Court Opinion

ID: 4458831
Source: CourtListenerOpinion
Date Created: 2019-11-25 20:04:11.050857+00
Date Added: 2024-06-11T14:51:38.377142
License: Public Domain

ATTORNEYS FOR PETITIONER:                        ATTORNEYS FOR RESPONDENT:
MATTHEW M. ADOLAY                                CURTIS T. HILL, JR.
WOODEN MCLAUGHLIN LLP                            ATTORNEY GENERAL OF INDIANA
Indianapolis, IN                                 WINSTON LIN
                                                 MEREDITH B. MCCUTCHEON
THOMAS M. ATHERTON                               DEPUTY ATTORNEYS GENERAL
BOSE MCKINNEY & EVANS LP                         Indianapolis, IN
Indianapolis, IN

                                                                               FILED
                               IN THE                                      Nov 25 2019, 1:59 pm

                         INDIANA TAX COURT                                     CLERK
                                                                           Indiana Supreme Court
                                                                              Court of Appeals
                                                                                and Tax Court

SOUTHLAKE INDIANA LLC,                         )
                                               )
      Petitioner,                              )
                                               )
                    v.                         ) Cause No. 18T-TA-00016
                                               )
                                               )
LAKE COUNTY ASSESSOR,                          )
                                               )
      Respondent.                              )

                    ON APPEAL FROM A FINAL DETERMINATION
                     OF THE INDIANA BOARD OF TAX REVIEW

                                 FOR PUBLICATION
                                 November 25, 2019

WENTWORTH, J.

      Southlake Indiana LLC challenges the Indiana Board of Tax Review’s final

determination that valued its real property for each of the 2007 through 2014 tax years.

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

        Southlake owns a 7.23 acre parcel with a 90,000 square-foot, two-story building

located in a premier retail location in Merrillville, Indiana. (See Cert. Admin. R. at 282,

576.) The property is a freestanding outlot building of the Southlake Mall, a large regional

mall with several anchor stores. (See Cert. Admin. R. at 293, 845-54.) The property sits

near a heavily traveled intersection at US 30 and Mississippi Street, with access and

visibility from both streets. (See Cert. Admin. R. at 573-74, 577.)

        In 1992, Southlake entered into a build-to-suit lease with a Kohl’s discount

department store, which was renewed in 2012. (See Cert. Admin. R. at 397-98, 1457-

58, 1707.) In its build-to-suit leases, Kohl’s requires its properties to be developed

according to its national specifications. (See Cert. Admin. R. at 1704-06.) To determine

a rental rate, Kohl’s applies a mortgage constant to the construction costs,

compensating both the developer and owner for their investments. (See Cert. Admin.

R. at 1706.) Under the terms of the Southlake lease, Kohl’s paid a fixed rental rate plus

an additional 1.5% of its retail sales above $14,500,000. (See Cert. Admin. R. at 397,

546.)

        For each tax year from 2007 through 2012, the Lake County Assessor valued the

property at $16,775,300 and for 2013 and 2014 valued the property at $13,700,000. (See

Cert. Admin. R. at. 533-34.) Believing those values to be too high, Southlake filed appeals

with the Lake County Property Tax Assessment Board of Appeals (“PTABOA”), which

reduced the assessments to $11,600,000 (2007); $12,500,000 (2008); $15,200,000

(2009); $11,500,000 (2010); $12,000,000 (2011); $12,700,000 (2012); $13,700,000

(2013); and $13,700,000 (2014). (See Cert. Admin. R. at 4, 12, 23, 38, 51, 64, 78, 81-

                                             2
82, 87.)    Still believing the property was over-assessed, Southlake appealed to the

Indiana Board.

       In February and December of 2016, the Indiana Board conducted its hearing on

Southlake’s appeals. The parties each presented appraisals that valued the property

using the cost, sales comparison, and income approaches to value; both appraisals,

however, relied primarily on the income approach 1 on the basis that investors would be

the most likely purchasers of the property. (See Cert. Admin. R. at 445, 551, 738-42,

1474, 2162.)

