[Cite as MDC Coast I., L.L.C. v. Union Cty. Bd. of Revision, 2020-Ohio-683.]

                              IN THE COURT OF APPEALS OF OHIO

                                   TENTH APPELLATE DISTRICT


MDC Coast I, LLC,                                      :

                 Appellant-Appellant,                  :                  No. 18AP-721
                                                                        (BTA No. 2016-2088)
v.                                                     :
                                                                   (REGULAR CALENDAR)
Union County Board of Revision et al.,                 :

                 Appellees-Appellees.                  :



                                            D E C I S I O N

                                   Rendered on February 27, 2020


                 On brief: Frost Brown Todd, LLC, Yazan S. Ashrawi, and
                 Frederick W. Kindel, for appellant. Argued: Yazan S.
                 Ashrawi.

                 On brief: Rich & Gillis Law Group, Mark H. Gillis, and
                 Richelle L. Thoburn Ford, for appellee Marysville Exempted
                 Village Schools. Argued: Mark H. Gillis.


                           APPEAL from the Ohio Board of Tax Appeals

KLATT, J.
        {¶ 1} Appellant property owner, MDC Coast I, LLC, appeals a decision of the Ohio
Board of Tax Appeals ("BTA") that affirmed the value the Union County Board of Revision
("BOR") assigned to the subject real property for tax year 2015. For the following reasons,
we reverse that decision and remand this matter to the BTA.
        {¶ 2} This appeal concerns the 2015-tax-year valuation of a 355,000 square foot
office/warehouse facility located on 26.641 acres in Marysville, Ohio. The building was
constructed in 2014 pursuant to a build-to-suit lease agreement between Sumitomo
Electric Wiring Systems, Inc., the tenant-client, and a landlord-developer. The cost of
No. 18AP-721                                                                                2

constructing the building, including the cost of purchasing the land, amounted to
approximately $13.5 million.
       {¶ 3} In October 2014, construction was completed, and the initial lease term
began. Under the lease, Sumitomo agreed to an initial ten-year term, followed by two
optional five-year terms. Sumitomo also agreed to a net lease term, meaning that it would
pay for the property's real estate taxes, property insurance, utilities, and maintenance.
       {¶ 4} In December 2015, the developer sold the property to MDC for $19 million.
Appellee, the Marysville Exempted Village Schools Board of Education ("Board"), then filed
a complaint with the BOR seeking to increase the subject property's true value for tax year
2015 to $19 million. At the BOR hearing, the Board argued that the 2015 sale price
constituted the best evidence of the true value of the property on the tax-lien date, i.e.,
January 1, 2015. MDC offered evidence to rebut the Board's argument. MDC presented the
testimony of William Lefebvre, general manager of Sumitomo's contracts and compliance
department, and Robert Weiler, an Ohio certified appraiser who appraised the subject
property. MDC also introduced into evidence the lease between Sumitomo and MDC, as
well as an appraisal Weiler completed. Weiler testified that the market value of the
unencumbered, fee-simple estate as of January 1, 2015 was $13.5 million.
       {¶ 5} In a decision issued September 29, 2016, the BOR assessed the true value of
the subject property for tax year 2015 at $19 million. MDC appealed that decision to the
BTA. At a hearing, MDC again presented the testimony of Lefebvre and Weiler, as well as
an appraisal of the property that Weiler completed. The BTA entered a decision on
August 24, 2018 that determined the true value of the subject property for tax year 2015
was $19 million.
       {¶ 6} MDC now appeals the BTA's August 24, 2018 decision to this court, and it
assigns the following errors:
              [1.] The Ohio Board of Tax Appeals committed an error of law
              by relying on Columbus City Schools Bd. of Edn. v. Franklin
              Cty. Bd. of Revision, 146 Ohio St.3d 470, 2016-Ohio-757 –
              which has been superseded by statute and case law – in
              requiring MDC Coast I, LLC to rebut some aspect of the sale
              before it properly considered appraisal evidence.

              [2.] The Ohio Board of Tax Appeals committed an error of law
              by failing to give full consideration of the non-sale appraisal
No. 18AP-721                                                                                 3

              evidence as required by Terraza 8, L.L.C. v. Franklin Cty. Bd.
              of Revision, 150 Ohio St.3d 527, 2017-Ohio-4415, 83 N.E.3d
              916 (2017) and its progeny.

              [3.] The Ohio Board of Tax Appeals erred in determining that
              the purchase price of $19 million represented the market value
              of the subject property for tax purposes because it did not
              consider that the property was subject to a long-term net lease
              by a creditworthy tenant.

