**TAX COURT OF NEW JERSEY**

**J OSHUA**  **D. N OVIN**  **Morris County Courthouse J**  **udge** W **ashington & Court Streets 1**  **st Floor, P.O. Box 910**  **Morristown, New Jersey 07963 Tel:**  **( 609**  **) 815** 

**- 2922, Ext. 54680**  **Fax (**  **862 )**  **397**

**- 5690** 

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE TAX COURT COMMITTEE ON OPINIONS
**February 11, 2021**  **Lawrence S. Berger, Esq. Berger & Bornstein, LLC**  **237 South Street P.O. Box 2049**  **Morristown, New Jersey 07962 Martin Allen, Esq.**  **DiFrancesco, Bateman, Kunzman, Davis, Lehrer & Flaum, P.C.**  **15 Mountain Boulevard Warren, New Jersey 07059** 
**Re: Washington Shopping Center, Inc. v. Washington Township**  **Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Dear Mr. Berger and Mr.**  **Allen: This constitutes the court’s opinion following trial of local property tax appeals fil**  **ed by plaintiff, Washington Shopping Center, Inc. (“WSCI”). WSCI challenges the 2016, 2017, and**  **2018 tax year assessments on its improved property located in Washington Township (“Washington Township”).**  **For the reasons stated more fully below, the court affirms**  **the 2016, 2017, and 2018 tax year assessments.** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-2-**
I. Procedural History
**A. Findings of Fact**  **WSCI is the owner of the real property and improvements located at 459** 

**- 471 Route 31**  **South, Washington Township, Warren County, New Jersey. The property is identified on Washington Township’s municipal tax map as Block 75, Lot 1 (the “subject property”).**  **The real property comprises a 22.84**

**- acre rectangular shaped parcel located at the**  **intersection of Route 31 South and County Road 632 (also known as Asbury Anderson Road)**  **. As of the valuation dates the real property was improved with an 82,233 square foot retail s**  **hopping center constructed in 1996. The subject property also includes a McDonald’s fast-food rest**  **aurant located on a 0.9703** 

**- acre pad site**  **and two additional undeveloped pad sites** 

**. The site is serviced**  **by well water and an on**

**- site sewage treatment system/plant. The on** 

**- site sewage treatment**  **system/plant is located southwest of the shopping center, with the septic field adjace nt thereto. A**  **water reservoir is located on the site to**  **ma intain sufficient water pressure for the shopping center’s**  **sprinkler system. The site is serviced by natural gas and electric. The subject property is located in Washington Township’s HC**  **– Highway Commercial**  **District, permitting uses that include applianc e stores, bakeries, banks, clothing stores, electronic**  **stores, furniture stores, grocery stores, hardware stores, liquor stores, me dical and dental offices,**  **pet stores, pharmacies, restaurants, and movie**  **theatres. 1**  **The subject property is located within the**  **Highlands Act**  **Planning Area. 2**  **The subject property is located in a rural setting, including areas**

**1 The Expert (as such term is hereafter defined) offered testimony that alth**  **ough not identified in his appraisal report, self** 

**- storage facilities are a permitted use in the HC**  **– Highway Commercial**  **District. 2**  **New Jersey enacted the Highlands Water Protection and Planning Act, N.J.S.A. 13:20** 

**- 1 to** 

**- 35**  **(the “Highlands Act”) , to provide an**  **apparatus for regional land use planning in areas of northern**  **New Jersey identified as**  **the Highlands Region. See**  **N.J.S.A. 13:20- 7(a).** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-3- of farms, open lands, residential developments, and some commercial development. The**  **subject property**  **is in the X Flood Hazard Zone, denoting an area o**  **f minimal flooding risk. WSCI timely filed complaints challenging the subject property’s 2016, 2017, and 2018 tax year**  **assessments. Washington Township timely filed a counterclaim for the 2018 tax year. At trial, WSCI offered testimony from a State of New**  **Jersey certified general real estate appraiser, who was accepted by the court, without objection, as an expert in the field of propert**  **y valuation (the “Expert”).**  **3 As of each valuation date, the subject property’s tax assessment, implied equalized val**  **ue ,**  **and the Expert’s value conclusions are set forth below:**

**Valuation date**  **Tax Assessment**  **Avg. ratio**

**assessed to true value**  **Implied**

**equalized Value**  **WSCI’s**

**Expert’s concluded value**  **10/1/2015 $6,438,700**  **94.19% $6,835,864**  **$3,525,000 10/1/2016**  **$6,438,700 97.43%**  **$6,608,539 $3,525,000**  **10/1/2017 $6,438,700**  **98.35% $6,546,721**  **$3,525,000 When initially constructed in 1996, the shopping center was designed to accommodate an**  **A&P grocery store consisting of 45,190 square feet and approximately 3 7,043**  **square feet of additional**  **retail space** 
**. 4**  **According to the Expert, the subject property has historically experienced**  **“issues of vacancies,” and “poor economic performance. ”**  **In his estimation, the permanent closure of the A&P store in December 2015 “impacted the financial feasibility and the future c**  **ontinuation of this retail center.”**  **During the tax years at issue, the subject property experienced the following**  **vacancy rates: (i) 25%, as of the October 1, 2015 valuation date (82,233 sq. ft./20,220 sq. ft. =**

**3 The defendant**  **stipulated as**  **to the Expert’s qualifications. 4**  **A portion of the 3 7,043**  **square feet comprises a building depth of 154 feet and was initially**  **designed for occupancy by a Walgreens pharmacy, however Walgreens never took possession of the space. The remainder of the 37,043 square feet comprises a building depth of 100 feet.** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-4- 24.5%); (ii) 80%, as of the October 1, 2016 valuation date (82,233 sq. ft./65,410 sq. ft. = 79.5%);**  **and (iii) 89%, as of the October 1, 2017 valuation date (82,233 sq. ft./72,914 sq. ft. = 88.66%). 5**  **The subject property is located less than one mile from a shopping center containing a S hop**  **Rite grocery**  **store constructed approximately “**  **ten [to]**  **fifteen years ago ”**  **that , in the Expert’s**  **opinion, “has had a negative impact on the subject [property].” The Expert offered that due t o the**  **“locational characteristics” and “because of changing retail habits and because of the**  **demo graphics, . . . this center has been severely impacted by the loss of**  **the A&P. And in my**  **opinion . . . it’s not something that can be fixed . . . it is a market concern that has substant ially**  **affected this center.” In the Expert’s opinion the subject pro**  **perty has been experiencing some**  **physical obsolescence for several years and the costs that would have to be expended by the property owner to secure new tenants for the former A&P space “will probably likely exce**  **ed any rent they could collect over ten years or a reasonable holding period, and that further diminis**  **hes the viability of this center.”**  **Specifically, the Expert opined that due to the depth of a**  **portion of the buildings, between**  **154 and 184 feet, in**

**- line retailers find “that’s just too much space**  **, it’s too deep.” Thus, he concluded that these portions of the buildings in the shopping center are “non** 

**- rentable space,”**  **“obsolete” and have “no economic value.” In the Expert’s opinion “ y**  **ou’d have to subdivide that space off because your in** 

**- line tenan**  **ts can’t use that.” In sum, the expert found that 4 9,769**  **square feet of the shopping center**  **is “non-**  **useable space ,**  **” to which he ascribed no value. 6**  **However, the**

**5 In the**  **E xpert’s opinion, “as of October 1, 2015 everybody knew that [A&P] were going into**  **bankruptcy**

**. This was the end of A&P. . . .”**  **Thus, the Expert ascribed an 81%**  **vacancy rate to the subject property as of the October 1, 2015 valuation date, even though**  **A&P remained in**  **possession and continued operations in the subject property until December 2015. 6**  **Under his income capitalization approach, t he Expert ascribed a**  **value to only 32,464 square feet of the shopping center (82,233 - 32,464 = 49,769 square feet).** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-5- Expert’s testimony**  **as to how he calculated this “non** 

**- useable”**  **square footage was**  **imprecise**

**. The**  **Expert offered testimony that the “non-useable”**  **area of the subject property comprises 23,500**  **square feet of “front retail space” and 21,690 of “non**

**- useable space” (**  **84’ depth x 235’**  **width =**  **19,740 square feet ,**  **plus 1,950 square feet of former shipping area = 21,690 ).**  **Yet, that accounts for only 45,190 square feet (23,500 + 21,690 = 45,190**  **square feet )**  **. T hus,**  **the Expert apparently concluded when**  **preparing his**  **appraisal report**  **that an addition al**  **4,579 square feet of the shopping**

**center was**  **“non- useable.**  **”**
**B. Presumption of Validity**  **At the close of WSCI’s proofs, Washington Township moved for dismissal of these matters under**  **R. 4:37-**  **2(b), arguing that WSCI failed to overcome the presumption of validity that attaches to the local property tax asses**  **sments. See**  **Pantasote Co. v. City of Passaic, 100 N.J. 408, 413 (1985);**  **Riverview Gardens v. North Arlington Borough, 9 N.J. 167, 174 (1952)); Little Egg**  **Harbor Twp. v. Bonsangue, 316 N.J. Super. 271, 285**

