              IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Missouri River Corp.                     :
                                         :
                    v.                   :
                                         :
Erie County Board of Assessment          :
Appeals, Erie County, PA                 :
                                         :
Interested Parties:                      :
City of Erie School District, City of    :
Erie and Erie County                     :
                                         :
Parcel No.: 17-040-037.0-210.00          :
Property Address: 1012 W. Bayfront       :
Pkwy., City of Erie, Erie County         :
                                         :
Appeal of: Missouri River Corp.          :
(Sunrise Senior Living, Inc., tenant and :
agent) and NHI-REIT of Bickford,         :
(Bickford Master Buckeye, LLC,           :
tenant and agent), successor-in-interest :
to Missouri River Corporation            :   No. 639 C.D. 2019

Missouri River Corp.                  :
                                      :
                   v.                 :
                                      :
Erie County Board of Assessment       :
Appeals, Erie County, PA              :
                                      :
City of Erie School District, City of :
Erie and Erie County                  :
                                      :
Parcel No.: 17-040-037.0-210.00       :
                                      :
Appeal of: Missouri River Corporation :      No. 640 C.D. 2019
and NHI-REIT of Bickford              :      Argued: February 11, 2020


BEFORE:     HONORABLE ANNE E. COVEY, Judge
            HONORABLE CHRISTINE FIZZANO CANNON, Judge
            HONORABLE ELLEN CEISLER, Judge

OPINION NOT REPORTED
MEMORANDUM OPINION BY
JUDGE COVEY                                      FILED: March 2, 2020

             Missouri River Corp. (Sunrise Senior Living, Inc., tenant and agent)
(Missouri River) and NHI-REIT of Bickford (Bickford Master Buckeye, LLC, tenant
and agent) (Bickford Master), successor-in-interest to Missouri River Corporation
(Current Owner) (collectively, Taxpayers) appeal from the Erie County (County)
Common Pleas Court’s (trial court) April 29, 2019 order denying Taxpayers’ appeal
and entering judgment in the City of Erie School District’s (District) favor. There are
two issues before this Court: (1) whether Taxpayers waived all issues on appeal by
filing an insufficiently detailed statement of errors complained of on appeal; and (2)
whether the trial court committed an error of law by including intangible assets and
other personal property in the fair market value of the Taxpayers’ property. After
review, we affirm.
             The instant matter arises from a tax assessment appeal for property
located at 1012 West Bayfront Parkway, Erie, Pennsylvania (Property). The Property
is the situs of a 69-room personal care facility (Facility) that Karrington Operating
Company, Inc. (Original Lessee) constructed between 1996 and 1998. In 1998,
Original Lessee negotiated a sale leaseback to Missouri River (1998 Sale Leaseback),
a real estate investment trust (REIT),1 and entered into a long-term lease (Original
Lease) as lessee with Missouri River as lessor that ran through 2018.
             The Original Lease defined “Leased Property” to include “personal
tangible and intangible property . . . acquired by [Missouri River] pursuant to the
Purchase Agreement [(Purchase Agreement)].” 2 Reproduced Record (R.R.) at 567a.


      1
        See Reproduced Record (R.R.) at 252a.
      2
         The Original Lease defined the “Purchase Agreement” as “[t]hat certain Agreement of
Purchase and Sale and Joint Escrow Instructions, dated as of May 12, 1998 . . . providing for
[Missouri River’s] acquisition of the Leased Property . . . .” R.R. at 573a.
                                             2
In addition, the Original Lease described “Facility” as “[t]hat certain assisted living
facility which is part of the Leased Property . . . inclusive of the Land, Leased
Improvements, Fixtures, Personal Property and Intangible Property pertaining to such
Facility.” R.R. at 570a. Section 6.3 of the Original Lease provided: “Lessee may . . .
at its expense, install, assemble or place on any parcels of the Land or in any of the
Leased Improvements, any items of Lessee’s Personal Property,[3] and Lessee
may, subject to the conditions set forth below, remove the same upon the
expiration or any prior termination of the Term.” R.R. at 579a (emphasis added).
Additionally, Section 9.1.4 of the Original Lease declared:

                Unless Lessor shall convey any of the Leased Property to
                Lessee pursuant to the provisions of this Lease, and subject
                to the provisions of Paragraph 6.3 regarding Lessee’s
                Personal Property, upon the expiration or prior termination
                of the [t]erm, all the Leased [P]roperty, including all
                [f]ixtures and Personal Property located thereon, and
                any [a]lterations, repairs, restorations, additions or
                improvements otherwise made by or for Lessee, shall be
                Lessor’s property and shall be vacated and surrendered
                to Lessor . . . .

R.R. at 584a (bold and underline emphasis added). Further, the Original Lease stated
that Missouri River would, at the term’s end or at the earlier termination of the
Original Lease, own patient and other records. See R.R. at 584a-585a. The Original

       3
           The Original Lease defines Lessee’s Personal Property as:
                All machinery, equipment, furniture, furnishings, moveable walls or
                partitions, computers, or trade fixtures or other personal property, and
                consumable inventory and supplies, owned by Lessee and used or
                useful in Lessee’s business on the Leased Property and located
                thereon, including without limitation, all items of furniture,
                furnishings, equipment, supplies and inventory, except items (i)
                included within the definition of Fixtures; and (ii) personal property
                described in Paragraph 1.1(v) above [(pertaining to personal property
                acquired by Lessor pursuant to the Purchase Agreement)].
R.R. at 572a.

                                                   3
Lease required that, at Missouri River’s request upon the Original Lease’s
termination or expiration, Original Lessee was to use its best efforts to transfer to
Missouri River or its nominee, all licenses, operating permits, governmental
authorizations and all contracts necessary for the Facility’s operation. See R.R. at
611a.
               Original Lessee operated the Facility and made yearly lease payments to
Missouri River. As of January 31, 2008, the Property’s real estate was assessed for
$7,400,000. On July 31, 2008, Missouri River filed an appeal with the Erie County
Board of Property Assessment Appeals (Board) challenging the $7,400,000
assessment. The Board sustained the January 31, 2008 assessment and Taxpayers
appealed to the trial court. The District intervened. In 2013, while the appeal was
pending, the County conducted a county-wide reassessment which increased the
Property’s assessment to $8,062,400. Taxpayers filed a protective appeal and the two
matters were consolidated for trial.
               On April 30, 2018, the Original Lease between Missouri River and
Original Lessee expired. That same day, Missouri River sold the Facility to Current
Owner as part of a portfolio of five assisted living properties.4                   The Facility’s
allocated sale price was $15,768,000. Current Owner leased the Property through




        4
          Four of the properties in the portfolio were located in Ohio. According to the Real
Property Conveyance Fee Statements of Value and Receipt, one Ohio property was valued at
$18,090,000. “Of that, [$]280,000 was paid for items other than real . . . property.” R.R. at 79a; see
also R.R. at 862a. Another Ohio property was valued at $14,242,500. Of that amount, “the portion
for items other than real property was [$]190,000.” R.R. at 80a; see also R.R. at 863a. A third
Ohio property was purchased for $12,075,750, which included $200,000 for items other than real
property. See R.R. at 80a, 864a. The fourth Ohio property was purchased for $7,323,750 which
included $170,000 for items other than real property. See R.R. at 80a, 865a. Notably, no similar
allocation representing the portion of the purchase price for items other than real property was made
for the Property. See R.R. at 867a.
                                                  4
2033 (2018 Lease) to Bickford Master, which subleased the Property to Bickford of
Erie, LLC (Current Lessee), Bickford Master’s wholly owned subsidiary.5
               The 2018 Lease described the leased Property to include “all of the
[Current Owner’s] right, title and interest in and to all the Land, the Facilities, the
[furniture, fixtures and equipment (]FF&E[)], [and] all other personal property”
owned or thereafter acquired by Current Owner and located at the Facility. R.R. at
711a. Further, the 2018 Lease defined “Facilities” as “the facilities and all land,
improvements (whether now existing or made during the term of the Lease), FF&E,
other personal property and intangibles, owned by [Current Owner] as set forth on
Schedule 1 and located at and used in the operation of [the] Facility.” R.R. at 704a.
The 2018 Lease also described “Personal Property” to include inventory and records.
It defined “Inventory” as “the operating supply of consumable supplies, including
food, drugs, medicines, materials and other supplies used in connection with the
operation of [the] Facility.” R.R. at 707a. Records are described in the 2018 Lease
as “electronic, digital or written files and records . . . .” R.R. at 709a.
               On December 19 and 20, 2018, the trial court held a hearing on
Taxpayers’ appeal. At the hearing, the Board offered County Assessment Director
Scott Maas’ (Maas) testimony.             Maas explained that, according to the County
Assessment Office, the Property’s assessed value between 2009 and 2012 was
$7,400,000. After the county-wide reassessment in 2013, the Property’s assessed



       5
          According to Current Lessee’s co-president, Michael Eby (Eby), the transfer to Current
Lessee included more than the real estate, such as “the rents -- the rents and the healthcare
component that the residents pay, and then also the staff costs, food costs that we use. So the net
operating income of the business.” R.R. at 72a. Eby elaborated: “[t]he contracts with the residents
to provide the services that the seller -- that . . . the previous operator, was currently providing.
There are the furniture and the fixtures [that] were transferred over. The employees, we assumed
those. We took all of them -- hired all of them, so.” R.R. at 75a-76a. Eby also described that
patient records and some food inventory was transferred.
                                                 5
value was $8,062,400. Current Lessee’s co-president Michael Eby (Eby) appeared
for Taxpayers.
              Both Taxpayers and the District presented the testimony of certified real
estate appraisers, who calculated the Property’s fair market value using the cost,
comparable sales and income approaches. Taxpayers’ valuation expert Mark R.
Shonberg (Shonberg) valued the Property between $6,190,000 and $6,900,000 for tax
years 2009 through 2019.           Although Shonberg considered all three valuation
approaches and developed the cost approach and income approach, he reached his
ultimate valuation opinion based on the cost approach. Shonberg related that, in
preparing his income approach, he did not use the Property’s yearly lease payments
because the leases included intangible assets, personal property and business value.
Shonberg explained that “[t]he primary challenge [in appraising a personal care
home] is making sure you allocate correctly between real estate and non-real estate
components” because “the real estate and non-real estate aspects are really
intertwined.” R.R. at 97a. Shonberg expounded:

              So personal care homes, they are – they’re residences, but
              they are residences that provide more than shelter. They
              provide meals. They provide varying levels of care.
              So, for instance, . . . [there’s] a trained staff[] in place.
              There’s care and social components to it. There’s the
              meals, wellness visits. There’s housekeeping, personal
              laundry, medication coordination. There’s a number of
              things that are in addition to just the shelter.

R.R. at 97a-98a.6


       6
         Further, Shonberg opined that a sale leaseback is not an accurate indicator of value.
Specifically, he testified:
              [S]ale leasebacks aren’t wonderful to use because they don’t have to
              be related to the market. They’re simply a mutually beneficial
              mechanism.

                                               6
              Shonberg justified his disregard of the leases based, in part, on the
inclusion of FF&E in the Original Lease. However, Shonberg admitted that he did
not know what specific personal property was included therein.                          He also
acknowledged that none of the FF&E present at the Facility in 1998 remained in
2018, because Original Lessee gradually replaced it through the years, and the FF&E
value that Original Lessee left at the Property when it ceased operating in 2018 was
“relatively small.” R.R. at 199a. Ultimately, Shonberg conceded that the FF&E

              So if, for instance, [Original Lessee], [its] intent, and this probably
              was [its] intent, was to raise capital to finance [its] expansion, they
              wanted the rent to be as high as possible so [it] could raise as much
              capital as possible so [it] could maximize [its] expansion potential.
              So what we see here is that there’s a lease in place because [it]
              want[s] to maximize [its] capital that is above market and we can see
              it’s above market because through the 10 years that we know about,
              never once did [its] actual operational revenue to the business even
              cover the lease.
              [Trial Court]: If the lease is above market, help me, how does that
              help [Original Lessee]?
              [Shonberg]: That helps [Original Lessee] because [it is] getting a big
              chunk of money up front. So that lease --
              [Trial Court]: Doesn’t the lease payment go to Missouri River?
              [Shonberg]: The lease payment goes to Missouri River, but because of
              the sale leaseback [Original Lessee] got paid a big chunk of money up
              front.
              ....
              [Shonberg]: And the more [it] inflate[s] [the] lease payment, the
              bigger [it] get[s] paid up front.
              [Trial Court]: And [its] lease payment is obviously a deduction for tax
              purposes.
              [Shonberg]: Correct. So --
              [Trial Court]: So [it] shift[s] revenue that might have been operating
              income to the purchase of the dwelling or of the property.

R.R. at 177a-179a.


                                                7
value “is too small of a number to have a material impact,” R.R. at 200a, and “the
physical, tangible personal property is not a big deal here. What is a more significant
component is the intangible personal property.” R.R. at 201a.
             Shonberg described the “intangible component” to be “things like the in-
place staff. It might be . . . the residents that are in place. The medical record cards
that are associated with those residents. Things of that nature.” R.R. at 107a.
Shonberg further detailed the intangible property as “relat[ing] to two different
factors, certainly the resident base and the medical records, all that stuff[,]” and “[t]he
employee base, so the workforce in place.          So those are probably the two big
components of intangible property.” R.R. at 192a. According to Shonberg, the
Original Lease required the intangible assets to be transferred to Missouri River.
However, to support that contention, Shonberg could point only to paragraph 1.1(v)
of the Original Lease, see R.R. at 204a, which provided that, under the Original
Lease, Original Lessee rented from Missouri River: “All personal tangible and
intangible property comprising the ‘Personal Property’ and/or the ‘Intangible
Property’ acquired by [Missouri River] pursuant to the Purchase Agreement.”
R.R. at 567a (emphasis added). Thus, pursuant to the Original Lease, the only
intangible property used at the Facility and owned by Missouri River was such
property that it acquired under the original Purchase Agreement.            Neither party
offered said Purchase Agreement into evidence and it is not a part of the record
below.
             Further, regarding the purported value of the Facility’s staff, the trial
court questioned Shonberg:

             [Trial Court]: Can’t you look at the employees themselves
             in an individual capacity as [not] having much value
             because they’re always underpaid. So they’re never
             interested in any one employee. And they don’t care as
             long as everyone doesn’t walk out the door or who comes

                                            8
               or who goes, they don’t really care about that, longevity,
               ten[ure], skill set. All they need to know is they got
               bodies there when they buy.
               [Shonberg]: They do care to some degree about skill set,
               but normally you’re correct.
               [Trial Court]: For a few people, perhaps. Generally,
               they’re buying an unskilled labor force that provide
               unskilled services to these residents at somewhere near
               minimum wage or slightly above. And there are few key
               people who know how they operate and want to crack the
               whip and keep things going.
               [Shonberg]: Yes, sir.
               [Trial Court]: I’m just guessing.
               [Shonberg]: That’s mostly correct. And it’s certainly
               mostly a -- I don’t want to say an unskilled labor, but a
               marginally skilled --
               [Trial Court]: Even when they employ nurses they try to
               maximize licensed practical nurses as opposed to registered
               nurses. They’re probably generally few and far between.
               [Shonberg]: Right.

R.R. at 201a-202a (emphasis added).7 Ultimately, Shonberg testified that, in his
estimation, $8,000,000 of the $15,768,000 sale price represented intangibles.8 See
R.R. at 237a.
               Because Shonberg believed that the leases included intangible assets and
personal property – items that are not subject to real estate tax – he settled on the cost
approach as the appropriate method to determine the Property’s fair market value.


       7
          After Shonberg admitted that Current Lessee changed the Facility’s name, the trial court
explained with respect to business value: “There’s no good will, so it’s solely the medical records,
the patients, the employees and the fact that it’s a going concern . . . .” R.R. at 237a.
        8
          This significant amount is in stark contrast to the estimated intangible values for the Ohio
properties (which ranged from $170,000 to $280,000). In fact, the $8,000,000 allocation for
intangibles is almost 30 times the highest such allocation made for items other than real property for
the four Ohio properties in the 2018 transfer.
                                                  9
Using the cost approach, Shonberg calculated the Property’s fair market value by first
estimating the Property’s land value. Shonberg considered nine sales of comparable
commercial properties (apartments/hotels). Based thereon, he estimated the land
value for the relevant years as follows: 2009 - $1,170,000; 2010 - $1,235,000; 2011 -
$1,235,000; 2012 - $1,275,000; 2013 - $1,275,000; 2014 - $1,275,000; 2015 -
$1,300,000; 2016 - $1,300,000; 2017 - $1,300,000; 2018 - $1,300,000; 2019 -
$1,325,000.         See   R.R.   at   426a.        With   respect   to   the     Property’s
improvements/buildings, Shonberg determined replacement costs for similarly sized
buildings and improvements of like utility. Shonberg also calculated the Property’s
improvements’ yearly depreciation. Shonberg provided the following market values
for the Property from 2009 through 2019:

Tax Year      Cost Approach             Income Approach             Value Conclusion
2009          $6,515,000                $4,550,000                  $6,515,000
2010          $6,190,000                $4,310,000                  $6,190,000
2011          $6,375,000                $4,710,000                  $6,375,000
2012          $6,380,000                $5,310,000                  $6,380,000
2013          $6,520,000                $5,440,000                  $6,520,000
2014          $6,740,000                $6,280,000                  $6,740,000
2015          $6,725,000                $6,040,000                  $6,725,000
2016          $6,750,000                $6,520,000                  $6,750,000
2017          $6,635,000                $6,620,000                  $6,635,000
2018          $6,810,000                $7,380,000                  $6,810,000
2019          $6,900,000                $7,840,000                  $6,900,000
See R.R. at 487a.




                                              10
              Expert appraiser Robert Glowacki (Glowacki) testified for the District
regarding the Property’s fair market value. Glowacki explained the manner in which
he performed his analysis:

              I developed a sales approach. I developed a cost approach.
              I put basically no weight on those at all. The primary
              reason is you’ve got a property that is encumbered by a
              long-term lease.
              And I think the decisions . . . going back to 1992 of the
              Pennsylvania State Supreme Court, which says when
              you’ve got a property that’s encumbered by a long-term
              lease that the income approach is probably the only -- I can
              quote if you want, but basically the only approach to be
              considered for a property that’s encumbered by the long-
              term lease, so I put basically all my weight on the income
              approach.

R.R. at 251a. Glowacki emphasized that since 1998, the Property has been owned by
REITs. See R.R. at 252a. He explained that a REIT cannot operate the Facility itself
and owns the Property as an investment. See R.R. at 252a-254a.
              Like Shonberg, Glowacki’s cost approach involved comparable site sales
analysis.    Based thereon, Glowacki estimated the Property’s land value to be
$960,000 for all relevant years.         Glowacki calculated the replacement costs for
similarly sized buildings and improvements to those on the Property and their
depreciation.     Glowacki’s initial figures were similar to Shonberg’s; however,
Glowacki added to his cost approach value for each year the difference between the
depreciated value and his income approach figure for that year.
              Glowacki developed his income approach valuing the Property’s leases. 9
Using the actual gross rent paid annually, Glowacki calculated the net rent by making



       9
         With respect to Shonberg’s assertion that the Original Lease included FF&E and intangible
property, Glowacki testified that the value of any such property was minimal. Glowacki further
explained:
                                               11
a 2% vacancy and credit loss adjustment, and another 3% reduction for administrative
and management fees associated with rent collection.                   Glowacki then applied a
market based capitalization rate to the net rent to produce his income approach
indication for each year.
               Glowacki valued the Property for the relevant years as follows:


Year      Cost Approach10                             Income Approach               Final Value

2009      $9,900,000                                  $9,900,000                    $9,900,000
          ($3,550,000+$6,350,000)

               Through this whole discovery process, [I raised the issue that] I need
               some clarification as to what is the value of this personal property and
               intangible property composing the personal property. And the
               response from counsel on the other side was there isn’t any value to it.
               So I’ve got items that are 20 years old. I’ve got items that have been
               in place after the [Original L]ease that were purchased by the
               operator. They definitely were not included in the [1998 Sale
               Leaseback]. And I got a statement from the [Current O]wner saying
               there isn’t any value to any of it. So I didn’t put a lot of weight on
               what the personal or intangibles are.
R.R. at 259a. With respect to patient records, although Section 9.1.4 of the Original Lease provides
that Missouri River “shall own and may remove . . . all patient records and other records in
connection with the Facility,” R.R. at 585a, the trial court expressed skepticism, stating:
               I got that language. But, you know, there’s a footnote in my head to
               the extent those records might constitute medical records, what -- I
               got a feeling that some HIPPA[, (Health Insurance Portability and
               Accountability Act of 1996 (HIPAA), Pub. L. No. 104-191, 110 Stat.
               1936 (codified as amended in scattered sections of 18, 26, 29, and 42
               U.S.C.)),] lawyer would be in the shorts of a REIT guy and try to
               walk off with those records in short order. I’m assuming that a fight
               broke out, but I’m just not sure that the tenant had any right to give to
               the landlord what the tenant didn’t own.
R.R. at 295a. The trial court elaborated: “[T]he landlord says he gets them, but those records are
the residents’ records. And to the extent there are medical records, they can’t be bought and sold so
easily.” R.R. at 296a.
        10
           The parentheses in this column depict the depreciated value plus the additional value
Glowacki attributed to the leased fee, which totals Glowacki’s cost approach.
                                                 12
2010        $10,025,000                           $10,025,000                $10,025,000
            ($4,000,000+$6,025,000)

2011        $10,500,000                           $10,500,000                $10,500,000
            ($4,600,000+$5,900,000)
2012        $11,050,000                           $11,050,000                $11,050,000
            ($5,150,000+$5,900,000)
2013        $11,250,000                           $11,250,000                $11,250,000
            ($5,650,000+$5,600,000)
2014        $12,200,000                           $12,200,000                $12,200,000
            ($6,150,000+$6,050,000)
2015        $13,100,000                           $13,100,000                $13,100,000
            ($6,350,000+$6,750,000)
2016        $13,200,000                           $13,200,000                $13,200,000
            ($6,600,000+$6,600,000)
2017        $13,800,000                           $13,450,000                $13,450,000
            ($6,650,000+$7,150,000)
2018        $14,150,000                           $13,800,000                $13,800,000
            ($6,850,000+$7,300,000)

2019        (Not provided)                        $14,150,000                $14,150,000

See R.R. at 921a-925a, 941a.
               On April 29, 2019, the Trial Court denied Taxpayers’ appeal, adopting
Glowacki’s income approach because it was more credible and consistent with
Pennsylvania stare decisis. Taxpayers appealed to this Court.11




       11
           “This [C]ourt’s review is limited to determining whether the trial court abused its
discretion, committed an error of law, or rendered a decision unsupported by the evidence.”
Downingtown Area Sch. Dist. v. Chester Cty. Bd. of Assessment Appeals, 131 A.3d 152, 156 n.4
(Pa. Cmwlth. 2015).
                                             13
                                                I. Waiver
                The District argues that, pursuant to Pennsylvania Rule of Appellate
Procedure (Rule) 1925(b)(4), Taxpayers waived all issues on appeal by filing an
insufficiently detailed statement of errors complained of on appeal.
                Initially, the Pennsylvania Superior Court has explained:

                [W]hen the trial court directs an appellant to file a concise
                statement of [errors] complained of on appeal, any issues
                that are not raised in such a statement will be waived for
                appellate review. Similarly, when issues are too vague for
                the trial court to identify and address, that is the functional
                equivalent of no concise statement at all. Rule 1925 is
                intended to aid trial judges in identifying and focusing upon
                those issues which the parties plan to raise on appeal. Thus,
                Rule 1925 is a crucial component of the appellate process.
                Id. ‘When the trial court has to guess what issues an
                appellant is appealing, that is not enough for meaningful
                review.’ [Commonwealth v. Lemon, . . . 804 A.2d 34, 37
                (Pa. Super. 2002).]

Commonwealth v. Smith, 955 A.2d 391, 393 (Pa. Super. 2008) (citations omitted).
“Importantly, however, ‘[e]ach error identified in the [Rule 1925(b) s]tatement will
be deemed to include every subsidiary issue which was raised in the trial court.’
Pa.R.A.P. 1925(b)(4)(v). . . .” Desher v. Se. Pa. Transp. Auth., 212 A.3d 1179, 1185
(Pa. Cmwlth. 2019).
                The District contends that Taxpayers’ ambiguous statement of errors
complained of on appeal hampered the trial court’s ability to address the issues on
appeal.12      Regarding Taxpayers’ first issue, the District stated: “Each expert

      12
           Specifically, the District asserted in its brief:
                In their [statement of errors] complained of on appeal, [] Taxpayers
                identified two issues. First, Taxpayers claimed the trial court erred by
                finding the District’s appraiser’s testimony to be substantial evidence
                because the appraiser ‘used an improper factor’ when calculating the
                Property’s [fair market value]. Taxpayers did not identify the alleged
                improper factor and provided no additional information regarding this
                                                     14
considered numerous factors in arriving at their value conclusions. To simply allege
that the District’s expert utilized ‘an improper factor,’ without anything further,
prevents the trial court from meaningfully addressing this issue.” District’s Br. at 16
(emphasis added). With respect to Taxpayers’ second issue, the District asserts:

               The [Original Lease] and 2018 [L]lease[], with exhibits and
               amendments, are 56 pages and 106 pages, respectively.
               Taxpayers argue that, under these leases, the operators
               obtained ‘more than just land and buildings.’ ([Taxpayers’
               Br. at 7]). . . . The Taxpayers’ statement of [errors]
               complained of on appeal does not dispute the trial court’s
               conclusion that the economic value of any personal property
               is de minimis; it simply asserts that the trial court’s value
               included personal property and intangibles. Taxpayers do
               not identify the specific personal property included in
               the trial court’s value conclusions. This prevented the
               trial court from conducting any meaningful assessment of
               Taxpayers’ claims.

District’s Br. at 17 (emphasis added).
               Taxpayers rejoin: “Throughout the trial of this matter, Taxpayers’
central contention was that the leases encumbering the Property should not be used to
value the real estate because the intangible components of the leases could not be
extracted therefrom.” Taxpayers’ Reply Br. at 4.



               purported improper factor. Second, they argued the trial court erred
               by ‘including value attributed to personal property and intangibles’ in
               the Property’s [fair market value]. Once again, Taxpayers did not
               identify the specifics of this alleged error and did not identify that
               personal property or intangible property allegedly included in the trial
               court’s value conclusions.
               In its Rule 1925(a) Opinion, the trial court found that [] