ATTORNEYS FOR PETITIONER: ATTORNEY FOR RESPONDENT:

MARILYN S. MEIGHEN BETH H. HENKEL

ATTORNEY AT LAW LAW OFFICE OF BETH HENKEL LLC

Carmel, IN Indianapolis, IN

BRIAN A. CUSIMANO

ATTORNEY AT LAW

Indianapolis, IN

IN THE

INDIANA TAX COURT

MADISON COUNTY ASSESSOR, )

)

Petitioner, )

)

v. ) Cause No. 18T-TA-00012

)

) 

SEDD REALTY COMPANY, )

)

Respondent. )

ON APPEAL FROM A FINAL DETERMINATION 

OF THE INDIANA BOARD OF TAX REVIEW

FOR PUBLICATION

May 22, 2019

WENTWORTH, J. 

The Madison County Assessor has challenged the Indiana Board of Tax Review’s 

final determination that reduced the assessed value of Sedd Realty Company’s River 

Ridge shopping center for each of the 2009 through 2012 assessment years. Specifically, 

the Assessor claims that the Indiana Board erred by applying a capitalization rate in its 

income approach that was different than the capitalization rates offered by either of the 

parties. Upon review, the Court reverses the Indiana Board’s final determination. 
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RELEVANT FACTS AND PROCEDURAL HISTORY1

The subject property, referred to as River Ridge, is part of the larger River Ridge 

Plaza retail center in Anderson, Indiana. (See Cert. Admin. R. at 712, 717-18, 1181.) 

River Ridge consists of ten buildings grouped into two main strip shopping centers (north 

and south) both with corresponding freestanding outlot improvements. (See Cert. Admin.

R. at 718, 1181, 3178 ¶¶ 8-9, 3440.) The property has approximately 350,000 square

feet of building area, over 300,000 square feet of leasable space, and 75 acres of land. 

(See Cert. Admin. R. at 718, 1181.)

River Ridge, owned by Sedd Realty Company, Sedd Anderson, LLC, Dori 

Development Co., Neal Development Co., and S&I East Development Co., (collectively, 

“Sedd”), was constructed by Sidney Eskenazi over several decades beginning in the 

1960’s. (See Cert. Admin. R. at 1106-34, 4453-56.) While River Ridge was located in

Anderson’s primary retail corridor when it was built, retail development has since 

proceeded southward causing River Ridge’s daily customer traffic and tenant occupancy 

to decline. (See Cert. Admin. R. at 726, 1229, 3744, 3850-53.) Consequently, its 

occupancy had fallen to 55% during the years at issue. (See Cert. Admin. R. at 4548-49.) 

The Madison County Assessor valued River Ridge at $12,469,000 for 2009,

$11,778,110 for 2010, $11,968,600 for 2011, and $9,950,400 for 2012. (See Cert. Admin. 

R. at 1106-34, 3178 ¶ 7.) Believing those values to be too high, Sedd filed appeals first 

 

1 Portions of the administrative record are confidential; consequently, this opinion will only provide 

the information necessary for the reader to understand its disposition of the issues presented. 

See generally Ind. Administrative Rule 9.
3

with the Madison County Property Tax Assessment Board of Appeals (“PTABOA”) and 

thereafter with the Indiana Board.2 (See Cert. Admin. R. at 1-406.) 

In February and March of 2017, the Indiana Board conducted a hearing on Sedd’s 

appeals. While the parties could not agree on the property’s assessed value, they did 

agree that 1) as a lower-tier shopping center, the original assessments were too high and 

2) the Assessor bore the burden of proof with respect to the 2009 assessment. (See

Cert. Admin. R. at 3416-19, 3443, 3826-27.) Both parties presented appraisals that

valued River Ridge for each of the years at issue using the income approach, the sales 

comparison approach, but not the cost approach. (See Cert. Admin. R. at 712-1054, 

1178-2885, 3463-64, 3837-38.) The Indiana Board afforded no weight to either parties’ 

sales comparison valuations, finding the analyses were not credible. (See Cert. Admin. 

R. at 3220-22 ¶¶ 147-52.) On appeal, neither party has challenged that finding.

The Assessor’s Income Approach Valuations

The Assessor’s appraisals were prepared by David Hall, a member of the 

Appraisal Institute (MAI). (See Cert. Admin. R. at 3432-34.) Under the income approach,

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Hall first determined River Ridge’s net operating income (“NOI”) for each year at issue. 

