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Home My WebLink About20072211.tiff RESOLUTION RE: THE BOARD OF EQUALIZATION, 2007, WELD COUNTY, COLORADO - DENY PETITIONER'S APPEAL AND AFFIRM ASSESSOR'S VALUE PETITION OF: TEBO WINDSOR LLC PO BOX T BOULDER, CO 80306-1996 DESCRIPTION OF PROPERTY: ACCOUNT#: R0161294 PARCEL#: 080720128005-WIN 2WW-5 L5 WINDSOR WEST SUB 2ND FILING 1159 W MAIN ST WINDSOR 80550 WHEREAS, the Board of County Commissioners of Weld County,Colorado,convened as the Board of Equalization for the purpose of adjusting, equalizing, raising or lowering the assessment and valuation of real and personal property within Weld County,fixed and made by the County Assessor for the year 2007, and WHEREAS, said petition has been heard before the County Assessor and due Notice of Determination thereon has been given to the taxpayer(s), and WHEREAS, the taxpayer(s) presented a petition of appeal of the County Assessor's valuation for the year2007,claiming that the property described in such petition was assessed too high, as more specifically stated in said petition, and WHEREAS, said petitioner being represented by Ron Novak, and WHEREAS,the Board has made its findings on the evidence,testimony and remonstrances and is now fully informed. NOW,THEREFORE, BE IT RESOLVED by the Board of County Commissioners of Weld County,acting as the Weld County Board of Equalization,that the evidence presented at the hearing clearly supported the value placed upon the Petitioner's property,after review by the Weld County Assessor. Such evidence indicated the value was reasonable,equitable,and derived according to the methodologies,percentages,figures and formulas dictated to the Weld County Assessor by law. The assessment and valuation of the Weld County Assessor shall be, and hereby is, affirmed as follows: ACTUAL VALUE AS DETERMINED BY ASSESSOR Land $ 326,394 Improvements OR Personal Property 2,111,106 TOTAL $ 2,437,500 e e r /95 04 ge-c /egg 2007-2211 AS0067 SYVe7De7 RE: BOE - TEBO WINDSOR LLC PAGE 2 BE IT FURTHER RESOLVED that a denial of a petition, in whole or in part, by the Board of Equalization maybe appealed by selecting one of the following three options;however,said appeal must be filed within 30 days of the denial: 1. Board of Assessment Appeals: You have the right to appeal the County Board of Equalization's(CBOE's)decision to the Board of Assessment Appeals(BAA). Such hearing is the final hearing at which testimony, exhibits, or any other evidence may be introduced. If the decision of the BAA is further appealed to the Court of Appeals,only the record created at the BAA hearing shall be the basis for the Court's decision. No new evidence can be introduced at the Court of Appeals. (Section 39-8-108(10), C.R.S.) Appeals to the BAA must be made on forms furnished by the BAA, and such appeals should be mailed or delivered within thirty(30)days of denial by the CBOE to: Board of Assessment Appeals 1313 Sherman Street, Room 315 Denver, CO 80203 Phone: 303-866-5880 Fees: A taxpayer representing himself is not charged for the first two appeals to the Board of Assessment Appeals; however,a taxpayer being represented by an agent or an attorney must submit a fee of$101.25 per appeal. OR 2. District Court: You have the right to appeal the CBOE's decision to the District Court of the county wherein your property is located. New testimony,exhibits or any other evidence may be introduced at the District Court hearing. For filing requirements, please contact your attorney or the Clerk of the District Court. Further appeal of the District Court's decision is made to the Court of Appeals fora review of the record. (Section 39-8-108(1), C.R.S.) OR 3. Binding Arbitration: You have the right to submit your case to arbitration. If you choose this option the arbitrator's decision is final and your right to appeal your current valuation ends. (Section 39-8-108.5, C.R.S.) Selecting the Arbitrator: In order to pursue arbitration, you must notify the CBOE of your intent. You and the CBOE select an arbitrator from the official list of qualified people. If you cannot agree on an arbitrator,the District Court of the county in which the property is located will make the selection. 2007-2211 AS0067 RE: BOE -TEBO WINDSOR LLC PAGE 3 Arbitration Hearing Procedure: Arbitration hearings are held within sixty days from the date the arbitrator is selected. Both you and the CBOE are entitled to participate. The hearings are informal. The arbitrator has the authority to issue subpoenas for witnesses, books, records,documents and other evidence. He also has the power to administer oaths, and all questions of law and fact shall be determined by him. The arbitration hearing may be confidential and closed to the public,upon mutual agreement. The arbitrator's written decision must be delivered to both parties personally or by registered mail within ten (10) days of the hearing. Such decision is final and not subject to review. Fees and Expenses: The arbitrator's fees and expenses are agreed upon by you and the CBOE. In the case of residential real property, such fees and expenses cannot exceed$150.00 per case. The arbitrator's fees and expenses, not including counsel fees, are to be paid as provided in the decision. The above and foregoing Resolution was,on motion duly made and seconded, adopted by the following vote on the 2nd day of August, A.D., 2007. BOARD OF COUNTY COMMISSIONERS WEaCOUr TY, COLORADO Lii ATTEST: �w David E. Long, Chair Weld County Clerk to thti8 (' �Ci?kV 1 EXCUSED William Pro-Tem BY: D-puty Clerk U' he Boa William F. Garcia APPROVED AS TO FORM: EXCUSED 0 Robert D. Masden Assnt Co ty Attorney// Doug a demacher Date of signature: 7/o/n7OD7 2007-2211 AS0067 Weld County CHRISTOPHER WOODRUFF COUNTY ASSESSOR BRENDA DONES, DEPUTY ASSESSOR VALUATION REPORT OF COMMERCIAL PROPERTY FOR County Board of Equalization TEBO WINDSOR LLC PETITIONER vs. WELD COUNTY ASSESSOR'S OFFICE RESPONDENT Parcel Number: 0807-20-1-28-005 Schedule Number: R0161294 Log Number: 521 Date: 8/2/2007 Time: 10:10 AM Board: CBOE PREPARED BY STAN JANTZ Signature Date Signature Date ASSESSOR'S OFFICE STAFF APPRAISER CBOE_COMM 010888 Page 1 SALIENT FACTS AND CONCLUSIONS Purpose of Appraisal To determine Market Value as of 1/1/07 based on an appraisal date of 6/30/06. Location 1159 MAIN STREET WINDSOR Land Area 108,798 Square Feet Zoning WIN PUD Property Type Commercial 1— Market Year Built 1974, 1994, 1999 Year Remodeled 1994 Quality Average Class Masonry Number of Stories 1 Improvement Sq. Ft. 31,389 Basement Unfinished Sq. Ft. Basement Finished Sq. Ft. Mezzanine: Value Indications: Land $326,394 Cost Approach $2,539,723 Market Approach $2.500,000 Income Approach $2,432,000 Assessor's Value $2,437,500 CBOE COMM_010998 Page 2 COST APPROACH LAND VALUE Sales utilized to establish the value in the subject neighborhood are from 2005 and the first six months of 2006 for the 2007 assessment date. The comparative sales approach is the most reliable method of land valuation. Pursuant to 39-104(10.2) (c) C. R. S., the Assessor may utilize sales from July 2001 through June of 2006 to establish the proper value, if sufficient information is not available in the prior 18 months. Also, comparables outside the subject property area may be used. The Weld County Assessor has an established ongoing sales confirmation and validation program for property transactions used in developing value. The land size of the subject is 108,798 square feet. Comparable commercial land in the subject area is valued at $3.00 per square foot. Address Sale Date Sale Price Land Size Per Sq Ft Comparable 1 392 & 15 LLC 5/1/03 $1,367,000 213,008 $6.42 1480 Main St. Windsor Comparable 2 Ford & Ford Investments 4/24/03 $397,500 54,839 $7.25 1150 Main St. Windsor Comparable 3 Windsor Mall Investments 7/11/05 $200,000 30,334 $6.59 1290 Main St. Windsor ASSESSOR'S SUBJECT LAND VALUE $3.00 Per Sq Ft X 108,798 SF = $326,394 CBOE_COMM 010988 Page 3 Subject Photo k-- ;;: (04 MEM ate �. ," .2%1 oZZ 412 o COST APPROACH SUMMARY The Assessor is currently using Marshall and Swift cost tables for the cost approach of commercial properties in Weld County, which has been approved by the Division of Property Taxation to be utilized by Colorado Assessors. The structure has been classified properly utilizing the Marshall and Swift Valuation service and an appropriate value assigned. A land value has likewise been established through the utilization of vacant land sales of comparable properties. Improvement Value 2,213,329 Land Value 326,394 TOTAL VALUE BY THE COST APPROACH 2,539,723 CBOE_COMM_010998 Page 4 MARKET APPROACH COMPARABLE SUPERMARKET SALES # ADDRESS GrariMr/0r'antee:'1' Date of Sile Price square .Price Per Sale Foot Sq F# Subject Steele's Market Dawes Properties/ 6/2/04 $2,500,000 31,389 $79.65 1159 Main St. Tebo Windsor LLC Windsor 1 Toddy's Todd Family Partner- 2/25/04 $3,500,000 38,956 $89.84 2400 W 16 St. Ship/Walgreen Co. Greeley 2 Albertsons Albertsons Inc/ 6/1/06 $4,400,000 41,132 $106.97 2325 23 Av ABS RM Investors Greeley Greeley MARKET CALCULATIONS SUBJECT 31,389 SQ. FT. TIMES $79.65 PER SQ. FT. EQUALS $2,500,000 CBOE_COMM_010998 Page 5 Comparable Number 1 '..` , 1 rt* . h .. r • NUW WWI 1 \k_ _____--, Comparable Number 2 F :' st. �` r- 4 V -„� _fr r ,., . , _ .._! _ - 4 CBOE_COMM_010998 Page 6 INCOME APPROACH Supermarket Lease Comparables Address , t t . a: 3.... C _ISMIAI 1 snow Subject #1 Steele's Market 12/15/98 12/31/18 31,389 $6.52 1159 Main Street Windsor Built 74/94/99 #2 King Soopers 12/5/91 12/5/16 75,588 $9.00 2100 35 Avenue Greeley Built 1992 #3 Safeway 8/1/03 7/31/23 58,374 $11.01 Centerplace Dr Greeley Built 2003 FORMER STEELE'S MARKET 1159 MAIN STREET WINDSOR, CO THE ACTUAL INCOME WAS UTILIZED IN THIS ANALYSIS.NASH FINCH IS OBLIGATED AS THE LESSEE UNTIL YEAR 2018 AT A RATE OF $204,809.04 ANNUALLY. TOTAL INCOME 204,809 LESS 5%MANAGEMENT&RESERVES - $10,240 NET OPERATING INCOME $194,569 CAPITALIZATION RATE 8 % INCOME VALUE $2,432,113 ROUNDED TO $2,432,000 CBOE_COMM_010999 Page 7 FINAL RECONCILIATION COST APPROACH MARKET APPROACH INCOME APPROACH 2,539,723 2,500,000 2,432,000 ASSESSOR'S VALUE 2,437,500 CBOE_COMM 010898 Page 8 _SJ NOTICE OF DENTAL r 9•SC:I:Crcol!hfl Y\5 S5x)it I4N'Noitm l:di AVE. WIN 2WW-5 L5 WINDSOR WEST SUE! 2ND t;RI:l1J:1',ix)>3�+i31 FILING 1159 W MAIN S'1' WINDSOR 1�ilor.I 19701.11t.33-11.,f:.rr :rjo 80550 %WM'CQ.«C1d csu u3 11111C OWNER: TEDO WINDSOR LLC ll�rC� COLORADO \ T83O WINDSOR LLC -- ' LOG 521 PO BOX T APARCEL S005 ACCOUNT R0161294 BOULDER, CO 80306--1996 t((c'/ �, :\ +�� YEAR 2007 ell° The appraisal value of propery is based on the approprialc consideration of the approaches to value required by law. 'l1ce Assessor has determined that your property should ho included in the following cutcgory(ics: Commercial property is valued by considering the cost, market,and income approaches. If your concern is the amount of yoar property tax,local taxing authorities(county,city,fire protection,and other spmie!districts)hold hedger hearings in the►alL Please refer to your tax bill or nab your+assessor fur a listing of these districts,acid plan to attend these budget hearings, The A. a:.oor has carefully studied all available inftwmation,giving particular attention 10 the speeilies included en your protest,and has detain the valuations s)assigned to your property. Thc Masons for this detern iaanlinn of value arc: Colorado case law requires the Assessor to recognize contract rent over market rent. r.. — -• PETITIONER'S ASSESSOR'S VALUATION PROPERTY CLASSIFICATION ESTIMATE OF VALUE ACTUAL VALUE ACTUAL VALUE PRIOR TO REVIEW AFTER REVIEW COMMERCIAL 2437500 2437500 TOTALS t $ 2437500 $ 2437500 APPEAL DRAIN.INES:.REAL PROPERTY JULY I6.PERSONAL PROPRIETY-JULY 20. If you disagree with the Assessor's decision,you have the right to appeal to the County hoard of Equalisation for further consideration. §39-8-166(1)(a),C.R.S. TO PRESERVE YOUR APPE.AI.RIO as,Noll M,t v In:Rt:Qt:1RED TO PROVE TIIAr YOU FILED A'1 t'th1.Y APPEAL; TIIERF.FORI:.IMRE:COMMEND ALL CORltf.Ptll\fEW.:K RI MAILEDH'al'alr'ttOOI OFbtAll.tnY;.06 ?.1 200'I By: Christopher M.Wood ruff WELD)COII NTY ASSESSOR DATE ADDITIONAL INFORMATI()N ON REVERSE SIDE X.': L'd eb0:L L LO VZ hf YOU HAVE THE RIGHT i'O APPEAL THE ASSESSOR' S DECISION The County Board of Equalization will sitto hear appeals beginning.baby 2 i d continuing through August 3 or real property(land and buildings)and personal properly(furnishings, machinery, and equipment). § 39-8-104 and § 39. 