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The Kankakee County Board of Review v. the Property Tax Appeal Board and Armstrong World Industries

May 7, 2012


Appeal from a Decision of the Illinois Property Tax Appeal Board. PTAB No. 06-1787.001-I-3

The opinion of the court was delivered by: Presiding Justice Schmidt

Petition for Review of Order of the Property Tax Appeal Board dated December 23, 2010.

PRESIDING JUSTICE SCHMIDT delivered the judgment of the court, with opinion. Justices Lytton and McDade concurred in the judgment and opinion.


¶ 1 The Kankakee County Board of Review (the County) appeals the decision of the Illinois Property Tax Appeal Board (PTAB). Armstrong World Industries (Armstrong) filed a real property assessment appeal with the PTAB, seeking reduction of the County's assessed value of a property parcel for the 2006 tax year. The PTAB issued a decision granting Armstrong's reduction, lowering the assessed value from $2,884,281 to $1,326,600. The County filed a petition for direct review pursuant to section 16-195 of the Property Tax Code (the Code) (35 ILCS 200/16-195 (West 2008)) and section 3-113 of the Illinois Code of Civil Procedure (735 ILCS 5/3-113 (West 2008)). The County claims the PTAB erred, inter alia: (1) in rejecting the County's appraisal based upon multitenant leases; (2) in concluding that sales involving multi-tenant leases require downward adjustments; and (3) by relying on sale values from out-of-market properties. While arguing numerous points, the gravamen of the County's appeal is that the PTAB erred in valuing the property when it assigned greater weight to the opinion of Armstrong's appraiser than to those of the County's experts. We confirm the decision of the PTAB.


¶ 3 The property at issue is a large, old and somewhat unique industrial complex located in Kankakee County. Armstrong uses the facility to manufacture floor tiles, employing a fairly uncommon vertical manufacturing approach. This vertical process requires a very tall facility, which would not be useful for many potential industrial users. Armstrong has been the facility's sole owner and user since construction. Numerous additions have resulted in a complex comprised of multiple buildings encompassing more than 395,000 square feet.

¶ 4 On March 8, 2007, the County issued a final decision on assessed value for the 2006 tax year for the Armstrong parcel, number 17-09-28-302-018. The County found the assessed value to be $2,884,281 (reflecting a market value of $8,609,794). On April 2, 2007, Armstrong filed a real estate tax appeal petition with the PTAB, claiming that the proper assessed value should have been $1,307,115 (reflecting a market value of $3,150,000). In support of its appeal, Armstrong submitted an appraisal prepared by J. Edward Salisbury of Salisbury & Associates, Inc. (Salisbury). In response to Armstrong's appeal, the County submitted an appraisal of the subject property prepared by Andrew Brorsen of Brorsen Appraisal Service, P.C. (Brorsen), as well as a review of Mr. Salisbury's appraisal performed by Richard Buchaniec of Buchaniec & Company (Buchaniec).

¶ 5 Salisbury, Brorsen and Buchaniec all testified at a March 10, 2010, PTAB hearing. All three experts agreed that the sales comparison approach was the proper valuation method for the subject property. Buchaniec did not express any opinion of value, as he only performed an appraisal review.

¶ 6 Mr. Salisbury, Armstrong's expert, testified that he relied upon five sales comparables to determine the value of the subject property. He did not consider properties where a significant portion was leased at the time of sale as such properties would be dissimilar to the subject property and, therefore, not comparable. Thus, none of Salisbury's comparables were leased at the time of sale (each instead conveying unencumbered ownership). Prior to being retained by Armstrong, he had either visited or appraised three of his comparables or their surrounding properties. The five Salisbury comparable properties sold between May 2003 and December 2005, with prices ranging from $750,000 to $2.1 million, or $2.91 to $8.10 per square foot. The properties ranged in size from 201,900 to 685,620 square feet and ranged in weighted age from 25 to 61 years. Salisbury opined that three features negatively affected the subject property: its 40-year weighted age, its construction in stages via multiple additions and its rack warehouse system, which he believed would not be useful for many potential buyers. Under the cost approach, Salisbury concluded that the subject property had a fair market value of $2.9 million. Under the sales comparison approach, Salisbury found the subject property had a fair market value of $3.15 million, or $8 per square foot.

¶ 7 Next, Mr. Buchaniec testified for the County regarding his review of Salisbury's appraisal. Buchaniec expressed concern regarding Salisbury's comparable sales. He challenged the accuracy of Salisbury's appraisal, given the distance of the comparable sales to the subject property as well as the degree of adjustment those properties required. However, Buchaniec acknowledged that distance to the subject property is not a factor in valuation. Buchaniec agreed with Salisbury that the property was unique given its age, size and multistory nature. This complicated the task of finding suitable comparable sales. Buchaniec opined that the only reason he could see for Salisbury to use his chosen comparable sales was if it was "handy for him" because "he just had them in his file." While Buchaniec made an effort to identify similar properties in neighboring Will County, he acknowledged that he made no effort to determine whether these properties were actually comparable to the subject property. Buchaniec would have used comparable sales located closer to the subject property, but acknowledged that the best method of sales comparison evaluation (though cost prohibitive) would be "to do a mini appraisal" of each comparable sale. Buchaniec ultimately believed Salisbury was intentionally using low value comparable sales. However, he admitted that he had neither analyzed Salisbury's comparable sales nor made an effort to verify the data from Salisbury's comparable sales.

¶ 8 Finally, Mr. Brorsen testified for the County that he analyzed data associated with six properties to determine the value of the subject property. These six properties sold between September 2000 and June 2006, with prices ranging from $2.1 million to $15 million, or $12.27 to $26.79 per square foot. All of the sales were within 55 miles of the subject property, ranging in size from 100,000 to 560,000 square feet with a weighted age from 31 to 66 years. Five of the sales were multitenant properties leased at the time of sale. Brorsen did not rely on information from the sixth sale as it occurred years prior to the 2006 tax assessment of Armstrong's property. Four of the properties were 90% to 100% leased at the time of sale. Brorsen claimed that the fact that a property was leased has no effect on its sale price as properties "in excess of 200,000 square feet seldom are leased to a single tenant." Brorsen ultimately determined that the subject property had a value of $10.4 million under the cost approach and $8.6 million under the sales comparison approach.

¶ 9 The PTAB issued a final administrative decision on December 23, 2010. It found that Brorsen's determination of the sales comparison approach was deficient, as four of his six comparable sales were "dissimilar to the subject's single user configuration" given their multi-tenant nature. According to the PTAB, the use of multitenant buildings "runs counter to Brorsen's highest and best use determination of the subject as improved," and Brorsen, therefore, should have made an adjustment for the leased properties. Furthermore, Brorsen provided no information regarding the lease terms, length or other details for any comparable sale. The PTAB found that Brorsen was not credible when he stated that "being leased does not have an impact on the sale" particularly given Brorsen's statement that one of his comparable properties was purchased "as an investment." The PTAB found Salisbury's comparables, which were unencumbered at the time of sale, "to be more indicative of market value than [Brorsen's] sales of fully leased properties."

ΒΆ 10 With regard to Salisbury's appraisal, the PTAB gave the most weight to a property in Watseka, finding it evinced "a market more similar to the subject's market area." It noted the Watseka property required upward adjustment for location, time and market conditions. This comparable sold for $8.10 per square foot. Ultimately, the PTAB found the proper assessed value of the subject property to be $10 per square foot for a total ...

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