(See Cert. Admin. R. at 1359, 1786, 2213, 2640, 3549-50.) Specifically, Hall estimated 

 

2

Indiana Code § 6-1.1-15-1 allowed Sedd to pursue its 2009 through 2012 appeals with the 

Indiana Board without first receiving a final determination from the PTABOA. See IND. CODE § 6-

1.1-15-1(o) (2009) (explaining that because the PTABOA failed to conduct a hearing on Sedd’s 

appeals within 180 days of their filing, Sedd could appeal directly to the Indiana Board) (repealed 

2017). 

3 The income approach, which “is used for income producing properties that are typically rented[, 

] converts an estimate of income, or rent, [a] property is expected to produce into value through 

a mathematical process known as capitalization.” See 2002 REAL PROPERTY ASSESSMENT 

MANUAL (2004 Reprint) (“2002 Manual”) (incorporated by reference at 50 IND. ADMIN. CODE 2.3-

1-2 (2002 Supp.)(repealed 2010)) at 3; see also 2011 REAL PROPERTY ASSESSMENT MANUAL

(“2011 Manual”) (incorporated by reference at 50 IND. ADMIN. CODE 2.4-1-2 (2011)) at 2.
4

River Ridge’s annual potential gross income and then subtracted the vacancy and 

collection losses and total operating expenses to conclude that the NOI was $998,718 for 

2009, $968,610 for 2010, $966,428 for 2011, and $948,725 for 2012. (See, e.g., Cert. 

Admin. R. at 1355-59, 1781-88, 2209-15, 2635-40, 3549-50, 3571-80.)

Next, Hall developed capitalization rates by averaging the rates he extracted from

1) four selected retail sales, 2) Pricewaterhouse Coopers (PwC) national investor surveys,

3) the CoStar analytic survey data for Madison County, and 4) an analysis using the band 

of investment method. (See, e.g., Cert. Admin. R. at 1364, 3580-84.) Hall then loaded 

each year’s capitalization rate by 1.35% to account for Sedd’s share of the real estate tax 

expense. (See Cert. Admin. R. at 1364, 1791, 2218, 2645, 3499-500, 3584.) Hall

concluded that the capitalization rate was 11.25% for tax years 2009, 2011, and 2012 

and 11.70% for 2010. (Cert. Admin. R. at 1364, 1791, 2218, 2645.) After applying his

capitalization rates to the property’s NOI, Hall added $100,000 to each year’s value to 

account for the property’s 39-acre tract of surplus floodplain land. (See Cert. Admin. R. 

at 1365, 1792, 2219, 2646, 3501-02, 3584.) Accordingly, Hall determined the appraised 

values of River Ridge were $8,980,000 for 2009, $8,380,000 for 2010, $8,690,000 for 

2011, and $8,530,000 for 2012. (See Cert. Admin. R. at 1365, 1792, 2219, 2646.)

Sedd’s Income Approach Valuations

Sedd’s appraisals were prepared by Jay Allardt, a certified general appraiser and 

real estate broker. (See Cert. Admin. R. at 3830, 3832.) Allardt completed his first set of 

appraisals in 2013, but revised them more than once to adjust for, among other things, 

his treatment of property rights under net lease contracts and his capitalization rates. 

(See Cert. Admin. R. at 3837, 4170-71 (explaining that Allardt changed the appraisals 
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after learning more about the process of appraising properties for real estate tax appeal 

purposes).) 

Under the income approach, Allardt determined River Ridge’s NOI using its actual

income and expense information, instead of estimating potential gross income and market 

vacancy and collection losses from market-level data. (See Cert. Admin. R. at 764, 890, 

964, 1036, 3907, 3911-3921.) He deducted River Ridge’s operating expenses from its 

income, and made adjustments and revisions to his initial appraisal conclusions to arrive 

at a NOI of $950,000 for 2009, $890,000 for 2010, $830,000 for 2011, and $690,000 for 

2012. (See Cert. Admin. R. at 1152 (revised NOI conclusions); but see Cert. Admin. R. 

at 772, 898, 972, 1044 (Allardt’s original NOI conclusions).) 

