[Cite as Kettering City Schools Bd. of Edn. v. Montgomery Cty. Bd. of Revision, 2018-Ohio-2325.]




                             IN THE COURT OF APPEALS OF OHIO
                                SECOND APPELLATE DISTRICT
                                    MONTGOMERY COUNTY

 KETTERING CITY SCHOOLS BOARD                          :
 OF EDUCATION, Appellee                                :
                                                       :    Appellate Case No. 27683
 v.                                                    :
                                                       :    BTA Case No. 2015-2331
 MONTGOMERY COUNTY BOARD                               :
 OF REVISION, Appellee; GEORGE E.                      :    (Administrative Appeal from Board of
 RYNE, Appellant                                       :    Tax Appeals)
                                                       :
                                                       :


                                               ...........

                                               OPINION

                             Rendered on the 15th day of June, 2018.

                                               ...........

KAROL FOX, Atty. Reg. No. 0041916 and MARK GILLIS, Atty. Reg. No. 0066908, 6400
Riverside Drive, Suite D, Dublin, Ohio 43026
       Attorneys for Plaintiff-Appellee Kettering City Schools Board of Education

CHARLES L. BLUESTONE and PATRICK J. HEERY, 141 E. Town Street, Suite 100,
Columbus, Ohio 43215
     Attorneys for Defendant-Appellant George E. Ryne

                                             .............
                                                                                     -2-


FROELICH, J.

      {¶ 1} George E. Ryne appeals from the Decision and Order of the Ohio Board of

Tax Appeals (BTA), which valued a McDonald’s restaurant owned by Ryne at $2,055,000

for tax year 2014. For the following reasons, the Decision and Order of the BTA will be

affirmed.

      Background Information

      {¶ 2} The property in question, parcel number N64 00803 0245, is located at 2901

Wilmington Pike in Kettering. The Wilmington Pike McDonald’s was constructed in 2012,

subject to a ground lease. As of January 1, 2014, the Montgomery County Auditor

valued the property at $1,402,840. The McDonald’s owner, Ryne, filed a complaint with

the Board of Revision (BOR) requesting that the value of the property be reassessed at

$1,076,200. The Kettering City Schools Board of Education (Kettering BOE) filed a

counter-complaint objecting to the requested reduction in value.

      {¶ 3} The BOR conducted a hearing at which both Ryne and the Kettering BOE

participated, but only Ryne presented expert evidence. Specifically, Ryne submitted a

report and expert testimony from Stephen J. Weis, who opined that the property should

be valued at $1,115,000.     Ryne amended his request for the reassessment of the

property to reflect this amount. The BOR voted to reduce the value of the subject

property to $1,118,870, without explaining why its valuation differed from Weis’s. For

reasons that are unclear, no record of the BOR hearing was made.

      {¶ 4} The Kettering BOE appealed to the BTA. (BTA Case No. 2015-2331).

Because there was no record of the BOR proceedings and because the parties sought to
                                                                                            -3-


supplement the record, the BTA conducted a hearing on October 6, 2016. 1                At the

hearing, Ryne again presented Weis’s opinion and his appraisal report in support of a

$1,115,000 valuation of the property. The Kettering BOE presented expert testimony

and an appraisal report from Thomas D. Sprout, who opined that the value of the property

was $2,055,000 as of January 1, 2014.

       {¶ 5} The BTA adopted the $2,055,000 valuation proposed by the Kettering BOE.

       {¶ 6} Ryne appeals, raising six assignments of error.          2    Each of these

assignments challenges the BTA’s assessment of the appraisal reports, the specific

calculations contained in them, and/or the relative qualifications of the appraisers.

       Standard of Review

       {¶ 7}   When cases are appealed to the BTA from boards of revision, the appellant

has the burden of proving its right to a decrease or increase in value from the value that

the board of revision has determined. (Citations omitted.) Shinkle v. Ashtabula Cty. Bd.

of Revision, 135 Ohio St.3d 227, 2013-Ohio-397, 985 N.E.2d 1243, ¶ 24. This means

that “the appellant must come forward and demonstrate that the value it advocates is a

correct value. Once competent and probative evidence of value is presented by the

appellant, the appellee who opposes that valuation has the opportunity to challenge it

through cross-examination or by evidence of another value.” (Citation omitted.) EOP-



1
 The BTA’s hearing involved two matters, both involving McDonald’s restaurants, the
same attorneys, the same appraisers, and “substantially the same appraisal reports”
(according to the BTA decision and order), but the cases were not formally consolidated
because the properties had different owners. The other case was BTA Case No. 2015-
2328, involving the valuation of a McDonald’s on Stroop Road.
2
 Although Ryne numbers his assignments as if there are seven, neither his table of
contents nor the text of his brief contains a third assignment.
                                                                                           -4-

BP Tower, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 1, 2005-Ohio-3096,

829 N.E.2d 686, ¶ 6.

       {¶ 8} The BTA itself, as a taxing authority, has an independent duty to weigh

evidence and make findings, and the BTA reviews the administrative decisions of boards

of revision de novo as to both fact and law. MacDonald v. Shaker Hts. Bd. of Income

Tax Rev., 144 Ohio St.3d 105, 2015-Ohio-3290, 41 N.E.3d 376, ¶ 21; Coventry Towers,

Inc. v. Strongsville, 18 Ohio St.3d 120, 122, 480 N.E.2d 412 (1985).             Under R.C.

