CHEMICAL BUILDING REDEV.,	)
	)
Complainant,	)
	)
v.	)		Appeal Number 03-20101
	)
ED BUSHMEYER, ASSESSOR,	)
ST. LOUIS CITY, MISSOURI,	)
	)
Respondent.	)

DECISION AND ORDER

Complainant has failed to present substantial and persuasive evidence demonstrating that its property would sell for no more than $1,020,000 on January 1, 2003. The value of $2,218,600 (assessed value $354,900) as originally determined by the Assessor and approved by the Board of Equalization, is AFFIRMED.

ISSUE

The issue in this case is the true value in money of the subject property on January 1, 2003, and January 1, 2004.

Complainant appeals the assessment of its office building on the ground of overvaluation. The subject parcel was originally valued by the Assessor at $2,218,600 (assessed value $354,900). The property has a 50% tax abatement. The Board of Equalization affirmed the Assessor’s value.

Complainant asserts a market value of $1,020,000 based upon a reconciliation of the income and sales approaches to value. Respondent asserts a market value of at least $2,218,600.

On September 21, 2004, an evidentiary hearing was held before the Tax Commission hearing officer, Luann Johnson, at the St. Louis City Courthouse in St. Louis, Missouri. Complainant appeared by counsel, James Wilson. Respondent appeared by counsel, Carl W. Yates, III.

Complainant’s Evidence

Ernest Demba, a state certified appraiser, testified on behalf of Complainant. Mr. Demba testified that the highest and best use of the subject property was for conversion into apartments and condominiums.

Mr. Demba testified that the sales comparison approach was the best methodology for valuing the subject property. Under his sales comparison approach, Mr. Demba presented six sales of older office buildings. He also presented one contract to purchase an older office building. Two sales were from 1999; two sales were from 2000; one sale was from 2001; and one sale was from 2003. No time adjustments were made. The sales indicated a range of value for the subject property of $4.59 per square foot to $14.83 per square foot. After adjustments, the sales indicated a range of value from $5.04 per square foot to $14.08 per square foot. Mr. Demba concluded that a value of $9.00 per square foot, or $1,450,600, was appropriate for the subject property under the sales approach.

Mr. Demba also presented an income approach to value based upon a discounted cash flow analysis and a direct capitalization approach but testified that the income approach was not the most reliable indicator of value for the subject property. Mr. Demba did not attempt to determine potential gross income because "This would be nearly impossible to accurately calculate or estimate considering the current operating status of the subject property." Mr. Demba attempted to determine effective gross income by averaging monthly income using data from 1997 through a portion of 2003. He used a similar averaging methodology to determine operating expenses. Mr. Demba’s income and expense figures were not supported by market data. Market data for Class C office buildings may not be readily available. Mr. Demba’s estimate of value under his two income approaches was $975,100.

Mr. Demba considered, but did not use, the cost approach in determining value.

Mr. Demba did not consider the potential impact the tax abatement had on market value of the subject property but did assert that the historical facade easement might impact value. No market data was presented to support this assertion.

Respondent’s Evidence

Martin Hilgeman, a state certified appraiser, testified on behalf of Respondent. Mr. Hilgeman also testified that the highest and best use of the subject property would be for conversion into residential apartments and condominiums.

Mr. Hilgeman testified that the sales comparison approach was the most reliable method of determining value for the subject property and found five comparable sales occurring between January 2003 and January 2004. No time adjustments were made. Those sales indicated a range of value for the subject property of $12.90 per square to $23.17 per square foot. Four sales indicate a value higher than the market value originally determined by the Assessor and approved by the Board of Equalization.

Mr. Hilgeman considered, but did not use, the income approach and cost approach in determining value for the subject property.

Mr. Hilgeman did not consider the potential impact the tax abatement or the historical facade easement might have on market value of the subject property.

1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the St. Louis City Board of Equalization.

2. The subject property is a 14,264 square foot tract improved with a 17-story class C office building built in 1892. The building contains 161,177 square feet above ground and 14,471 square feet of basement area (Ex. 1, p. 2; Tr. 65). The property is commonly known as 715 Olive Street, St. Louis, Missouri and is further identified as locator number 01810000801 (Ex. 1, p. 3). The subject property occupies the northeast corner of Oliver Street and 8^th Street, in the heart of the central business district (Ex. A, p. 15). The subject site is mostly rectangular in shape and occupies approximately 25% of a city block. Most of the building was renovated in or around 1985 (Ex. A, p. 16). A full tax abatement commenced in 1986 after the completion of renovations and for a term of ten years. For 1997 through 2011, the subject property is 50% tax abated (Ex. A, p. 21).

3. The central business district of St. Louis has experienced heavy re-vitalization. Revitalization continues, but at a slower pace over the past five to ten years. The last twenty to thirty years has seen a virtual metamorphosis in the downtown area. The St. Louis central business district serves as a business and financial nerve center for a wide hinterland and for connecting St. Louis with other large metropolitan centers. Historically, the central location of St. Louis made it a choice place to locate for corporate administration. However, the recent past has seen the loss of some corporate headquarters (Ex. A, p. 28).

The central business district is roughly bounded by Interstate 64/Highway 40/61 to the south, Tucker Boulevard, (12^th Street) to the west, Cole Street to the north, and the Mississippi River to the east. The greater downtown neighborhood extends all the way to Jefferson Avenue to the west (Ex. A, p. 40).