                                       Coers Appraisal

       Southlake presented a USPAP-compliant appraisal prepared by Sara Coers, a

member of the Appraisal Institute (MAI). (See Cert. Admin. R. at 274-75.) In her income

approach, she estimated the subject property’s rent using three different methods: 1)

averaging extracted market rents of other Indiana properties, 2) calculating rent as a

percentage of gross sales, and 3) calculating a cost-based rent. (See Cert. Admin. R. at

400-17, 1459-65.) Based on these methods, Coers determined that the subject property’s

contract rent was actually below market rents that ranged from $5.50 to $7.00 per square

foot. (See Cert. Admin. R. at 397, 416-17.)

       After accounting for expenses, Coers concluded that the property’s net operating

income (NOI) ranged from $4.88 to $6.09 per square foot. (See Cert. Admin. R. at 423-

1
  The income approach “is used for income producing properties that are typically rented[, and]
converts an estimate of income, or rent, [a] property is expected to produce into value through a
mathematical process known as capitalization.” See 2002 REAL PROPERTY ASSESSMENT MANUAL
(2004 Reprint) (“2002 Manual”) (incorporated by reference at 50 IND. ADMIN. CODE 2.3-1-2 (2002
Supp.) (repealed 2010)) at 3; 2011 REAL PROPERTY ASSESSMENT MANUAL (“2011 Manual”)
(incorporated by reference at 50 IND. ADMIN. CODE 2.4-1-2 (2011)) at 2.

                                               3
30, 1470-71.) She then selected loaded overall capitalization rates ranging from 7.15%

to 8.65% that were based on rates extracted from market sales in Indiana, Ohio, and

Kentucky as well as investor surveys. (See Cert. Admin. R. at 432-40, 1471-73.) After

applying the capitalization rates to her NOI values, Coers estimated the property’s market

value-in-use as follows: $6,460,000 (2007); $6,240,000 (2008); $5,350,000 (2009);

$5,090,000 (2010); $5,970,000 (2011); $6,500,000 (2012); $7,050,000 (2013); and

$7,160,000 (2014). (Cert. Admin. R. at 438-39, 1473.)

                                   Kenney Appraisal

      The Assessor presented a USPAP-compliant appraisal prepared by Mark Kenney,

MAI. (See Cert. Admin. R. at 525-28, 1739-40, 1760.) In his income approach, Kenney

assumed that both the subject property’s category and its location near the Southlake

Mall limited the types of comparable leases to those with similar users. (See Cert. Admin.

R. at 576, 2286-87, 2289-90.) Kenney then concluded that the subject property’s highest

and best use was as a discount department store and that leased fee sales were the most

relevant comparable sales for estimating its market rent. (See Cert. Admin. R. at 551.)

      Kenney averaged market rents extracted from sale-leaseback and build-to-suit

leases of several Kohl’s stores and other national discount department stores and big box

stores, estimating that the market rent ranged between $9.00 to $10.50 per square foot.

(See Cert. Admin. R. at 655-68.) Using these market rent estimates, Kenney concluded

that the property’s NOI ranged from $8.19 to $9.58 per square foot during the years at

issue. (See Cert. Admin. R. 674-81.)

      Finally, Kenney developed overall capitalization rates that ranged from 6.7% to

7.6%. (See Cert. Admin. R. at 674-81.) He applied the capitalization rates to his NOI

                                            4
estimates to arrive at final values for the subject property of $11,700,000 (2007);

$11,800,000 (2008); $10,900,000 (2009); $12,100,000 (2010); $12,100,000 (2011);

$11,000,000 (2012); $12,300,000 (2013); and $13,000,000 (2014). (See Cert. Admin. R.

at 714-16.)

                        The Indiana Board’s Final Determination

      On May 10, 2018, the Indiana Board issued a final determination. In it, the Indiana

Board assigned no weight to either party’s sales comparison or cost approaches. (See

Cert. Admin. R. at 3372 ¶ 130, 3379 ¶ 151.) In considering each appraisal’s income

approach, the Indiana Board noted that Kenney provided a more detailed market rent

analysis than Coers by offering more relevant comparable properties. (See Cert. Admin.

