SUPREME COURT OF THE STATE OF NEW YORK

Appellate Division, Fourth Judicial Department

351 

CA 14-01385 

PRESENT: SCUDDER, P.J., SMITH, CARNI, SCONIERS, AND WHALEN, JJ. 

 

IN THE MATTER OF RITE AID CORPORATION, 

PETITIONER-RESPONDENT, 

V MEMORANDUM AND ORDER

STEPHEN HAYWOOD, ASSESSOR, AND BOARD OF 

ASSESSMENT REVIEW OF TOWN OF WILLIAMSON, 

WAYNE COUNTY, RESPONDENTS-APPELLANTS.

(PROCEEDING NOS. 1 & 2.) 

---------------------------------------- 

IN THE MATTER OF RITE AID CORPORATION, 

PETITIONER-RESPONDENT,

V

 

TOWN OF WILLIAMSON BOARD OF ASSESSMENT 

REVIEW, ASSESSOR OF TOWN OF WILLIAMSON 

AND TOWN OF WILLIAMSON, WAYNE COUNTY, 

RESPONDENTS-APPELLANTS. 

(PROCEEDING NO. 3.)

 

HACKER MURPHY, LLP, LATHAM (PATRICK L. SEELY, JR., OF COUNSEL), FOR

RESPONDENTS-APPELLANTS. 

ROBERT L. JACOBSON, PITTSFORD, FOR PETITIONER-RESPONDENT.

 

Appeal from an order and judgment (one paper) of the Supreme

Court, Wayne County (Matthew A. Rosenbaum, J.), entered January 31,

2014 in proceedings pursuant to RPTL article 7. The order and

judgment determined tax assessments for tax years 2009/2010 through

2011/2012. 

It is hereby ORDERED that the order and judgment so appealed from

is modified on the law by dismissing the petitions challenging the

assessments for the 2009/2010 and 2011/2012 tax years and by reducing

the assessment for the 2010/2011 tax year to $3,610,100, and as

modified the order and judgment is affirmed without costs. 

Memorandum: Petitioner commenced these RPTL article 7

proceedings seeking review of the real property tax assessments for a

commercial property located in respondent Town of Williamson for the

tax years 2009/2010, 2010/2011, and 2011/2012. In each of the

proceedings, respondents appeal from an order and judgment granting

the respective petitions in part and ordering respondents to correct
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CA 14-01385 

the assessment rolls and to refund the tax overpayments with interest. 

Respondents concede that the assessment for the 2010/2011 tax year

should be reduced to $3,610,100.

Petitioner is the lessee under a 20-year triple net lease of a

2.36 acre parcel of real property located at 4061 Route 104 in the

Town of Williamson, which is improved by a 14,690-square-foot

single-tenant retail pharmacy. Rent is $377,000 per annum or

approximately $25.73 per square foot. The pharmacy building was

constructed in 2003 under a build-to-suit arrangement with

petitioner’s predecessor, Eckerd Drugs. The build-to-suit arrangement

in this case involved the assemblage of five separate parcels of real

property situated on a corner lot with a traffic light. Under the

terms of the lease, petitioner is responsible for, among other things,

the payment of real property taxes. The property was sold in 2003 in

what the parties agree was an arm’s length sale for $4,650,000. In

2009, 2010, and 2011, the property was assigned an assessed value of

$3,750,000 by respondent Stephen Haywood, assessor of the Town of

Williamson. Petitioner commenced three proceedings pursuant to RPTL

article 7 challenging those assessments. A nonjury trial was

conducted at which the parties presented expert testimony. In

granting the petitions in part, Supreme Court credited the appraisal

and valuation approach of petitioner’s expert and concluded, inter

alia, that the 2003 sale of the subject property was of “no probative

value” in determining the fair market value of the fee simple interest

in the property. We conclude that the court’s decision to credit the

appraisal of petitioner’s expert was against the weight of the

evidence, and we modify the order and judgment accordingly (see Matter

of Rite Aid Corp. v Otis, 102 AD3d 124, 127, lv denied 21 NY3d 855;

see also Matter of Kohl’s Ill. Inc. #691 v Board of Assessors of the

Town of Clifton Park, 123 AD3d 1315, 1317).