8-107(2), C.R.S. APIUMPROCEDVRESi If you choose to appeal the Assessor' s decision,mail or deliver one copy of this completed farm to the County Board of Equalization. To preserve your right to appeal,your appeal must be POS'f MARKED OR DELIVERED ON OR BEFORE JULY 16 FOR REAL PROPERTY,AND JULY 20 FOR PERSONAL PROPER'T'Y. WELD COINTY BOARD OF EQUALIZATION 915 10th Street, P.O. Box 758 Greeley, Colorado 80632 Telephone(970)356-4000 Ext. 4225 NO. t€��eb l" INGi You wi�` ti led of`the time and place set for the hearing of your appeal. j GVISIM .1�.Cn4'.lzu M IAZ I■tJ1VVOMMOWi N The County Board of Equalization must make a decision on your appeal and mail you a determination within five business days of that decision. The County Board must conclude its hearings and render decisions by August 3. gpamnivapptsfooppernEromptrAti If you are not satisfied with the County Boar of Equali�.ation's decision you must file within thirty days ol'the County Board of Equalization's written decision with ONE of the following,: Board of Assessment Appeals(BA A): 1313 Sherman Street, Room 315 Denver,Colorado 80203 Telephone(303) 866-5880 www.dola.cnlorado,gov boa District Court: 9th Avenue and 9th Street,P.O. Box C Greeley,Colorado 80632 Telephone(970)356-4000, Ext. 4520 o* IT? c 3 rn Arbitration: C) r 3r WELD COUNTY BOARD OF EQUALIZATION m ao c'n� 915 10th Street,P.O. Box 758 Greeley, Colorado 80632 ]> 2 Telephone(970)356-4000, Ext.4225 rn �—f d If you do not receive a determination from the County Board of Equalization, contact the county N.Ord.¶the county board is not going to mail a decision,you must file an appeal with the Board of Assessineni"Appeals by September 10th. TO PRESERVE YOUR APPEAL RIGHTS, YOU MUST PROVE YOU HAVE FILED A TIMELY APPEAL; THEREFORE,WE RECOMMEND ALL CORRESPONDENCE BE MAILED WITH PROOF OF MAILING. PETITION' TO THE COUNTY BOARD OF EQf.:A( ATION In the space below,please explain why you disagree with the Assessor's valuation. IN ACCORDANCE WIT1I § 39-8-106(1.5), C.R.S.,IF YOUR APPEAL INVOLVES REAL PROPERTY, YOU MUST STATE YOUR OPINION OF VALUE IN TERMS OF A SPECIFIC DOLLAR AMOUNT. Attach additional documents as necessary. 7/6/, . :. HUNT- l)NTR .� - -- ---- 5A11 ^YD!!Jt17 a;V.' NASH FINCH COMPANY RETAIL GROCERY Vacant 1159 West Main Street City of Windsor County of Weld State of Colorado Prepared by: Assessment Valuation Services, LLC 200 West 98th Street, Suite 101 Minneapolis, MN 55420 Ron J. Novak Principal = EXHIBIT Igo f 9/a941 August 1, 2007 APRNASHFINCHWINDSOR07.doc LETTER OF AUTHORITY TO ACT IN MATTERS OF AD VALOREM TAXATION We do hereby appoint and authorize Assessment Valuation Services,Inc. to represent our firm as ad valorem tax agent. They have the right to file applications,examine any records, and discuss or appeal any tax assessments to the appropriate authorities for the purpose of obtaining the proper tax values relative to:he following property owned or controlled by this corn pane. Former Steele's Market 1159 W.Main Street Windsor,CO BY: TIT!.E: COMPANY\AMT&ADDRESS: Tebo Windsor,1.1.C 1590 Broadway Boulder,CO 80302 BEFORE ME,the undersigned,a Notary Public within and for the County of State of , c t e- ,personally appeared t;• 1•� I< _ .� .r ' who acknowledged to me that this certificate of authority was executed for the purposes herein expressed. I }4-, WITNESS MY HAND and notarial seal this_ (t.'" day of _Li j "- ,2006. NA _ l;sit �� 1�1 e. .ptAq Notary Public 2 4i lily C mmission Expires ' 1 ice . rfi of coy°Q `.. U Contents Summary of Facts Notice of Denial Colorado case law Assessor referred to on the Notice of Denial "City and County Denver v. BOAA and Regis Jesuit Holding, Inc. 848 P. 2d 355 (Colorado.1993)" List of Individuals from the Colorado Division of Property Taxation Contacted July 31, 2007 and after Division of Property Taxation Assessor's Reference Library Volume 3 "Long Term Lease" Correspondence sent to Assessor Dated June 27, 2006 Correspondence sent to Assessor Dated April 30, 2007 Realtyrates.com Investor Survey of Capitalization Rates Conclusion SUMMARY OF FACTS Property Type: The subject property consists of a former retail grocery building. Location: The street address is: 1159 West Main Street Windsor, Colorado Property Owner: Tebo Windsor, LLC PID: 080720128005 Improvement Description: The subject improvement consists of a building with GBA of 31,389 sf. The improvement was originally built in 1974. Assessed Value 2007: $2,437,500 Based on Long Term Lease(Contract Rent) Requested Value 2007: $1,299,505 Based on Market Rent Note: The facts of this case were discussed with Ms. Sue Dickinson with the Colorado Division of Taxation. It is the opinion of the Division of Taxation that Market Rent is the controlling factor in this case. This was conveyed by Ms. Sue Dickinson to the Weld County assessing office, Mr. Stan Jantz on August 1, 2007. Jul-16-2007 08:05 From-NASH FINCH COMPANY 19528441044 T-351 P.002/002 F-027 • NOTICE OF DENIAL OFFICISOF COUNTY Assb'SSOR t/, WIN 2WW-5 L5 WINDSOR WEST SUS 2ND 1400 NUR'1'H 1716 Ave FILING 1159 W MAIN ST WINDSOR OR51:AN,alSia31 V PHONY'MO)351384S,GX1'.3650 114 80550 „w,,.co_ eltleoas 1 1 OWNER: TEBO WINDSOR LLC • e: e ' e • TEBO WINDSOR LLC LOG 521 PO BOX T PARCEL 080720128005 ACCOUNT BOULDER, CO 80306-1996 YEAR 2007 1�9A The appraised value of property Is based on the appropriate consideration of the approaches to value required by law. The Assessor has determined that your property should be included in the following cxtegery(ies): Commercial property is valued by considering the cost, market, and income app oachhes . Iryour concern is the amount of your property tax,local taxing authorities(county,city,fire protection,and other special districts)hold budget hearings in the fell. Muse rotor to your tax bill or ask your Assessor for a listing ur these districts,end plan to attend these budget hearings. The Assessor has carefully studied all available Information,giving particular attention to the specifics included on your protest,and hos determined the valuations)assigned to your property. The reasons for this determination of value cc: Colorado case law requires the Assessor to recognize contract rent over market rent. PETITIONER'S ASSESSOR'S VALUATION PROPERTY CLASSIFICATION ESTIMATE ACTUAL VALUE ACTUAL VALUE OF VALUE PRIOR TO REVIEW AFTER REVIEW COMMERCIAL 2437500 2437500 TOTALS S $ 2437500 $ 2437500 r APPEAL DEADLINES: REAL PROPERTY-JULY 16,PM:lcNAl,I'KOPRRTY••JULY 20, . If you disagree with the Ammar's decision,you have the right to appeal to the County Board of Equalization for further consideration. §39$-106(1 xa),C.R.S. 7o PNESERYE YOUR APPEAL RIGHTS,YOU MAY RR REQUUISU TO PROVE THAT YOU FILM A TIMELY APPEAL: THP.REKURIC,WK RECOMMEND ALL CORRESPONDENCE HE MAII ED W ITII PROOF OF MA1L1NC.0 6/2 7/2 0 07 By: ChtistanherM.Woodruff WELD COUNTY ASSESSOR DATE ADDITIONAL INFORMATION ON REVERSE SIDE VVeStlaW. 848 P.2d 355 Page 1 848 P.2d 355 (Cite as:848 P.2d 355) P estates such as leasehold interests; rule prohibits City and County of Denver v.Board of Assessment multiple assessments on multiple taxpayers holding Appeals of State of Colo. disparate interests in single piece of property. West's Colo.,1993. C.R.S.A. $ 39-1-106. Supreme Court of Colorado,En Banc. at Taxation 371 X2519 CITY AND COUNTY OF DENVER, State of Colorado; Board of Equalization of the City and 371 Taxation County of Denver; and Patricia Beer, Manager of 371111 Property Taxes Revenue,in her official capacity as ex-officio 37111I(H)Levy and Assessment Assessor of the City and County of Denver, 371111(H)5 Valuation of Property Petitioners, 371 k2512 Real Property in General v. 371 k2519 k. Interests Less Than Fee BOARD OF ASSESSMENT APPEALS OF the in General; Leasehold Interests. Most Cited Cases STATE OF COLORADO; and Regis Jesuit Holding, (Formerly 371k348(7)) Inc.,Respondents. Under unit assessment rule, both lessor's and lessee's No.91SC775. interest are assessed simultaneously and property is taxed as though it was unencumbered fee; all March 8, 1993. interests in property are taxed, no matter how they Rehearing Denied March 29, 1993. are divided. West's C.R.S.A. § 39-1-106. Review was sought of Board of Assessment Appeals' 'II Taxation 371 x-•'2513 determination that value of commercial property, subject to long-term lease, was well below that urged 371 Taxation by assessor and affirmed by municipal board of 371111 Property Taxes equalization. The Court of Appeals, 829 P.2d 1319 371III(H)Levy and Assessment affirmed. Certiorari was granted. The Supreme 371111(H)5 Valuation of Property Court, Rovira, C.J., held that consideration of actual 37 I k2512 Real Property in General rent was appropriate in determining value, for ad 371k2513 k. In General. Most Cited valorem tax purposes, of real property subject to Cases existing long term below market lease. (Formerly 371 k348(I)) Under unit assessment rule, although assessor may Affirmed. initially isolate interests, property ultimately is assessed as unit and responsibility of apportioning tax Lehr, J., filed opinion concurring in part and on assessment among various interest holders rests on dissenting in part,with which Mullarkey,J.,joined. private parties who own interests; assessor need West Headnotes produce only single assessment. West's C.R.S.A. f11 Taxation 371 €--'2513 39-I-102(14)(a), (16), 39-I-106; West's C.R.S.A. Const. Art. 10, $ 3(I)(a). 371 Taxation 371111 Property Taxes pa Taxation 371 X2513 371111(H)Levy and Assessment 371111(H)5 Valuation of Property 371 Taxation 371 k2512 Real Property in General 371111 Property Taxes 371 k2513 k. In General. Most Cited 371111(H)Levy and Assessment Cases 371111(11)5 Valuation of Property (Formerly 371k348(1)) 371 k2512 Real Property in General "Unit assessment rule" is rule of property taxation 371k2513 k. In General. Most Cited requiring that all estates in unit of real property be Cases assessed together, and real estate as entirety be (Formerly 371k348(I)) assessed to owner of fee free of ownerships of lesser Under unit assessment rule, "owner" of property is ® 2007 Thomson/West.No Claim to Orig.U.S.Govt.Works. 848 P.2d 355 Page 2 848 P.2d 355 • (Cite as: 848 Rid 355) responsible for property taxes regardless of how various property rights may be pledged or exchanged. 37 I Taxation West's C.R.S.A. $ § 39-I-102(14)(a), (16), 39-1-106; 371111 Property Taxes West's C.R.S.A. Const. Art. 10, S 3(I)(a). 371111(H)Levy and Assessment 371111(11)5 Valuation of Property 111 Administrative Law and Procedure ISA 371 k2512 Real Property in General €462 371k2515 k. Market Value and Sale Price; Comparable Sales. Most Cited Cases 15A Administrative Law and Procedure (Formerly 371k348(3)) 15AIV Powers and Proceedings of Administrative For purposes of valuation of property for ad valorem Agencies,Officers and Agents tax, "actual value" is fair market value of property 15AIV(D)Hearings and Adjudications during base year. West's C.R.S.A. 6 39-I- I5Ak458 Evidence 103(5)(a),39-I-104(10.2)(a); West's C.R.S.A. Const. I5Ak462 k. Weight and Sufficiency. Art. 10, 5 3(I)(a). Most Cited Cases 131 Taxation 371 Ce--'2517 Administrative Law and Procedure ISA€786 371 Taxation 15A Administrative Law and Procedure 3711II Property Taxes 15AV Judicial Review of Administrative 371111(11)Levy and Assessment Decisions 37 III 1(11)5 Valuation of Property 15A V(E)Particular Questions,Review of 371 k2512 Real Property in General I 5Ak784 Fact Questions 37!k2517 k. Capitalized Income. 