To determine annual capitalization rates, Allardt first identified eleven properties 

that had been sold in Indiana and Ohio between 2001 and 2011 and two properties that 

were listed for sale in Indiana. (Cert. Admin. R. at 773-75, 899-902, 974-75, 1045-47.) 

The properties consisted of manufacturing facilities, office buildings, and retail shopping 

centers with capitalization rates ranging from 10.90% to 16.26%. (Cert. Admin. R. at 774, 

900, 974, 1046.) Allardt chose a 14% overall capitalization rate for 2009 and 14.5% for 

2010-2012 based on the rates of the market sales “that bracketed closer in size” to River 

Ridge and had similar occupancy levels. (See Cert. Admin. R. at 776, 902, 975, 1047, 

4424-25.) He then confirmed the reasonableness of his capitalization rates by comparing 

them with survey information published by CB Richard Ellis (CBRE) for Indianapolis retail 

centers. (See, e.g., Cert. Admin. R. at 3962-65, 3967-70, 4425-27.)

To account for Sedd’s property tax expense, Allardt loaded his capitalization rates 

by the same percentage that Sedd’s tenants paid in total insurance expense 
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reimbursements. (See Cert. Admin. R. at 1152, 4427-33 (stating that tax reimbursements 

are typically similar to insurance reimbursements).) As a result, Allardt applied 

capitalization rates ranging from 15.69% to 16.22% for resulting property values of 

$5,900,000 for 2009, $5,300,000 for 2010, $4,900,000 for 2011, and $4,100,000 for 2012. 

(Cert. Admin. R. at 1152, 3990-93, 4037-38, 4060.)

The Indiana Board’s Final Determination

The Indiana Board issued its final determination on February 20, 2018. After 

reviewing the parties’ competing income approaches, the Indiana Board found that Allardt 

“essentially valued a leased-fee interest, rather than a fee-simple interest in the property” 

and assigned no weight to his determination of net operating income or his conclusions 

under the income approach. (Cert. Admin. R. at 3226-27 ¶¶ 167-73.) The Indiana Board 

found Hall’s approach “more credible and his data and judgments generally more 

persuasive[,]” ultimately adopting his conclusions of NOI for each of the tax years at issue. 

(See Cert. Admin. R. at 3219 ¶ 145, 3226 ¶ 166.) 

Regarding the competing capitalization rates, the Indiana Board had “misgivings 

about Hall’s market-extracted [capitalization] rate[s]” because even though they “involved 

retail centers of roughly the same vintage as River Ridge, they all had significantly higher 

occupancy rates than River Ridge.” (See Cert. Admin. R. at 3228 ¶¶ 176-77 (stating “we 

disagree that sales of buildings with occupancy rates of 90% to 100% necessarily 

compare very closely to property with a market occupancy rate of 55%”).) Accordingly, 

the Indiana Board turned to Allardt’s analysis for help in determining an appropriate 

overall rate. (See Cert. Admin. R. at 3229 ¶¶ 179, 181.)
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The Indiana Board used three retail properties from Allardt’s original thirteen 

comparable properties to arrive at a 12% capitalization rate for all the years at issue. (See

Cert. Admin. R. at 3229 ¶¶ 179-82 (finding Allardt’s remaining ten properties irrelevant 

because they were either non-retail properties, a freestanding big-box building, or too far 

removed from the assessment dates at issue).) Then, the Indiana Board added Hall’s 

1.35% load to its 12% capitalization rate and applied the resulting 13.35% to Hall’s NOI 

conclusions for each year at issue. (Cert. Admin. R. at 3229-30 ¶¶ 183-84.) After trending 

the 2009 valuation to the January 1, 2008 assessment date, the Indiana Board

determined the proper value of River Ridge was $7,421,200 for 2009, $7,255,500 for 

2010, $7,239,200 for 2011, and $7,106,600 for 2012. (Cert. Admin. R. at 3230-31 ¶¶ 

184-86 3231 ¶ 186.)

The Assessor initiated this original tax appeal on April 5, 2018. The Court 

conducted oral argument on November 1, 2018. Additional facts will be supplied when 

necessary. 

STANDARD OF REVIEW

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

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

Assocs., 789 N.E.2d 109, 111 (Ind. Tax Ct. 2003). Accordingly, the Assessor must 

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

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

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

statutory jurisdiction, authority, or limitations; without observance of the procedure 
8

required by law; or unsupported by substantial or reliable evidence. See IND. CODE § 33-

26-6-6(e)(1)-(5) (2019). 