**- 86 (App. Div. 1998);**  **MSGW Real Estate Fund, LLC v. Borough of Mountain Lakes, 18 N.J. Tax 364, 373 (Tax 1998).**  **According WSCI all reasonable and legitimate inferences which could be deduced f rom**  **the evidence presented, the court concluded that WSCI produced cogent evidence sufficient to overcome the presumption of validity. If accepted as true, the opinions of the**  **Expert and the facts upon which the Expert relied raised debatable questions regarding the correctness of the**  **subject property’s local property tax assessments for the 2016, 2017, and 2018 years.**  **MSGW Real Estate Fund, LLC, 18 N.J. Tax**  **at 376. Accordingly, the court denied Washington Township’s motion and placed a statement of reasons on the record.** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-6- Following denial of its motion, Washington Township notified the court that under**  **R. 8:3-**  **9, it was withdrawing its counterclaim for the 2018 tax year. 7**  **Add itionally, Washington Township**  **advised the court that it was resting, without introducing or offering any proofs or evidence in these matters, including any testimony from its proposed testifying expert.**  **The court then assigned dates for submission of post-trial briefs and reply brie fs.**  **WSCI’s counsel then**  **raised the prospect of seeking to compel testimony from Washington Township’s proposed testifying expert, as a rebuttal witness. Although no testimony or evidence had bee**  **n offered by Washington Township**  **in defense of the subject property’s local property tax assessments, WSCI’s counsel argued that he should be permitted to compel testi**  **mony from Washington Township’s proposed testifying expert. Washington Township objected to WSCI’s**  **request. Accordingly, the court afforded the parties an opportunity to submit written brief s**  **addressing the matter. On April 9, 2019, the court delivered a written opinion conclud**  **ing that WSCI c**  **ould not compel the**  **testimony of Washington Township’s proposed testifying expert against the proposed testifying expert’s wishes, or without his consent. In addition, the court**  **declin ed**  **to permit WSCI to offer rebuttal testimony when Washington Township failed to offer any**  **affirmative evidence.** 
**T he court declined to reopen the trial**  **record in these matters and set down dates for the submission of post-**  **trial briefs.**
**C. Adverse Inference**  **8 In its post** 

**- trial brief WSCI asserts that it is “entitled to an adverse inference with regard**  **to the support that defendant[’]s appraisal and appraiser would have for plaintiff [WSCI**  **’s]**

**7 No counterclaims were filed**  **by Washington Township for the 2016 or 2017 tax years.**  **8 In its post** 

**- trial reply brief, WSCI refers to the adverse inference charge as a “negative inferen**  **ce.” Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-7- evidence.”**  **9 Specifically, WSCI asks the court to “draw an adverse inference from [Wa**  **shington Township’s] failure to call its**  **[proposed testifying] expert as a witness to refute [WSCI’s Expert’s]**  **determinations and his conclusion as to the fair market value of the subject property.” In response, Washington Township maintains that it would be impermissible for the court**  **to draw an adverse inference from its decision to rest and not offer any evidence in these matters,**  **including without limitation, soliciting testimony from its proposed testifying expert.**  **“When ‘a party fails to produce a witness who is within its power to produce and who should have been produced,’ the**  **adverse inference rule permits the factfinder ‘to infer that the**  **witness's evidence is unfavorable to the party's ca se.”**  **Washington v. Perez, 219 N.J. 338, 352 (2014) (quoting**  **Black's Law Dictionary , 62 (9th ed. 2009)). Thus, when it is within the power of**  **a party to produce a witness whose testimony would be meaningful and provide clarity rega rding**  **issues presented, the rule permits the factfinder to presume that the testimony w ould have been**  **harmful. See**  **Graves v. United States , 150 U.S. 118, 121 (1893);**  **State v. Clawans** , **38 N.J. 162 (1962); Maul v. Kirkman, 270 N.J. Super. 596 (App. Div. 1994).**  **However, in New Jersey our courts have historically applied the adverse inference r ule**  **with a measure of caution, requiring trial courts to adhere to a procedure requi ring a “case** 

**- specific** 

**9 WSCI argues in its post** 

**- trial brief that it sought the opportunity to “put parts of [Washington**  **Township’s proposed testifying expert’s] appraisal into evidence since his apprais al supported a**  **number of [WSCI’s Expert’s] findings and he was present in the courtroom.” However, the cour t**  **emphasizes that in support of its argument to compel testimony from Washington Township’s proposed testifying expert, WSCI did not place any limitations on the scope of the expe**  **rt testimony or evidence that it would solicit. Instead, WSCI argued that it had anticipated it “w**  **ould have the opportunity to cross** 

**- examine Mr. Raymond and elicit testimony as to his expert report,” and that**  **“[s]ince Mr. Raymond’s appraisal report unequivocally corroborated Mr. Manzione’ s testimony. .**  **. Mr. Raymond’s testimony will be helpful to the court is assessing the w**  **eight to be given to Mr. Manzione’s determinations in finding the true value of the property.”**  **See WSCI’s February 22,**  **2019 letter br ief.** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-8- analysis,” and consideration of the potential prejudice and likelihood to “mislead or confuse**  **the jury,” in gauging whether an**  **adverse inference charge is warranted.**  **See Washington, 219 N.J. at**  **353-357; State v. Hill**  **, 199 N.J. 545, 561 (2009); State v. Velasquez**  **, 391 N.J. Super. 291, 306 (App. Div. 2007). This procedure**  **and analysis mandates that the party seeking the adverse charge notify the adversary and the court of the name of the witness not called, and who has “superior**  **knowledge of relevant facts.” State v. Hill**  **, 199 N.J. at 561. Moreover, the trial court must make**  **specific factual findings on the record whether the witness is “peculiarly within t he control or**  **power of only the one party”; the witness’ availability to that party “both practica lly and**  **physically”; and that the “testimony of the uncalled witness w ill elucidate relevant and critical**  **facts in issue.” Id.**  **at 561-562. Importantly, our Supreme Court has drawn a distinction between affording an adverse**  **inference charge with respect to fact witness testimony and expert testimony. Re cognizing the**  **“signif icant distinctions” that exist between fact witness and expert witness testimony,**  **the Court observed that our court rules afford litigants broad discovery rights with respect to the opini**  **ons of expert witnesses, in contrast to those of fact witnesses.**  **Was hington**  **, 219 N.J. at 361. The Court highlighted that because an expert is required to set forth the factual bases supporting**  **the expert’s opinion, “an expert is unlikely to be in exclusive possession of factual evidence that woul**  **d justify an adverse inference charge.”**  **Ibid. Thus, “[r]arely will an expert be in a position to reveal**  **previously undisclosed factual information, for the first time, on the stand at trial.” Id.**  **at 362. Therefore, it**  **will be an “unusual setting” when a party decides “not to call an expert witness . . .**  **prompted by the party's fear that the expert will reveal unfavorable facts that would other wise not**  **be disclosed.” Ibid. Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-9- Moreover, the Court emphasized that giving an adverse inference charge because of the**  **failure of a party t o call an expert witness would be inconsistent with our court rules which “do**  **not compel a litigant who has disclosed the name and opinion of a particular expert t o call that**  **expert to testify at trial.” Ibid.**  **Finally, the Court highlighted that during a trial there are “many**  **strategic and practical reasons that may prompt a party who has retained an expert w itness to decide**  **not to present the expert's testimony . . . a party may decide against calling a particula r expert at**  **trial to save resources . . . [a]n expert’s testimony may no longer be relevant because a previously**  **contested issue has been resolved. . . .” Id.**  **at 363. Thus, the Court reasoned, there may be “ many**  **explanations for a party's decision not to call a particular expert that may have nothing to do wi th**  **a party's fear that the expert will reveal prejudicial information.” Ibid.**  **Accordingly, the Court concluded that**  **an adverse inference charge “will rarely be warranted when the missing witness is**  **not a fact witness, but an expert.” Id.**  **at 364. Here, WSCI argues that because Washington Township elected not to offer testimony fr**  **om its proposed**  **testifying expert the court should infer that the expert would have offered testimony**  **favorable or supportive of WSCI’s Expert’s value conclusions and opinions. Specifical ly, WSCI**  **asserts that had Washington Township’s expert testified during trial, he may have offe red**  **testimony “su**

