KESSLER, J.
¶ 1 Bonstores Realty One, LLC, (Bonstores) appeals an order of the circuit court which dismissed Bonstores's complaint against the City of Wauwatosa (the City). Bonstores alleged that the City's property tax assessment on Bonstores's real property was incorrect. The circuit court, in a cogent and thoughtful decision, concluded that Bonstores failed to overcome the statutory presumption that the City correctly assessed Bonstores's property in 2009 and 2010. For the reasons below, we affirm.
¶ 2 Bonstores is the owner of the Boston Store department store, located at Mayfair Mall, in the City of Wauwatosa. Bonstores acquired this store in March 2006 as a result of its parent company's purchase of a large number of stores throughout the United States from Saks, Inc. (Saks). The purchase of all of the properties totaled over one billion dollars. In tax year 2009, the City assessed the subject property at $25,593,300. Bonstores appealed to the City of Wauwatosa Board of Review, contending that the property's fair market value, as of January 1, 2009, was $11,000,000. The Board upheld the City's assessment. In December 2009, the City issued Bonstores a real property tax bill.
¶ 3 Pursuant to WIS. STAT. § 74.37 (2009-10),
¶ 4 On appeal, Bonstores argues that: (1) the circuit court erred by concluding that Bonstores failed to overcome the presumption that the City's assessment was correct; (2) the circuit court erroneously relied on information pertaining to the
¶ 5 Bonstores argues that "[t]he substantial evidence test is the appropriate standard to apply to a challenger's evidence to determine whether the presumption of accuracy [of the assessment] is overcome." However, Bonstores is mistaken. When considering an excessive assessment claim, the circuit court need not defer to any determination made at a previous proceeding before the board of review. Allright Props., Inc. v. City of Milwaukee, 2009 WI App 46, ¶ 12, 317 Wis.2d 228, 767 N.W.2d 567. Instead, the court must accord the assessor's assessment a presumption of correctness. Id. The presumption of correctness does not apply, though, if the challenging party presents "significant contrary evidence[,]" or shows that the assessment "does not apply the principles in the Property Assessment Manual." Adams Outdoor Adver., Ltd. v. City of Madison, 2006 WI 104, ¶¶ 25, 56, 294 Wis.2d 441, 717 N.W.2d 803.
¶ 6 On appeal, we defer to the circuit court's findings of fact when resolving conflicting evidence. Allright Props., Inc., 317 Wis.2d 228, ¶ 13, 767 N.W.2d 567. We will not upset the court's factual findings, including findings involving the credibility of witnesses, unless they are clearly erroneous. See WIS. STAT. § 805.17(2); Lessor v. Wangelin, 221 Wis.2d 659, 665-66, 586 N.W.2d 1 (Ct.App.1998). In particular, it is within the province of the factfinder to determine the weight and credibility of expert witnesses' opinions. Bloomer Housing Ltd. P'ship v. City of Bloomer, 2002 WI App 252, ¶ 12, 257 Wis.2d 883, 653 N.W.2d 309. Conversely, application of the law to the facts presents a question of law which we review de novo. Allright Props., Inc., 317 Wis.2d 228, ¶ 13, 767 N.W.2d 567. Thus, we independently review whether a valuation complied with the statutes and the Wisconsin Property Assessment Manual. See id.
¶ 7 WISCONSIN STAT. § 70.49(1) requires a municipal assessor to attach a particular affidavit to the completed assessment role when she reports her conclusions of assessed values. Thereafter each assessment "shall, in all actions and proceedings involving such values, be presumptive evidence that all such properties have been justly and equitably assessed." WIS. STAT. § 70.49(2).
¶ 8 WISCONSIN STAT. § 903.01 describes, generally, how presumptions are handled in civil cases. The statute provides:
The 1974 Judicial Committee Notes explaining the statute's adoption explain why Wisconsin rejected the approach to presumptions which Bonstores advocates:
¶ 9 Once the presumed fact (the assessed value) is established, WIS. STAT. § 903.01 shifts the burden of producing evidence to the opponent of the presumed fact — here to Bonstores — to produce evidence that it is more probable than not that the assessed value is not correct. The presumption (that the City assessed value is correct) does not disappear simply because contrary evidence exists. Although the burden of producing evidence shifts, the burden of persuasion never leaves the proponent of the presumption. Professor Daniel D. Blinka explains:
7 Daniel D. Blinka, Wisconsin Practice Series: Wisconsin Evidence, § 301.4 at 81 (3rd ed. 2008). The trier of fact retains the obligation to weigh the competing evidence, including the presumption, and to determine whether the presumed fact is more probable than not.