15Ak786 k. Conflicting Evidence. Most Most Cited Cases Cited Cases (Formerly 371k348(5)) Actual rental income may be considered in valuing, Administrative Law and Procedure ISA C—'793 for ad valorem tax purposes,property subject to long- term below market lease, but board of assessment 1 SA Administrative Law and Procedure appeals may place whatever weight it deems I5AV Judicial Review of Administrative appropriate to that figure if consideration of actual Decisions rental income distorts determination of actual value. I5AV(E)Particular Questions,Review of West's C.R.S.A. $ S 39-I-103(5)(a), 39-I- I5Ak784 Fact Questions I04(10.2)(a); West's C.R.S.A. Const. Art. 10, $ I5Ak793 k. Weight of Evidence. Most 3(I)(a). Cited Cases Administrative agency, and not reviewing court, has 121 Taxation 371 €. -"2513 task of weighing evidence and resolving conflicts. West's C.R.S.A. ti 39-I-103(5)(a), 39-8-108(2). 371 Taxation 371111 Property Taxes J6j Taxation 371 €2510 371111(11)Levy and Assessment 37 1111(14)5 Valuation of Property 371 Taxation 371 k25 12 Real Property in General 3711II Property Taxes 371k25 13 k. In General. Most Cited 371111(H)Levy and Assessment Cases 37 111I(H)5 Valuation of Property (Formerly 371k348(I)) 37!k2510 k. In General. Most Cited For ad valorem tax purposes, actual value of Cases improved real estate is arrived at by considering all (Formerly 371k347) various circumstances that affect property, including Decision of board of assessment appeals may be set existence of long-term leases; ignoring effect of aside if it reflects failure to abide by statutory scheme lease on judgment of purchaser in estimation of fair for calculating property tax assessments. West's market value would ignore requirement that property C.R.S.A. $ § 39-1-103(5)(a),39-8-108(2). be valued at actual value. Lll Taxation 371 €2515 J 101 Taxation 371 €2517 ® 2007 Thomson/West.No Claim to Orig.U.S.Govt.Works. 848 P.2d 355 Page 3 • 848 P.2d 355 • (Cite as: 848 P.2d 355) properties that were entered into in 1987 and 1988. 371 Taxation It is also not disputed that at the time this lease was 371111 Property Taxes entered into it was the result of arm's length 37I 1I1(H)Levy and Assessment negotiation. Although the 1965 market rent was 371111(H)5 Valuation of Property $1.38 a square foot, the actual payments that year 371 k2512 Real Property in General were$1.75 a square foot. 371k25I7 k. Capitalized Income. Most Cited Cases (Formerly 3711(348(5)) FN I. The relevant base period for 1989 For ad valorem tax purposes,both actual rent and fair valuations is January 1, 1987, through June market rent may be used to determine actual value of 30, 1988. See 39-I-104(10.2), I6B property. West's C.R.S.A. 5 F 39-1-103(5)(a), 39-8- C.R.S.(1989 Supp.). 108(2). The Denver assessor valued the property, as of January 1, 1989, at $3,731,000. FN2 This value was *356 Daniel E. Muse City Atty., Donald E. Wilson, affirmed by the Denver Board of Equalization Karen A. Aviles, Asst. City Attys., Denver, for (DBOE). Regis appealed to the BOAA which held a petitioners. hearing de novo. Gale A. Norton, Atty. Gen., Raymond T. Slaughter, Chief Deputy Atty. Gen., Timothy M. Tymkovich, Sol. Gen., Larry A. Williams, First Asst. Atty. Gen., FN2. For purposes of clarity, the petitioners Denver,for respondent Bd.of Assessment Appeals. collectively shall be referred to either as *357 Jon Slaughter Pelegrin. Lakewood, for "Denver"or as"petitioners." respondent Regis Jesuit Holding,Inc. Chief Justice ROVIRA delivered the Opinion of the At the BOAA hearing, the assessors evidence was Court. that he examined real estate data from January 1, We granted certiorari to review the court of appeals 1987 through June 30, 1988, the relevant statutory decision in Board of Assessment Appeals v. Gin & base period. In evaluating this data, he found no County of Denver. 829 P.2d 1319 (Colo.App.1991), comparable properties which sold free from a long- affirming a de novo valuation by the Board of term lease,and thus,he rejected the market approach. Assessment Appeals (BOAA) of respondent Regis F"' He valued the property using a cost approach '=' Jesuit Holding, Inc.'s(Regis)property. The court of at $3,997,400 and at $3,731,000 using the income appeals held that the BOAA properly considered both approach.r"s The assessor's income approach used actual and market rent in valuing Regis' property. three allegedly comparable properties for which Because the consideration of actual rent in leases were negotiated during the base period: a K- determining the value, for ad valorem tax purposes, Mart leased in 1988, a Burlington Coat Factory of real property subject to an existing long-term leased in 1987, and a Service Merchandise Mart below-market lease is appropriate,we affirm. leased in 1987. This analysis indicated that $4.00 per square foot for the department store and$7.25 per square foot for the service garage was the appropriate I fair market rental for the property. Based on the cost and income approaches the assessor established a The facts in this case are not in dispute. This action value of $3,731,000 for the property. The actual involves the 1989 ad valorem tax valuation of lease rental was not considered in establishing a property located in Denver, Colorado, owned by value for the subject property by the assessor. Regis, and leased since 1965 to the S.S. Kresge Company which operates a K-Mart department store and service garage on the premises. The base term FN3. The market approach, or comparable of the lease is for 20 years, and the lessee has the sales method, involves an analysis of sales option to renew until the year 2001. The lease of comparable properties in the market. It payments are $1.50 a square foot plus an override. has been described as the most accurate As a result, the lease payments during the years method of determining market value. 1987-88 LN were approximately $2.00 a square foot. Board of Assessment Appeals v. E.E. It is undisputed that this rate is below the prevailing Sonnenberg, 797 P.2d 27, 31 n. 12 market rental rates for leases of comparable (Colo.I990). © 2007 Thomson/West.No Claim to Orig.U.S.Govt.Works. 848 P.2d 355 Page 4 848 P.2d 355 (Cite as:848 P.2d 355) rent. Because the BOAA's assessment is a figure FN4. The cost approach involves estimating between [Regis] and [Denver's] proposals, we may the cost of replacing the improvements to conclude that actual and economic rent were the property, less accrued depreciation. Id. considered by it. at 30 n. 8. Board of Assessment Appeals, 829 P.2d at 1323. FN5. The income approach is a common method for calculating the value of This case requires us to decide whether any commercial property, especially apartment consideration can be given to actual rent which buildings, office buildings and shopping results from a long-term below-market lease centers. It generally involves calculating encumbering commercial property when determining the income stream (rent) the property is the actual value of that property for ad valorem tax capable of generating,capitalized to value at purposes. a rate typical within the relevant market. Id. at 30 n. 8. II Regis' expert witness also considered the market, cost, and income approaches for *358 valuing the The substance of Denver's argument is that actual property. In support of his market approach to rental income from the property is extraneous to a valuation, he presented three sales of comparable determination of the actual value of the property,and properties which were encumbered by long-term thus, the BOAA erred in considering the rental below-market leases. His income approach derived income of the property. Denver urges that although from a capitalization of an average actual rent from the general rule is that actual rent is a factor in the subject store as well as three other K-Mart stores determining value, an exception exists where such of similar age in the Denver Metropolitan Area. The rent is wholly misleading. Denver asserts that here subject property's actual income and expenses were such rent is misleading because it does not reflect the used as an "indicator" to "simply establish a value of all interests in the subject property; in parameter" for value. Evidence was also presented particular the "leasehold bonus value" 1-Nik in the by Regis' witness on the cost approach to valuation, below-market lease. Denver claims that this but was not relied upon by him in valuing the conclusion necessarily follows from the "unit property because, in his opinion, replacement costs assessment rule." are higher than the market value of the property. The BOAA valued the property at $2,500,000, a FN6. The lessee's possessory interest has a value below that urged by the assessor($3,731,000), value over and above the actual rent paid in and greater than that urged by Regis ($1,316,000). those instances where market rent exceeds Thus, according to the BOAA,the value of the fee is the actual rent that the lessee is obligated to approximately$20.00 a square foot. In reaching this pay under the lease. See C. Ackerson, conclusion the BOAA noted that it reviewed all of Capitalization Theory and Techniques: the sales presented by both parties but paid Study Guide 65 (1984); American Institute "particular attention to sales of similar properties that of Real Estate Appraisers, The Appraisal of sold with long-term leases in place? It also opined Real Estate 115 (9th ed. 1987). Cf. 4 that the comparable sales presented by Regis Nichols, Law of Eminent Domain 12D-60 "included all interests in property, and reflected the (rev. 3d ed. 1989). The parties have long-term leases as an encumbrance at the time of phrased this as the"leasehold bonus value." sale." Denver appealed pursuant to section 39-8- 108(2), 16B C.R.S. (1989 Supp.). The court of [11121 The unit assessment rule is a rule of property appeals affirmed the BOAA's valuation, holding that taxation which requires that all estates in a unit of BOAA "properly considered actual rent as well as real property be assessed together,and the real estate economic rent." The court of appeals concluded that as an entirety be assessed to the owner of the fee the actual rent generated from a lease is a valid factor "free of the ownerships of lesser estates such as to consider because it affects the property's selling leasehold interests...." Alliance Towers v. Stark C'in' price and fulfills the statutory goal which is to assess Bd. of Rev., 37 Ohio St.3d 16, 523 N.F.2d 826, 832 property based on its actual value. Thus,the BOAA (1988). See Merrick Holding Corp. v. Board of properly considered actual rent as well as economic Assessors, 45 N.Y.2d 538. 410 N.Y.S2d 565. 568 ® 2007 Thomson/West.No Claim to Orig.U.S.Govt.Works. 848 P.2d 355 Page 5 848 P.2d 355 (Cite as:848 P.2d 355) _ 382 N.E.2d 1341, 1344 (1978); Folsom v. County of property.EN] See Martin v. Liberty County Bd. of Tax Spokane, Ill Wash.2d 256, 759 P.2d 1196, 1202 Assessors-, 152 Ga.App. 340, 262 S.E.2d 609, 612 (1988) (Folsom II). See also 84 C.J.S. Taxation § (1979) (where lessor chose to receive 404(a), at 770 *359 (1954). It prohibits multiple disproportionate share of rental income in first four assessments on multiple taxpayers holding disparate years of tong term lease, held: "Taxing statutes interests in a single piece of property. Folsom II, 759 should not be construed so as to create inequalities P.2d at 1203. In other words, both the lessor's between taxpayers who own comparable parcels of interest and the lessee's interest are assessed substantially the same market value but who, for a simultaneously, and the property taxed as though it variety of reasons, receive disproportionate incomes was an unencumbered fee. from the lease thereof."). Finally,the rule avoids the difficult task of ascertaining the individual value of Both parties treat the rule as applying; however, it is the separate interests, circumventing the a question of first impression in Colorado. The court administrative nightmare of examining the terms of of appeals held that section 39-1-106, 16B C.R.S. all leases within the taxing jurisdiction to determine (1982), establishes "a unit rule for the assessment of the allocation of the interests in the taxable property. property; rather than requiring assessment of the various interests in the property ... the property is assessed to the owner only, and it `makes no FN7. Although, as the briefs in this case difference' that his ownership or possession is demonstrate, appeals to uniformity can qualified or limited." Board of Assessment Appeals, support any given method of valuation, the 829 P.2d at 1323. Section 39-I-106 provides: constitutional requirement that the property Partial interests subject to tax. For purposes of tax levy "shall be uniform upon all real ... property taxation, it shall make no difference that the property" convinces us that it is similarly use,possession,or ownership of any taxable property situated property that should be treated is qualified, limited, not the subject of alienation, or uniformly, and not similarly situated the subject of levy or distraint separately from the owners. See Colo. Const. art. X, S 3(1)(a) particular tax derivable therefrom. (constitutional mandate that taxes on real and personal property be uniform). 39-1-106, 16BC.R.S.(1982). J31141 The result of applying the unit assessment rule We agree with the court of appeals conclusion that is that although the assessor may initially isolate the section 39-1-106 establishes a unit assessment rule. interests,the property ultimately must be assessed as The language of section -106 renders an a unit. The responsibility of apportioning the tax on encumbrance irrelevant for purposes of property this assessment among the various interest holders taxation; thus, avoiding the distortion of property rests on the private parties who own these interests. values caused by fragmenting the leasehold interest Thus,the rule concerns only the final outcome of the from the fee. See Folsom v. County of Spokane, 106 assessor's task: the assessor need produce only one Wash.2d 760,725 P.2d 987, 993 (1986) (Folsom I). assessment. Cf Montgomety Ward & Co. v. Other considerations weigh in favor of such a Sterling, 185 Colo. 238, 243, 523 P.2d 465, 468 construction. The unit assessment rule taxes all (1974) (in eminent domain law undivided basis rule interests in property, no matter how they are divided. requires parties to apportion condemnation award See § 39-1-102(16), 16B C.R.S. (1982) ( "taxable after its computation from the whole of the property" defined as all property, real and personal); interests*360 involved). In the ordinary case the $ 39-I-I02(14)(a), 16B C.R.S. (1982) ("real whole of the property is taxed, and which party bears property" defined as "all interests in land"); Colo. the taxation burden is not a matter of public concern; Const. art. X, § 3(I)(a) (property tax levy shall be rather it is to be resolved as a matter of contract upon all real and personal property). See also J. between the landlord and tenant. See Trimble v. Youngman, Defining and Valuing the Base we the .Seattle, 231 U.S. 683. 689, 34 S.Ct. 218, 219, 58 Property Tax, 58 Wash.L.Rev. 713, 725 (1983)(most L.Ed. 435 (1914). important and persuasive of the rationales supporting the"unit assessment rule" interprets the tax as a levy In valuing all the interests in land by a single against all interests in a given parcel of real assessment we follow the weight of authority from property). Additionally, the rule achieves the jurisdictions that have decided the issue. See, e.g., constitutional mandate of uniformity by assuring Department of Revenue v. Morgamvoods Greentree, horizontal equity between comparable parcels of Inc... 341 So.2d 756, 758 (Fla.1976); Bvstrom V. ® 2007 Thomson/West.No Claim to Orig.U.S.Govt.Works. 848 P.2d 355 Page 6 848 P.2d 355 (Cite as:848 P.2d 355) Valencia Center, Inc., 432 So.2d 108, III appraisal.... (FIa.App.1983); Merrick Holding Corp. v. Board of Assessors, 45 N.Y.2d 538, 410 N.Y.S.2d 565, 568 c 39-1-103(5)(a), I6B C.R.S. (1992 Supp.). See 382 N.E.2d 1341, 1344 (1978); People ex rel. Gale Colo. Coast. art. X, $ 3(0(a). Actual value has v. Tax Conan'r of New York, 17 A.D2d 225, 233 been defined as the fair market value of the property N.Y.S.2d 501, 507 (1962); Alliance Towers, Ltd. v. during the base year period.F" Board of Assessment Stark County Bd. of Revision, 37 Ohio St.3d 16, 523 Appeals v. Arlberg Club, 762 P.2d 146. 151 N.E.2d 826. 832 (1988); Board of Supervisors v. (Colo.1988). See Black's Law Dictionary 35 (6th ed. Nassif 223 Va. 400, 290 S.E.2d 822, 824 (1984); 1990) ("actual value," and "market value" may be Folsom v. County of Spokane, Ill Wash.2d 256, 759 used as interchangeable terms). P.2d 1196, 1203 (1988). See generally 84 C.J.S. Taxation § 404(a) at 770 (1954); Defining and Valuing the Base of the Property Tax, 58 FN8. Section 39-I-104(10.2)(a), 16B C.R.S. Wash.L.Rev. at 718-33. (1989 Supp.), requires that the 1989 tax value of property be based on the level value for January 1, 1987,to June 30, 1988. The III base year method requires "property valuations be obtained by fixing those Having concluded that the "owner" of property is valuations to conditions that existed in the responsible for property taxes regardless of how specified base year." Carrara Place Ltd v. various property rights may have been pledged or Arapahoe County Bd. of Equalization, 761 exchanged, we now turn to the question of whether it P.2d 197. 201 (Colo.1988). Contrary to was error for the BOAA to consider actual rental Denver's assertions, use of actual rental income in valuing the subject property for ad income does not run afoul of this statutory valorem tax purposes. requirement. Rather, actual rental income may be used for determining the actual 151161 Because this appeal was filed by the assessor value of the property during the base year after June 7, 1989, our review is limited to "alleged period. procedural errors or errors of law." ti 39-8-108(2), 16B C.R.S. (1992 Supp.). The administrative Ill Denver asserts that the actual value of the agency, not the reviewing court, has the task of unencumbered fee is equal to the fair market value of weighing the evidence and resolving any conflicts, the sum of the lessor's and the lessee's interests. Board of Assessment Appeals v. E.E. Sonnenberg, Denver argues that to this sum actual rent is 797 P.2d 27. 34 (Colo.1990); Board of Assessment irrelevant. Denver concedes that ordinarily the Appeals v. Arlberg Club, 762 P.2d 146, 151 actual rent received will be a factor in (Cobo.1988). However, a decision of the BOAA determining*361 the value of the property-it may be set aside if it reflects a failure to abide by the represents the income the property generates, which statutory scheme for calculating property tax under the income approach to valuation is capitalized assessments. Sonnenberg, 797 P.2d at 34. Leavell- to determine the value of the property. See City & Rio Grande Cent. Assocs. v. Board of Assessment County of Denver v. Lewin, 106 Colo. 331, 338, 105 Appeals, 753 P.2d 797, 799 (Colo./km.1988). P.2d 854, 859 (1940). However, Denver urges that Accordingly, our review is limited to determining an exception should exist for long-term below-market whether the BOAA erred, as a matter of law, in leases because actual rent distorts the value of the considering the actual rent of the property in arriving property and invites taxpayer-manipulated, at its actual value. artificially depressed property values contrary to the constitutional and statutory mandates that property be E. With respect to the valuation of property for ad assessed at its actual value. See id.; Leave/l-Rio valorem tax purposes, section 39-I-103(5)(a) Grande, 753 P.2d at 800 (inclusion of bargained for provides: rent abatements in commercial leases in valuation of All real and personal property shall be appraised and property invites artificially depressed property the actual value thereof for property tax purposes values). determined by the assessor.... The actual value of such property ... shall be that value determined by Denver's concern about the distorting influence of appropriate consideration of the cost approach, the actual rent is misplaced. Although in some market approach, and the income approach to circumstances actual rent may be misleading, only in C 2007 Thomson/West.No Claim to Orig.U.S.Govt. Works. 848 P.2d 355 Page 7 848 P.2d 355 (Cite as: 848 P.2d 355) an ideally negotiated lease would actual rent equal Mart lease encumbrance, which alone makes it market rent. American institute of Real Estate saleable at any price that would justify current Appraisers, The Appraisal of Real Estate 115(9th ed. assessments, and ignore the rent reserved in that 1987). Additionally, where consideration of actual lease. rental income distorts the determination of the actual value of the property, the BOAA is free to place C.A.F. Inv. Co. v. Township of Saginaw, 410 Mich. whatever weight it deems appropriate to that figure. 428, 302 N.W.2d 164, 176 (1981) (Levin, J., See Wvnwood Apartments, Inc. v. Board of Revision, concurring). The actual value of improved real 59 Ohio St.2d 34, 391 N.E.2d 346 (1979); Townsend estate is arrived at by considering all the various v. Town of Aliddlehurv, 134 Vt. 438, 365 A.2d 515, circumstances that affect it. See Lewin, 106 Colo. at 5I 7 (1976) ("any attempted fraud ... would be readily 338, 105 P.2d at 859. It is axiomatic that the"actual discoverable through resort to the judicial process"). value" of real property for tax assessment purposes is We note that in this case the BOAA did exactly grounded in the marketplace where the customary this." willing seller/willing buyer concepts are applicable; whether such willing seller and willing buyer place an"actual value" on the property by looking at other FN9. The BOAA valued the property sales of comparable properties (the "market considerably above the valuation suggested approach"), by capitalizing the net income from the by Regis. In its conclusion, the BOAA property (the "income approach"), or by calculating stated that it `reviewed all of the sales the cost to replace the improvements less presented by both parties, [but paid] depreciation plus vacant land value (the "cost particular attention to sales of similar approach"). To ignore the effect of the lease on the properties that sold with long-term leases in judgment of a purchaser in his estimation of the fair place." These sales were presented as market value of the property is to ignore the mandate evidence by Regis in support of its market that the property is to be valued at its actual value. approach to valuation, and testimony of Moreover,Regis is bound by the*362 terms of a now Regis' expert established that the sales below-market lease, encountering the prospect of a reflected only the value of the landlord's fixed income in a future fraught with the potential for interest, i.e., they did not include the unforeseen inflation. "Failure to take notice of[the leasehold value held by the lessee. Had the lessor's] plight unduly penalizes the entrepreneur BOAA accepted a valuation of only the whose efforts have created the business environment landlord's interest, Regis' valuation,then the from which communities derive greater property tax BOAA's valuation would have been closer revenues." Folsom, 725 P.2d at 991. Thus, it to the suggested valuation of Regis, follows that both the actual rent and the fair market $1,316,138. Instead,the BOAA determined rent may be used to determine the actual value of the the actual value of the property to be almost property. See Board of Supervisors of Fairfax double the suggested value of only the Comity v. Na.ssif, 223 Va. 400, 290 S.E.2d 822, 824- landlord's interest. In light of the testimony 25 (1982) (both actual and economic rent should be before the BOAA, and its conclusions, it is considered in valuing a property for taxation clear that the BOAA considered the lessee's purposes); Oherstein v. Adair County Bd. of Review. interest in determining the actual value of 318 N.W.2d 817, 821 (Iowa 1982) (rental income is the subject property. some evidence of value of premises independent of existing lease). We do not hold that actual rent is the 1911101 In fact,the existence of a long term lease may only factor to be considered in valuing property, nor be the predominant factor giving value to the is it necessarily the predominate factor, only that property. We are not certain that a purchaser could theoretic market rent is not the exclusive factor to be be found for this property unless it was burdened considered. with this lease, and this concern has been expressed by other courts that have examined this issue: Additionally, Denver's concern that owners will seek No one could be found to buy this property for what to avoid the proper valuation of their property by even the owner claims it is worth unless it were artificially low lease payments is misplaced. First, 'encumbered' with the K-Mart lease and the assured no reasonable owner of commercial property would cash flow that goes with it. This Court cannot choose to reduce rental income by an amount many legitimately allow local taxing authorities or the Tax times greater than could possibly be saved in taxes. Tribunal to evaluate the property as if there is a K- See C.A.F. Inv. Co., 302 N.W.2d at 180 (Levin, J., O 2007 Thomson/West.No Claim to Orig.U.S.Govt.Works. 848 P.2d 355 Page 8 848 P.2d 355 (Cite as:848 P.2d 355) concurring). Second, actual rental income may be accordance with this opinion. inappropriate where it appears that the parties have not reached an arms-length agreement. Finally, we have confidence that in those limited circumstances I where manipulation exists, the BOAA will detect it, and value the property according to its actual non- The City and County of Denver(Denver) challenges manipulated value. a valuation for 1989 ad valorem*363 tax purposes of certain real property located in Denver. The property is owned by Regis Jesuit Holding, Inc. IV (Regis) and has been leased since 1965 to the S.S. Kresge Company which operates a K-Mart Accordingly, because the BOAA may properly department store and service garage on the premises. consider the actual rental income of property in The base term of the lease is twenty years, but the determining its value, the judgment of the court of lessee has the option to renew until the year 2001. appeals is affirmed. The lease was the result of arms-length negotiations, but prevailing market rental rates for leases of LOHR, J., concurs in part and dissents in part, and comparable properties executed in 1987 and 1988 F"' MULLARKEY, J., joins in the concurrence and were significantly higher than the actual contract rent dissent. under the lease. SCOTT, J., does not participate.Justice LOHR concurring in part and dissenting in part: I concur that provisions of article 1 of Colorado's FN I. As noted by the majority, the relevant General Property Tax Act, 5 kl 39-1-101 to-121, 16B base period for 1989 valuations is January 1, C.R.S. (1982 and 1992 Supp.), contemplate the 1987, through June 30, 1988. See maj. op. application of a rule that taxes all the interests in at 357 n. 1, citing S, 39-1-104(10.2), 16B taxable property no matter how they are divided. I C.R.S.(1989 Supp.). further concur that the Board of Assessment Appeals (BOAA) may properly consider "actual" or A Denver assessor initially valued the property at "contract"rent payable under an existing lease when $3,731,000. This value was affirmed by the Denver it determines the actual value of property for ad Board of Equalization, and Regis sought a de novo valorem tax purposes. I dissent, however, to the review before the BOAA. In defending its value of majority's affirmance of the Colorado Court of $3,731,000, Denver relied in part on an income Appeals' judgment, because the BOAA order approach to valuation 1-"-` that ignored the actual affirmed by that court suggests that the BOAA did contract rent under the lease in favor of prevailing, not apply the proper standards in valuing the property but higher, market rental rates for leases executed in for assessment. 1987 and 1988. Regis,on the other hand,urged that the income approach to valuation should be based When taxable property is divided into a lessor's estate partly on the average, actual contract rent under the and a lessee's estate, consistent application of a rule lease. that taxes all the interests in taxable property no matter how they are divided requires that the actual value of both the lessor's and the lessee's estates be FN2. The actual value of property for ad considered. The BOAA decision at issue in this case valorem tax purposes must be determined suggests that in determining the actual value for 1989 "by appropriate consideration of the cost tax purposes of certain taxable real property the approach, the market approach, and the BOAA failed to take into account the value of the income approach to appraisal." F 39-1- lessee's estate. However, the BOAA's findings and 103(5)(8), 16B C.R.S.(1992 Supp.). conclusions are too compactly stated for me to be certain this is so. I therefore would reverse and After a hearing, the BOAA issued findings of fact remand to the court of appeals with instructions that and concluded that the value of the property was it direct the BOAA to set forth more fully the manner $2,500,000, a figure less than that urged by Denver, in which it considered the value of both the lessor's but greater than that proposed by Regis. The court and lessee's estates if it considered the value of both, of appeals affirmed in Board at Assessment Appeals and if it did not, to conduct such further proceedings v. City and County of Denver, 829 P.2d 1319 as may be necessary to value the property in (Colo.App.1991). Denver now argues that both the ® 2007 Thomson/West.No Claim to Orig.U.S.Govt. Works. 848 P.2d 355 Page 9 848 P.2d 355 (Cite as:848 P.2d 355) lessor's and the lessee's estate must be valued for consists of (a) the right to occupy the property tax purposes, that relying on actual contract leasehold, (b) the right to the difference rent from a below-market lease to determine the between contract rent and higher market value of the property does not value the lessee's rent, and (c) any interest he might have in estate, and that the appropriate method for valuing any improvements to the leasehold." property with a long-term below-market lease under Folsom, 759 P.2d at 1202 (quoting Folsom the income approach is to use currently prevailing v. County of Spokane, 106 Wash.2d 760 market (sometimes called "economic") rent, rather 725 P.2d 987, 989-90 (citing Solis-Cohen, than the actual contract rent. Regis, on the other Jr., Appraisal of Leaseholds, in hand, argues that even when property is subject to a Encyclopedia of Real Estate Appraising 465, long-term below-market lease it is appropriate for the 473,476-77(1959))). BOAA to consider both actual contract rent and market rent. *364 The manner of calculating the value of both the lessor's and lessee's estates in any given case is not, however, a matter for this court to determine. In II particular, although both actual contract rent and market rent may be relevant, the manner in which Under Colorado's General Property Tax Act, all each is to be brought into play in determining the interests in taxable property are taxed no matter how actual value of all interests in the property is a matter they are divided. Maj. op. at 359; see $ S 39-1_ for experts in appraisal to decide applying accepted 102(16)and -106, 1613 C.R.S.(1982). However,this appraisal principles. FN4 Our role as a reviewing does not mean that there are to be multiple court includes making certain that the BOAA abides assessments on multiple taxpayers holding disparate by the statutory scheme for calculating property tax interests in a single piece of land. Rather, the assessments. Board of Assessment Appeals v. E.E. property ultimately must be assessed as a unit to a Sonnenberg & Sons, Inc., 797 P.2d 27, 34 single taxpayer,and the manner of sharing the burden (Co 10.1990). Only if the BOAA took into account of the property tax among the holders of estates in the the value of both the lessor's and the lessee's estates taxable property is a matter to be resolved by in the present case did it abide by the statutory contract. Maj. op. at 359-60; see Oherstein v. Adair scheme. County ad. of Review, 318 N.W.2d 817, 820-21 (Iowa App.1982); Folsom v. County of Spokane, Ill Wash.2d 256. 759 P.2d 1196, 1202-03 (1988). FN4. In general, a contract rent in excess of When,as in this case,taxable property is divided into market rent tends to increase the value of the a lessor's and a lessee's estate, it is necessary that the lessor's estate and decrease the value of the value of both estates be considered in arriving at the lessee's estate while a contract rent below value,for ad valorem tax purposes,of all the interests market rent tends to have the opposite effect. in the taxable property. Valencia Center, Inc. v. See American Institute of Real Estate Bvstrom, 543 So.2d 214. 217 (FIa.1989); Oberstein, Appraisers, The Appraisal of Real Estate 318 N.W2d at 820-21' Yadco, Inc. v. Yankton 114-15(9th ed. 1987). County, 89 S.D. 651, 237 N.W.2d 665, 668 (1975); Folsom, 759 P.2d at 1201-02.EN' My reading of the BOAA's decision suggests that it did not take into account the value of the lessee's interest, but its findings and conclusions are too FN3. In this connection, the Washington compactly stated for me to be certain this is so. For Supreme Court has observed that example, the BOAA nowhere states that it took into "[a]n estimation of the value of property account the value of the lessee's interest. Moreover, subject to a lease focuses upon two major Regis presented for the consideration of the BOAA interests: (1) the interest of the lessor who "four comparable sales" to which the BOAA says it owns the fee, and (2) the interest of the paid "particular attention," but these sales appear lessee occupying the leasehold. Further from the record to have been sales of only lessors' analyzed,the lessor's fee interest consists of estates. I would therefore reverse and remand to the (a)the right to receive contract rent, (b) the court of appeals with instructions that it direct the right of reversion,and(c)any right he might BOAA to set forth more fully the manner in which it have to improvements at the end of the considered the value of both the lessor's and lessee's lease. The lessee's leasehold interest estates if it considered the value of both, and if it did © 2007 Thomson/West.No Claim to Orig.U.S.Govt. Works. 848 P.2d 355 Page 10 848 P.2d 355 (Cite as:848 P.2d 355) not, to conduct such further proceedings as may be necessary to value the property in accordance with this opinion. In so doing, I agree with the majority that the BOAA may consider both actual contract rent and market rent, maj. op. at 362, and reaffirm that the decision of the BOAA may not be set aside if it is supported by competent evidence. E.E. Sonnenberg&Sons, 797 P.2d at 34. MULLARKEY, J., joins in this concurrence and dissent. Colo.,1993. City and County of Denver v. Board of Assessment Appeals of State of Colo. 848 P.2d 355 END OF DOCUMENT ® 2007 Thomson/West.No Claim to Orig.U.S.Govt. Works. Colorado Division of Property Taxation As of July 1, 2007 the following individuals were contacted for assistance and guidance regarding this matter. Frank Bregar Field staff Administrative Resources 970-248-7318 Mr. Bregar helped me locate the Colorado case law the Assessor referred to on the Notice of Denial. Greg Schroeder Annual Reports 303-866-2681 Mr. Schroeder provided guidance regarding the Board of Equalization hearing. Sue Dickinson Appraiser Certification & Licensing 303-866-3099 Ms. Dickinson referred me to Assessor's Reference Library Volume 3 "Long Term Lease". In addition, I asked Ms. Dickinson for the opinion of the Division of Property Taxation regarding the application or applicability of the case Law "City and County Denver v. BOAA and Regis Jesuit Holding, Inc." to this matter. It is the opinion of the Colorado Division of Property Taxation that the case is not applicable to the matter and that Market Rent should be the controlling indicator of value on the subject property. This opinion was conveyed on 8/1/07 to the assessing office of Weld County. LAND VALUATION MANUAL Prepared by Division of Property Taxation Department of Local Affairs After Review by the Advisory Committee to the Property Tax Administrator and Approval by the State Board of Equalization Pursuant to §§ 39-2-131, C.R.S.,and 39-9-103(10),C.R.S. Published Pursuant To: § 39-2-109(1)(e),C.R.S. 15-AS-DPT ARL VOL 3 1-89 Rev 1-07 11 Preface The Assessor's Reference Library(ARL) Volume 3 is the third in a series of five manuals to address property valuation and assessment. ARL Volume 1 is a comprehensive index of Colorado Constitutional provisions, statutes, and case law relevant to property taxation. ARL Volume 2 contains assessment procedures, processing policies, and legal references for administration of the assessor's office. ARL Volume 4, when published, will deal with real property valuation. ARL Volume 5 deals with personal property valuation. The purpose of ARL Volume 3 is to provide a reference source for appraisal and assessment policies and procedures for the valuation of land according to the Colorado Constitution and statutes. Valuation and/or assessment issues not pertaining directly to the valuation of land may be referenced to one of the other ARL manuals, as appropriate. Constitutional amendments or statutory changes which occur after the publication dates shown at the bottom of each page, supersede the provisions of this manual. 15-AS-DPT ARL VOL 3 1-89 Rev 1-07 7.15 LONG-TERM NON-MARKET LEASE VALUATION Long-term, non-market lease situations usually occur when: I. A property is occupied by a single tenant; 2. Rental income per unit of comparison (usually $/sf), is outside the range that is typical of similar properties; 3. The lease is of long enough duration to have a significant impact on value. When appraising real property encumbered by a long-term non-market lease, these procedures should be observed to ensure correctness of the assessment. The following procedures comply with the 1993 Colorado Supreme Court ruling which allows non-market rents to be considered while achieving a unity of value for assessment. City and County of Denver v.BAA and Regis Jesuit Holding,Inc., 848 P. 2d 355,(Colo. 1993). Consideration of the following criteria will be helpful in determining the applicability of long-term,non-market lease valuation procedures: • Long-term lease refers to a lease with a remaining term of ten years or more. Lease options are not relevant in this determination, unless there is strong evidence that the option(s) will be exercised. (Examples of this type of evidence may include: a letter of intent to renew, a lease renewal agreement, or a solid history of exercising renewal options.) • Lease terms are not renegotiable upon sale of the property. • Lease terms are not renegotiable upon exercise of a renewal option. • The tenant's interest (leasehold estate) must be transferable for there to be any leasehold value. LEASED FEE AND LEASEHOLD DEFINED Leased Fee Interest — A leased fee interest is the lessor's, or landlord's interest. It is an ownership interest held by a landlord with the rights of use and occupancy conveyed by a lease to others. Leasehold Interest — A leasehold estate is the lessee's, or tenant's estate. It is the interest held by the lessee (tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions. VALUATION METHODOLOGY Colorado Statutes, Court Decisions, and Uniform Standards of Professional Appraisal Practice (USPAP) require that all three approaches to value be considered when valuing this property type: 15-AS-OPT ARL VOL 3 1-89 Rev 1-07 7.16 COST APPROACH The cost approach is most helpful in valuing this property type when the lease rate and terms are at market levels, i.e., leased fee and fee simple values are the same. Below market rent may be a form of economic (external) obsolescence that could be estimated and deducted as a part of total depreciation. The calculation used to develop this estimate is simply a reiteration of the Income Approach and is not significant as an independent indicator of value. MARKET (SALES COMPARISON) APPROACH The sale of a property subject to a long-term, non-market lease cannot reflect the value of both the leased fee and leasehold estates; therefore, each component of value should be considered separately by this methodology. Leased Fee Interest: The market approach may be helpful in valuing the leased fee interest in this property type if: 1. The sale property is leased; 2. The lease term is similar; 3. The lease rate is similar; 4. Rent escalations are similar; 5. The creditworthiness of the tenant is similar. As the number of items of comparability decreases, the reliability of this methodology diminishes. Leasehold Interest: Sales of leasehold interests in buildings rarely occur. It is unlikely that this methodology will be helpful in valuing this component of the fee simple interest. INCOME APPROACH The income approach is the most useful methodology when providing an opinion of the value of a property encumbered by a long-term,non-market lease. Long-term, non-market leases frequently include other sources of income in addition to base rent, such as percentage rent. It is important to include income from all sources when analyzing the relationship of contract rent to market rent. Frequently, large national tenants are able to negotiate below market rental rates. Because of the good creditworthiness of this type of tenant, these properties may sell at a lower overall rate. Where this situation exists,the value of the leased fee interest may be equal to the value of the fee simple interest, even if the contract rent would otherwise be considered below market. 15-AS-DPT ARL VOL 3 1-89 Rev 1-07 7.17 UNIT ASSESSMENT RULE Partial interests not subject to separate tax. For purposes of property taxation, it shall make no difference that the use, possession, or ownership of any taxable property is qualified, limited, not the subject of alienation, or the subject of levy or distraint separately from the particular tax derivable therefrom. Severed mineral interests shall also be taxed. Annotation: This section establishes a unity rule for the assessment of property rather than requiring assessment of the various interests in the property. §39-1-106,C.R.S. In the Regis case, 848 P. 2d 355 (Colo. 1993), the court cited § 39-1-106, C.R.S. as applying the Unit Assessment Rule in Colorado. The court defines this as "...a rule of property taxation which requires that all estates in a unit of real property be assessed together...." This is an important concept in the valuation of a property encumbered by a below market rent on a long-term basis. For example, a leased property includes both the rights of the landlord (leased fee estate) and the rights of the tenant (leasehold estate). As noted in The Appraisal of Real Estate 12th ed., p. 83, "a leasehold interest may have value if contract rent is less than the market rent,..." The problem the court had in the Regis case was that by capitalizing the market rent into value, the assessor ignored the value impact of the existing lease. The court ruled that "the BOAA is free to place whatever weight it deems appropriate" on the lease, (Regis, p. 361). In the facts of that case the court noted that the BOAA concluded a value well above the leased fee interest in the property, and further stated "it is clear that the BOAA considered the lessee's interest in determining the actual value of the subject property," (Regis, p. 361). The court concluded: "We do not hold that actual rent is the only factor to be considered in valuing property, nor is it necessarily the predominate factor, only that theoretic market rent is not the exclusive factor to be considered,"(Regis,p. 362). RECOMMENDED PROCEDURE In order to be in compliance with the statutory requirement of § 39-1-106, C.R.S. (Unit Assessment Rule) and the Supreme Court ruling in Regis, we recommend the following procedure for developing an opinion of value for properties leased on a long-term basis at below market rent. 1. Calculate the value of the leased fee position by capitalizing net income based on contract rent; 2. Calculate the value of the leasehold position by estimating the present worth of the rent difference over the remaining term of the lease,and 3. Conclude the value of all estates in the "unit of property." (The appraiser should recognize that the market value of a property is not necessarily the sum of the value of the individual estates.) 15-AS-DPT ARL VOL 3 1-89 Rev 1-07 7.18 Some of the factors to be considered are: • The general concept is that lower risk positions are worth more and should be capitalized into value at lower overall rates; • Items to be considered in assessing the level of risk with this property type include: o duration of the lease, o variance compared to market rent, o rent escalation clauses during the base lease term, o percentage rent clauses. • The leased fee interest is a lower risk position; therefore, a lower overall rate is appropriate; • Conversely, the leasehold interest is a higher risk position and requires use of a higher overall rate; • Sources to be considered in developing the appropriate overall rates: o market sales data; o comparison of actual rates for financing instruments with varying degrees of risk, e.g., comparison of treasury bills (very low risk), corporate bonds (moderate risk), and junk bonds(higher risk). Example: The following example may be helpful in developing the required values: Given Lease Information Contract Rent: $108,519/year Market Rent: $128,519/year Remaining Lease Term: 10 years Leased Fee Value Potential Gross Income(at contract rent): $ 108,519 Less Vacancy& Collection Loss @ 5% $5,4261 Effective Gross Income: $ 103,093 Less Expenses: ( $3,093) Net Operating Income: $ 100,000 Leased Fee Capitalization Rate: 10% Value of Leased Fee Interest Equals: $1,000,000 Leasehold Value Difference between Contract and Market Rent: $ 20,000/year Leasehold Capitalization Rate: 15% Present Value of Rent Difference for Remaining Lease Term, (Column 5,PW of$1 Per Period): 5.018769 Value of Leasehold Interest Equals: $ 100,375 Rounded To: $ 100,000 (Present Worth of Rent Difference, $20,000 x 5.018769) Unit Value of the Property for Assessment Purposes Leased Fee Value: $1,000,000 Leasehold Value: 100.000 Unit Value: $1,100,000 15-AS-OPT ARL VOL 3 1-89 Rev 1-07 7.19 DEFINITIONS The following definitions have been generally taken from The Dictionary of Real Estate Appraisal, Third Edition,Appraisal Institute(1993). BASE RENT The minimum rent stipulated in a lease. CONTRACT RENT The actual rental income specified in the lease. It may be the same, lower, or higher than market rent. EXCESS RENT The amount by which contract rent exceeds market rent at the time of the appraisal created by a lease favorable to the landlord (lessor) and may reflect a locational advantage, unusual management, unknowledgeable parties, or a lease execution in an earlier, stronger rental market. Due to the higher risk inherent in the receipt of excess rent, it may be capitalized at a higher rate in the income approach. FEE SIMPLE ESTATE Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. LEASE A written document in which the rights to use and occupy land or structures are transferred by the owner to another for a specified period of time in return for a specified rent. LEASED FEE ESTATE An ownership interest held by a landlord with the rights to use and occupy conveyed by lease to others. The rights of the lessor (leased fee owner) and the leased fee are specified by contract terms contained within the lease. LEASEHOLD ESTATE The interest held by the lessee (tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions. LEASEHOLD VALUE The value of a leasehold interest. Usually applies to a long-term lease when market rental for similar space is higher than rent paid under the lease. LESSEE/TENANT One who has the right to use or occupy a property under a lease agreement: the leaseholder or tenant. 