**pportive of [WSCI’s] conclusions on some issues.” However, WSCI does not contend, nor has it effectively demonstrated that Washington Township’s expert possess**  **ed a “superior knowledge of relevant facts” in these matters. The mere possibility t**  **hat an expe rt may**  **have offered testimony supportive to the conclusions of another expert, had the expert testifi ed**  **during trial, does not warrant application of an adverse inference. WSCI offered no evidence that**  **Washington Township’s proposed testifying expert witness possessed superior knowledge of fact s** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-10- related to the subject property and that his testimony would have elicited more meaningful**  **insight into that information than WSCI’s Expert offered.**  **Significantly, WSCI was made aware, prior to commencement of**  **tri al, of both the factual**  **bases and conclusions reached by Washington Township’s proposed testifying expert, when the parties exchanged discovery and appraisal reports. Thus, in advance of trial Was**  **hington Township disclosed to WSCI**  **, and WSCI was afforded t**  **he opportunity to discover any alleged “superior” facts known by Washington Township’s proposed testifying expert witness probative to the subje**  **ct matter in these local property tax appeal actions.**  **Additionally, as expressed by the court in its April 9, 2019 letter opinion, in New Jersey “a party cannot compel the testimony of an adversary’s proposed testifying expert unless the expe**  **rt has consented to offering such expert opinion testimony.**  **” Thus, permitting the factfinder to apply**  **an adverse inference b ased on a litigant’s knowing and willful trial strategy, or by virtue of a**  **party’s selection during trial from multiple sources of expert testimony, would run af oul of those**  **principles. As cogently expressed by our Appellate Division, in local property ta x appeal matters**  **the appealing party shoulders “the burden of proving [that] the assessment erroneous. T he**  **evidence necessary to overcome the presumption of validity must be ‘definite, posit ive and certain**  **in quality and quantity’ . . . [the taxing distri ct] ‘**  **was under no legal obligation to shore up the weaknesses in plaintiff's proofs by the presentation of independent evidence of value.’”**  **Glenpointe Associates v. Teaneck Twp., 12 N.J. Tax 118, 123 (App. Div. 1990). Thus, applying the criteria and considerations expressed by the Court in Washington v.** 
**Perez , the court finds that Washington Township’s failure to present expert witness tes**  **timony and independent evidence of**  **market value does not warrant an adverse inference charge. Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-11-**
**D. Trial record**  **Annexed to the certification of WSCI’s counsel, in support of its post**

**- trial brief, are copies**  **of Washington Township’s proposed testifying expert’s appraisal report and copies of ta x bills and**  **farmland assessment applications. In its post**

**- trial brief, WS**  **CI’s counsel highlights portions of the value conclusions reached by Washington Township’s proposed testifying expert in his**  **appraisal report, which report was not part of the trial record. Moreover, WSCI’s post**

**- trial brief**  **requests the court “take judici al notice of the farmland assessment of the 34 acre [adjacent]**  **farmland -assessed parcel. . . . ,” which property was not the subject matter of these local**  **property tax appeals and which documents were not made part of the trial record.**  **Washington Township object**  **s to “the references [contained] throughout plaintiff’s [post** 

**** **trial] brief to defendant’s expert’s appraisal report which was not introduced into e vidence. . . .”**  **Additionally, Washington Township object s**  **to “the submission of Exhibits C [Applicatio n for**  **Farmland Assessment and tax bills] and D [Washington Township’s proposed testif ying expert’s**  **appraisal report] to [WSCI’s counsel’s] Certification, neither of which was in evidence at trial.”**  **It is well**

**- settled principle that counsel is afforded “bro**  **ad latitude in summation.” Colucci**  **v. Oppenheim, 326 N.J. Super. 166, 177 (App. Div. 1999); Hayes v. Delamotte**  **, 231 N.J. 373, 387**

**- 388 (2018)**  **; Diakamopoulos v. Monmouth Med. Cen., 312 N.J. Super. 20, 32 (App. Div. 1998);**  **Condella v. Cumberland Farms, Inc., 298 N.J. Super. 531, 534 (Law Div. 1996). However, that latitude is**  **not without its reaso**  **nable limits, and a counsel's “comments must be confined to the facts**  **shown or reasonably suggested by the evidence introduced during**  **the course of the trial**  **.” Ibid.**  **(Emphasis added); see also**  **Spedick v. Murphy, 266 N.J. Super. 573, 590 (App. Div.), certif.**  **denied , 134 N.J. 567 (1993).**  **“[C] ounsel may draw conclusions even if the inferences that the jury**  **is asked to make are improbable, perhaps illogical, erroneous or even absurd, unless they ar e** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-12- couched in language transcending the bounds of legitimate argument, or there are no grounds for**  **them in the evidence.” Colucci**  **, 326 N.J. Super. at 177. “Within those limits, however, ‘[c]ounsel may argue from the evidence any conclusion which a jury is free to reach.’”**  **Hayes , 231 N.J. at** 
**387-388. Significantly, in New Jersey, “[i]t is error to rest a decision on matters not a**  **ppearing in the record.”**  **Second Reformed Church v. Board of Adjustment of Borough of Freehold, 30 N.J. Super. 338 (App. Div. 1954). A judge is “governed by the principle of the exclusiveness of the record,”**  **thus, the court must base its decisions on the trial record, and not information personally known t o**  **the judge, or information that may have been disclosed outside of the trial record. Morris C ounty**  **Land Improv. Co. v. Parsippany**

**- Troy Hills**  **, 40 N.J. 539, 549 (1963) ;**  **s ee also**  **Giordano v. City Com. of Newark, 2 N.J. 585 (1949).**  **Here, in lieu of summation or closing arguments, the court afforded WSCI’s counsel and**  **Washington Township’s counsel the opportunity to submit post**

**- trial briefs.**  **Thus, WSCI’s**  **counsel’s post**

**- trial brief, certification, and exhibits to the certification are the functional equ**  **ivalent of their summation or closing arguments**  **in these matters. Accordingly, the arguments offered by**  **WSCI’s counsel must be confined to the facts disclosed in the trial record, or those**  **that were reasonably suggested by the evidence introduced during trial. Washington Township’s proposed**  **testifying expert’s appraisal report was not made part of the trial record in these matters and the**  **conclusions and opinions contained therein were not reasonably suggested by the evidence** 

**. Additionally, the opinions and/or conclusions reached by Washington Township’s proposed**  **testifying expert in his appraisal report were not part of the trial record. Ther efore,**  **because Washington Township’s proposed testifying expert’s appraisal report, including the statem**  **ents and conclusions reached therein,**  **w ere**  **not part of the trial record and w**  **ere not reasonably** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-13- suggested by the evidence, the court will not consider those documents and any statements or**  **conclusions reached therein as evidence in deciding these matters. However, the court observes that during cross** 

**- examination the Expert disclosed that “there**  **is a farmland qualified piece that does add about another 30 plus a cres to the site.” Moreover,**  **Washington Township’s counsel methodically cross**

**- examined the Expert regarding the subject**  **property’s zoning and that “part of the property which is now farmland,” inquiring whether t he**  **Expert made any inquiry into “developing the farmland area into [a] residential” subdivision.**  **Additionally, the Expert’s appraisal report, admitted into evidence as P**

**- 1, delineates the subject**  **property’s local property tax assessment, Washington Township’s applicable tax r ate, and the**  **subject p roperty’s local property taxes for the 2016, 2017, and 2018 tax years. Thus, insofar that**  **WSCI’s counsel’s certification or briefs contains or aver s**  **to the Applications for Farmland Assessment for the 2016, 2017**  **, and 2018 tax years, and copies of Washington Township’s tax**  **bills for the subject property and the farmland assessed property for the 2016, 2017 ,**  **and 2018 years, the court will afford WSCI’s counsel’s deference and latitude in his sum**  **mation papers, as such information was reasonably suggested by t**  **he evidence introduced during**  **trial.**
II. Conclusions of Law **Having concluded that WSCI presented evidence sufficient to overcome the presum ption**  **of validity that attaches to the local property tax assessment, does not inexorably l ead the court to**  **the conclusion that the subject property’s tax assessments are erroneous. Once the pre sumption**  **has been overcome, “the court must then turn to a consideration of the evidence adduced on be half**  **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 correctnes**  **s at Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-14- the close of [the plaintiff’s] case** 

**- in** 

**- chief, the burden of proof remain[s] on the [plaintiff] . . . to**  **d emonstrate that the judgment [or local property tax assessment] under review was**  **incorrect.” Id.** 
**at 314-15.**
**A. Highest and Best Use**  **In the court’s pursuit to determine the true value of the subject property, considerat ion must**  **be given to that price which a hypothetical buyer would pay a hypothetical seller, neither of whic h**  **are constrained to purchase or sell the property, as of October 1 of the pretax year. See**  **Petrizzo v. Borough of Edgewater, 2 N.J. Tax 197, 200 (Tax 1981); Genola Ventures v. Shrewsbury**  **Borough , 2**  **N.J. Tax 541, 551 (Tax 1981). An indispensable element to the process of property valuation and to the determination of a property’s true market value is discerning its highes**  **t and best use. Ford Motor Co., 127 N.J. 290 (1992). “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). Thus, the highest and best use analysis is often referred to as “the fi**  **rst and most important step in the valuation process.” Ford Motor Co. v. Edison Twp., 10 N.J. Tax**  **153, 161 (Tax 1988). The highest and best use analysis comprises the “sequential consideration of the follow**  **ing four criteria, determining whether the use of the subject property is: 1) legally perm**  **issible; 2) physically possible; 3) financially feasible; and 4) maximally productive.”**  **Clemente v. Twp. of**  **South Hackensack , 27 N.J. Tax 255, 267** 