¶ 10 Because both parties agreed that the property was assessed at $25,593,300, the City has met its burden of establishing the presumptive fair market value of the property. For Bonstores to challenge this assessment, it is required by WIS. STAT. § 903.01 to present sufficient evidence to persuade the circuit court that $25,593,300 is probably not the fair market value of the property. A failure to provide sufficient persuasive evidence that this amount is probably not the fair market value would entitle the City to judgment based on the statutory presumption. See WIS. STAT. § 70.49(2). The first step in our analysis, then, is to determine whether Bonstores overcame the presumption in favor of the assessor's valuation. If not, our inquiry ends and we will sustain the assessed valuation. See State ex rel. Campbell v. Township of Delavan, 210 Wis.2d 239, 262, 565 N.W.2d 209 (Ct.App.1997) (question of whether credible evidence supports assessor's valuation only reached if presumption in favor of assessor's valuation has been overcome). The circuit court, as the trier of fact, is the ultimate arbiter of the weight and credibility of the evidence and of any reasonable inferences drawn from that evidence. U.S. Oil Co., Inc. v. City of Milwaukee, 2011 WI App 4, ¶ 11, 331 Wis.2d 407, 794 N.W.2d 904 (Ct.App.2010). We may not consider whether the evidence might support a contrary conclusion, or a contrary inference that is reasonable. See Morden v. Continental AG, 2000 WI 51, ¶ 39, 235 Wis.2d 325, 611 N.W.2d 659. We therefore examine the record as a whole to determine whether evidence, and reasonable inferences therefrom, support the court's conclusion.
¶ 11 Here, the circuit court weighed the evidence, considered the credibility of the opinions expressed, and was not persuaded that Bonstores had established that it was more probable than not that the assessed value was not correct. To reach that conclusion, the court necessarily did not find persuasive Bonstores's appraiser's opinion that the fair market value of the subject property was $11,000,000. The circuit court specifically found that "the assessor here made a just, equitable assessment" of the property and that "the value found by the assessor, $25,593,300, represents [the] fair market value of the subject [property] on January 1st of 2009."
¶ 12 Both parties presented hundreds of pages of evidence and hours of testimony, in which witnesses expressed a wide range of opinions as to the value of the subject property based on various appraisals employing a variety of methods. These witnesses disputed or corroborated various facts or methodologies of other opinions expressed at various times as to the fair market value of the subject property.
¶ 13 WISCONSIN STAT. § 70.32(1) sets forth the requirements for the evaluation of real property and requires assessors to follow the mandates outlined by the Wisconsin Property Assessment Manual. The statute provides:
¶ 14 We explained the three-tier hierarchy described in the assessment manual that must be applied to determine the fair market value of property for tax assessment:
Allright Props., Inc., 317 Wis.2d 228, ¶ 11, 767 N.W.2d 567 (citing Adams, 294 Wis.2d 441, ¶ 34, 717 N.W.2d 803) (some formatting altered; emphasis added; five sets of brackets in Allright Props., Inc.). The Wisconsin Property Assessment Manual identifies valuation techniques generally applicable to commercial property by explaining that "[e]stimates of market value can be derived by using the cost, income and/or sales comparison approaches. Commercial property can be valued by either single property or mass appraisal techniques." Wisconsin Property Assessment Manual at 9-5.
¶ 15 None of the appraisers that testified considered the 2006 purchase of this store in the bulk sale by Saks (allocating the $32.7 million purchase price financed and reported for the subject property) to be an arms-length tier one sale. The City's appraiser concluded that a tier two analysis of comparable sales was possible, and resulted in a value of $27,600,000. Bonstores's appraiser applied a tier three analysis and concluded the value of the subject property was $11,000,000. We discuss the appraisals separately.
¶ 16 Bonstores's expert witness, Michael Kelly,
¶ 17 Kelly fundamentally relied on determining "stabilized" retail sales generated on property he selected as comparable
¶ 18 Kelly's report explained the "Sales Comparison Approach" he used:
¶ 19 Of the eight stores used as comparable properties, Kelly described six as "inferior." (Yonkers in Eau Claire; Yonkers in Racine; JC Penny in Bloomingdale, Illinois; Lord & Taylor in Columbus, Ohio; Marshall Fields in Columbus, Ohio; and Saks in Dearborn, Michigan). Two of his comparable stores — Jacobson in Ann Arbor, Michigan, and Jacobson in Livonia, Michigan — were sold in a bankruptcy auction in September 2002. The Ann Arbor store shut down in January 2002. Kelly chose to "stabilize" the retail sales for that Jacobson store prior to the sale by calculating the retail sales per square foot of three other anchor stores in the mall — JC Penny, Marshall Fields, and Sears — "and in other Midwest markets" to arrive at a retail sales figure to apply to Jacobson. The Jacobson property was treated with the same sales stabilization technique as its sister store. Kelly concluded that the 2001 Livonia Jacobson sales were too low because of "knowledge that the store was to close and the infrequency of new supplies entering the store." He therefore applied to Jacobson a figure for the retail sales per square foot in 2001 based on the other anchor store in that mall — Parisian — and sales per square foot from "other Midwest markets." In his summary of adjustments Kelly considered none of the properties superior to the subject property, the two bankrupt properties "similar overall" to the subject property, and the six other properties "inferior" to the subject property.