We note at the outset that respondents do not dispute that

petitioner came forth with substantial evidence, in the form of the

appraisal report and testimony of its expert, to rebut the presumption

of validity of the tax assessments (see generally Matter of Techniplex

III v Town & Vil. of E. Rochester, 125 AD3d 1412, 1412-1413). Nor do

respondents contend that the approach to valuation used by

petitioner’s expert, which rejects drugstore comparables on the ground

that they are “build-to-suit” and, thus, subject to above-market

leases which encompass purchasing, often at a premium, and assembling

various pieces of property, demolition and construction costs, is not

plausible (see Matter of Brooks Drugs, Inc. v Board of Assessors of

City of Schenectady, 51 AD3d 1094, 1095, lv denied 11 NY3d 710).

Within this framework, an appellate court is empowered to make

new findings of value where the trial court “ ‘has failed to give to

conflicting evidence the relative weight which it should have’ ”

(People ex rel. MacCracken v Miller, 291 NY 55, 61, quoting Matter of

City of New York [Newton Creek], 284 NY 493, 497 [emphasis omitted]),

giving due deference to the trial court’s power to resolve credibility

issues by choosing among conflicting expert opinions (see Brooks

Drugs, Inc., 51 AD3d at 1095). 
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CA 14-01385 

It is well settled that real “[p]roperty is assessed for tax

purposes according to its condition [and ownership] on the taxable

status date, without regard to future potentialities or possibilities

and may not be assessed on the basis of some use contemplated in the

future” (Matter of Addis Co. v Srogi, 79 AD2d 856, 857, lv denied 53

NY2d 603; see RPTL 302 [1]; Matter of BCA-White Plains Lanes v Glaser,

91 AD2d 633, 634-635, appeal dismissed 59 NY2d 673). Although several

methods of valuing real property are acceptable, “the market value

method of valuation is preferred as the most reliable measure of a

property’s full value for assessment purposes” (Matter of General

Elec. Co. v Town of Salina, 69 NY2d 730, 731), because “[t]he best

evidence of value, of course, is a recent sale of the subject property

between a seller under no compulsion to sell and a buyer under no

compulsion to buy” (Matter of Allied Corp. v Town of Camillus, 80 NY2d

351, 356, rearg denied 81 NY2d 784). A recent sale has been

characterized as evidence of the “highest rank” in determining market

value (Matter of F. W. Woolworth Co. v Tax Commn. of City of N.Y., 20

NY2d 561, 565 [emphasis omitted]; see Plaza Hotel Assoc. v Wellington

Assoc., 37 NY2d 273, 277, rearg denied 37 NY2d 924). The scope of a

“market” need not be limited to the locale of the subject property

and, depending on the nature of the use, it may encompass national

and/or international buyers and sellers (see e.g. Matter of Saratoga

Harness Racing v Williams, 91 NY2d 639, 646). 

In support of its case, petitioner presented the testimony of

appraiser Christopher Harland, who concentrated his analysis on the

fee simple value of the property, unencumbered by any leases. Harland

employed the comparable sales approach and income capitalization

approach in arriving at his valuation. He valued the subject property

at $1.0 million to $1.1 million on the relevant taxable status dates. 

The comparable properties he used in his analysis consisted primarily

of commercial retail properties located in the same general geographic

area. None, however, were currently occupied by national pharmacy

chains nor subject to build-to-suit leases. Indeed, Harland’s sales

comparables consisted of a Dollar Tree store; a Staples office supply

store; a Salvation Army thrift shop; a retail bicycle shop; and a

Dollar General store. Although Harland’s appraisal recognized that 12

recent sales of retail drugstores had occurred in the region, he

concluded that it was “not appropriate to use these sales” and gave

them “little weight . . . in valuing the subject property.”