**- 269 (Tax 2013),**  **aff’d ,**  **28 N.J. Tax 337 (App. Div.**  **2015). See als**  **o County of Monmouth v. Hilton, 334 N.J. Super. 582, 588 (App. Div. 2000). However, the highest and best use of a property is not a static principle. The highest and**  **best use of a property may alter over time with a market that is in transition, or b**  **ecause of changes**  **in the economic climate, zoning, or from the presence or lack of development. When engaging i n** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-15- a highest and best use analysis the appraiser must interpret “the market forces that**  **affect the subject property and identify[] the use or uses on which the final opinion of value is based.”**  **Appraisal Institute,**  **The Appraisal of Real Estate , 42 (14th ed. 2013).**  **An appraiser must closely examine the parcel being appraised “for all possible uses and that use which will yield the highe**  **st return s hould**  **be selected.” Inmar Associates, Inc. v. Edison Twp., 2 N.J. Tax 59, 64 (Tax 1980).**  **In arriving at a**

**conclusion of**  **a property’s highest and best use ,**  **the “**  **focus of [the]**  **highest and best use analysis is on the potential uses of the land as though vac**  **ant. In practice, however,**  **the contributory value of the existing improvements and any possible alteration of those improvements are just as important in determining highest and best use and . . . in developing**  **an opinion of the market value of the property.”**  **The Appraisal**  **of Real**  **Estate at 337.** 

**[A]n appraiser needs to test whether the existing improvements**  **contribute value, rather than simply assume that the current use is the highest and best use because the improvements are already in**  **place. . . . Demolition**  **of improvements can be considered the most extreme form of modification to the current use of the property as**  **improved. If the value of the property as improved is greater than**  **the value of the site as though vacant less demolition**  **costs, the existing improvements contribute value to the property's highest and**  **best use, and the improvements should not be demolished at that time.**  **When the improvements no longer contribute to value,**  **demolition and redevelopment of the ideal improvemen**  **t would be economically supportable.**  **[ The**  **Appraisal of**  **Real Estate**  **, at 346 (Emphasis added).]**
**1. As Improved** 
**T he Expert concluded that the highest and best use of the subject property, as improved,**  **and to “reduce operating costs, including maintenance, tax es, insurance and other items . . . is to**  **demolish the former A&P portion of the facility.” In reaching that conclusion t he**  **Expert indicated**  **that he examined the subject property’s historical vacancy rates, and the vacan cy rates of**  **the Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-16- shopping centers co**  **mprising his comparable leases . After performing that analysis, the Expert**  **reached the conclusion that it is “not financially feasible” to maintain the A&P spac e, and that it**  **should be razed rather than attempting to refit it and subdivide it. 10**  **The E**  **xpert explained that “considering the physical deficiencies of the [property] . . . the highest and best use**  **[as improved] is to demolish the A&P space and then you’re really left with just in** 

**- line retail that can serve the**  **local market where the ty pe of ma and pop user would go to that center.” In the**  **E xpert’s opinion,**  **“the market’s not going to absorb this space [so] there’s no point in having it.” Therefore, the**  **Expert concluded that the highest and best use of the subject property, as improved, is as a**  **neighborhood strip retail center with demolition of the existing A&P**  **space**
**. However, the court finds the Expert’s concluded highest and best use**  **analysis of the subject**  **property, as improved, flawed and not**  **credible**

**. T**  **he Expert opines that it w**  **ould be more**  **financially advantageous for WSCI to reduce its overhead and expenses by demolishing 4 9,769**  **square feet of leasable area**  **in the shopping center ,**  **or approximately 61**  **% of the shopping center (4**  **9,769 sq. ft./82,233 sq. ft. =**  **60.52 %)**  **, because**  **of w hat he characterizes as a**  **perceived inability**  **of the market**

**place to absorb such retail space** 

**. In support of such proposition, the Expert offered**  **testimony that one mid**

**- sized retail space**  **, approximately 50 to 60 years old, has remained vacant**  **for an extended time**  **. Nonetheless, the Expert then undertakes an income capitalization approach**  **to value, relying on six**  **comparable retail leases entered into**  **between 2004 and 2014.**  **11 The**  **se six**

**10 Although the**  **Expert conceded that t**  **he A&P space could be subdivided and**  **repurposed for other retail**  **uses ,**  **he offered testimony t**  **hat the cost to subdivide and**  **repurpose the space**  **would be between $70 to $200 per square foot. However, this**  **testimony must be reconciled with the Expert’s appraisal report**  **, which states that the costs for “sub** 

**- dividing the space to attract smaller**  **tenants” would be approximately “$100+/SF.”**
**11 The Expert’s appraisal report included**  **a total of fifteen leases rang**  **ing in size from 1,500**  **to 30,0**  **00 square feet. However, for reasons detailed later in the court’s opinion, the court found that**  **se veral leases were not credible evidence of economic rent due a number of factors**  **, including the Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-17- comparable leases comprise mid** 

**- sized re**  **tail stores ranging in size from 7,600 to 16,934 square feet**  **, and bear unadjusted rental rates of between $7.17 to $13.30 per square foot. Thus, despite**  **the Expert**  **’s conclusion that it would not be “financially feasible” to subdivide the 45,190 square**  **fee t of former A&P space because the**  **market would be unable to absorb it, his reliance on an**  **income capitalization approach to value and six comparable leases ranging in size fr om 7,600 to**  **16,934 square feet suggests otherwise. Moreover, although the Expert opined that the market cannot absorb this type of retail space, and that the highest and best use of the subject prop**  **erty, as improved, would be to demolish 61% of the shopping center, the Expert was unable to identify**  **any other shopping centers in the subject property’s market area that have engaged in**  **such**

**w holesale demolition** 

**. The court’s conclusion is further buttressed by the Expert’s testimony**  **regarding how he**  **computed the subdivision**  **costs . During**  **trial , t**  **he Expert offered testimony that in reaching his conclusion that it was not financially feasible to subdivide the A&P space, he consulte**  **d Marshall and**  **Swift Valuation Service’s cost tables to estimate the subdivision**  **costs. According to his testimony, the**  **tables for Neighborhood and Community Shopping Center Interior Retail Space**  **discloses “if you look at the good space, it’s $53.38 a square foot. You’ve got to multiply it by a local multiplier, which is about a third, 1.3. That gives you up to about $72, give or take.”**  **12 The**  **Expert further offered that the aforesaid calculated amount does not include interior demolition** 

**dates of execution of the leases, the circumstances surrounding the execution of the lease s, and**  **locational differences between the subject property and the comparable leased propert y.**  **12 The Marshall and Swift Valuation Service cost tables reproduced in the Appendix to the**  **Expert’s re port discloses that for a Neighborhood and Community Shopping Center Interior Retail**  **Space of “Good” quality, the cost would be $55.38 per square foot, not $53.38 per square foot. Additionally, the court is uncertain how the Expert determined the local mu**  **ltiplier to be applied to the base finish cost was 1.30, as no local multiplier for Washington Township or any**  **municipality in Warren County was included in the Expert’s Appendix. Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-18- costs, therefore, he opined that it would be uneconomical to incur approximately $100 per square**  **foot to subdivide the A&P space**  **into smaller retail space**

**. However, during cross** 

**- examination the**  **Expert acknowledged that his estimates for demolition and alt eration of mechanicals systems were**  **offered**

**. Significantly**  **however, later during trial**  **and in an effort to explain his estimated**  **subdivision costs ,**  **the Expert offered that “I think the best someone could hope to get at this center would be $5 a square foot for that type of space” and “[i]f I’m getting $5 rent and it cost me $100**  **[to subdivide the A&P**  **retail space], that’s a 5 percent return before making any [money] on my investment**  **. Plus, . . . it’s going to take me 20 years to recoup my cost.” Thus, in reaching his conclusion that the subject property’s highest and best use, as improved, was demolition of 49,769**  **square feet of retail area he determined it was not financially feasible to subdivide, the Expert**  **apparently attributed only a $5.00 per square**  **foot rent al value**  **to those subdivided area, rather than**  **his concluded economic rent al value o**  **f $12.00 per square foot. Stated differently, i**  **n analyzing the financial feasibility and maximally productive uses of the subject property**  **under the highest**  **and best use analysis, the Expert did not apply his concluded economic rent. Instead, the Expert applied a value of $5.00**  **to the potential subdivided area, or approximately**  **40% of his concluded economic rent.**  **In sum, the court finds that Expert’s conclusion**  **that the**  **subject property’s highest and best use, as improved,**  **is demolition of demolition of 49,769 square feet, or**  **approximately 61% of the subject property’s**  **retail area not c**  **redible.**
**2. As Vacant** 
**T he Expert concluded the subject property’s highest and bes**  **t use, as vacant, was for “commercial use.” H**  **owever, in performing his highest and best use, as vacant analysis**  **, the Expert** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-19- apparently**  **did not consider**  **the maximally productive or financially feasible criteria under the** 
**h ighest and best use**  **test. Althoug**  **h the Expert’s appraisal report detailed that “[f]inancially feasible and maximally productive uses for the site are for commercial develop**  **ment,” h is**  **testimony revealed that he**  **did not investigate or analyze**  **what specific “**  **commercial use” would**  **produce the highest and best use of the subject property. Stated differently, the Exper t did not**  **analyze what**  **legally permissible and physically possible commercial**  **uses of the subject property**  **would be both financially feasible and maximally productive**