R. at 3374-75 ¶¶ 136-37 (stating that Coers’s reliance on a month-to-month lease for a

fireworks store in a soon-to-be demolished building cast significant doubt on her

analysis).) To determine which appraiser’s estimate of market rent was best supported,

however, the Indiana Board used its own unique evaluation method.

      First, the Indiana Board selected sixteen leases, five from Coers’s data and eleven

from Kenney’s data, that it found most relevant to the subject property’s market. (See

Cert. Admin. R. at 3374-75 ¶ 137.) Of those leases, nine were Kohl’s build-to-suit leases

from various locations across the United States with rents ranging from $6.40 to $11.97

per square foot, and two leases involved properties that were located close to the subject

property (i.e., Gander Mountain and The RoomPlace) with rents of $7.42 and $9.75 per

square foot. (See Cert. Admin. R. at 3374-76 ¶¶ 137-39.)

      Next, the Indiana Board compared the rents from its selected leases with Coers’s

and Kenney’s estimated market rents and concluded that Kenney’s estimates were better

                                            5
supported than Coers’s. (See Cert. Admin. R. at 3376 ¶ 140.) The Indiana Board

explained that once it “corrected” and “reconstructed” Coers’s gross sales percentage

rent analysis, Coers’s rent estimates themselves supported Kenney’s. (See Cert. Admin.

R. at 3376-77 ¶¶ 141-43 (stating that Coers’s analysis was flawed because she based

her findings on gross rent clauses and not rent as a percentage of gross sales).)

       Finding Kenney’s estimated market rents more credible, the Indiana Board

adopted Kenney’s income approach values. 2 As a result, the Indiana Board valued the

property as follows:     $11,700,000 (2007); $11,800,000 (2008); $10,900,000 (2009);

$9,600,000 (2010); $9,600,000 (2011); $10,400,000 (2012); $12,300,000 (2013); and

$13,000,000 (2014). (See Cert. Admin. R. at 3380 ¶ 153.)

       Southlake initiated this original tax appeal on June 22, 2018. The Court conducted

oral argument on December 20, 2018. Additional facts will be supplied when necessary.

                                 STANDARD OF REVIEW

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

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

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

demonstrate to the Court that the Indiana Board’s final determination is arbitrary,

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

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

jurisdiction, authority, or limitations; without observance of the procedure required by law;

or unsupported by substantial or reliable evidence. See IND. CODE § 33-26-6-6(e)(1)-(5)

2
 The Indiana Board substituted Coers’s capitalization rates for Kenney’s in 2010, 2011, and 2012
because Kenney’s were actually below the ranges of rates selected in his own data. (See Cert.
Admin. R. at 3378-79 ¶¶ 149-50.)
                                               6
(2019). On review, however, the Court may not reweigh or assess the credibility of

evidence absent finding an abuse of discretion. See Clark Cty. Assessor v. Meijer Stores

LP, 119 N.E.3d 634, 642 (Ind. Tax Ct. 2019).

                                             LAW

       In Indiana, real property is assessed on the basis of its “market value-in-use.”

2002 REAL PROPERTY ASSESSMENT MANUAL (2004 Reprint) (“2002 Manual”) (incorporated

by reference at 50 IND. ADMIN. CODE 2.3-1-2 (2002 Supp.) (repealed 2010)) at 2; 2011

REAL PROPERTY ASSESSMENT MANUAL (“2011 Manual”) (incorporated by reference at 50

IND. ADMIN. CODE 2.4-1-2 (2011) at 2.          See also IND. CODE § 6-1.1-31-6(c) (2007)

(amended 2016). Market value-in-use is defined as the value “of a property for its current

use, as reflected by the utility received by the owner or a similar user, from the property.”

2002 Manual at 2; 2011 Manual at 2. Because Indiana’s property tax system taxes the

value of real property – and not business value, investment value, or the value of

contractual rights – this Court has explained that “market value-in-use, as determined by

objectively verifiable market data, is the value of a property for its use, not the value of its

use.” Stinson v. Trimas Fasteners, Inc., 923 N.E.2d 496, 501 (Ind. Tax Ct. 2010) (citation

omitted).   See also IND. CODE § 6-1.1-1-15 (2007) (amended 2008) (stating what

constitutes “real property” for purposes of property tax assessment).