       {¶ 7} An appellate court will affirm a BTA decision if it is reasonable and lawful,
and reverse, vacate, or modify the decision if it is unreasonable or unlawful. R.C. 5717.04.
In reviewing a BTA decision, an appellate court considers legal issues de novo. Notestine
Manor, Inc. v. Logan Cty. Bd. of Revision, 152 Ohio St.3d 439, 2018-Ohio-2, ¶ 13. An
appellate court will defer to the BTA's findings concerning the weight of the evidence as
long as the record supports those findings. Terraza 8, LLC v. Franklin Cty. Bd. of Revision,
150 Ohio St.3d 527, 2017-Ohio-527, ¶ 7.
       {¶ 8} By its first two assignments of error, MDC argues that the trial court applied
an outdated legal analysis to determine the true value of the subject property. R.C. 5713.03
governs how the true value of real property is determined. In 2012, the General Assembly
significantly changed the language of R.C. 5713.03. First, the General Assembly required a
tax assessor to determine not just "the true value" of property, but "the true value of the fee
simple estate, as if unencumbered." 2012 Am.Sub.H.B. No. 487. Second, the General
Assembly replaced "shall" with "may," so the statute now reads, a tax assessor "may
consider the sale price * * * to be the true value for taxation purposes." (Emphasis added.)
Id.
       {¶ 9} These two statutory amendments overrode Berea City School Dist. Bd. of
Edn. v. Cuyahoga Bd. of Revision, 106 Ohio St.3d 269, 2005-Ohio-4979, under which a
voluntary, recent arm's-length sale absolutely and irrefutably determined true value for tax
purposes. Terraza 8 at ¶ 26, 30. "At the very heart of Berea [was] the rejection of appraisal
evidence of the value of the property whenever a recent, arm's-length sale [was] offered as
evidence of value." Cummins Property Servs., LLC v. Franklin Cty. Bd. of Revision, 117
Ohio St.3d 516, 2008-Ohio-1473, ¶ 13.          Amended R.C. 5713.03, however, restored
evidentiary value to non-sale-price evidence as proof of true value, even if a property has
been the subject of a voluntary, recent arm's-length sale. Terraza 8 at ¶ 27. Now, under
No. 18AP-721                                                                                  4

the statutory amendments to R.C. 5713.03, the sale price from a voluntary, recent arm's-
length sale of encumbered property is presumptive—not conclusive—evidence of the value
of the unencumbered fee-simple estate. Notestine Manor at ¶ 26; Spirit Master Funding
IX, LLC v. Cuyahoga Cty. Bd. of Revision, 155 Ohio St.3d 254, 2018-Ohio-4302, ¶ 6. The
rebuttable nature of the presumption opens the door to consideration of appraisal evidence
(and other non-sale-price evidence) of the property's unencumbered value. Notestine
Manor at ¶ 26.
       {¶ 10} Under amended R.C. 5713.03, appraisal evidence is equally admissible and
competent as sale price evidence in proving a property's value. GC Net Lease @ (3)
(Westerville) Investors, LLC v. Franklin Cty. Bd. of Revision, 154 Ohio St.3d 121, 2018-
Ohio-3856, ¶ 11; Westerville City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 154
Ohio St.3d 308, 2018-Ohio-2855, ¶ 14, 16. The proponent of appraisal evidence need not
make any threshold showing before a taxing authority must fully consider that evidence.
Westerville City Schools at ¶ 14. Once a party introduces appraisal evidence, the taxing
authority has to consider that appraisal in its totality to determine whether it or the sale
price more accurately values the property. Id.; Spirit Master at ¶ 6, 9; Menlo Realty Income
Properties 28, LLC v. Franklin Cty. Bd. of Revision, 10th Dist. No. 19AP-316, 2019-Ohio-
4872, ¶ 5-6.
       {¶ 11} Rebuttal of the sale-price-as-best-evidence presumption occurs if the
opponent of the sale price proves that an existing lease affected the sale price. In other
words, the opponent of the sale price may rebut the presumption by demonstrating that the
buyer of the property paid more for the property because the property was under lease. See
Menlo Realty at ¶ 16 ("The point of Ohio's statutory scheme is to endeavor to separate out,
where possible, value attributable to having the lease itself (value not subject to the property
tax) and value attributable to the 'fee simple estate, as if unencumbered' (value that is
subject to the property tax.)".). Factors impacting the amount a buyer will pay to own a
leased property include: (1) the amount of rent charged under the lease in comparison to
market rent, (2) the creditworthiness of the tenant, and (3) whether the lease is a net lease,
under which the tenant defrays expenses related to the property. GC Net Lease at ¶ 10;
Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 10th Dist. No. 19AP-
204, 2020-Ohio-200, ¶ 13 (hereinafter "JDM II SF Natl. LLC"). "The convergence of these
No. 18AP-721                                                                                5

