office $27.00 PSF @ 529,362 sq. ft. $14,292,774

TOTAL: POTENTIAL GROSS INCOME $14,292,774

LESS: Vacancy & Collection Loss @ 20% PGI ($ 2,858,555) 

TOTAL: EFFECTIVE GROSS INCOME $11,434,219

STABILIZED EXPENSES: 

Insurance @ $0.21 x 529,362 sq. ft. $ 111,166

Utilities (net) @ $1.50 x 529,362 sq. ft. $ 794,043

Repairs & Maintenance @ $2.25 x 529,362 sq. ft. $1,191,065

Cleaning/Janitorial @ $1.25 x 529,362 sq. ft. $ 661,703

Management/General/Admin. @ 5% of EGI $ 571,711

Replacement Reserves @ 1% of EGI $ 114,342

Leasing Commissions @ 5% of EGI $ 571,711 

Tenant Imp. Allowance @ $2.88 x 529,362 sq. ft. $1,524,563 

TOTAL: STABILIZED EXPENSES ($ 5,540,304) 

NET OPERATING INCOME $ 5,893,915

Base Capitalization Rate: 6.57% 

Plus: Effective Tax Rate: 2.456%

TOTAL CAPITALIZATION RATE: 9.03% 

INDICATED VALUE: $65,270,377

CONCLUDED VALUE: $65,300,000

2019 Tax Year

INCOME: 

Office $27.00 PSF @ 529,362 sq. ft. $14,292,774

TOTAL: POTENTIAL GROSS INCOME $14,292,774

LESS: Vacancy & Collection Loss @ 20% PGI ($ 2,858,555) 

TOTAL: EFFECTIVE GROSS INCOME $11,434,219

STABILIZED EXPENSES: 

Insurance @ $0.21 x 529,362 sq. ft. $ 111,166

Utilities (net) @ $1.50 x 529,362 sq. ft. $ 794,043

Repairs & Maintenance @ $2.25 x 529,362 sq. ft. $1,191,065

Cleaning/Janitorial @ $1.25 x 529,362 sq. ft. $ 661,703

Management/General/Admin. @ 5% of EGI $ 571,711

Replacement Reserves @ 1% of EGI $ 114,342

Leasing Commissions @ 5% of EGI $ 571,711 

Tenant Imp. Allowance @ $2.88 x 529,362 sq. ft. $1,524,563 

TOTAL: STABILIZED EXPENSES ($ 5,540,304) 

NET OPERATING INCOME $ 5,893,915

Base Capitalization Rate: 6.57% 

Plus: Effective Tax Rate: 2.533%

TOTAL CAPITALIZATION RATE: 9.10% 

INDICATED VALUE: $64,768,297

CONCLUDED VALUE: $64,800,000
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 56 

G. Subject property sales 

In the court’s journey to determine the true or fair market value of real property, the focus 

of the inquiry is “the price a willing buyer would pay a willing seller.” New Brunswick v. State 

Div. of Tax Appeals, 39 N.J. at 543. The term market value has been defined as:

the most probable price, as of a specified date, in cash or in terms 

equivalent to cash, or in other precisely revealed terms, for which 

the specified property rights should sell after reasonable exposure in 

a competitive market under all conditions requisite to a fair sale, 

with the buyer and seller each acting prudently, knowledgeably, and 

for self-interest, and assuming that neither is under undue duress. 

[The Appraisal of Real Estate at 58 (14th ed. 2013).] 

Thus, although the sale of a property reflects an exchange of consideration between parties, 

it may not be dispositive on the issue of market value. “[T]here may be instances when the sale 

price may not reflect true market value. In such instances it is for the court to appraise the 

circumstances surrounding a sale to determine if there were special factors which affected the sale 

price without affecting the true value.” Glen Wall Assocs. v. Wall Twp., 99 N.J. 265, 282 (1985). 