       Accordingly, when valuing a property under the income approach, the fee simple

interest in property must be valued based on an estimate of market rent, not contract rent.

See Grant Cty. Assessor v. Kerasotes Showplace Theatres, LLC, 955 N.E.2d 876, 881

(Ind. Tax Ct. 2011) (explaining that “‘[a]ny potential value increment in excess of a fee

simple estate is attributable to the particular lease contract . . . [and] constitute[s] contract

                                               7
[rights] rather than real property rights’” (citation omitted)). Market rent is defined as the

“most probable rent that a property should bring in a competitive and open market

reflecting all conditions and restrictions of the lease agreement[.]” APPRAISAL INSTITUTE,

THE APPRAISAL   OF   REAL ESTATE 447 (14th ed. 2013). Comparable rental data used to

estimate market rent must therefore represent freely negotiated, arm’s length

transactions. See id. at 466.

                                        ANALYSIS

       On appeal, Southlake presents seven issues for the Court to decide. The Court

consolidates and restates those issues as whether the Indiana Board’s final determination

must be reversed because it 1) relied on market rent values that are contrary to law; and

2) is unsupported by substantial and reliable evidence.

                                  1. Contrary to Law

       A final determination of the Indiana Board is contrary to law if it violates a statute,

constitutional provision, legal principle, or rule of substantive or procedural law. See

Meijer, 119 N.E.3d at 641. Southlake contends that in relying on Kenney’s market rent

estimates, the Indiana Board violated the legal principles in this Court’s jurisprudence that

leases reflecting contract rents cannot be used to estimate market rent. (See Pet’r Br. at

17-31, Pet’r Reply Br. at 4-5 (citing Kerasotes, 955 N.E.2d at 881-82).)

       In its Kerasotes opinion, the Court rejected the use of unadjusted sale-leaseback

transactions to determine market rent. See Kerasotes, 955 N.E.2d at 882. Noting that

sale-leaseback transactions often value more than just the real property, the Court found

that “one should approach the rental data from such transactions with caution, taking care

to ascertain whether the sales prices/contract rents reflect real property value alone or

                                              8
whether they include the value of certain other economic interests.” Id. (citation omitted).

Thus, while Kerasotes does not specifically prohibit the use of sale-leaseback

transactions when valuing property, it does require either the adjustment of the rent to

remove any non-taxable property values that are included or the presentation of evidence

to show that the rent reflects the market value of the real property alone. See id.; Shelby

Cty. Assessor v. CVS Pharmacy, Inc. #6637-02, 994 N.E.2d 350, 354 (Ind. Tax Ct. 2013)

(finding that contract rent based on a sale-leaseback transaction valued more than the

real property where the lease was used to generate business capital from investors). See

also THE APPRAISAL    OF   REAL ESTATE at 466 (“[s]ince sale-leasebacks are actually

financing vehicles, they should not be used in estimating market rent”). This same

requirement of caution and adjustment applies to the use of build-to-suit leases when

valuing property. See Kerasotes, 955 N.E.2d at 881-82 (citing Walgreen Co. v. City of

Madison, 752 N.W.2d 687, 701, 703 (Wis. 2008)).

       In this case, the Indiana Board acknowledged that Kenney had not adjusted the

rental data contained in the build-to-suit leases on which he relied. (See, e.g., Cert.

Admin. R. at 3373-74 ¶¶ 132, 136.) Nonetheless, the Indiana Board found that the

testimony of Kendall Lees, a Kohl’s Real Estate Expense Manager, supported Kenney’s

decision not to adjust the market rent estimates because they were above market due to

business strategy, not because they reflected non-property interests associated with

raising capital or financing personal property. (See Cert. Admin. R. at 3340-41 ¶¶ 20-22,

3374 ¶ 135, 3376 ¶ 140.) The Indiana Board, however, ignored both the breadth and

substance of his testimony:

         Q. Does the build-to-suit and reverse build-to-suit structure
         transaction, does that allow Kohl’s to open more stores?