15-AS-DCT ARL VOL 3 1-89 Rev 1-07 7.20 LESSOR One who holds property title and conveys the right to use and occupy the property under a lease agreement; the leased fee owner or landlord. LONG-TERM LEASE Generally a lease agreement extending for 10 years or more. MARKET RENT The rental income that a property would most probably command in the open market indicated by the current rents paid and asked for comparable space as of the date of the appraisal. The rate prevailing in the market for comparable properties and is used in calculating market value by the income approach. Sometimes called economic rent. OVERAGE RENT The percentage rent paid over and above the guaranteed minimum rent or base rent calculated as a percentage of sales in excess of a specified breakeven sales volume. Overage rent is a contract rent. PERCENTAGE LEASE A lease in which the rent or some portion of the rent represents a specified percentage of the volume of a business, productivity, or use by the tenant. GOVERNMENT-ASSISTED HOUSING VALUATION In 1937, Congress passed the Federal Housing Act that provided for the construction of low- income, affordable multi-family housing. Since then, the Act has been modified several times to include state and local low- and moderate-income housing programs as well. In the 1970s, the federal Housing and Urban Development(HUD)agency initiated low-interest rate programs along with the federal Farmer's Home Administration loan programs for rural areas. In 1986, Congress added the Low-Income Housing Tax Credit (LIHTC) program to encourage private industry to invest in and construct low income housing or rehabilitate existing housing projects. Federal income tax credits are given to investors in qualified projects in exchange for equity participation and to offset property restrictions that all or part of the project be leased at below-market rents to qualified low-income tenants. Beginning in 1989, an irrevocable, recorded Land Use Restriction Agreement(LURA) was placed against each new LIHTC property in Colorado requiring the continuation of low-income housing use for a minimum of 30 years. These procedures have been developed for use by all county assessors in identifying government-assisted multi-family housing. For those properties that have restricted rents and that are subject to property use restrictions that limit the use of the property, specific market value adjustment procedures have been developed to allow assessors to make adjustments to value to take into account the effects of the restricted rents and land use restrictions on market value. If any question arises as to whether a property is subject to these procedures,contact the Division of Property Taxation. 15-AS-DPT ARL VOL 3 1-89 Rev 1-07 A ASSEssMEN)l> noN SERVICES t June 27,2006 Mr.Chris Woodruff Chief Deputy Assessor Weld County 1400 North 17th Avenue Greeley,CO 80631 RE: Former Steele's Market 1159 West Main Street Windsor,CO(PIN 0807720128005) Dear Mr.Woodruff: Thank you for speaking with me recently regarding the above referenced property. As we discussed the transaction on June 2,2004 was a lease fee estate purchase,not representative of the true market value of the real property on a fee simple estate basis. Tebo Windsor,LLC purchased the property on a lease fee basis,which was confirmed by Mr.Gene Pride,the listing broker with Marcus Millichap&RE Investment Brokerage Company,at the time of the sale. He also said without Nash Finch's leasehold interest they would have had a hard time attracting a buyer for the building at$30 psf. Nash Finch is obligated as a lessee until 2018 at a rate of$204,809.04 annually, which is above market rent for the facility. The location was a supermarket which closed in 2001 due to poor sales. Nash Finch has been trying to sublease the location through local broker representation (currently, Zall Company, Corey Dulberg) since closing the facility. They currently have a prospective tenant for 12,000 sf at a rate of$5.00 psf,which is 23.4%below what Nash Finch is actually paying for the space. If they are able to get this tenant after 5 years of marketing the property for sublease,they still need to fill the other 19,389 sf or 62%of the property. It is my understanding that the assessment of property in the state of Colorado is based on a fee simple estate. I have enclosed income approaches to value both on lease fee estate (Tebo Windsor, LLC purchase) and fee simple estate (market rent),as well as a narrative discussion of the approaches. I believe once you have reviewed this information you will agree that the assessed value for 2007 & 2008 should be much lower than the assessed value for 2006 of$2,437,500. Please let me know if you need additional information and I will try to provide it. Once you have had a chance to review this information,please contact me. I can be reached at my office number of 952-884-7303 or my cell number of 612-272-7301. Sincerely, Ron J.Novak • enclosures RJN/lal Assessment Valuation Services, LLC 200 West 98th Street, Suite 101 Minneapolis, MN 55420 Telephone(952) 884-7303 Fax(952) 884-0588 LETTER OF AUTHORITY TO ACT IN MATTERS OF AD VALOREM TAXATION We do hereby appoint and authorize Assessment Valuation Services,Inc. to represent our firm as ad valorem tax agent. They have the right to file applications,examine any records, and discuss or appeal any tax assessments to the appropriate authorities for the purpose of obtaining the proper tax values relative to the following property owned or controlled by this company! Former Steele's Market 1159 W-Main Street Windsor,CO BY: TITLE: COMPANY NAME&ADDRESS: Tebo Windsor,LLC 1590 Broadway Boulder,CO 80302 BEFORE ME,the undersigned,a Notary Public within and for the County of t 1 jot _r,State of ( (it Wart ,personally appeared —1-82) who acknowledged to me that this certificate of authority was executed for the purposes herein expressed. a WITNESS MY HAND and notarial seal this P day of IL it II, ,2006. Notary Public + � 4, y mmissian Expires p,�,,,,L � ICI�A ',UB A Lease Abstract Windsor,CO Steele's CLOSED,Windsor, CO Lease Information: Region fordwest Lease Term 220000��+W��s.F J Location Windsor,CO Steele's CLOSED Size Leased �': 1159 W.Main Street Size Occupied Windsor,CO Space Use Vacant lit United States Employees Division Minneapolis s>"a)71424 Primary Space Status Active File m 31200 Lease Number 200 *for Customer NA •Capital Lease? Shopping Center Sq Ft (Sub)Tenant Type Zoning Store Easements Entity Year Built Profit Center Liability Insurance Tenant Cost Center 1012067 Liability Coverage Deferred Rent Acct Building insurance Tenant Closed CC 1012067 Building Coverage Acres Contacts: __ Company Name - Lessee Nash Finch Company Lessor Dawes Properties I,LLC Operating Payee Qwest Operating Payee Town of Windsor Operating Payee Pashto Other Payment Weld County Treasurer Payee Other Payment Xcel Energy Payee Other Payment Green Lein P.G.M.;LLC Payee Real Estate Nash Finch Company Manager Key Dates: het Date Status mat Lease Commencement 12/15/1998 Completed Lease RE Tax Reminder 06/15/2004 Pending Lease RE Tax Reminder 02/28/2005 Inactive Renewal Option Notice End 03/02/2018 Inactive Renewal Option Notice Start 05/31/2018 Inactive Lease Expiration 12/31/2018 Inactive Rent Annual Rent Annual Rent Per Start Date-Fs ygt Annual Amount Eilialializt p�S.F employ 12/15/1998 - 12/31/2018 $17,067.42 $204,809.04 Monthly (...zrgr 0114 Lease Abstract for%Nadeor,CO Steals's CLOSED.Wedsor,CO1 of 3 Lease Abstract Windsor,CO Steele's CLOSED,Windsor, CO Security Deposit Holdover Percent Rent Type: Rent Index: Base Value: CPI Min: CPI Max: Additional Rent Comments: RE.Taxes,Assess.,and Ins. Expenses: ExoenseTvne Start Date-End Date Amount Annual Amount Annual Per SF amens,Truculency Insurance Annually RE Tax Semi-Annually Eamense Item klummosatilltE feannint HVAC Maintenance Tenant Pays Direct Inducing replacement Landscaping Tenant Pays Direct Other Tenant Pays Direct Glass,parking lot Property Insurance Tenant Pays Direct Property Taxes Tenant Pays Direct Roof Tenant Pays Direct Inducting replacement Snow Removal Tenant Pays Direct Trash Tenant Pays Direct Utilities Tenant Pays Direct WaterfSewer Tenant Pays Direct Options: Las Comment Renewal 8-5 Yr.@ 5%increase over previous 5 yrs. Option Sign Oft Informational Time to Exercise: 90 days Notice Start 0931/2018 Notice et 03/02/2018 05/18/2)04 Lease Abstract for Windsor,CO Steele's CLOSED,Windsor,CO Page 2 of 3 LEASE FEE ESTATE INCOME APPROACH TO VALUE Lease Fee Estate: is an"ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others; usually consists of the right to receive rent and the right to repossession at the termination of the lease". I constructed an income approach to value to arrive at Tebo Windsor,LLC's purchase price of the subject site. Rental Rate: The annual rent used is Nash Finch's leasehold interest payment. Vacancy&Credit Loss: For the following reason,no consideration was given to vacancy& credit loss: Typically long term NNN acquisitions do not reflect vacancy or credit loss. 14 years remaining on the lease to a publicly trade company, with a good credit rating. Management Fee: NNN lease,no consideration Reserves For Replacement: NNN lease,no consideration Capitalization Rate: The implied rate is 8.2% LEASE FEE INCOME APPROACH TO VALUE 1159 West Main Street Windsor CO R080720128005 TEBO WINDSOR,LLC PURCHASE RATE X SQUARE FOOTAGE PERCENT SUM 1stflor $8.53 31,389 100.00% $204,970 Blended $8.53 SUBTOTAL 31,389 3204,970 LESS VACANCY&CREDIT LOSS 0.00% E0 EFFECTIVE INCOME $204,970 LESS EXPENSES: MANAGEMENT S0 0.00% INSURANCE S0 EXP.OF AVG.VACANCY $0.00 0 SO RESERVES FOR REPLACEMENTS $0 0% TOTAL EXPENSES $0 NET INCOME $204,970 NET INCOME DIVIDED BY CAP RATE MARKET VALUE $204,970 DIVIDED BY S.20% $2,499,638 FEE SIMPLE ESTATE INCOME APPROACH TO VALUE Fee Simple Estate: is an"absolute ownership unencumbered by any other interest or estate; subject only to the limitations of eminent domain, escheat, police power, and taxation". I constructed an income approach to value using market rent for the subject. Rental Rate: As previously note Nash Finch hope to secure a subtenant at$5.00 psf for a third of the space. The remaining space hopefully would fill in at or near this rate. Therefore, I have arrived at a blended rate of$4.50 psf to account for broker commissions and some leasehold cost in