**. In response to Washington**  **Township’s counsel’s inquiry that “[y]ou didn’t go through the exercise of determining what was maximally productive and financially feasible as a . . . vacant highest and best use,” the**  **Expert responded, “Yeah. T**  **ypically [,]**  **you’ re looking at what’s legally permissible, and there’s lots of**  **uses there. So,**  **it depends on the individual user’s needs for that.” In sum, the Expert offer ed**  **no meaningful**  **testimony or evidence as to**  **his analysis of either the size of the improvement tha**  **t could be erected on the subject property, nor did he**  **delineat e**  **exactly what type of commercial use would be**  **financially feasible and maximally productive.** 
**3. Excess**  **and Surplus Land The Expert**  **’s appraisal report further contains the conclusion that**  **the “sub ject**  **contains excess land for future retail development**  **.” However, effective cross**  **-examination caused**  **the Expert to**  **alter th is**  **co nclusion and**  **contend that he erred in**  **describing the land as “excess land**  **.” Rather, the Expert submitted during cross** 

**- examination**  **that the land should be more appropriately characterized as “surplus land.”**  **While this di stinction**  **may seem inconsequential, the analysis required**  **to be undertaken w**  **ith respect to “excess land” and “ surplus land”**  **can be very different.**  **Surplus land is the portion of the land that**  **is unnecessary “**  **to support the existing improvement and**  **cannot be separated from the property and s**  **old off**

**. ” Appraisal Institute,**  **The Appraisal of Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-20- Real Estate**  **, 214 (13 th**  **ed. 2008) (Emphasis added).**  **Conversely, e xcess land is “**  **land beyond the normal needs of a particular use and that which is not necessary to support the existing**  **improvements.” Schimpf v. Little Egg Harbor T**  **wp. , 14 N.J. Tax 338, 343**  **(Tax 1994).**  **Thus,**

**ex cess land possesses a**  **separate and distinct value**  **, has the ability to be sold, and must be**  **“ valued**  **at its highest and best use and added to the value of the lot currently used, in order to ascerta in the**  **value of the lot as a whole.” Ibid** 

**. (citing Appraisal Institute,**  **The Appraisal of Real Estate , 212**  **(10 th**  **ed. 1992)) (Emphasis added).**
**H ere**  **, despite**  **the Expert having initially**  **concluded in his appraisal**  **report that the subject property contains excess land, the**  **report failed to**  **contain any**  **analysis of the highest and best use of this land, nor d**  **id the report**  **offer any c**  **redible evidence of**  **the market value of the land.**  **Moreover, i n an attempt to**  **support the conclusion in his report**  **that th e**  **excess land**  **had little**  **contributory value, the Expert’s report includes a land offering “[a]cross Asbury Anderson Road**  **from the subject (with frontage on Rt 31 also), a 22.15**

**- acre site is for sale . . .” However, a**  **sal e**  **offering is not credible evidence of a property’s true value. See**  **New Jersey Turnpike Authority v. Bowley, 27 N.J. 549, 556 (1958)**  **; Olin Mathieson**  **Chem. Corp. v. Paulsboro,**  **3 N.J. Tax 255,** 
**262-263 (Tax**  **1981); Red Devil v. Union Twp., 5 N.J. Tax 1, 5 (Tax 1982); Highview Estates v.**  **Englewood Cliffs Bor., 6 N.J. Tax 194, 213 (Tax 1983). Thus, the Expert offered no credible evidence of the value of the land.**  **Importantly, despite contending**  **during cross**

**- examination that the land shoul**  **d be more**  **appropriately characterized as surplus land and not excess land, the Expert continued to**  **express his opinion**  **that th is**  **land attributed**  **little value to the subject property**  **because of the subject property’s high vacancy rates** 

**. However, r**  **egardless of whether the land should be characterized** 

**as surplus land or**  **excess land , and a highest and best use analysis performed, because**  **the Expert Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-21- failed to present the court with**  **any c redible**  **evidence of value, the court is unable to**  **make a determination of its value, if any.** 
**B. Approach to Value -**  **Income Capitalization Approach**
**“ There is no single determinative approach to the valuation of real property.” 125 Monitor**  **Street LLC v. City of Jersey City , 21 N.J. Tax 232, 237** 

**- 238 (Tax 2004)**  **(citing Samuel Hird &**  **Sons, Inc. v. City of Garfield**  **, 87 N.J. Super. 65, 72 (App. Div. 1965)); ITT Continental Baking**  **Co. v. East Brunswick Twp., 1 N.J. Tax 244, 251 (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, capital**  **ization o f income**  **and cost.” Brown v. Borough of Glen Rock , 19**  **N.J. Tax 366, 376 (App.**  **Div. 2001),**  **certif. denied**  **, 168**  **N.J. 291 (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 t hese facts by**  **the experts.” Coca** 

**- Cola Bottling Co. of New York v. Neptune Twp., 8 N.J. Tax 169, 176 (Tax**  **1986) (citing**  **New Brunswick v. Tax Appeals Div. ,**  **39 N.J. 537 (1963)). See also WCI** 

**** **Westinghouse, Inc. v. Edison Twp., 7 N.J. Tax, 610, 619 (Tax 1985), aff’d**  **, 9 N.J. Tax 86 (App.**  **Div. 1986). Here, the Expert relied exclusively on the income capitalization approach to derive a**  **n opinion of**  **the subject property**  **’s market value**

**. When a property is income producing, the income**  **capitalization approach is the favored method for determining the estimated value of that property.**  **Parkway Vill. Apartments Co. v. Twp. of Cranford, 8 N.J. Tax 430 (Tax 1985), aff’d**  **, 9 N.J. Tax 199 (App. Div. 1986), rev'd on other grounds, 108 N.J. 266 (1987); Hull Junction Holding Corp.** 

**v. Borough of Princeton, 16 N.J. Tax 68, 79 (Tax 1996). The**  **income capitalization approach**  **“consists of methods, techniques, and mathematical procedures that an appraiser uses t o analyze a** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-22- property’s capacity to generate benefits (i.e., usually the monetary**  **benefits of income and reversion) and convert these benefits into an indication of present value.”**  **Appraisal Institute, The**  **Appraisal of Real Estate , 439 (14**  **th ed. 2013). As Judge Hopkins succinctly stated, in valuing a**  **property employing the income- capitalization approach:** 

**the gross rental value**  **of the property is estimated**  **. From the estimated**  **gross rental there is deducted a factor for possible vacancies and collection losses. This results in effective gross**  **income. Then all the expenses involved in running the property are subtracted, resulting in net income. Net income is the money which**  **an investor could expect to receive through an investment in the property. It is computed into a**  **value by means of a capitalization**  **rate which embodies considerat ion of capital cost, remaining**  **economic life of the property, and the degree of risk involved. [**  **Lamm Associates v. West Caldwell Borough, 1 N.J. Tax 373, 377**  **(Tax 1980).] Thus, central to the income capitalization approach is the appraiser’s scrut**  **iny, evaluation and analysis of data, information, statistics, costs, and a property’s capacity to gener**  **ate future**  **benefits in order to determine the economic rent,**  **“‘market rent’ or fair rental value’” of a property. Parkway Village Apartments Co.**  **, 108 N.J. at 270.**
**1. Market**  **or Economic Rent**  **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 le**  **ase agreement, including permitted uses, use restrictions, expense obligations, term, conces**  **sions, renewal and purchase options and tenant improve**  **ments.” Appraisal Institute,**  **The Dictionary of Real Estate Appraisal**  **, 121**

**- 22 (5**  **th ed. 2010). The economic or**  **market rent attributable to a property may differ substantially from the actual rent derived on a property, which may be bel**  **ow market rates.**  **Par**

**kview Village Assocs. v. Collingswood Bor.**  **, 62 N.J. 21, 29**

**- 30 (1972).**  **However, Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-23- “this does not mean that the actual rent is to be disregarded . . . ‘in determining what is fa**  **ir rental income, the actual rental income, while not controlling, is an element t**  **o be considered.’” McCrory**  **Stores Corp. v. Asbury Park, 89 N.J. Super. 234, 243 (App. Div. 1965) (quoting Somers v. City of Meriden**  **, 174 A. 184, 186 (Sup. Ct. Err. 1934)).**