                                             9
         A. It does. You know, certainly, we’re not necessarily cash poor, but,
         you know, some of these -- these are really financing transactions for
         going into these stores, these build-to-suit and reverse build-to-suit.
         So since Kohl’s is not -- its not putting out all those funds for these
         stores, it frees up our cash for a lot of other things, to build more stores,
         for advertising, to expand. You know, we’ve gone through a very
         significant expansion through the late ‘90s and 2000s. And it’s
         something -- like I said, we’re not cash poor, but do have significant
         borrowings, so it[] helps to minimize some of our borrowings.

         Q. So does Kohl’s make a conscious decision when it enters into a
         reverse build-to-suit or a build-to-suit lease . . . to incur an obligation
         for a rate of rent that it knows is above the market rate?

         A. No. We certainly don’t want to incur a rate above market rent . . .
         but I know it does happen. . . . [W]e developed strategy for where we
         want our stores. And sometimes, those locations -- when we go into
         a new market, those locations -- some may be at market. Some
         landowners, developers may not be willing to develop property at the
         time that we want to go in there. So we need to pay a premium to get
         in. It’s cost effective for us to do that, because we’re spreading it out
         over the entire market. We can spread out our advertising costs. And
         its something that we need to do to create a presence in the market in
         the right places. There may be a location three miles away from an
         existing store that we can get for a market rent, but it’s not where we
         want to be. 10 miles away might be another location that fits in better
         with our other stores, so we’re willing to pay whatever the rent is there
         as long as it’s something we can still -- we can make a reasonable
         profit on from our operations side.

                                             *****

         Q. When Kohl’s is negotiating a build-to-suit or reverse build-to-suit
         transaction, are they negotiating for a market rate of rent, or are they
         negotiating a financing transaction?

         A. We’re negotiating for that financing transaction.

(Cert. Admin. R. at 1707-09; 1733-34.)

      Lees’s testimony confirms that Kohl’s build-to-suit rents are often above market

because they actually reflect non-property interests. (See Cert. Admin. R. at 3340-41 ¶¶

21-22, 3376 ¶ 140.) Accordingly, the build-to-suit leases that both Kenney and the

                                              10
Indiana Board relied upon should have been adjusted to be probative evidence of market

rent under Kerasotes. There is no evidence in the administrative record that this occurred.

      Moreover, the Indiana Board’s explained that it properly relied on Kenney’s market

rent estimates because Coers also used unadjusted build-to-suit rents in her analysis.

(See Cert. Admin. R. at 3373-74 ¶¶ 132-33, 136.) This explanation, however, is unsound.

The evidence in the administrative record demonstrates that Coers treated the build-to-

suit leases in her analysis in accordance with Kerasotes. Indeed, while Coers included

unadjusted build-to-suit leases in her market extraction analysis, she explained that she

ultimately did not consider them because they were old leases and she did not have a

“great way” to adjust them to market levels. (See Cert. Admin. R. at 1458-59, 1490-91,

1667-69.) Coers further explained that she would not consider build-to-suit rental data in

her analysis unless she could confirm that the leases were motivated by market terms,

that the potential above-market rent could be isolated, or how the increment of tenant

quality could affect the sales price. (See Cert. Admin. R. at 2599-2601.)

      Coers also acknowledged that she considered market surveys that may have

included build-to-suit lease data in her percentage of gross sales analysis and in the

development of her capitalization rates. (See Cert. Admin. R. at 432, 1459-61; see also

Pet’r Br. at 46-47 (explaining that Coers considered retail sales of properties with build-

to-suit leases, not the rents for those properties).) Nonetheless, she repeatedly explained

that she took care to either avoid reliance on or otherwise account for build-to-suit data

influences. (See, e.g., Cert. Admin. R. at 1458-61 (stating that while she presented two

Kohl’s leases in her market rent comparable properties, she considered them to be far

less relevant because they were build-to-suit), 432 (stating that in developing her