tenant build out that would not be recoverable from the tenants. Vacancy& Credit Loss: Given the history of the subject,the fact the subject would be 62% vacant with the prospective tenant, a 10%vacancy&credit loss is more than conservative. Management Fee: A 5 percent management fee is an acceptable rate for a property with multiple tenants. Reserve for Replacements: A 3 percent reserve is an acceptable rate for a property with multiple tenants. Capitalization Rate: Given the history of the subject&the risk associated with ownership a 9%cap rate is low. FEE SIMPLE INCOME APPROACH TO VALUE 1159 West Main Street Windsor CO R080720128005 Market Rent RATE X SQUARE FOOTAGE PERCENT SUM lstflor $4.50 31,389 100.00% $141,251 Blended $4.50 SUBTOTAL 31,389 $141,251 LESS VACANCY&CREDIT LOSS 10.00% $14,125 EFFECTIVE INCOME $127,125 LESS EXPENSES: MANAGEMENT $6,356 5.00% INSURANCE $0 EXP.OF AVG.VACANCY $0.00 3,139 $0 RESERVES FOR REPLACEMENTS $3,814 3% TOTAL EXPENSES $10,170 NET INCOME $116,955 NET INCOME DIVIDED BY CAP RATE = MARKET VALUE $116,955 DIVIDED BY 9.00% 51,299,505 A ASSESSMENTVAI.I!'A1JON SERVICES { April 30,2007 Mr.Chris Woodruff Chief Assessor Weld County 1400 North 17th Avenue Greeley,CO 80631 RE: Former Steele's Market 1159 West Main Street Windsor,CO(PIN 0807720128005) Dear Mr.Woodruff As authorized agent,please consider this correspondence our intent to appeal the assessed value for 2007. Per our discussion of today,1 am re-sending the information previously sent on June 27th,2006. In the information I had discussed a possible sub-tenant for a third of the space.Nash Finch was able to sign the sub- tenant agreement,effective January 2007,at a rate of$4.91 psf(Copy of lease abstract attached). Once you have had a chance to review this information,please contact me. I can be reached at 952-884-7303. Sincerely, Ro .Novak enclosures RJN/lal Assessment Valuation Services, LLC 200 West 98th Street, Suite 101 Minneapolis,MN 55420 Telephone (952) 884-7303 Fax (952) 884-0588 Abstract FORIFIM opaRegion Midwest File Id: 31200 Division Minneapolis Status: Active File Name: Windsor,CO Windsor 247 Fitness,Inc Type: Income-Lease Address: 1159 W.Main Street Subtype: Tenant Suite: - Size/Alt Size: 12,250 SF/-Acres City State Postal: Windsor,CO 80550 Commencement: 08/01/2006 Country: United States Expiration Date: 12/27/2018 Lease Details Employees NA Acres NA Lease Number 200A Major Customer NA Capital Lease? Shopping Center Sq Ft 31,433 (Sub)Tenant Type Tenant Zoning Store Easement(s) Entity Nash Finch Company Year Built Profit Center Liability Insurance Tenant Cost Center 1012067 Liability Coverage 3,000,000 Deferred Rent Acct Building Insurance Nash Finch Co Closed CC 1012067 Building Coverage Full Replacement Cost-Tenant to reimburse 38% Rent Details Rent Type Holdover Percent 150 Deposit Amount NA Additional Rent Comments:R.E.Taxes,Assess.,and 38%of Ins.on entire premises.Base Rent Comments:thru 7/31/11;$5,518.33 mo.thru 7/31/16;$6,070.17 mo.thereafter. Link Type Company Contact Phone Fax Accountant Nash Finch Company Jodie Schluter - - Lessee Windsor 247 Fitness,Inc. David Haase - - Lessor Nash Finch Company - _ - Operating Payee Town of Windsor - 686-7476 - Other David L.Haase David Haase - - Other David Palmer David Palmer - - Other Payment Payee Weld County Treasurer - 970.353.3845 x3290 970.304.6435 Real Estate Manager Nash Finch Company Todd Rymer 952.844.1138 952.844.1044 Key Date Type Key Date Alert Date Key Date Status Key Date Comment Income-Lease Commencement 08/01/2006 - Completed - Base Rent Expense Change 08/01/2006 06/17/2006 Completed - Income-Lease Execution 08/08/2006 - Completed - Income-Lease Other 09/10/2006 08/11/2006 Completed Bill subtenant prorata no.of months taxes and insurance from 8/1/06-12/31/06. Base Rent Expense Change 01/01/2007 11/17/2006 Completed - Income-Lease RE Tax Reminder 02/28/2007 01/29/2007 Pending - Income-Lease RE Tax Reminder 06/15/2007 05/16/2007 Inactive - Income-Lease Insurance Expires 07/28/2007 07/13/2007 Inactive Obtain evidence of liability coverage. Income-Lease Other 01/10/2008 12/11/2007 Inactive Bill Subtenant 38%of buildling insurance premium. Base Rent Expense Change 08/01/2011 06/17/2011 Inactive - Base Rent Expense Change 08/01/2016 0647/2016 Inactive - Renewal Option Notice Start 09/10/2018 08/11//018 Inactive - Income-Lease Expiration 12/27/2018 11/12/2018 Inactive - 2007-01-31 12:56:51 PM Page 1 of 3 Abstract DR1 Expense Type Frequency Amount Start Date End Date Paid Next Next Amount Base Rent Monthly $ 0.00 08/01/2006 12/31/2006 - - Base Rent Monthly $ 5,016.66 01/01/2007 07/31/2011 03/01/2007 5,016.66 Base Rent Monthly $ 5,518.33 08/01/2011 07/31/2016 - - Base Rent Monthly $ 6,070.17 08/01/2016 12/27/2018 - - Expense Type Expense Comment Base Rent - Expense Metrics Frequency Amount Annualized PSF Adj Amount Adj Annualized PSF Base Rent Monthly $ 5,016.66 4.91 $ 5,016.66 4.91 Expense By Year FY-2 FY-1 FY0 FY1 FY2 FY3 FY4 FY5+ Base Rent $ 0.00 0.00 60,199.92 65,216.58 60,199.92 60,199.92 57,691.61 478,759.83 Expense Remaining FY0 FY1 FY2 FY3 FY4 FY5+ Total Base Rent $ 50,166.60 65,216.58 60,199.92 60,199.92 57,691.61 478,759.83 772,234.46 Expense Item Responsibility Comment HVAC Maintenance Tenant Pays Direct Including replacement Landscaping Tenant Pays Direct - Other Tenant Pays Dired Glass,parking lot Property Insurance Landlord Bills Nash Finch to carry full replacement value and bill tenant 38%upon such dates as are reasonably required by Nash Finch Property Taxes Landlord Bills Nash Finch Bills Tenant -payable 10 days before prime lease due date-Billed on Due and Payable basis. Under Prime Lease,we pay on Assessed Basis. Roof Tenant Pays Direct Including replacement Snow Removal Tenant Pays Direct - Trash Tenant Pays Direct - Utilities Tenant Pays Direct - Water/Sewer Tenant Pays Direct - 2007-01-31 12:56:51 PM Page 2 of 3 • • Abstract DRIu Clause Type Comment Alterations Consent required on alterations and repairs over$2,500. Also within 3 days,Haase and Palmer to provide guaranty of payment per Section 13D. Assignment Consent required Continuous Operations - It is a Sublease default if subtenant abandons the premises. Default - See Paragraph 38 Estoppel - Subtenant to execute estoppel per Section 31. Guarantors David Palmer and David Haase for alterations. Need to get a new Guaranty for each repair or obligation. Holdover - Section 42-Month to Month basis at 150%. Insurance - Tenant-liability$2,000,000 single limit and$1,000,000 excess liability,LL as additional insured,building hazard 100% replacement cost. Late Charges If 5 business days late,then both a late payment service charge shall apply and be paid by Subtenant of$25.00 or 5%of the amount due,whichever is greater(but no more than$100)and the unpaid sums shall bear interest from the date due to the date paid at the rate of 18%per annum or the highest rate permitted by law,whichever is less. Maintenance by T - Repairs and replacement of interior and exterior non-structural portions,all coverings(floor and sheetrock),cosmetic aspects (i.e.paint),windows,HVAC plumbing and electrical and other bullding systems,parking lot and parking lot lighting. There will be parking lot lighting cost sharing agreement when other tenants lease the building. Notices Deemed given on the date of mailing by certified mail or nationally recognized ovemight courier service. Signage Subject to Nash Finch approval,subtenant may place reasonable signage on the exterior of the Leased Premises Sublease - Consent required Subordination Tenant must subordinate. See Section 30 Surrender of Premises - Property remains personal property and may be removed,damage repaired;surrender in good condition,reasonable wear and tear excepted. Use - Sole and exclusive purpose of operating a physical fitness health dub,in the typical Anytime Fitness format Waiver of Subrogation Both parties covered Option Type Comment Renewal Option None Inactive Notice Start:09/10/2018 Alert Date:08/11/2018 Log Date Comment Document Name Comment Date 2007-01-31 12:56:51 PM Page 3 of 3 CNI O IC) N N- IC) t N 0) N- CO t it O O 4 00 9 r N O Iti N- a) C O N o m N- i IC) CO m m t F V '; M •a a C. a CO ai ai a) o o Oo of as as a = .- E i a. 4 v m , E e v 7 a a v - .;. . . V N +t 00 t it it it m CO it N CO C) N 0 CD CO m v to 0:! P•; It o m N "it4 4 M m m n. r v '0 0 NI a - r = - -- ^ 04 r it tin CC ,o 0 I& 0 o. 5 N _a 0, ill 04 Ili 0) CO Al- '°- +t N- m CO IC) CD CD CD CO it mil. 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CD IC) it C) N 4 7 •Q ts N C) N ^ N N N N N N 09 m am) m m m am) am) ? `L c) Conclusion We respectfully request that the Weld County Board of Equalization give consideration to the Market Rent (sublease to Windsor 247 Fitness, Inc.). and the fact that 62% of the property remains vacant. Prior to subleasing a third of the space to Windsor 247 Fitness, Inc., the entire property was vacant from November 2001. The property has been marketed for lease since 2001 and there is no additional prospect to date. a CLERK TO THE BOARD PHONE (970) 356-4000 EXT 4226 FAX: (970) 352-0242 WEBSITE: www.co.weld.co.us I 915 10TH STREET P.O. BOX 758 C. GREELEY, COLORADO 80632 COLORADO July 25, 2007 TEBO WINDSOR LLC PO BOX T BOULDER CO 80306-1996 Parcel No.: 080720128005 Account No.: R0161294 Dear Petitioner(s): The Weld County Board of Equalization has set a date of August 2, 2007, at or about the hour of 10:10 AM,to hold a hearing on your valuation for assessment. This hearing will be held at the Weld County Department of Planning Services, Conference Room, 918 10th Street, Greeley, Colorado. You have a right to attend this hearing and present evidence in support of your petition. The Weld County Assessor or his designee will be present. The Board will make its decision on the basis of the record made at the aforementioned hearing, as well as your petition, so it would be in your interest to have a representative present. If you plan to be represented by an agent or an attorney at your hearing, prior to the hearing you shall provide, in writing to the Clerk to the Board's Office, an authorization for the agent or attorney to represent you. If you do not choose to attend this hearing, a decision will still be made by the Board by the close of business on August 3, 2007, and mailed to you on or before August 10, 2007. Because of the volume of cases before the Board of Equalization, all cases shall be limited to 15 minutes. Also due to volume, cases cannot be rescheduled. It is imperative that you provide evidence to support your position. This may include evidence that similar homes in your area are valued less than yours or you are being assessed on improvements you do not have. Please note: The fact that your valuation has increased cannot be your sole basis of appeal. Without documented evidence as indicated above, the Board will have no choice but to deny your appeal. If you wish to obtain the data supporting the Assessor's valuation of your property, please submit a written request directly to the Assessor's Office by fax(970)304-6433,or if you have questions, call (970) 353-3845. Upon receipt of your written request, the Assessor will notify you of the estimated cost of providing such information. Payment must be made prior to the Assessor providing such information,at which time the Assessor will make the data available within three(3) working days, subject to any confidentiality requirements. Please advise me if you decide not to keep your appointment as scheduled. If you need any additional information, please call me at your convenience. TEBO WINDSOR LLC - R0161294 Page 2 Very truly yours, EQUALIZATION BOARD �OoFlat //�EQ UUAALIZATI ON Donald D. Warden Clerk to the Board cc: Christopher Woodruff, Assessor NOVAK RON J ASSESSMENT VALUATION SERVICES LLC 200 WEST 98 ST STE 101 MINNEAPOLIS MN 55420 Hello