In Parsippany’s expert’s opinion the subject property’s April 2014 sale by OTR-MCC to 

Brookwood for $82,400,000 was “arm’s length” and credible evidence of the subject property’s 

true or fair market value. According to Parsippany’s expert, he had discussions with a 

representative of Brookwood about the marketing and sale of the subject property, confirming that 

it was arm’s length, however, he could not recall the representative’s name. 

Conversely, in OTR-MCC/Brookwood’s expert’s opinion, the April 2014 sale of the 

subject property by OTR-MCC to Brookwood for $82,400,000 represented a leased fee value. 

According to OTR-MCC/Brookwood’s expert, the subject property was only seventy percent 

occupied at the time of the sale and the income stream being generated supported the leased fee 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 57 

purchase price. In OTR-MCC/Brookwood’s expert’s opinion, Brookwood was a Boston based 

investor, unfamiliar with the landscape of New Jersey Class A multi-tenanted office buildings. 

Based on his discussions with Brookwood’s representatives, they believed that a lower stabilized 

vacancy could be achieved, thereby increasing the income generated and improving its equity 

position in the subject property. 

However, effective cross-examination of OTR-MCC/Brookwood’s expert disclosed that 

Brookwood was not wholly unfamiliar with the New Jersey Class A multi-tenanted office 

marketplace. Rather, the evidence revealed that Brookwood acquired and sold another Class A 

multi-tenanted office building in the Morris County, New Jersey marketplace several years prior 

to its acquisition of the subject property.46

In addition, the testimony of OTR-MCC/Brookwood’s expert further revealed that on or 

about December 6, 2019, approximately fourteen months after the latest valuation date involved 

herein, Brookwood entered into a Purchase and Sale Agreement with Monarch Owner, LLC to sell 

46

 Cross-examination also disclosed that in or about January 2000, OTR-MCC/Brookwood’s 

expert prepared an appraisal report valuing the subject property on a leased fee basis. In addition, 

cross-examination revealed that in or about September 2005, one of OTR-MCC/Brookwood’s 

expert’s business partners prepared an appraisal report valuing the subject property on a leased fee 

basis. A leased fee appraisal report values the “ownership interest held by the lessor, which 

includes the right to the contract rent specified in the lease plus the reversionary right when the 

lease expires.” The Appraisal of Real Estate, 72 (14th ed. 2013). The leased fee approach is 

influenced by the leasehold interest, including the “remaining term of a lease, the creditworthiness 

of the tenants, the influence of atypical lease clauses and stipulations, and other factors [that] can 

affect the value.” Id. at 505. Because of these factors, a leased fee appraisal report is of dubious 

import to this court, which must value the subject property’s fee simple estate. See Marina Dist. 

Development Co., LLC v. City of Atlantic City, 27 N.J. Tax 469, 488 (Tax 2013), aff’d, 28 N.J. 

Tax 568 (App. Div. 2015), certif. denied, 223 N.J. 354 (2015); Pine Plaza Associates, L.L.C. v. 

Hanover Twp., 16 N.J. Tax 194, 199 (Tax 1996); Harclay House v. East Orange City, 18 N.J. Tax 

564, 569 (Tax 2000); International Flavors & Fragrances, Inc. v. Union Beach Borough, 21 N.J. 

Tax 403, 423 (Tax 2004). Accordingly, the conclusions of value in the January 2000 and 

September 2005 appraisal reports were of no consequence to the court and played no role in the 

court’s determination of the subject property’s true or fair market value herein. 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 58 

the subject property. That sale was reportedly consummated for $58,500,000, under deed dated

March 9, 2020 and recorded on March 12, 2020 in the Morris County Clerk’s Office in Deed Book 

23730, Page 1717. 