5717.01, the BTA has “three options when hearing an appeal: the board may confine itself

to the record and the evidence certified to it by the board of revision, hear additional

evidence from the parties, or may make such other investigation of the property as is

deemed proper.” Coventry Towers at 122.

       {¶ 9} Under what is called the “Bedford rule,” “ ‘when the board of revision has

reduced the value of the property based on the owner’s evidence, that value has been

held to eclipse the auditor’s original valuation,’ and the board of education as the appellant

before the BTA may not rely on the latter as a default valuation.” Dublin City Schools

Bd. of Edn. v. Franklin Cty. Bd. of Revision, 147 Ohio St.3d 38, 2016-Ohio-3025, 59

N.E.3d 1270, ¶ 6, referencing Bedford Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 115

Ohio St.3d 449, 2007-Ohio-5237, 875 N.E.2d 913. (Other citation omitted.) Thus, when

the board of revision adopts a new value based on an owner’s evidence, the burden of

going forward shifts to the board of education on appeal to the BTA. Id. The board of

education then has the burden to establish a new value, whether that be the valuation of

the auditor or another value. Id. at ¶ 7.

       {¶ 10} With respect to our review of BTA decisions, we note that Ryne’s notice of
                                                                                          -5-


appeal was filed before the effective date of recent amendments to R.C. 5717.04, which

became effective on September 29, 2017. See Am. Sub. H.B. 49, 2017 Ohio Laws File

14. Prior to the amendments, parties had the option of appealing decisions of the BTA

to the Supreme Court of Ohio, as well as to the court of appeals for the county in which

the taxed property was situated. However, the statute was amended to eliminate initial

appeals to the Supreme Court of Ohio, and the court of appeals now has exclusive

jurisdiction over such an appeal.3 See Am. Sub. H.B. 49, 2017 Ohio Laws File 14, Part

15.

       {¶ 11} R.C. 5717.04, as amended, states that:

              If upon hearing and consideration of such record and evidence the

       applicable court decides that the decision of the board appealed from is

       reasonable and lawful it shall affirm the same, but if the court decides that

       such decision of the board is unreasonable or unlawful, the court shall

       reverse and vacate the decision or modify it and enter final judgment in

       accordance with such modification.4


3 An exception was made for appeals in which a party files a petition requesting a transfer
of jurisdiction to the Supreme Court of Ohio. The petition must be filed within 30 days
after the notice of appeal has been filed with the appropriate court of appeals, and the
petition must be filed with the Supreme Court of Ohio. If the appeal “involves a
substantial constitutional question or a question of great general or public interest,” the
Supreme Court of Ohio may approve the petition and order the appeal to be taken directly
to the Supreme Court. However, if jurisdiction is not transferred, the appeal proceeds in
the court of appeals. See R.C. 5717.04, as amended in 2017. The remainder of the
amendments to R.C. 5717.04 are non-substantive, except for a line that was added which
stated that “[a]s used in this section, ‘taxpayer’ includes any person required to return any
property for taxation.”
4The amendment to this paragraph is non-substantive, as the only change under the
2017 revision was the insertion of the word “applicable.” Am. Sub. H.B. 49, 2017 Ohio
Laws File 14, Part 15. Thus, the standard of review is unchanged.
                                                                                        -6-


      {¶ 12} The general standards for reviewing BTA decisions are well settled. If the

BTA’s decision is both “reasonable and lawful,” the reviewing court must affirm. NWD

300 Spring, L.L.C. v. Franklin Cty. Bd. of Revision, 151 Ohio St.3d 193, 2017-Ohio-7579,

87 N.E.3d 199, ¶ 13, citing R.C. 5717.04. Nonetheless, a reviewing court does not

hesitate to reverse BTA decisions that are based on incorrect legal conclusions. See,

e.g., Satullo v. Wilkins, 111 Ohio St.3d 399, 2006-Ohio-5856, 856 N.E.2d 954, ¶ 14, citing

Gahanna-Jefferson Local School Dist. Bd. of Edn. v. Zaino, 93 Ohio St.3d 231, 232, 754

N.E.2d 789 (2001). Consequently, questions of law are reviewed de novo. Terraza 8,

L.L.C. v. Franklin Cty. Bd. of Revision, 150 Ohio St.3d 527, 2017-Ohio-4415, 83 N.E.3d

916, ¶ 7; Dublin City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 139 Ohio St.3d

193, 2013-Ohio-4543, 11 N.E.3d 206, ¶ 13.