On the other hand, respondents’ expert, Ronald Rubino, testified,

and his appraisal concluded, that there is an established national

submarket for the sale and purchase of built-to-suit net lease

national chain drugstores, which provides an abundance of drugstore

comparable sales, both local and regional, for use in the sales

comparison approach. Notably, petitioner’s expert agreed that there

is a wholly separate national net lease drugstore real estate

submarket and further acknowledged that his appraisal cited to and

relied upon a national “Net Lease Drugstore Market Report.” This

report is published by The Boulder Group, which describes itself as “a

boutique investment real estate service firm specializing in single

tenant net lease properties. The firm provides a full range of

brokerage, advisory, and financing services nationwide to a
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CA 14-01385 

substantial and diversified client base, which includes high net worth

individuals, developers, REITs, partnerships and institutional

investment funds” (The Boulder Group, http://bouldergroup.com/

[accessed June 18, 2015]). Respondents’ expert also included a

reference to The Boulder Group net lease market report in his

appraisal. In other words, there is no serious dispute that the

submarket identified and relied upon by respondents’ expert exists,

and sales and rental data for that submarket are readily available

(see Brooks Drugs, Inc., 51 AD3d at 1095; Matter of Eckerd Corp. v

Gilchrist, 44 AD3d 1239, 1240-1241, lv denied 10 NY3d 707). It is

noteworthy that petitioner’s expert also recognized that the

boundaries of the applicable submarket “are not purely physical or

geographical” and, “to the extent that the market is the meeting place

for buyers and sellers of real estate of a given type, the

participants who deal within its confines set the boundaries of the

market.” Nonetheless, in his appraisal, petitioner’s expert

disregarded the applicable submarket and relied upon properties that

are clearly outside of the well-recognized parameters of the net lease

national drugstore submarket. 

On the other hand, in reaching his valuation through the use of

the sales comparison approach, respondents’ expert identified and used

nine commercial properties, eight of which were improved and occupied

as national retail drugstore chain locations. Those eight properties

were clearly within the recognized parameters of the national net

lease drugstore submarket. The average sale price for those

comparables was $4,716,648. Respondents’ expert gave the recent sale

of the subject property the “most weight” as the “best indicator” of

the market value of the subject property. Petitioner’s expert

considered the 2003 sale of the subject property but “did not put any

weight on it.” 

Petitioner’s expert also used the income capitalization method. 

When using that method, actual rental income is often, as a general

rule, the best indicator of value (see Techniplex III, 125 AD3d at

1413; Matter of Schoeneck v City of Syracuse, 93 AD2d 988, 988; see

also Matter of Merrick Holding Corp. v Board of Assessors of County of

Nassau, 45 NY2d 538, 543). In reaching a valuation using the income

capitalization method, petitioner’s expert also rejected the actual

contract rent, which he described as “substantially above market.” 

Moreover, petitioner’s expert rejected the rents of other net lease

national drugstore properties in arriving at his determination of

market rent. Instead, petitioner’s expert identified “market rent” by

using the following properties: a Goodwill Industries store and

donation drop-off center, a nonprofit corporation serving community

needs; a Petsmart store; an Old Navy clothing retail store; a Family

Dollar retail store; and a Volunteers of America store, a nonprofit

corporation that serves community needs and operates thrift or resale

stores. Petitioner’s expert did not use any operating national chain

drugstore-occupied properties in his determination of “market rent”

and arrived at a market rent of $8.00 per square foot. 

On the other hand, respondents’ expert utilized eight rental
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CA 14-01385 

comparables, seven of which were occupied and used as national chain

drugstores. The use of those comparables demonstrated that the

adjusted comparable median market rent for similar national chain

drugstores was $33.86 per square foot, which yields a valuation of

$4,130,000 for July 1, 2008, and $3,760,000 for July 1, 2009. 