During cross-examination, Parsippany’s counsel vigorously questioned OTRMCC/Brookwood’s expert’s conclusion valuing the subject property for $31,700,000 for the 2019 

tax year, despite Brookwood purportedly having entered into a sales agreement on December 6, 

2019 for $58,500,000. Nonetheless, OTR-MCC/Brookwood’s expert steadfastly maintained that 

he believed his 2019 tax year value conclusion was accurate. In his opinion, Monarch Owner, 

LLC valued the leased fee interest in the subject property, whereas OTR-MCC/Brookwood’s 

expert was required to value, for Tax Court purposes, the subject property’s fee simple estate. In 

OTR-MCC/Brookwood’s expert’s opinion, the leased fee interest in a property can be worth 

substantially more than the fee simple estate, depending on the quality and length of the leases 

being valued. 

Here, the court concludes that neither the subject property’s April 28, 2014 sale nor the

March 9, 2020 sale are dispositive on the issue of the subject property’s true or fair market value. 

See Glen Wall Assocs. v. Wall Twp., 99 N.J. 265, 281-82 (1985) (concluding that “a bona fide 

sale of property may be indicative of the true value of the property. Such a sale, however, is not 

dispositive on the issue of value. We recognize that there may be instances when the sale price 

may not reflect true value. In such circumstances it is for the court to appraise the circumstance 

surrounding a sale to determine if there were special factors which affected the sale price without 

affecting the true value”). The court finds credible OTR-MCC/Brookwood’s expert’s testimony 

that in arriving at the 2014 purchase price, Brookwood’s representatives attributed greater weight 

to the creditworthiness of the subject property’s tenants and the strength of the leases, thereby 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 59 

valuing the leased fee interest in the subject property. 

Moreover, the court finds that the subject property’s March 9, 2020 sale between 

Brookwood and Monarch Owner, LLC was too remote in time to amount to meaningful evidence 

of the subject property’s true or market value as of any valuation date involved herein. 

Accordingly, for the foregoing reasons, the court gave no consideration to the subject 

property’s April 28, 2014 sale or March 9, 2020 sale in determining its true or fair market value. 

H. Corrected property tax assessment

Having reached a conclusion of the subject property’s true or fair market value for the 

2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, and 2019 tax years, the court will 

endeavor to determine the correct assessments. Under N.J.S.A. 54:51A-6(a), commonly referred 

to as Chapter 123, when the court is satisfied in a non-revaluation year by the evidence presented 

“that the ratio of the assessed valuation of the subject property to its true value exceeds the upper 

limit or falls below the lower limit of the common level range, it shall enter judgment revising the 

taxable value of the property by applying the average ratio to the true value of the property . . . .” 

N.J.S.A. 54:51A-6(a). This process involves application of the Chapter 123 common level range. 

N.J.S.A. 54:1-35a(b). When the ratio of assessed value exceeds the upper limit or falls below the 

lower limit, the formula for determining the revised taxable value of property, under N.J.S.A. 

54:51A-6(a), is as follows: 

True market value x Average ratio = Revised taxable value

For the 2009 tax year, the ratio of total assessed value, $57,660,700, to true market value, 

$69,400,000, yields a ratio of 0.8308%, which falls within the upper limit (87.76%) and lower 

limit (64.86%) of Parsippany’s 2009 tax year Chapter 123 common level range. Consequently, no 

reduction in the subject property’s 2009 local property tax assessment is warranted. 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 60 

For the 2010 tax year, the ratio of total assessed value, $57,660,700, to true market value, 

$68,800,000, yields a ratio of 0.8381%, which falls within the upper limit (88.77%) and lower 

limit (65.61%) of Parsippany’s 2010 tax year Chapter 123 common level range. Consequently, no 

reduction in the subject property’s 2010 local property tax assessment is warranted. 