      {¶ 13} Review of BTA decisions “is guided by the premise that ‘ “[t]he fair market

value of property for tax purposes is a question of fact, the determination of which is

primarily within the province of the taxing authorities.” ’ ” NWD 300 Spring at ¶ 13,

quoting EOP-BP Tower, 106 Ohio St.3d 1, 2005-Ohio-3096, 829 N.E.2d 686, at ¶ 17.

(Other citation omitted.) The BTA’s factual decisions are upheld “if the record contains

reliable and probative evidence supporting the BTA’s determination.”          Dublin City

Schools Bd. of Edn., 139 Ohio St.3d 193, 2013-Ohio-4543, 11 N.E.3d 206, at ¶ 13, citing

Satullo at ¶ 14. Deference is also given to BTA findings about the weight of the evidence,

as long as the findings are supported by the record. Terraza 8 at ¶ 7, citing Olmsted Falls

Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 122 Ohio St.3d 134, 2009-Ohio-2461, 909

N.E.2d 597, ¶ 27.

      {¶ 14} Article XII, Section 2 of the Ohio Constitution requires property to be “taxed
                                                                                        -7-


by uniform rule according to value.” “This provision generally requires a real-property

valuation to ascertain ‘the exchange value’ of the property.” (Citation omitted; emphasis

sic.) Johnston Coca-Cola Bottling Co. v. Hamilton Cty. Bd. of Revision, 149 Ohio St.3d

155, 2017-Ohio-870, 73 N.E.3d 503, ¶ 13. As a general rule, “the value or true value in

money of any property is the amount for which that property would sell on the open market

by a willing seller to a willing buyer. In essence, the value of property is the amount of

money for which it may be exchanged, i.e., the sales price.” State ex rel. Park Inv. Co.

v. Bd. of Tax Appeals, 175 Ohio St. 410, 412, 195 N.E.2d 908 (1964). Actual sales are

the best way to determine value, when they are available. (Citations omitted.) Terraza 8,

150 Ohio St.3d 527, 2017-Ohio-4415, 83 N.E.3d 916, at ¶ 9

       {¶ 15} However, where no recent sales of the property have occurred, the BTA

has wide latitude in the matters it can consider and broad discretion in the weight it can

attach to expert testimony. (Citations omitted.) Wynwood Apts, Inc. v. Bd. of Revision

of Cuyahoga Cty., 59 Ohio St.2d 34, 35, 391 N.E.2d 346 (1979). When the BTA reviews

appraisals, it also “ ‘is vested with wide discretion in determining the weight to be given

to the evidence and the credibility of the witnesses that come before it.’ ” NWD 300

Spring, 151 Ohio St.3d 193, 2017-Ohio-7579, 87 N.E.3d 199, at ¶ 13, quoting EOP-BP

Tower, 106 Ohio St.3d 1, 2005-Ohio-3096, 829 N.E.2d 686, at ¶ 9. (Other citation

omitted). Reviewing courts also apply an abuse of discretion standard to BTA decisions

on witness credibility and the weight their testimony is given. Id. at ¶ 14. An abuse of

discretion refers to “an unreasonable, arbitrary, or unconscionable attitude.” Renacci v.

Testa, 148 Ohio St.3d 470, 2016-Ohio-3394, 71 N.E.3d 962, ¶ 32, citing J.M. Smucker,

L.L.C. v. Levin, 113 Ohio St.3d 337, 2007-Ohio-2073, 865 N.E.2d 866, ¶ 16.
                                                                                       -8-


       The Evidence Presented at the BTA Hearing

       {¶ 16} Ryne and the Kettering BOE presented expert appraisers at the BTA

hearing.   Ryne’s expert was Stephen J. Weis, and the Kettering BOE’s expert was

Thomas D. Sprout. Both experts used the sales comparison and income capitalization

methods in valuing the property, and both concluded that the property’s highest and best

use was as a restaurant.       However, Weis defined the highest and best use as a

restaurant, generally, whereas Sprout concluded that the highest and best use was

specifically as a fast-food restaurant.

       {¶ 17} Using the sales comparison approach, Weis compared the Wilmington

Pike McDonald’s to six other restaurant properties in Montgomery County which he found

to be comparable and which had been sold between 2013 and 2015. Three of these

were sit-down restaurants (Applebee’s, Bob Evans, and Longhorn Steakhouse) and one

was a Subway with no drive-thru; the other two were fast-food restaurants (KFC and

Burger King) that were no longer in operation. After adjusting for superior or inferior

characteristics of the various properties, such as location, size, ease of access, and age

of the building, Weis arrived at a price-per-square-foot for each comparable property. He

concluded that the Wilmington Pike McDonald’s should be valued at $215 per square foot

as of January 1, 2014. Using this number, the sales comparison value of the Wilmington

Pike McDonald’s was $1,100,000 (5,118 sq. ft. at $215 per sq. ft. = $1,100,370, rounded

to $1,100,000).5,6


5
  The valuations discussed by the appraisers in this case were rounded to the nearest
thousandth or ten-thousandth.
6
 We note that the parties’ calculations use different square footages for the Wilmington
Pike McDonald’s. Weis’s calculations are based on 5,118 sq. ft., an area based on his
                                                                                           -9-


       {¶ 18} Weis also valued the property using the income capitalization approach.