The subject neighborhood is the center of the region and is considered to have an appealing location with good and easy access to major transportation arteries, employment centers, and commercial support services. This location is within reasonable proximity to most all major employment centers in the region and the subject neighborhood itself is a major employment center within the region. The subject neighborhood is located within 25 minutes to the southeast of Lambert International Airport, and approximately 20 minutes east of Clayton, the county seat of St. Louis County (Ex. A, p. 40).

The subject neighborhood is generally stable with paced growth/re-development throughout. The subject neighborhood is considered to be one of the most desirable city locations (Ex. A, p. 55).

4. There is no market for class C office space in downtown St. Louis and it is not economically feasible to renovate this building for use as office space (Ex. A, p. 71; Tr. 8). However, a residential use is financially feasible and is allowable under the current zoning of the subject (Ex. A, p. 71). The subject neighborhood is evolving, with many office buildings being converted for residential use (Tr. 11). Most of the recent purchases of industrial and office loft buildings have been for redevelopment into residential living space (Ex. A, p. 79). Approximately 9,000 people live in the central business district and an estimated 1,000 new residential units are set to come on line (Ex. A, p. 42). The highest and best use for the subject building would be conversion to apartments or condominiums (Tr. 9, 11, 18, 24, 33 and 46; Ex. A, p. 73).

5. The cost approach is not a reliable indicator of value for the subject property (Ex. 1, p. 12; Ex. A, p. 110; Tr. 18).

6. Complainant’s income approaches are not reliable indicators of value for the subject property inasmuch as they consider the income producing ability of the property for use as an office building; a use neither appraiser considers to be the highest and best use of the property (Tr. 18, 57-58, 63).

7. The sales comparison approach is the most reliable indicator of value for the subject property. There are a sufficient number of recent sales of older office buildings, for the purpose of conversion into residential use, to provide reliable market data.

8. The value originally determined by the assessor and approved by the Board of Equalization was $2,218,600, or $13.77 per square foot.

9. Complainant presented six sales which indicated a range of value from $5.04 per square foot to $14.08 per square foot. Mr. Demba concluded that a value of $9.00 per square foot, or $1,450,600, was appropriate for the subject property. However, the majority of Mr. Demba’s comparable sales were older and, therefore, less reliable. Mr. Demba did not make age adjustments for his older sales and did not present market data from which we can conclude that the market value of comparable buildings had not changed between 1999 and January 1, 2003. Therefore, we find that Mr. Demba’s Comparable Sales #1 through #5 are not reliable indicators of value for the subject property. Only Sale #6 sold within 18 months of the tax day and it indicates a value of $14.08 per square foot for the subject property according to Mr. Demba’s records and $15.91 per square foot according to county records (Tr. 44).

10. Respondent presented five sales. Those sales indicated a range of value for the subject property of $12.90 per square to $23.17 per square foot. All of Respondent’s sales occurred within a year of the tax day. However, like Complainant’s appraiser, Mr. Hilgeman failed to make any time adjustments. But, because Respondent used sales which occurred closer in time to the sales date, Respondent’s sales are more reliable indicators of value for the subject property. Mr. Hilgeman concluded that $15.00 per square foot, or $2,400,000 was an appropriate value for the subject property.

11. Complainant has failed to present reliable market data in support of its opinion of $9.00 per square foot for the subject property. Only one sale within the last eighteen months has sold for less than the Assessor’s value of $13.77 per square foot. All five other recent sales indicate a higher value than originally determined by the Assessor and approved by the Board of Equalization.

12. Complainant’s principal, Alan Pervil, asserts that the subject property is not a good candidate for conversion because of lack of parking but this assertion is disputed by Complainant’s appraiser (Tr. 55-56, 96-97). The evidence suggests that, while on site parking might be an issue for condominium development, it does not have a significant impact on the marketability of rental units (Tr. 54, 55, 56) and there is a significant number of available parking spaces in the area where Athe supply of parking far exceeds the demand for parking.@ (Ex. A, p. 78-79; Tr. 55, 56).

13. We do not address the issue of the impact of the historic facade easement or the tax abatement because no market data was presented which would tend to indicate that either impacts the market value of the property.

14. The true value in money for the subject property on January 1, 2003, was 2,218,600, as originally determined by the Assessor and approved by the Board of Equalization.

15. No evidence was presented which tended to demonstrate that any new construction and property improvements occurred to the property between January 1, 2003, and January 1, 2004. Thus, the market value determined for tax year 2003 will remain the same for tax year 2004.

Burden of Proof

There is a presumption in favor of the Board of Equalization. Therefore, in order to prevail Complainant must demonstrate, by substantial and persuasive evidence, that the market value of its property was $1,020,000 on January 1, 2003.

Substantial evidence is that evidence which, if true, has probative force upon the issues, i.e., evidence favoring facts which are such that reasonable men may differ as to whether it established them, and from which the Commission can reasonably decide an appeal on the factual issues. Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

True Value in Money

Section 137.115, RSMo requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and purchased by one who is desiring to purchase but who is not compelled to do so. St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993). It is the fair market value of the subject property on the valuation date. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978).

In order to prevail, Complainant must prove, by substantial and persuasive evidence, that the market value of its property on January 1, 2003, was $1,020,000. All of the most reliable evidence points to the fact that the property was worth at least as much, if not more, than originally determined by the Assessor. Complainant has failed to meet its burden of proof.

ORDER

The assessed value ($354,900) as originally determined by the Assessor and approved by the Board of Equalization, is AFFIRMED.

A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision. The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial.

If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of St. Louis City as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED November 16, 2004.

STATE TAX COMMISSION OF MISSOURI

Luann Johnson

Hearing Officer