LAW AND ANALYSIS

On appeal, the Assessor claims the final determination must be reversed because 

the Indiana Board determined the assessed value of River Ridge using capitalization 

rates that are arbitrary and capricious, an abuse of discretion, and unsupported by 

substantial evidence. (See Pet’r Br. at 1.) Specifically, the Assessor argues that the 

Indiana Board arbitrarily applied its subjective opinion that 12% was the correct 

capitalization rate for each year at issue, a rate that neither party’s expert witness offered 

into evidence. (See Pet’r Br. at 1, 8-9, 12; Oral Arg. Tr. at 7-8.)

The Legislature has specifically authorized “the Indiana Board as trier of fact, to 

review the probative value of an appraisal report.” IND. CODE § 6-1.1-15-4(p) (2017). 

When reviewing an assessment, the Indiana Board is required to “determine the 

relevance and weight to be assigned to the evidence” before it. 52 IND. ADMIN. CODE 2-

7-2(c) (2017). Moreover, the Indiana Board “may correct any errors that may have been 

made and adjust [an] assessment . . . in accordance with the correction.” I.C. § 6-1.1-15-

4(a). 

Upon weighing the parties’ evidence and competing capitalization rates, the 

Indiana Board stated that “while Hall’s analysis and underlying data say something about 

what an appropriate [capitalization] rate might be,” it would look to Allardt’s capitalization 

rate calculation to see if it was more persuasive. (See Cert. Admin. R. at 3229 ¶ 179.) 

The Indiana Board, however, did not adopt Allardt’s capitalization rate, but instead, 

selected three of Allardt’s eleven market sales that it considered relevant and 
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incorporated “the upper ends” of the PwC survey data to develop its own unique 

capitalization rate:

Of the three retail properties that sold between 2008 and 2011, the 

overall rates ranged from 10.9% to 16.24%, with an average of 

12.94% and a median of 11.7%. The properties’ occupancy rates 

ranged from 60% to 82%[.] . . . While we have little faith in Allardt’s 

analysis in general, we find that those three sales are relevant to 

determining an appropriate overall rate. [ ] Looking at the upper ends 

of the ranges indicated by Hall’s [survey] analyses (excluding the CoStar Analytics survey) and the rates extracted from Allardt’s [three] 

recent sales for retail centers, we find that 12% is a reasonable overall 

rate for each year. 

(See Cert. Admin. R. at 3229 ¶¶ 181-82.) The Indiana Board provided no further 

explanation of how it arrived at its 12% capitalization rate. 

The overall rates from Allardt’s three selected comparable properties ranged from 

10.9% to 16.24%, but the Indiana Board did not choose the average of 12.94% or even 

the median of 11.7%. Moreover, the Indiana Board never explained how it incorporated 

“the upper ends” of the PwC survey data into its rate conclusion. Accordingly, the Court 

finds that the Indiana Board’s 12% capitalization rate is unsupported by any evidence and 

thus, arbitrary and capricious - little more than throwing a dart at a board. See CVS 

Corporation (#6689-02) v. Monroe Cty. Assessor, 83 N.E.3d 1281, 1284 (Ind. Tax Ct. 

2017) (“[a] final determination is arbitrary and capricious when there is no basis in the 

record that would lead a reasonable person to the same conclusion”) (citation omitted). 

See also, e.g., Western Select Properties, L.P. v. State Bd of Tax Comm’rs, 639 N.E.2d 

1068, 1073-74 (Ind. Tax Ct. 1994) (finding that the State Board’s failure to explain its 

rationale for choosing a 75% obsolescence adjustment rather than 95% was unsupported 

by any evidence and therefore arbitrary and capricious).
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CONCLUSION

In light of the Court’s finding that the Indiana Board’s capitalization rate is improper 

and the Indiana Board’s finding that Allardt’s rate conclusion from his comparable

properties was not reliable, Hall’s rate conclusion is the only remaining probative evidence 

of River Ridge’s capitalization rates. (See Cert. Admin. R. at 3229 ¶ 179 (stating that 

Hall’s “analysis and underlying data say something about what an appropriate overall rate 

might be”).) Consequently, the Indiana Board’s final determination is REVERSED and 

REMANDED with instructions for the Indiana Board to apply the capitalization rates stated 

in the Assessor’s appraisal.