**A. Retail**  **Leases**
**To compute the economic rent of the retail stores, t**  **he Ex pert identified fifteen retail leases.**  **Comparable lease 15 was a lease offering and did not result in the execution of a lease a greement.**  **Accordingly, during trial, the court struck consideration of comparable lease 15 in determination**  **of the subject property’s economic or**  **market rent** 

**. See**  **Harrison Realty Corp. v. Harrison Town ,**  **16 N.J. Tax 375 (Tax 1997), aff’d**  **, 17 N.J. Tax 174 (App. Div. 1997)**

**. In addition, c**  **omparable leases 12, 13, and 14**  **were lease modification agreements apparently entered into by WSCI with three existing tenants sometime after A&**  **P vacated the subject property** 

**. 13**  **However, the date of each of the three lease modifications w**  **as not identified by the Expert in his appraisal**  **report , nor**  **during trial. Moreover,**  **the Expert acknowledged during direct examination that he used comparable leases 12, 13, and 14**  **simply “to illustrate what’s going on at the center. I wouldn’t**  **say that I really relied on these to determine the [market] rental rate.” Because comparable leases**  **12, 13, and 14 were lease modifications**  **, and were**  **either modified gross or gross lease**  **arrangements, and**  **do not represent the exposure**  **of the retail space**  **to a competitive and open**  **market , the court does no**  **t find them credible evidence of economic or market rent.**

**13 The leases were apparently modified from net to gross**  **, and the**  **gross rent**  **paid ranged from $5.00 to $24.00 per square foot**  **. It was unclear from the Expert’s testimony whether the leases are modified gross or gross leases. Additionally, the Expert made no adjustments to these t**  **hree leases in his adjustment grid to account for**  **the fact that these were gross leases and not net leases. Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-24- The remainin**  **g eleven comparable leases**  **bore commencement dates between January 2004 and June 2016.**  **Four of the leases were in Warren County, five**  **were in Sussex County, and two**  **were in Union County. The unadjusted rents ranged from $6.35 per square foot to $13.30 per**  **square foot. In determining the effective rent for the remaining**  **eleven comparable leases, the Expert computed**  **the average rent over the le ase term.**  **See First Republic Corp. of Am., 16 N.J.**  **Tax at 578 (concluding that the technique of averaging rents payable over the life of a lease is “consistent with sound appraisal principles”).**  **The Expert then applied a**

**- 10% location adjustment to comparable leases 2, 5, and 6.**  **In the Expert’s opinion, because comparable lease 2 had “better visibility” and “better t**  **raffic counts,” 40,070 vehicles, compar**  **ed to the subject property’s 18,700 vehicles**  **, the Expert opined that**  **a -1**  **0% location adjus tment was appropriate.**  **14 In addition, in the Expert’s opinion the location of**  **comparable lease s**  **5 and 6 in New Providence, Union County, New Jersey had “better surrounding demographics, population income characteristics**  **.” Thus**  **, the Expert applied a**  **- 10% location**  **adjustment to comparable lease 5 and 6.**  **Moreover, d espite the wide range of leased area of the remaining eleven comparable lease**  **s ,**  **fluctuating between 2**  **,196 and 30,000 sq uare feet**  **, in the E**  **xpert’s opinion he could not**  **discern a size adjustment in the market**  **place**

**. Th**  **us , he made no size adjustment to any of the comparable**  **leases in computing his adjusted rents. Additionally, although the lease dates for the eleven remaining**  **comparable leases range from January 2004 through June 2016, the Expert applied no adjustment for time or market** 

**14 Although the Expert testified that traffic count**  **studies “are one of the things that we look at” in**  **making comparisons and adjustments to retail properties, the Expert did not**  **include the traffic count studies in the Appendix to his report, nor did he furnish the court with copies of**  **the traffic count studies he relied on.** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-25- conditions. In the Expert’s opinion, despite the country**  **having experienced**  **a nation wide recession**  **beginning in late**  **2008 and lasting for seve**  **ral years , he saw no basis to justify a**  **time or market**  **adjustment. After**  **applying the adjustments, the adjusted rents of the eleven remaining comparable**
**l eases varied**  **from $6.35 per square foot to $13.30 per square foot, with an average of $10.32. 15** 
**After analyzing the adjusted and unadjusted rents, the Expert concluded an economic or**  **market rent of $12.00 per square foot for the retail space in the**  **subject property. The Expert then**  **applied his $12.00 per square foot economic**  **r ent to 32,464 square feet of**  **in**

**- line retail**  **space in the**  **subject property to discern the Potential Gross Income for the subject property during each tax** 
**year. According to the Expert, the 32,464 square foot figure was derived from “tak[ing] down the**  **A&P space, that’s what you’re left with.” However, the court’s analysis of the Expert’s conclusion**  **reveals that by deducting 45,190 square feet, representing the leased area formerly o ccupied by**  **A&P, from the total shopping center square footage of 82,233 square feet, causes 37,043 square feet to remain (82,233**  **– 45,190 = 37,043**  **square feet ).**  **T o reach the Expert’s computation of**  **32,464 square feet, one must**  **include demoli tion of**  **an additional 4,583 square feet of**  **retail area originally designed for occupancy by Walgreens.** 
**Howev er, the court has m**  **aterial concerns with respect to the quality**  **, value, substance,**  **and comparability of several leases identified by the Expert.**  **C omparable lease 1 was entered into on**  **January 1, 2004, approximately 11 years prior to the first valuation date involved in these tax appeals** 

**. In**  **response to defendant’s cross**

**- examination on comparable lease 1, the Expert opin**  **ed**

**15 The**  **range of adjusted rents reported in the Expert’s appraisal repo rt**  **was $5.00 to $13.30 per square foot and the average rental rate was $10.06 per square foot as it included compa**  **rable lease s**  **12, 13, 14, and 15. Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-26- that this**  **“market is pretty static. I’m not going to say that this is the best lease to use to determine the market value,**  **but I thought it told a lot of the story of what was going on in the market.” However,**  **effective cross**

**- examination revealed**  **that WSCI**  **negotiated a lease for one of its in** 

**- line**  **retail stores in 2004 at a**  **substantially higher rental rate**  **than comparable le ase 1**  **that the Expert**  **characterized as “too old”**  **in determining**  **the economic rent**  **of the shopping center as of the**  **October 1, 2015, October 1, 2016, and October 1, 2017 valuation dates. Thus, while comparable lease 1**  **executed in 2004 was deemed**  **acceptable by the Expert in determining the subject**  **property’s economic rent, WSCI’s 2004 lease for an in** 

**- line retail**  **store at the subject property was**  **characterized by the Expert as “too old.” In sum, the court finds the Expert’s inconsistenc y in the**  **characterization and treatment of these two 2004 lease agreements renders comparab le lease 1**  **meaningless in the determination of the subject property’s economic or market**  **rent. Similarly, comparable lease 2**  **was originally**  **entered into on February 9, 2008, approximately 7 years**  **prior to the first valuation date involved in these tax appeals at an initial**  **rate of $11.28 per square foot**

**. However,**  **comparable lease 2 was subsequently renewed,**  **modified or amended**  **in about January 2009 to an average rent of $11.64 per square foot.**  **Thereafter,**

**c omparable lease 2 was again renewed, modified**  **, or**  **amended in July 2014 to extend the term**  **for an additional six months through December 2014, at rental rate of $12.20 per square foot** 

**. Finally,** 

**c omparable lease 2 was again renewed**  **, modified, or extended in December 2014 for an additional term of six months**  **at a rental rate of $9.76 per square foot. The court does not find that a lease**  **agreement executed in 2008, and which has undergone**  **three rene**  **wals, modifications, or amendments**  **accurately represent s**  **the economic rent of the subject property on the valuation dates**  **involved herein**

**. The motivations of a landlord**  **or a tenant**  **can shape**  **how the rental rate i**  **s fixed in a**  **lease modification, extension, or renewal. Tenants unwilling to incur costs associated with** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-27- moving and relocating their business operations may be willing to pay a rent higher than the**  **market. Conversely, landlords fearing that one tenant vacating will result in the ma ss exodus of** 

**te nants may be willing to offer a below-**  **market rent to a tenant to entice them to remain. Without engaging in**  **in**

**- depth discussions with**  **both the landlord and tenant to gain a better understanding**  **and perspective of their relationship and what motivated them**  **to execute the lease renewal, modification, or extension, it is of questionable**  **usefulness . Here, the Expert acknowledged**  **during**

**cross -**  **examination that he did not have any discussions with the tenant and thus, did not ascertain**  **their motivations for**  **executing the three**  **lease modification s**  **, extension s,**  **or renewal s** 
**. Therefore,** 

**t he court finds comparable lease 2 not to be meaningful and credible evidence of the subje**  **ct property’s economic rent for the 2016, 2017, and 2018 tax years.**  **Comparable lease 3 is located at 128 Route 94, Blairstown, Warren County, New Jersey.**  **Comparable lease 3 was a net lease at $12.00 per square foot, for**  **7,600 square feet of retail space executed in April 2013. The Expert obtained a copy of the lease from another appraiser**  **and did not verify the lease terms with either the landlord, tenant, or any brokers involved in negotiat**  **ion of the lease.**  **Comparable lease 4 is located at 46 Route 94, Vernon, Sussex County, New Jersey ,**  **approximately thirty (30)**  **miles from subject propert y**  **. Comparable lease 4 was a net lease for $12.75 per square foot, for 9,100 square feet of retail space executed in May 2013. The Expert**  **obtained a copy of the lease from another appraiser and did not verify the lease terms with either**  **the landlord, tenant, or any brokers involved in negotiation of the lease. Comparable lease 5 and comparable lease 6**  **wer e part of**  **a former A&P grocery store located at 598 Central Avenue, New Providence, Union County, New Jersey, more than thirty**  **(30) miles from the subject**  **property**

**. Following A&P vacating the property the landlord subdivided** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-28- the A&P space and erected demising walls to create smaller leased areas. Comparabl**  **e lease 5 consists of 16,934 square feet and comparable lease 6 consists of 10,274 square feet.**  **The landlord**  **apparently incurred costs to subdivide and fit -up**  **comparable lease 5 of $894,473, or approximately $52.82 per square foot ($894,473/16,934 sq. ft. = $52.82). In addition, the**  **landlord apparently incurred costs to subdivide and fit**  **-up comparable l**  **ease 6 of $345,747, or approximately $33.65 per square foot ($345,747/10,274 sq. ft. = $33.65).**  **16 A net lease for comparable lease 5**  **was entered into in August 2012 at a rate of**  **$10.88 per square foot**  **and a net lease for comparable lease**  **6 was entered into in January 2013 at a rate of $10.23 per square foot. Comparable leases 7, 9, 10, and 11 are all located in the same shopping center at 205 Route**  **23, Wantage, Sussex County, New Jersey,**  **more than thirty (30)**  **miles from the subject property**

**. Since the disparity in leased area of these four leases is significant**  **, from 2,196 to 10,512 square**  **feet, the court finds that comparable lease 9 (2,204 square feet), comparable lease 10 (2,897 square**  **feet) and comparable lease 11 (2,196 square feet) should be grouped separately from**  **comparable lease 7 (10,512 square feet), as well as the other comparable leases which contai**  **n significantly larger leased areas** 

**. 17**  **Comparable lease 7 was a net lease entered into in December 2014 at an average rental rate of $7.17 per square foot over the lease term. Comparable lease 9**  **was a net lease entered into in March 2015 at an average rental rate of $11.57 per square foot over the le**  **ase term. Comparable lease 10 was a net lease entered into in June 2015 at an average rental**  **rate of**

**16 The Expert offered testimony during cross** 

**- examination that the landlord’s cost**  **s of $33.65 to**  **$52.82 per s**  **quare foot to erect**  **demising walls and fit**

**- up comparable lease 5 and 6 did not include**  **demolition costs , which the Expert had no information about.**  **17 The key elements of comparison in a rental analysis is “location**  **– [t]ime** 

**- distance linkages and**  **unit-spe cific locations in project.”**  **Appraisal Institute, The Appraisal of Real Estate**  **, 466 (14th ed. 2013).**  **I t is pivotal for an appraiser to establish appropriate “elements of comparison for a gi**  **ven appraisal through market research and [to] support those conclusions with market e**  **vidence.” Id.**  **at 390. Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-29- $12.61 per square foot over the lease term.**  **Comparable lease 11 was a lease renewal, the tenant**  **had apparently occupied the leased area on a month**

**- to** 

**- month basis and**  **entered into a new lease**  **agreement in June 2016 at an average rental rate of $8.164 per square foot over the lease term.**  **Comparable lease 8 is located at 100 Main Street, Hacketts town, Warren County, New**  **Jersey. Comparable lease 8 consists of a stand** 

**- alone retail store in d**  **owntown Hackettstown, an older store than the subject property. Comparable lease 8 was a net lease for $13.30 per**  **square foot, for 8,770 square feet of retail space**  **, executed in December 2014. The Expert obtained a copy**  **of the lease from another appraiser and did not verify the lease terms with ei ther the landlord,**  **tenant, or any brokers involved in negotiation of the lease. The**  **Expert’s concluded adjusted rents for the comparable leases containing leased**  **areas of**  **between 7,600 and 16,934 square feet are set forth below:** 

**Lease 3 Lease 4**  **Lease 5 Lease 6**  **Lease 7 Lease 8**  **$12.00 $12.75**  **$9.79 $9.21**  **$7.17 $13.30** 

**The court places the greatest weight on comparable leases 3 and 8, as those properties are**  **in closest**  **proximity to the subject property**  **, are in**  **Warren County, and did not require any adjustments**  **. Conversely, the court places the least**  **weight on comparable leases**  **4, 5, 6, and**  **7, as**  **those shopping centers**  **were located more than thirty**  **(30) miles from the subject property,**  **were located in Sussex and Union Counties,**  **and several required adjustments to account for perceived**  **differences in location**

**. Further, th**  **e court emphasizes that the Expert offered little data and**  **support , other than his years of**  **experience as an appraiser, for his**

**- 10% adjustment to comparable**  **leases 5 and 6**

**. D**  **uring cross**

**- examination the Expert admitted that his** 

**- 10% adjustment to**  **comparable leases 5 and 6 amounted to simply**  **a “judgment call.” Moreover, t**  **he Expert Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-30- acknowledged during cross** 

**- examination that the traffic counts for the subject property (18,700)**  **, t**  **he traffic counts for comparable leases 5 and 6 (18,339) ,**  **and the traffic counts for comparable lease 4 (12,000) and comparable lease 7 (15,917)**  **were almost identical**

**. In addition,**  **the Expert opined that the demographics surrounding comparable leases 5 and 6 were superior**  **to the subject property**  **, justifying a**

**- 10% adjustment. However, the Expert offered no**  **meaningful statistics, data,**  **evidence, or analysis**  **as to how**  **the demographics**  **surrounding comparable lease 5 and 6 translated into it being 10% superio**  **r to**  **the subject property ,**  **or how that perceived superiority was measured** 

**. T**  **he Expert performed no paired**  **analysis or study of the marketplace surrounding comparable lease 5 and 6 to demonstrate not only that it is superior, but that a** 

**- 10% adjustment**  **appropriately accounts for the locational differences. Additionally, the Expert offered no meaningful evidence how the perceived similar**  **location of and demographics surrounding comparable lease 4 and 7 led him to conclude that no adjustment was warranted** 

**. During cross** 

**- examination regarding the comparability of the**  **demographics of Wantage to Washington Township, the Expert offered only that he “live[s] in**  **that area” and that he “knows those markets very well . . . They’re almost what we call a cherry**  **comp.” T**  **he Expert performed no paired**  **analysis or study of the marketplace surrounding comparable lease**  **4 and 7 to demonstrate that it is**  **truly a similar**  **market to the subject property.**  **By definition, comparability does not require properties to be identical, as “differences**  **between a comparable property and the subject property are anticipated. Such differen ces are dealt**  **with by adjustments recognizing and explaining these differences, and then relating the two**
**pro perties to each other in a meaningful way so that an estimate of the value of one can be**  **determined from the value of the other.” U.S. Life Realty Corp. v. Jackson Twp., 9 N.J. Tax 66,**  **72 (Tax 1987). Generally, properties are considered comparable when t**  **hey “lend logical, coherent Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-31- support . . . show[ing] ‘comparable building density ratios, functional similarities, . . . simil**  **arity of age,**  **construction, and condition, and in some cases size.’” Ford Motor Co., 127 N.J. at 308**  **(quoting Shulton, Inc. v. Cli**  **fton City , 7 N.J. Tax 208, 218 (Tax 1983),**  **aff’d , 7 N.J. Tax 220 (App.**  **Div. 1984)). However, w**  **hen the opinion of an expert is offered “[w]ithout explanation as to the basis, the opinion of the expert is entitled to little weight. . . .” Dworman v. Tinton**  **Falls , 1 N.J.**  **Tax 445, 458 (Tax 1980). Accordingly, the court finds that the**  **economic or market**  **rent of the subject property’s retail**  **areas containing**  **between 7,600 and 16,934 square feet, is $12.50 per square foot,**  **as of each valuation date involved here**  **in**

**. The Expert’s concluded adjusted rents for the comparable rentals containin**  **g leased areas less than 7,600 s**  **quare feet are set forth below:**
**Lease 9 Lease 10**  **Lease 11 $11.57**  **$12.61 $8.64** 

**However, the court observes that each of these comparable leases is located in the same shopping center in Wantage, Sussex County, New Jersey, a distance more than thirty (30) miles**  **from the subject property ,**  **and located in a county different than the subj ect property** 

**. As outlined**  **above, d espite this seemingly mate**  **rial difference, the Expert opined that no location adjustment**  **was warranted finding that the traffic counts**  **, location, and demographics of Wantage comparable** 

**to Washington Township. However,**  **as set forth above,**  **the Expert offered little tangible**  **statistical and analytical evidence**  **with respect to the similarities between Washington Township and Wantage**  **, other than his personal views, and**  **did not offer any empirical evidence as to how those similarities translate**  **d into an accurate**  **representati on**  **of comparable**  **economic or market rent**

**. In** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-32- sum, the Expert offered no data**  **, research**  **, or analysis, other than his personal observations and reporting on this single shopping center in Wantage.**  **Moreover, the court observes that comparable lease 11**  **i s a lease renewal where the tenant**  **had occupied the demised space s**  **ince 2005 under a previously**  **expired lease agreement. As**  **expressed above, the motivations of a landlord or a tenant may shape how the rental rate is fixed**  **in a lease modification, extension, or renewal. Without engaging in in**

**- depth discussions with both**  **the landlord and tenant to gain a better understanding and perspective of their relationship and what motivated them to execute the le**  **ase renewal, modification, or extension, it is of questionable usefulness.**  **Here, the Expert acknowledged during cross**

**- examination that he did not have any**  **discussions with the tenant and thus, did not ascertain their motivations for executing t he lease** 

**re newal** 

**. T**  **herefore, the court finds comparable lease 11**  **not to be meaningful and credible evidence of economic**  **or market rent** 

**. Thus, t**  **he court turns to consideration of two**  **remaining comparable leases containing**  **retail**

**areas less than 7,600 square feet.**  **G iven the**  **limited sampling size of comparable retail leases comprising less than 7,600 square feet**  **and the lack of credible analytical data demonstrating that these two leases are located in a market substantially similar to that of the subject pro**  **perty, the** 

**court cannot decisively conclude that either comparable lease 9 or 10 accurately reflect the m**  **arket or economic rent for the subject property as of the valuation dates at issue. Accor**  **dingly, the court concludes that insufficient analytical and market**  **data has been proffered by WSCI and the Expert to enable the court to discern the economic or market rent for the subject property’s**  **retail stores containing less than 7,600 square feet.** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-33-**
**B. Pad Sites**  **The Expert offered testimony that the subject property contains three pad sites, one**  **developed with a McDonald’s fast**

**- food restaurant, and the other two which are undeveloped. In**  **computing the economic rent of the three pad sites, the Expert relied exclusively on a 1995 gr ound**  **lease between WSCI and McDonald ’s.**  **18 The Expert’s appraisal report states that the annual rent**  **for the pad site was $62,355 and “[u]pon A&P’s departure, the rent was reduced to $31,177 as per the lease agreement.” No other evidence or testimony was offered to the court with res**  **pect to how**  **this reduction in ground rent was calculated. However, because the Expert opined that W SCI**  **knew A&P was in bankruptcy and “closing in 2015,” the Expert applied the $31,177 McDonald’s pad rental rate to the three pad sites as of each valuation date herein to determine an eco**  **nomic rent of $93,531 ($31,177 x 3 = $93,531).**  **Notably, the Expert offered no other market evidence of value of the pad sites. The Expert did not consider, nor did the Expert research or evaluate any other ground leases for the t**  **ax years at issue. Moreover, the Expert offered no evidence of other comparable leases fo**  **r fast -food** 

**restaurant s**  **. Cross**

**- examination further revealed that the Expert had only limited familiarity with**  **the McDonald’s site, did not measure the McDonald’s building, and was unable to recite basi c**  **information about the McDonald’s site**  **like whether it possessed one drive**

**- thru window or two**  **drive-thru windows. The court finds the Expert’s analysis of the economic or market rent for the pad s**  **ites to be fundamental**  **ly flawed and not credible. Here, the Expert relied on a 1995 ground lease to establish**

**18 The**  **1995 land lease between WSCI and McDonald’s**  **apparently expired in 2016. However, the Expert was unfamiliar with the terms of the land lease renewal and was initially**  **unsure whether the lease renewed,**  **reasoning during direct examination that it must have renewed because McDonald’s continued to occupy the subject property in 2018, as of the date of his appraisal report.** **Washing ton Shopping Center, Inc. v. Washington Township** 

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-34- a market rent for the subject property’s three pad sites for the 2016, 2017, and 2018 tax years.**  **Although more than twenty years elapsed from execution of the McDonald’s ground lease, and**  **without having conducted any current market analysis, the Expert opined that the McDonald’s**  **ground lease rent should be the economic rent for the 2016, 2017, and 2018 tax years. Moreover, while limited testimony and evidence was elic**  **ited during trial regarding the terms of the McDonald’s lease, the Expert’s appraisal report states that the “rent was reduced . .**  **. as per the lease agreement” (**  **e mphasis added). Thus, it is possible that under the terms of the 1995**  **McDonald’s ground leas e,**  **the parties expressly stipulated that the rent would be reduced by 50% ($62,355/2 = $31,177) in the event the shopping center**  **attained a certain vacancy rate or the**  **shopping center’s anchor tenant vacated**

**. However, neither WSCI nor the Expert**  **offered any evidence or testimony as to how the reduced rental rate of $31,177 was c**  **omputed. 19**  **Without this critical evidence, the court cannot reasonably conclude that the $31,177, per pad value**  **opined by the Expert represents the economic or market rent. Fundamental to the conclusion of an ec**  **onomic or market rent is that the value reflects**  **the most probable rent that the property would bring in a**  **n open and**  **competitive market . Here, the Expert offered no credible evidence permitting the court**  **to rationally conclude that the $31,177 value represents what the subject**  **property would reap in an open and competitive market.**  **Accordingly, the court rejects the Expert’s opinions of value for**  **the subje ct property’s**  **three pad sites.**

**19 For instance, was the reduced ground rent based on a fixed formula set forth under the 1995**  **ground lease agreement? W**  **as the $31,177 a negotiated rent between WSCI and McDonald’s based on other fast-**  **food restaurant leases in the marketplace? Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-35-**
**2. Potential Gross Income**  **The n ext step under the**  **i ncome**  **c apitalization**  **a pproach to value is computation of a**  **property’s Potential Gross Income. To determine Potential Gross Income the c oncluded economic**  **or market rent is applied to the square footage of the improvement s.**  **After determ ining Potential**  **Gross Income, the applicable vacancy and collection loss rate is applied to**  **calculate a property’s Effective Gross Income.**  **Here however, a s a result of the court’s inability to discern the economic or market**  **value of: (i)**  **the subject property’s retail space comprising less than 7,600 square feet;**  **(ii) the subject property’s excess or surplus land, if any; and**  **(i ii) the three pad sites locate**  **d on the subject property, the court is rendered unable to**  **determine the**  **subject property’s Potential Gross Income** 

**. Correspondingly,**  **the court is unable to discern the subject property’s e stimated fair market value** 

**as of the October 1, 2015, October 1, 2016, and October 1, 2017 valuation dates.** 
**3. The Glen Wall dilemma**  **Nonetheless, the court is mindful of its obligation “to apply its own judgment to valuation data submitted by experts in order to arrive at a true value and find an assessment for the ye**  **ars in question.”**  **Glen Wall Associates v. Wall. Twp. , 99 N.J. 265, 280 (1985) (citing**  **New Cumberland Corp. v. Roselle Borough, 3 N.J. Tax, 345, 353 (Tax 1981)).**  **However, to enable the court to make an independent finding of true value, credible and competent evidence must be adduced in the trial**  **record. Here, the court’s review of the**  **Expert’ s**  **testimony and appraisal report regarding his highest and best use**  **analysis and comparable leases**  **discloses material issues of credibility**  **, rendering his conclusions of dubious value. Although the court was able to discern from the**  **testimony offered an economic or market rent of $12.50 per square foot, for**  **the subject property’s Washing**  **ton Shopping Center, Inc. v. Washington Township**

**Docket Nos. 005517-2016, 002869-2017, and 006408-2018 Page**  **-36- retail space containing between 7,600 and 16,934 square feet, t**  **he court was unable to determine**

**an economic or market rent to be applied to the subject property’s**  **retail space comprising less than 7,600 square feet.**  **Moreover, based on the Expert’s faulty analysis of the pad sites, the court was**  **unable to ascribe any value to the subject property’s three pad sites. Thus, w ithout**  **credible evidence of economic or market rent supported by objective, market extracted data, the court**  **is unable to discern the units of value to be applied to each of the subject property’s component pa**  **rts. The court’s independent determination of value must be based “on the evidence before it**  **and the data that are properly at its disposal.” F.M.C. Stores Co. v. Morris Plains Borough, 100**  **N.J. 418, 430 (1985). Here, the court concludes that**  **based on the**  **E xpert**  **’s testimony and**  **appraisal report**  **, the trial record contains insufficient**  **credible information to enable the court to make a**  **reliable independent finding of the subject property’s value as of the October 1, 201 5**  **, October 1, 2016, and October 1, 2017 valuation dates.**  **Accordingly, for the above stated reasons,**  **the court will enter judgments affirming the subject property’s 2016**  **, 201 7, and 2018**  **local property tax assessments. Very truly yours,** 

**Hon. Joshua D. Novin, J.T.C.**