circumstances could affect the price a buyer would pay for the property, possibly elevating
it above what the same buyer would pay for the unencumbered fee-simple estate." GC Net
Lease at ¶ 10.
       {¶ 12} By its first assignment of error, MDC argues that the BTA erred by requiring
it to rebut some aspect of the sale before the BTA would fully consider MDC's appraisal
evidence. We agree.
       {¶ 13} In the challenged portion of the decision, the BTA stated:
                 The [Supreme Court of Ohio] has held that while an appraiser's
                 sworn statements and report may be relied upon to rebut the
                 presumptive validity of a sale, "the mere fact that an expert has
                 opined a different value should not be deemed sufficient to
                 undermine the validity of the sale price as the property value."
                 Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of
                 Revision, 146 Ohio St.3d 470, 2016-Ohio-757, ¶20. Thus,
                 before we can consider Weiler's ultimate conclusion of value,
                 we must first find that MDC has rebutted some aspect of the
                 sale.

(Aug. 24, 2018 BTA Decision at 3.) At the end of its decision, the BTA found that MDC had
not rebutted some aspect of the sale, so the BTA did not consider the appraiser's ultimate
conclusion of value or, for that matter, the entirety of the appraisal.
       {¶ 14} As we recently pointed out in JDM II SF Natl. LLC, Columbus City Schools
applied the version of R.C. 5713.03 that pre-dated the 2012 statutory amendments. JDM
II SF Natl. LLC at ¶ 22. In Columbus City Schools, the Supreme Court of Ohio explained
that an expert's opinion of value could not undermine the validity of a sale price because
"[t]hat would, of course, violate the Berea precept." Columbus City Schools at ¶ 20. The
precept the court referred to was Berea's "rejection of appraisal evidence of the value of the
property whenever a recent, arm's-length sale price has been offered as evidence of value."
Cummins at ¶ 13. Terraza 8, however, overrode Berea's rejection of appraisal evidence.
Now, under amended R.C. 5713.03, "the General Assembly has directed taxing authorities
to consider not just the sale price but also any other evidence the parties present that is
relevant to the value of the unencumbered fee-simple estate." Bronx Park S. III Lancaster,
LLC v. Fairfield Cty. Bd. of Revision, 153 Ohio St.3d 550, 2018-Ohio-1589, ¶ 12.
       {¶ 15} Because the BTA relied on outdated precedent, it erred in concluding that it
had to find MDC rebutted some aspect of the sale before it could fully consider the
No. 18AP-721                                                                              6

appraiser's opinion regarding the property's value. When the General Assembly amended
R.C. 5713.03, it opened the door to the consideration of evidence other than sale price by
allowing that a tax assessor "may"—instead of "shall"—consider the sale price to be the true
value of the property. Terraza 8 at ¶ 27. By changing "shall" to "may," R.C. 5713.03
"establish[es] that appraisal evidence is admissible and competent evidence of value
alongside a sale price and that the fact-finder has a duty to consider whether the appraisal
constitutes a more accurate valuation of the property than the sale price." Westerville City
Schools at ¶ 14. Consequently, the proponent of appraisal evidence need not impugn the
sale in some way before a tax tribunal has an obligation to fully consider the appraisal
evidence. Id. Only after reviewing the entire appraisal alongside evidence of a sale price
may a fact finder determine whether a party has rebutted the sale-price-as-best-evidence
presumption.
       {¶ 16} Here, the BTA never considered the appraiser's ultimate conclusion of value
because it found MDC had not rebutted an aspect of the sale. This was error. Accordingly,
we sustain MDC's first assignment of error.
       {¶ 17} By its second assignment of error, MDC argues that the BTA erred in failing
to consider all its non-sale-price evidence. We agree.
       {¶ 18} Both in his report and testimony, Weiler, MDC's appraiser, opined that the
sale price did not constitute the true value of the subject property. Before the BTA, MDC's
attorney and Weiler engaged in the following colloquy:
               Q: Do you believe that the $19 million sale of the property
               represents its market value or its true value for property tax
               purposes?

               A: No, it doesn't.

               Q: Any why not?

               A: It represents the value of the creditworthiness and strength
               of the tenant upon which the purchase price was based. It does
               not in my judgment represent what the value of the property is
               worth if it were sold unencumbered on the open market.

(Tr. at 18.) In his report, Weiler stated:

               The above $19,000,000 figure is not reflective of the market
               value as of 1/1/2015. * * * This leased fee is the investment value
No. 18AP-721                                                                               7

              of a totally net income stream, analogous to a bonded lease
              since the tenant [has] highly rated credit [thus] securing the
              lease payments. Therefore, as discussed within this report, the
              market value is supported by an income approach with
              comparable market rents substantially below that which would
              be calculated from the net lease amount. In short, the current
              lease is not supported by market rents. The appropriate
              methodology would be to use market rents which are shown in
              the income approach as well as comparable sales of properties
              similar to the subject. Again, the cost approach is a very
              reliable method and all of these approaches indicate a value
              ranging from $13,000,000 to $14,000,000.

(Feb. 16, 2017 Appraisal at 9.)
       {¶ 19} The BTA disregarded Weiler's opinion, primarily because the BTA disagreed
with Weiler's conclusion that Sumitomo was paying above-market rent. Problematically,
however, the BTA excluded relevant evidence from its analysis of whether the appraisal or
sale price more accurately valued the subject property. In determining whether an existing
lease affected the sale price, a tax tribunal must consider: (1) the amount of rent charged
under the lease in comparison to market rent, (2) the creditworthiness of the tenant, and
(3) whether the lease is a net lease. GC Net Lease at ¶ 10; JDM II SF Natl. LLC at ¶ 13.
Here, the appraisal referred to Sumitomo as "an AAA-credit tenant" and as having "highly
rated credit." (Appraisal at 9.) The BTA did not consider Sumitomo's creditworthiness.
The BTA also overlooked Section 3.02 of the lease, which provides "this Lease is a net Lease,
it being the intention of the parties hereto that Tenant shall pay as additional rent, all
expenses incurred by Landlord in owning and operating the Leased Premises as provided
herein." (Dec. 20, 2013 Lease at Section 3.02.)
       {¶ 20} Additionally, the BTA ignored any evidence that cut against its rejection of
Weiler's supplementary opinion that the cost of development manifested the property's
true value. Weiler explained that the cost approach accurately measured the property's
market value given that construction was completed only two months prior to the tax-lien
date. In rejecting Weiler's opinion, the BTA pointed out that the actual budgeted cost of
developing the facility included "fees," but no entrepreneurial profit for the developer. The
BTA concluded that the difference between the $19 million sale price and the $13.5 million
development costs—approximately $5.5 million—constituted the entrepreneurial profit
missing from the budgeted development costs. To reach this conclusion, the BTA ignored
No. 18AP-721                                                                                8

Weiler's calculation of the property value using the cost approach with data from the
Marshall Valuation Service, which resulted in a valuation of $14,035,000. That calculation
included a line item for developer's profit of approximately $1 million dollars, or
approximately 8 percent of the estimated cost of construction. The BTA also failed to factor
into its decision Weiler's testimony before the BOR that the developer's entrepreneurial
profit certainly would not be in the range of $6 million, i.e., approximately 40 percent of
the $13.5 million project.
       {¶ 21} In addition to not considering all evidence from the appraiser, the BTA also
ignored evidence from Lefebvre, the general manager of Sumitomo's contracts and
compliance department. Lefebvre confirmed that the total construction costs, including
the cost of purchasing the land, were approximately $13.5 million. Lefebvre also explained
that the developer constructed the facility under a build-to-suit lease agreement. In a build-
to-suit situation:
              [T]he owner builds a structure to the tenant's specifications
              and then enjoys the benefit of rent under a long-term lease that
              provides the owner with recovery of the costs of construction
              and a profit. Alternatively, the owner can turn around and sell
              the property, and the price the property commands will be
              enhanced by the anticipated revenue stream from the lease.

Meijer Stores Ltd. Partnership v. Franklin Cty. Bd. of Revision, 122 Ohio St.3d 447, 2009-
Ohio-3479, ¶ 22. Moreover, Lefebvre testified that the desire to get the facility built
expeditiously resulted in Sumitomo agreeing to above-market lease rates.
       {¶ 22} In sum, we agree that the BTA erred in failing to address all relevant non-
sale-price evidence. Accordingly, we sustain MDC's second assignment of error.
       {¶ 23} By its third assignment of error, MDC argues that MDC erred in determining
the true value of the subject property for tax year 2015 was $19 million. Given that we have
sustained MDC's first and second assignments of error, we must vacate the BTA's decision
and remand for the BTA to properly address and weigh the evidence. Accordingly, we
cannot now review a challenge to the weight of the evidence, and thus we find the third
assignment of error moot.
       {¶ 24} For the foregoing reasons, we sustain the first and second assignments of
error, which moots the third assignment of error. We vacate the decision of the Board of
No. 18AP-721                                                                          9

Tax Appeals, and we remand this matter to it for further proceedings consistent with law
and this decision.
                                                    Decision vacated; cause remanded.

                      BEATTY BLUNT and NELSON, JJ., concur.