                                            11
capitalization rates, “[l]eased fee sales of newer single-tenant, net lease investment

properties like leased Kohl’s were given less consideration because they typically involve

above-market lease terms, and market participants price these properties based on the

investment quality of the tenant”), 1462-63 (explaining that her percentage of gross sales

analysis was not intended to value the business or even the specific user of the property

in any way), 1471 (explaining that with a capitalization rate, it is nearly impossible to avoid

using sales of leased properties where tenant quality and credit strength could factor into

risk premiums paid when the property sells).) This evidence shows that Coers exercised

caution – as required by Kerasotes – whenever build-to-suit rental data was included in

her analyses, and the record is devoid of relevant evidence that shows otherwise. (See

also Pet’r Br. at 42-47.) Accordingly, the Indiana Board’s finding that Coers relied on

build-to-suit leases that did not reflect market rent is unsupported by the record evidence.

       In determining the subject property’s market value-in-use, Kenney, and ultimately

the Indiana Board, relied heavily on build-to-suit rental data that was neither adjusted nor

explained as reflecting market rent as required by Kerasotes. Consequently, the Indiana

Board’s market rent conclusions are contrary to law.

              2.     Unsupported by Substantial and Reliable Evidence

       A final determination is unsupported by substantial and reliable evidence if a

reasonable person reviewing the entire record could not find enough relevant evidence

to support it. See CVS Corp. (#6698-02) v. Monroe Cty. Assessor, 83 N.E.3d 1281, 1285

(Ind. Tax Ct. 2017). Southlake claims that the Indiana Board’s adjustment of Coers’s

percentage of gross sales market rent estimates is unsupported by substantial and

reliable evidence. (See Pet’r Br. at 34-39, Pet’r Reply Br. at 17-18.)

                                              12
       One method Coers used to develop her market rents was a percentage of gross

sales analysis that evaluated potential sales of various types of retailers (i.e., discount

department stores, junior department stores, junior discount department stores, and

discount mixed apparel) and is published in national market surveys and other trade

reports. (See Cert. Admin. R. at 411-16, 1461-65, 1674-80, 3349-50 ¶¶ 50, 52.) Coers

also considered Kohl’s national and Indiana sales data as a proxy for discount department

stores sales. (See Cert. Admin. R. at 413, 1463.) Although Coers believed that the

subject property was best categorized as a discount department store, she used the

median sales from both the discount department store and the junior discount department

store categories to develop a range of annual sales per square foot – with junior discount

department stores representing the lower end of the range. (See Cert. Admin. R. at 414,

1676.) Coers then applied a range of rent, expressed as a percentage of sales from 1.5%

to 3.0% as reported in “Dollars & Cents,” to the median sales per square foot for each

retail category to determine a market rent. (See Cert. Admin. R. at 415-16, 1462-1465,

1674-80 (explaining that expressing rent as a percentage of gross sales is like “equat[ing]

30 percent of your income going towards your house payment”).)

       In its final determination, the Indiana Board found Coers’s analysis flawed because

it could not duplicate her calculations, inferring that she “evidently” based it on gross rent

clauses in the leases instead of rent as a percentage of gross sales. (See Cert. Admin.

R. at 3376 ¶ 141 (stating that “[o]ftentimes, as with the lease on the Southlake Outlot,

gross percentage rent is in addition to fixed rent[; t]he median clause percentage is not

helpful without knowing the fixed median base rate”).) The Indiana Board “corrected”

Coers’s alleged error by dividing the median rent per square foot by the median sales per

                                             13
square foot to arrive at a new “range of medians of gross percentage sales as a measure

of rent” of 2.03% to 4.22%, not the 1.5% to 3% range used by Coers. (See Cert. Admin.