For the 2011 tax year, the ratio of total assessed value, $57,660,700, to true market value, 

$60,800,000, yields a ratio of 0.9484%, which exceeds the upper limit (91.25%) of Parsippany’s 

2011 tax year Chapter 123 common level range. Consequently, the subject property’s revised 

2011 tax year assessment calculation is as follows: 

$60,800,000 x .7934 (Average Ratio) = $48,240,000 [ROUNDED]

Accordingly, a judgment establishing the subject property’s local property tax assessment 

for the 2011 tax year will be entered as follows:

 Land $18,496,200 

 Improvement $29,743,800 

 Total $48,240,000 

For the 2012 tax year, the ratio of total assessed value, $57,660,700, to true market value, 

$60,200,000, yields a ratio of 0.9578%, which exceeds the upper limit (92.85%) of Parsippany’s 

2012 tax year Chapter 123 common level range. Consequently, the subject property’s revised 

2012 tax year assessment calculation is as follows: 

$60,200,000 x .8074 (Average Ratio) = $48,605,000 [ROUNDED]

Accordingly, a judgment establishing the subject property’s local property tax assessment 

for the 2012 tax year will be entered as follows:

 Land $18,496,200 

 Improvement $30,108,800 

 Total $48,605,000 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 61 

For the 2013 tax year, the ratio of total assessed value, $57,660,700, to true market value, 

$62,500,000, yields a ratio of 0.9226%, which falls within the upper limit (98.45%) and lower 

limit (72.77%) of Parsippany’s 2013 tax year Chapter 123 common level range. Consequently, no 

reduction in the subject property’s 2013 local property tax assessment is warranted. 

For the 2014 tax year, the ratio of total assessed value, $57,660,700, to true market value, 

$66,300,000, yields a ratio of 0.8697%, which falls within the upper limit (97.68%) and lower 

limit (72.20%) of Parsippany’s 2014 tax year Chapter 123 common level range. Consequently, no 

reduction in the subject property’s 2014 local property tax assessment is warranted. 

For the 2015 tax year, the ratio of total assessed value, $57,660,700, to true market value, 

$67,200,000, yields a ratio of 0.8580%, which falls within the upper limit (97.07%) and lower 

limit (71.74%) of Parsippany’s 2015 tax year Chapter 123 common level range. Consequently, no 

reduction in the subject property’s 2015 local property tax assessment is warranted. 

For the 2016 tax year, the ratio of total assessed value, $57,660,700, to true market value, 

$66,800,000, yields a ratio of 0.8632%, which falls within the upper limit (97.06%) and lower 

limit (71.74%) of the Chapter 123 common level range. Consequently, no reduction in the subject 

property’s 2016 local property tax assessment is warranted.

For the 2017 tax year, the ratio of total assessed value, $57,660,700, to true market value, 

$65,800,000, yields a ratio of 0.8763%, which falls within the upper limit (95.62%) and lower 

limit (70.68%) of Parsippany’s 2017 tax year Chapter the Chapter 123 common level range. 

Consequently, no reduction in the subject property’s 2017 local property tax assessment is 

warranted.

For the 2018 tax year, the ratio of total assessed value, $57,660,700, to true market value, 

$65,300,000, yields a ratio of 0.8830%, which falls within the upper limit (96.30%) and lower 
OTR-MCC, LLC v. Parsippany-Troy Hills Township and 

Brookwood MC INV. I & II % CBRE v. Parsippany-Troy Hills Township 

Page 62 

limit (71.18%) of Parsippany’s 2018 tax year Chapter the Chapter 123 common level range. 

Consequently, no reduction in the subject property’s 2018 local property tax assessment is 

warranted.

For the 2019 tax year, the ratio of total assessed value, $57,660,700, to true market value, 

$64,800,000, yields a ratio of 0.8898%, which falls within the upper limit (95.91%) and lower 

limit (70.89%) of Parsippany’s 2019 tax year Chapter the Chapter 123 common level range. 

Consequently, no reduction in the subject property’s 2019 local property tax assessment is 

warranted.

III. Conclusion 

 Accordingly, for the above stated reasons, contemporaneously herewith the court will enter 

judgments affirming the subject property’s 2009, 2010, 2013, 2014, 2015, 2016, 2017, 2018, and 

2019 local property tax assessments. In addition, contemporaneously herewith the court will enter 

judgments reducing the subject property’s 2011 and 2012 local property tax assessments. 

 Very truly yours, 

 

 Hon. Joshua D. Novin, J.T.C.