He described the steps of this process, generally, as follows: 1) determining the effective

gross income of the property by analyzing the potential gross income of the property and

its occupancy level; 2) deducting actual or estimated operating expenses from the

effective gross income to determine the net operating income; and 3) capitalizing the net

operating income by an appropriate rate reflecting the “risk and return characteristics for

[the] type of investment,” to arrive at an estimate of the property’s value.

       {¶ 19} Weis     considered    numerous     properties   and    their    market-derived

capitalization rates in determining a capitalization rate for the Wilmington Pike

McDonald’s. These properties included other fast-food restaurants (but no McDonald’s),

as well as other types of retail, such as drug, hardware, cellular phone, and pet stores, a

dollar store, and a medical office; Weis also considered some secondary sources of

capitalization rates. For the Wilmington Pike McDonald’s, Weis determined that the

direct capitalization rate was 8% and that the rate using a tax additur analysis 7 was

8.17%. Using a net operating income of $91,303, capitalized at a rate of 8.17%, Weis




own on-site measurements and a survey provided to him by the restaurant. Sprout’s
calculations are based on an area of 5,318 sq. ft., “per County Auditor.”
7
  A “tax additur” is a component of the capitalization rate that accounts for the negative
effect that property taxes have on the value of the property. When the amount of real
estate taxes is unknown, such as when the taxes are in dispute, the appraiser develops
an adjustment – a “tax additur” ̶ that reflects the “effective tax rate” for the subject
property; this percentage then is added to and becomes a component of the capitalization
rate. Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 144 Ohio St.3d
324, 2015-Ohio-3633, 43 N.E.3d 387, ¶ 26-28, citing Worthington City Schools Bd. of
Edn. v. Franklin Cty. Bd. of Revision, 140 Ohio St.3d 248, 2014-Ohio-3620, 17 N.E.3d
537, ¶ 8, fn. 2.
                                                                                         -10-


concluded that the value of the McDonald’s under this method was $1,120,000 ($91,303

/ .0817 = $1,117,539.78, rounded to $1,120,000).

       {¶ 20} In reconciling his two valuations, Weis gave greater weight to the sales

comparison method “due to the abundance of free standing retail building sales.”

Accordingly, he concluded that the value of the Wilmington Pike McDonald’s on January

1, 2014, was $1,115,000.

       {¶ 21} Like Weis, Sprout, the Kettering BOE appraiser, examined various

characteristics of the Wilmington Pike McDonald’s, including its physical characteristics,

its location, the availability of other properties in the vicinity, and the stability of the

neighborhood, in conducting his sales comparison analysis.            Sprout used seven

restaurant properties for comparison; two were in Montgomery County and five were in

other Ohio counties. These properties had been sold between 2012 and 2015, and

Sprout testified as to whether each was analyzed for superior or inferior characteristics to

the Wilmington Pike McDonald’s.       Five were operating fast-food restaurants. Based

on comparisons to the sales of these properties, Sprout concluded that the sales

comparison value of the Wilmington Pike McDonald’s on January 1, 2014 was between

$2,020,000 and $2,150,000 (5,381 sq. ft. at $375 or $400 per sq. ft. = $2,017,875 or

$2,152,400, rounded to $2,020,000 and $2,150,000, respectively).

       {¶ 22} Using the income capitalization method and procedures similar to those

described by Weis, Sprout compared eight properties with the Wilmington Pike

McDonald’s. Six were occupied by fast-food restaurants (Wendy’s, Chipotle, Arby’s,

Steak & Shake), and two were vacant but previously occupied by fast-food restaurants

(Taco Bell and Krispy Kreme). Many of the restaurants had drive-thrus, and Sprout
                                                                                         -11-


discussed the importance of this feature to a fast-food restaurant, where “well over 50

percent” of sales, and perhaps as much as 70 percent, comes from the drive-thru.

Sprout distinguished Chipotle restaurants, which do not have drive-thrus but which he

nonetheless characterized as fast-food restaurants and used in his comparisons; he

explained that Chipotle was an “exception to the rule” because of its “food concept,” where

“you walk through the line in order to tell them what you want on your burrito or your bowl

or whatever.” Sprout was critical of Weis’s comparisons because some were not fast-

food restaurants.