In light of the foregoing, we conclude that the failure of

petitioner’s expert to use the recent sale of the subject property as

well as readily available comparable sales of national chain drugstore

properties in the applicable submarket as evidence of value

demonstrates the invalidity of the expert’s conclusion with respect to

the sales comparison valuation (see Matter of Thomas v Davis, 96 AD3d

1412, 1415, lv denied 21 NY3d 860). We further conclude that the use

of sales not comparable to the subject and outside of the applicable

market should have been rejected by the court as unreliable (see

Matter of Adcor Realty Corp. v Srogi, 54 AD2d 1096, 1096, lv denied 41

NY2d 806). Moreover, the failure of petitioner’s expert to use the

actual rent, negotiated at arm’s length and without duress or

collusion, as well as the failure to use similar rental comparables

from the applicable market as evidence of value, demonstrates the

invalidity of the expert’s conclusions using the income capitalization

method (see Matter of Conifer Baldwinsville Assoc. v Town of Van

Buren, 68 NY2d 783, 785; see generally Techniplex III, 125 AD3d at

1413). 

All concur except SCUDDER, P.J., who dissents and votes to affirm 

in the following memorandum: I respectfully dissent. In my view, the

valuation determination made by Supreme Court should be upheld, and I

would therefore affirm the order and judgment. While it is well

established that “a property valuation by the tax assessor is

presumptively valid” (Matter of FMC Corp. [Peroxygen Chems. Div.] v

Unmack, 92 NY2d 179, 187), I agree with the majority that petitioner

came forward with substantial evidence to rebut the presumption by

submitting “a detailed, competent appraisal based on standard,

accepted appraisal techniques and prepared by a qualified appraiser”

(Matter of Niagara Mohawk Power Corp. v Assessor of Town of Geddes, 92

NY2d 192, 196; see Matter of Rite Aid Corp. v Otis, 102 AD3d 124, 125-

126, lv denied 21 NY3d 855). Once that presumption of validity is

rebutted, “a court must weigh the entire record, including evidence of

claimed deficiencies in the assessment, to determine whether

petitioner has established by a preponderance of the evidence that its

property has been overvalued” (FMC Corp., 92 NY2d at 188; see Rite Aid

Corp., 102 AD3d at 126). 

In tax certiorari proceedings, such as the one at issue on this

appeal, the Court of Appeals has specifically held that the Appellate

Division “ ‘may not set aside a finding of value made at Special Term,

unless such finding is based upon [an] erroneous theory of law or [an]

erroneous ruling in the admission or exclusion of evidence, or unless

it appears that the court at Special Term has failed to give to

conflicting evidence the relative weight which it should have and thus

has arrived at a value which is excessive or inadequate’ ” (People ex

rel. MacCracken v Miller, 291 NY 55, 61; see Matter of Adirondack Mtn.
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CA 14-01385 

Reserve v Board of Assessors of the Town of N. Hudson, 106 AD3d 1232,

1237; Matter of Universal Packaging v Assessor of City of Saratoga

Springs, 259 AD2d 875, 875; cf. Matter of Kohl’s Ill. Inc. #691 v

Board of Assessors of the Town of Clifton Park, 123 AD3d 1315, 1317;

Matter of Al Turi Landfill, Inc. v Town of Goshen, 93 AD3d 786, 791,

lv denied 19 NY3d 815). 

 The crux of this appeal as well as the appeals in Matter of Rite

Aid Corp. v Huseby (___ AD3d ___ [July 10, 2015]) and Matter of Rite

Aid Corp. v Huseby (___ AD3d ___ [July 10, 2015]) are the method and

manner of valuing first-generation, build-to-suit retail drugstores

for tax assessment purposes. Petitioner’s expert, Christopher

Harland, concluded that the value of the leased fee interest, i.e.,

the value of the property with the lease, is different from the value

of the fee simple interest, i.e., the value of the property itself

without any attendant lease. He opted to use the value of the fee

simple interest only and thus used retail properties not subject to

long-term retail drugstore leases as comparables. The majority

concludes that Harland’s opinions and valuations are invalid because

he used commercial retail properties instead of first-generation

build-to-suit pharmacies in his sales comparison and income

capitalization analyses. Harland, however, explained his reasons for

doing so. As was stated succinctly by the Third Department in a

similar appeal in which Harland’s valuation method was credited,

“[t]he exclusion of national retail drug stores from Harland’s

analysis was premised upon his designation of those properties as

‘build-to-suit,’ meaning that they often have above-market leases

attributable to premiums being paid to acquire the land, as well as

assembly, demolition and construction costs” (Matter of Eckerd Corp. v

Burin, 83 AD3d 1239, 1242; see Matter of Eckerd Corp. v Semon, 35 AD3d

931, 934). Moreover, the testimony at the nonjury trial established

that the price of the land before the retail drugstore was built was

$1.59 million, and a similar retail drugstore, the lease of which had

expired, had recently sold for only $1.4 million.

Respondents’ expert, Ronald Rubino, gave considerable weight to

the 2003 sale of the property for $4.65 million. At that time,

however, the property was subject to a 20-year retail drugstore lease

in the amount of $377,000 per year. In his sales comparison and

income capitalization analyses, Rubino relied almost exclusively on

first-generation, build-to-suit retail drugstores still subject to

lease provisions.

Each expert used the sales comparison and income capitalization

methods of valuation, but the fundamental difference in whether to

consider the lease in their respective analyses explains their

different valuations. Both approaches to valuation have been upheld

by the Third Department and, where trial courts have accepted

Harland’s valuations, the Third Department has generally affirmed (see

e.g. Eckerd Corp., 83 AD3d at 1242-1243; Matter of Eckerd Corp. v

Semon, 44 AD3d 1232, 1234; Eckerd Corp., 35 AD3d at 934). Where trial

courts have rejected Harland’s valuations, the Third Department has

also generally affirmed (see Matter of Rite Aid of N.Y. No. 4928 v
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CA 14-01385 

Assessor of Town of Colonie, 58 AD3d 963, 966, lv denied 12 NY3d 709;

Matter of Brooks Drugs, Inc. v Board of Assessors of City of

Schenectady, 51 AD3d 1094, 1095-1096, lv denied 11 NY3d 710; Matter of

Eckerd Corp. v Gilchrist, 44 AD3d 1239, 1240, lv denied 10 NY3d 707). 

Notably, however, even when a trial court had rejected Harland’s

valuation, the Third Department wrote that Harland had “articulated a

plausible reason for his failure to use the type of comparables

adopted by” the respondent’s expert and that he had “put forth a

persuasive case for [his] . . . valuation[]” (Rite Aid of N.Y. No.

4928, 58 AD3d at 966). 

The Third Department has concluded that the decision whether to

credit Harland’s testimony on the valuation of retail drugstore

properties is “a credibility determination that [the Court] decline[s]

to disturb” (id.; see Eckerd Corp., 83 AD3d at 1243; Eckerd Corp., 44

AD3d at 1241). The one exception is Rite Aid Corp. (102 AD3d 124). 

In that case, the trial court concluded that, because the recent sale

price of the subject property was consistent with the value of the

property as determined by respondents’ expert, the trial court’s

“decision to credit the appraisal offered by petitioner was against

the weight of the evidence” (id. at 127). While that case involved

circumstances similar to the circumstances at issue in the instant

appeal, I would decline to follow that decision. There, as here,

Harland explained his reasoning for rejecting recent sales, i.e., that

such sales do not reflect the value of the fee simple interest but,

rather, inflated above-market leases. I thus conclude that, if one

were to credit Harland’s reasoning, a recent sale of the subject

property while the lease was still in effect would not affect the

valuation of the fee simple interest in the property. 

Here, the court agreed with Harland’s valuation, concluding that

the lease was nothing more than a contract, i.e., “an intangible

property right,” not subject to taxation under RPTL 300. “Given that

Harland provided a plausible reason for not relying on [the 2003 sale

or] data from other national retail pharmacies in the area, [I] cannot

say that [the court’s] decision to credit Harland’s report and

testimony over [Rubino’s] was against the weight of the evidence”

(Eckerd Corp., 35 AD3d at 934). I would thus decline to disturb

“[t]he court’s ultimate finding concerning the value of the property

[because it] is within the range of the expert testimony and supported

by substantial evidence, and the court adequately explained the basis

for its ultimate finding” (Matter of Markham v Comstock, 38 AD3d 1262,

1263; see Universal Packaging, 259 AD2d at 875; cf. Rite Aid Corp.,

102 AD3d at 126-127). 

Entered: July 10, 2015 Frances E. Cafarell

Clerk of the Court