¶ 20 The circuit court expressed substantial skepticism about Kelly's appraisal methods. Specifically, the circuit court noted that Kelly's reliance on retail sales and his belief that all other considerations — location, store size, etc. — were included in retail sales such that normally required adjustments of comparable properties did not have to be made. This view did not "allow for changes in product line, quality of management [and] brand name." All of these changes, the circuit court noted, are fundamental aspects of a retail department store which have a direct impact on retail sales, regardless of where the store is located or whether the property is owned or leased by the department
¶ 21 The circuit court also expressed concern over Kelly's "Sales Comparison Approach." The court explained that it did not "see the apples-to-apples comparison" between the subject property and the properties Kelly relied on as comparable, and concluded that Kelly did not provide meaningful comparable properties because many of the properties had gone "dark." Kelly defined "dark" as "a period of time where the store is not operating." The circuit court stated:
¶ 22 Bonstores concedes, to some degree, that some of the comparable properties relied upon by Kelly were "distressed." In an intricate parsing of language, Bonstores argues that "none of the comparables ... upon which Mr. Kelly placed any significant reliance were `distressed.'" (Emphasis added.) Thus, Bonstores effectively admits that at least some of the comparable properties were fairly characterized as "distressed." Kelly confirmed that a store going "dark" may have a significant impact on the property. It appears from the record that the circuit court used the phrase "distressed property" to refer to a "dark" business. Kelly agreed that the subject property is not a "dark" store, has never gone dark, and there is no evidence it would go dark and be sold off as a single property. As such, the circuit court did not erroneously determine that Kelly's reliance on the sales of properties he deemed comparable was unreliable.
¶ 23 Moreover, the circuit court's skepticism of Kelly's use of retail sales to value real estate reflects our supreme court's holding in ABKA Limited Partnership v. Board of Review of The Village of Fontana-On-Geneva Lake, 231 Wis.2d 328, 603 N.W.2d 217 (1999). The court explained that when inquiring into the income producing capacity of the land, "[i]ncome that is attributable to the land, rather than personal to the owner, is inextricably intertwined with the land and is thus transferrable to future purchasers of the land. This income may then be included in the land's assessment under WIS. STAT. § 70.03 because it appertains to the land." ABKA Ltd. P'ship, 231 Wis.2d at 336, 603 N.W.2d 217 (emphasis added; internal citations omitted). Examples of business inextricably linked to the land may be seen in State ex rel. N/S Associates v. Board of Review of The Village of Greendale, 164 Wis.2d 31, 473 N.W.2d 554 (Ct.App.1991) (Southridge Mall's business of leasing space to tenants is a transferrable value inextricably linked to the land), and Waste Management of Wisconsin v. Kenosha County Board of Review, 184 Wis.2d 541, 568, 516 N.W.2d 695 (1994) (income from landfill attributed
¶ 24 Here, the record describes nothing specific to the land that appertains to Bonstores management's capacity to sell department store goods. The circuit court properly rejected Kelly's reliance on retail sales of department store goods as a significant factor in determining the value of the real estate where the department store is located.
¶ 25 The City's expert appraiser,
¶ 26 Kenney did a traditional tier two sales comparison approach. He explained how he applied this approach:
¶ 27 Kenney noted that the Wisconsin Property Assessment Manual points out that "[t]he location for a retail store is of extreme importance." Kenney concluded that the highest and best use of the subject property was an uninterrupted use as an anchor department store. The parties stipulated that "Mayfair Boston Store is one of Bon Ton's best performing stores." Kenney concluded that large department stores and big box sales were the most comparable to the subject property. He did not include in his comparable properties any conversion, redevelopment or "dark store" sales because they have a different highest and best use than the subject property. Considering sales of comparable properties after the valuation date is permitted by the Uniform Standards of Professional Appraisal Practice in a retrospective valuation. Because this valuation is to determine a value at a date already past, it is a retrospective valuation.
¶ 28 Kenney compared sales of thirteen large department stores or big box stores around the United States. The sales closed between May 2006, and June 2010. He also considered two Boston Stores in Wisconsin acquired from Saks in the 2006 transaction. He explained that, as authorized by the Wisconsin Property Assessment Manual, he compared sales of the properties on the basis of the sale price per square foot of the gross leasable area. As to each of the comparable sales, Kenney noted the financial terms of any applicable lease
¶ 29 Kenney ultimately concluded that the market value of the property was approximately $25.6 million and that surplus land added an additional $2,000,000 to the market value.