R. at 3376 ¶ 141.)

      The Indiana Board also determined that the subject property’s sales were more

likely at the high end of Coers’s discount department store sales per square foot rate

range, and the percentage rental rate was best reflected by the junior discount

department store category, not the discount department store category, due to its “prime

location.” (See Cert. Admin. R. at 3377 ¶ 142.) Based on those findings, the Indiana

Board “reconstruct[ed]” Coers’s gross percentage of sales analysis, multiplying its newly

derived percentage rent for junior discount department stores by its newly concluded

sales per square foot rate for discount department stores. (See Cert. Admin. R. at 3377

¶¶ 142-43.) The Indiana Board’s corrected calculations produced square foot rental rates

ranging from $9.54 to $10.25 for the years at issue, which it found were “remarkably

supportive of the market rents proposed by Kenney.” (See Cert. Admin. R. at 3376-77

¶¶ 141, 143.)

      Southlake asserts that the Indiana Board’s alteration of Coers’s percentage of

gross sales market rent estimation was made out of whole cloth – a new analysis and

appraisal technique that is unsupported by record evidence. (See Pet’r Br. at 34-39, 48-

50.) Southlake states that the Indiana Board’s new analysis is tantamount to a rebuttal

to Coers’s evidence, which is the purview of an advocate and therefore outside of the

scope of the Indiana Board’s authority. (See Pet’r Br. at 48-50 (citing Hometowne Assocs.

v. Maley, 839 N.E.2d 269, 280 (Ind. Tax Ct. 2005) (explaining that the Assessor carries

the burden to rebut the taxpayer’s prima facie case, not the Indiana Board)).)

                                           14
      The Indiana Board provided little basis for its conclusion that Coers’s percentage

of gross sales analysis was erroneous, and it seemed to bolster its conclusion by

providing its own independent analysis to correct Coers’s alleged error. (See Cert.

Admin. R. at 3376 ¶ 141 n.2 (explaining that Coers’s analysis was substantially flawed

because it “infer[red] that the survey data references reported percentage rent clauses”

when it could not duplicate her arithmetic).)    Moreover, the Indiana Board cited no

evidence or authority to support its methodology or show that it actually corrected the

alleged error in Coers’s analysis. (See Cert. Admin. R. at 3377 ¶¶ 142-43.) (See also

Pet’r Br. at 38-39 (arguing that the Indiana Board provided no reason to mix and match

the survey data, but doing so was the only way to get to a value that would support

Kenney’s market rents).) Accordingly, no reasonable person reviewing the administrative

record would find enough relevant evidence to support the Indiana Board’s reconstruction

of Coers’s percentage of gross sales analysis or its resulting conclusions; as a result, it

is unsupported by substantial and reliable evidence. See Amax Inc v. State Bd. of Tax

Comm’rs, 552 N.E.2d 850, 852 (Ind. Tax Ct. 1990) (stating that “‘[s]ubstantial evidence is

more than a scintilla[; i]t means such relevant evidence as a reasonable mind might

accept as adequate to support a conclusion’” (citation omitted)).

                                     CONCLUSION

      The Tax Court reverses the Indiana Board’s final determination in this matter

because its reliance on Kenney’s market rent estimates is contrary to law and its

repudiation of Coers’ percentage of gross sales analysis is unsupported by substantial

                                            15
and reliable evidence. 3 Accordingly, the Court remands the matter to the Indiana Board

with instructions to assign the subject property a market value-in-use under the income

approach that: 1) calculates the property’s NOI each year at issue by replacing Kenney’s

market rents with the market rents derived by Coers through her reconciliation of her

market extraction and gross percentage of sales estimations; 4 and 2) applies Coers’s

capitalization rates for 2010, 2011, and 2012, but Kenney’s capitalization rates for 2007,

2008, 2009, 2013, and 2014. (See Cert. Admin. R. at 3368 ¶ 116, 3380 ¶ 153.)

3
 Southlake asks the Court to determine several other issues including whether the Indiana Board
erroneously ignored evidence and violated Southlake’s due process rights, and whether the
Assessor waived the ability to present certain arguments. (See Pet’r Br. at 49-50, Pet’r Reply Br.
at 5-6, Oral Arg. Tr. at 43-45.) The Court will not address these issues because the matter is
resolved on other grounds.
4
  The Indiana Board found Coers’s third method of calculating market rent was not probative and
the Court will not reweigh that evidentiary determination. (See Cert. Admin. R. at 3371-72 ¶ 128,
3377 ¶ 144.)

                                               16