      {¶ 23} Based on his estimates of the Wilmington Pike McDonald’s sales and

expenses, Sprout determined that its net operating income was $214,583. (Sprout also

testified that the unwillingness of the Wilmington Pike McDonald’s to provide him with

specific sales and lease information to use in his calculations caused him to assume “that

the sales must have been higher than what my indications were.”) Sprout arrived at a

base capitalization rate of 7%, but using the tax additur he estimated the capitalization

rate to be 10.44%.     Therefore, he estimated the income capitalization value for the

property at $2,055,000 ($214,583 / .1044 = $2,055,392.72, rounded to $2,055,000).

       {¶ 24} In reconciling his two valuations, Sprout noted in his report that both values

were based “on good quality data,” but that the “income approach” provided the “primary

indication of value,” considering the active rental market for such properties. Therefore,

he valued the property at $2,055,000 as of January 1, 2014.

       {¶ 25} When Sprout was questioned about why he used some properties in his

comparisons that were outside of Montgomery County, rather than certain properties

within the county, he provided specific reasons for the exclusions. For example, Sprout
                                                                                         -12-


stated that he did not use a former Burger King because it was a “land sale” and “improper

to use” because the buyer intended to tear down the building and erect a different one

with a non-restaurant use (a tire store). Sprout also testified that he excluded the sales

of several Wendy’s restaurants in Montgomery County from his comparisons because

they were part of a “bulk purchase of multiple Wendy’s throughout the Midwest.” Sprout

criticized Weis for including sit-down restaurants in his comparisons of rental value,

commenting that the design of a fast-food restaurant is largely based on the importance

of the drive-thru and that, in his opinion, such properties are not comparable without

appropriate adjustments related to the type of service.

       {¶ 26} Weis was recalled at the hearing to rebut Sprout’s testimony and

conclusions. Weis asserted that Sprout made contradictory statements about whether

the property was “special-use property” or could accommodate various restaurant uses,

but then compared it to properties in the market more generally. Weis was also critical

of Sprout’s focus on drive-thrus, stating that several of Sprout’s comparables did not have

drive-thrus (the Chipotle restaurants), that it is “not a big deal,” and that drive-thrus

present a “trade-off” because they take up parking spaces. Weis also emphasized that,

in his opinion, use of properties “outside the market,” as opposed to local sales, and other

bases for Sprout’s calculations made Sprout’s analysis less reliable than Weis’s.

       BTA Findings

       {¶ 27} The BTA found that Sprout’s highest and best use analysis was “most

appropriate,” based on his determination that the property was “most suitable for

continued use consistent with the original purpose as a national fast-food restaurant.”

The BTA noted that Sprout did not view the property so narrowly as to limit it to a single
                                                                                         -13-


user, but did define its use more narrowly than simply a “restaurant.” The BTA also noted

that Sprout did not appraise the property as if it were a “special-purpose property,”

although he observed that it could have fit that definition, and thus that Weis’s and Ryne’s

criticism of Sprout’s conclusion that the property could have been treated as a special-

purpose property was of no consequence.

       {¶ 28} The BTA also found that, with respect to both the sales comparisons and

the income capitalization comparisons, Sprout’s “selection of comparable properties * * *

best represented the market in which the subject property would operate.” Specifically,

the BTA favored Sprout’s use of comparables that operated as fast-food restaurants both

before and after their transfers.     It found that Weis’s comparisons to “dissimilar”

properties, including sit-down restaurants, vacant properties, and at least one property

that had been converted to a different use, led to an undervaluation of the subject

property.

       {¶ 29} With respect to the locations of the comparable properties used in the

valuations, the BTA found “it was appropriate to select comparable properties in other

Ohio counties that were more similar to the subject property, which Sprout did, [rather]

than to select dissimilar properties located within Montgomery County, which Weis did.”

Similarly, with respect to the appraisers’ determinations of capitalization rates, the BTA

concluded that, because Weis used dissimilar properties from the subject property, the

BTA could not “confirm that his capitalization rate appropriately captures the market in

which the subject property would operate,” whereas Sprout’s capitalization rate, because

it was based on fast-food restaurants, reflected the property’s “most likely use.”

       {¶ 30} The BTA was critical of both appraisers for failing to develop “the cost
                                                                                        -14-


approach to value.” The BTA noted that the Wilmington Pike McDonald’s building was

only approximately 18 months old on January 1, 2014, and that, with new or relatively

new construction, “the cost approach is particularly relevant.” Although Weis’s report

contained some information about construction costs, the BTA concluded that the

information was insufficient for the BTA to rely upon it, because some probative market

factors were not included. The BTA’s decision was critical of Ryne’s attempt to impugn

Sprout’s qualifications at the hearing, finding that this argument was without merit.

       {¶ 31} Based on its independent weighing of the evidence presented, the BTA

found that the Kettering BOE had “satisfied its evidentiary burden on appeal” and that its

appraisal evidence, as presented by Sprout, “was the most competent and probative

evidence of the subject property’s value” as of January 1, 2014. It therefore adopted

Sprout’s appraisal value of $2,055,000 as the true value of the Wilmington Pike

McDonald’s.

       {¶ 32} Ryne appeals from the decision of the BTA, pursuant to R.C. 5717.04.

       Arguments on Appeal

       {¶ 33} Ryne argues that Weis’s methodology for valuing the property was more

appropriate than Sprout’s, that Sprout improperly concluded that the property was a

“special purpose” property without identifying any unique characteristics, that Sprout’s

conclusions were “inconsistent,” and that it made no sense for the BTA to conclude that

the comparable properties identified and relied upon by Sprout best represented “the

market in which the subject property would operate,” because he did not limit himself to

Montgomery County.

       {¶ 34} As discussed above, we review questions of law de novo, but we recognize
                                                                                          -15-


that the fair market value of a property for tax purposes is a question of fact, on which we

defer to the taxing authorities. NWD 300 Spring, 151 Ohio St.3d 193, 2017-Ohio-7579,

87 N.E.3d 199, at ¶ 13, quoting EOP-BP Tower, 106 Ohio St.3d 1, 2005-Ohio-3096, 829

N.E.2d 686, at ¶ 17. An appellate court will not disturb a decision of the BTA with respect

to valuation if its decision is both “reasonable and lawful.” Id. If the record contains

reliable and probative evidence supporting the BTA’s factual determinations, we must

uphold its decision. Dublin City Schools Bd. of Edn., 139 Ohio St.3d 193, 2013-Ohio-

4543, 11 N.E.3d 206, at ¶ 13, citing Satullo at ¶ 14; Terraza 8, 150 Ohio St.3d 527, 2017-

Ohio-4415, 83 N.E.3d 916, at ¶ 7, citing Olmsted Falls Bd. of Edn., 122 Ohio St.3d 134,

2009-Ohio-2461, 909 N.E.2d 597, at ¶ 27.

       {¶ 35} Many of Ryne’s arguments urge us to engage in our own weighing of the

evidence presented to the BTA and, presumably, to reach a different result. This is not

our proper role, and we decline to do so. The BTA considered two opinions as to

valuation, and each appraiser documented his methodology.                     Of particular

consequence, the reports and the appraisers’ testimonies described the manner in which

comparable properties were selected. Determining which appraiser selected the best

comparable properties was the crux of the BTA’s decision. On the one hand, Weis

generally placed a high priority on using properties within Montgomery County, but this

limited the number of properties that were similar to the Wilmington Pike McDonald’s in

other ways, such as the specific nature of the restaurant business (fast-food vs. sit-down

restaurants), and resulted in the inclusion of one property that was torn down after its sale

and used for a completely different purpose (a tire store). On the other hand, Sprout

chose properties from a wider geographical area, which led to some variations in
                                                                                         -16-


neighborhood, population, and the like, but allowed him to more narrowly focus his

comparisons on operating fast-food restaurants.

       {¶ 36} The BTA stated its reasons for concluding that Sprout’s appraisal was

entitled to greater weight. The BTA agreed with Sprout’s conclusion that the highest and

best use of the property was as a fast-food restaurant, rather than as a more-broadly-

defined restaurant or as a property that could be put to use for another retail purpose.

The BTA found this difference to be “crucial” and concluded that Weis’s approach had

undervalued the property. Because Sprout had defined the highest and best use more

narrowly, the BTA, as the finder of fact, reasonably concluded that his comparables were

more carefully tailored to this particular use.

       {¶ 37} Ryne also criticizes Sprout’s capitalization rates, arguing that “the strong

creditworthiness of the tenant[s] heavily exerted downward pressure on the cap rate” for

some of the sales, thus increasing their value.        Weis testified at the hearing that

McDonald’s restaurants “have actually one of the highest credits in the market for

restaurants,” and Sprout testified that “McDonald’s is the gold standard from the

standpoint of an investment company.”             But no McDonald’s were used in the

comparisons of either appraiser. Of the seven comparable properties Sprout used in

calculating his capitalization rate, four were either Wendy’s, a longstanding national chain,

or Chipotle. Moreover, there was testimony at the hearing about Chipotle’s very rapid

growth rate compared to McDonald’s, and that the Chipotle sales used in Sprout’s

calculations preceded the listeria outbreaks at a few Chipotle restaurants, which might

have negatively affected its financial outlook. The capitalization rates of the comparable

properties used by Sprout ranged from 6% to 6.77%. Further, Sprout testified that he
                                                                                        -17-


had consulted a national publication which states the “typical capitalization rates within

the net lease market”; this source indicated a capitalization rate of between 6% and 8.5%

in the first quarter of 2014, with an average of 7.03%. Sprout used a capitalization rate

of 7% (prior to adjustment for tax additur). Based on the evidence presented, it was not

unreasonable or unlawful for the BTA to conclude that Sprout’s capitalization rate was

based on sound calculations.

      {¶ 38} Further, although Ryne’s argument in his brief places great emphasis on

“location, location, location,” the BTA concluded that comparison of the properties based

on other factors was entitled to greater weight than geographical location. On the whole,

the BTA determined that Sprout’s comparable properties were more similar to the subject

property in characteristics and markets than Weis’s properties, even if they were located

in a broader geographical area.       The BTA’s statement that Sprout’s selection of

comparable properties “best represented the market in which the subject property would

operate” is reasonable if the “market” is defined in this broader sense, rather than as

Montgomery County. We reject Ryne’s assertion that this statement by the BTA “makes

no sense whatsoever” and is “literally impossible.”8

      {¶ 39} Ryne also focuses much of his argument on the fact that the two appraisers

expressed different opinions about whether the Wilmington Pike McDonald’s was a



8
  Nor do we agree with Ryne’s argument that the Sprout report “strangely chose” an
appraisal method, that the BTA’s decision is “not merely unreasonable, but shocking,”
that the Sprout testimony “laughably referr[ed]” to certain building features, that the BTA
engaged in “[s]loppy reasoning,” that Sprout made “outlandish claims,” that the BTA’s
reasoning was “lazy and factually inaccurate,” that the BTA failed “to employ common
sense and good judgment in evaluating [Sprout’s] appraisal report,” or that Sprout
“magically conclude[d]” a higher value than the BOR.
                                                                                        -18-


special purpose property. However, Sprout did not value the property as a special-

purpose property, even though he believed that it could have been treated as such.

Accordingly, Sprout’s observation that the Wilmington Pike McDonald’s might have been

classified as a special-purpose property was inconsequential to the BTA’s decision; in

fact, the BTA specifically noted that Sprout did not appraise the property as a special-

purpose property. Under these circumstances, there was no reason for the BTA to

“conspicuously” identify the unique physical nature of the property, as Ryne suggests.

         {¶ 40} Further, Ryne asserts that Sprout’s analysis was inferior to Weis’s because

Sprout’s qualitative adjustments of the comparable properties were less reliable than

Weis’s qualitative and quantitative ones,9 and because Sprout did not provide market

support for his conclusions. The BTA could have reasonably concluded that Sprout did

provide market support for his conclusions. Moreover, the BTA noted in its decision that

it “has repeatedly recognized the permissibility of qualitative adjustments, rather than

quantitative adjustments,” and found no fault with Sprout’s adjustments on that basis.

Although Ryne characterized Sprout’s adjustments as “conjecture,” both experts adjusted

for similar factors, such as location or condition of the building. We fail to see how

Sprout’s adjustments were more unsubstantiated that Weis’s.

         {¶ 41} Ryne brings to our attention another case involving a McDonald’s valuation

in which both Weis and Sprout participated as appraisers, Bd. of Edn. of the Brookville

Local Schools v. Montgomery Cty. Bd. of Revision, BTA Case No. 2016-325. In that

case, the appraisers valued a McDonald’s “at the end of its economic life,” which was

slated to be demolished and replaced and where the restaurant’s age “greatly impact[ed]”


9
    The BTA described Weis’s adjustments only as “quantitative.”
                                                                                          -19-


its value. In that case, the BTA relied on Weis’s selection of comparables, rather than

Sprout’s, in determining the true value of the property.

       {¶ 42} Ryne suggests that we should conclude that Sprout’s position in the

Brookville case was unreasonable, based on the evidence presented in that case (which

is not before us) and the BTA’s adoption of Weis’s valuation in that case. Ryne further

reasons that the result in the Brookville case should cause us to reject Sprout’s appraisal

in this case and in three other pending tax appeals involving McDonald’s restaurants.

There are many flaws in this reasoning, including that each case is factually different, that

we do not have the record and evidence from the Brookville case, and that the BTA’s

rejection of the valuation provided by an appraiser in one case does not automatically

impugn that appraiser’s qualifications or his opinion in any other case. One may even

argue that the BTA’s differing conclusions demonstrate its ability to weigh facts unique to

each case.

       {¶ 43} Ryne also cites Rite Aid of Ohio, Inc., v. Washington Cty. Bd. of Revision,

146 Ohio St.3d 173, 2016-Ohio-371, 54 N.E.3d 1177, which he describes as “a nearly

identical case.” We agree that Rite Aid was similar to this case in that: 1) “The disparity

of valuations [was] striking,” as Rite Aid’s appraiser valued the property at $1,150,000,

and the county’s appraiser valued it at $2,400,000, id. at ¶ 15; 2) the appraiser for Rite

Aid looked at comparable general retail properties for sale or lease in the same

geographic area as the Rite Aid in Marietta, Ohio (including one across the Ohio River in

West Virginia), while the county’s appraiser looked for comparable drugstores,

specifically, which led to the use of properties that were more geographically distant within

the state; and 3) both appraisers used the income approach and sales comparison
                                                                                        -20-


approach, and then reconciled those two results in their appraisals.

       {¶ 44} The BTA adopted Rite Aid’s lower valuation. In a “terse” decision, the

BTA found that the county’s comparables, “while potentially appropriate,” were drawn

from an unnecessarily narrow pool of properties.       Id. at ¶ 16.    The supreme court

agreed; it concluded that the county’s appraiser had essentially treated the Rite Aid as a

special-use property, which its characteristics did not justify, and therefore that the BTA

“was justified in rejecting” the county’s appraisal and adopting Rite Aid’s appraisal. The

supreme court also criticized the county’s argument that properties encumbered by a

lease at the time of sale could be compared with unencumbered properties, without

adjustment for this difference, “[p]recisely because the lease affects the sale price and

value.” Id. at ¶ 20. Insofar as Sprout’s appraisal did not treat the Wilmington Pike

McDonald’s as a special-purpose property, and it incorporated very specific information

about any existing leases on the properties in determining whether upward or downward

adjustments in value were appropriate, we are unpersuaded that the BTA’s decision

conflicts with the holding in Rite Aid.

       {¶ 45} Ryne also claims that the BTA erred in “applying the holding” of Johnston

Coca-Cola Bottling Co. v. Hamilton Cty. Bd. of Revision, 149 Ohio St.3d 155, 2017-Ohio-

870, 73 N.E.3d 503, because that case involved the valuation of an enormous bottling

plant which was dissimilar to the McDonald’s property. Johnston Coca-Cola reaffirmed

the supreme court’s view that a property’s present-use may not be considered to the

exclusion of other factors in determining its value. Id. at ¶ 14. However, we have

previously stated and the BTA observed that Sprout did not value the Wilmington Pike

McDonald’s as a special-purpose property. Likewise, he did not value it based solely on
                                                                                          -21-

its present use as a McDonald’s. In Johnston Coca-Cola, the BTA referred to the subject

property’s current use as a bottling company, but “it did so in the context of deciding which

comparables identified by the appraisers were ‘more analogous’ under the sales-

comparison approach,” which was not improper.          Id. at ¶ 16.   As in this case, the

appraisers in Johnston Coca-Cola used “the sales-comparison and income approaches,

two accepted methods of analysis.” Id. at ¶ 15. Johnston Coca-Cola does not present

any basis to conclude that the valuations in this case were problematic.

         {¶ 46} Finally, Ryne contends that the BTA acted unreasonably and unlawfully

and abused its discretion in “continuing to recognize” Sprout as an expert at all. Ryne

suggests that he (Ryne) discredited or impeached Sprout such that the BTA should have

doubted whether Sprout “ha[d] experience in appraising fast-food restaurants” or was

“familiar with the neighborhood in which the Subject Property is located.” The record

does not support this argument. The appraisers agreed that the highest and best use of

the property was as a restaurant.       Sprout viewed it more narrowly as a fast-food

restaurant, and he provided specific reasons for doing so, including the location and the

building design’s amenability to a high volume of drive-thu business. The BTA provided

a detailed discussion of how it weighed the experts’ opinions and methodology, including

specific criticisms of the properties Weis used as comparables and the capitalization rates

derived from them. Ryne obviously disagrees with Sprout’s conclusions, but nothing in

the record suggests that Sprout was unqualified, that his choice of comparable properties

or his calculations was unreasonable, or that his valuation should have been disregarded

because he lacked appropriate qualifications.10


10
     Ryne says that Sprout “admitted that he is not an expert and once he made such a
                                                                                         -22-


       {¶ 47} The BTA’s decision acknowledged that, “inherent in the appraisal process

is the fact that an appraiser must make a wide variety of subjective judgments” in selecting

data upon which to rely, making adjustments to make such data “usable,” and interpreting

and evaluating the information gathered in forming an opinion. Likewise, the BTA must

use its judgment in determining which evidence presents the most credible valuation.

Here, the BTA relied on credible evidence from an appraiser, who presented support for

his positions. Based on the record before us, we conclude that the BTA’s determination

was reasonable and lawful.

       {¶ 48} The assignments of error are overruled.

       {¶ 49} The Decision and Order of the BTA will be affirmed.

                                     .............



WELBAUM, P.J. and Hall, J., concur.


Copies mailed to:

Karol C. Fox
Mark H. Gillis
Adam Laugle
Joseph W. Testa, Ohio Tax Commissioner
Charles L. Bluestone
Patrick J. Heery




telling admission no longer should have been recognized as an expert witness by the
BTA.” (Emphasis sic.) But the record reflects that the parties stipulated to Sprout’s
qualifications and that the BTA found Sprout to be an “expert qualified to render an opinion
on the subject property’s value.”