¶ 30 Kenney obtained similar values in considering the same tier three approaches Kelly used. Kenney did a direct income capitalization analysis. Kenney reviewed market rents at sixteen big box or anchor department stores in Wisconsin and around the country which he considered generally comparable to the subject property. The lease amount paid by each lessor (income from the land), was reduced by other occupancy expenses incurred by the landlord to determine a net operating income per square foot of leased property. The net operating income attributable to both the building and the surplus land was then capitalized at the rate of 7.40%. This rate was selected based on Kenney's comparison of the capitalization rates from the comparable sales when enough information was available. Capitalizing the net operating income at 7.40% produced a value of $24,210,297 for the building and related parking and $2,014,650 for the surplus land, for a total value of the subject property of $26,224,947. Kenney rounded this to $26,200,000.
¶ 31 Kenney also did a cost approach analysis. Essentially this approach considers what it would cost to reproduce the existing property — land and building. He determined the value of the land as though vacant based on sales of comparable land. Then he calculated the estimated cost of reproducing the existing building. The two values are added together, which resulted in a value of $29,300,000 as of January 1, 2009, under the cost approach.
¶ 32 Kenney reconciled the tier three approaches, as required by the Wisconsin Property Assessment Manual, to test the reasonableness of his value based on the tier two comparable sales approach. He adopted his comparable sales value, $27,600,000, as the fair market value of the subject property. In reaching its decision affirming the Board, the circuit court noted that Kenney's tier two appraisal figure, before the addition of the value of the surplus land, very closely matched that of the Board.
¶ 33 Bonstores argues that the circuit court should not have either considered or "relied upon" a variety of other evidence regarding the value of the subject property for various purposes at various times. Specifically, Bonstores argues that the 2006 purchase price and an appraisal report from Cushman and Wakefield were irrelevant and should not even have been considered by the circuit court.
¶ 34 Paul Ruby, the senior vice president of Bon Ton Department Stores, Inc., confirmed that $32.7 million was the amount Bonstores actually paid for the subject property and that Bonstores recorded that amount on the real estate transfer return it filed with the Milwaukee County Register of Deeds. Ruby testified that the retail sales that a particular store generates are based significantly on the operations, the business aspect of a store. He also testified that generally the only time Bon Ton would sell a single store is when the store is underperforming, with a long history of underperforming or losing money. Ruby also testified that Bon Ton stores are currently paying rent at approximately five percent of retail sales, although his goal is to pay rent in the amount of two to three percent of retail sales.
¶ 35 The circuit court observed that the public filing was "telling the world" that the purchase price of the subject property was $32,700,000 and, as such, could not simply be ignored. It contributes to the range of values that have been stated for the subject property at various times by responsible people. Various opinions as to the value of the property in 2006 provide at least some context to consider in determining whether either party has presented a preponderance of evidence of the fair market value of the property on January 1, 2009.
¶ 36 In the long discussion by Kelly of rent as a percentage of a store's retail sales, which he considered relevant to his opinion of the value of the property, he argued that a range of two to three percent was appropriate based on various data he considered. Ruby's testimony as to what Bonstores was actually paying, which was considerably higher than Kelly's figure, was relevant to the court's obligation to determine the weight and credibility of the opinion evidence presented.
¶ 37 The circuit court found that an appraisal Cushman & Wakefield did for Saks was used in 2006 by Bon Ton Stores to obtain a loan for $1.185 billion from Bank of America to finance the purchase from Saks of 142 stores. Bon Ton obtained mortgage financing within that loan in the sum of $260 million, of which $32.7 million was attributed by Cushman & Wakefield to the Wauwatosa property. Neither party claimed that the 2006 interrelated transaction between Bonstores and the Saks entity was an arm's-length sale.
¶ 38 The significance of this appraisal was that Bonstores relied on it when it represented in a public document (the Real Estate Transfer Return) that the value of the subject property was $32,700,000. That representation in 2006 was $21,200,000 more than the $11,000,000 value
¶ 39 For the foregoing reasons, we affirm the circuit court.
Order affirmed.
FINE, J., (concurring).
¶ 40 In my view, the majority overcomplicates the analysis of state-court presumptions in Wisconsin. WISCONSIN STAT. RULE 903.01 is clear:
(Emphasis added.) Quod erat demonstrandum. Nothing more needs to be said or written.
All references to the Wisconsin Statutes are to the 2011-12 version unless otherwise noted.
FED.R.EVID. 301.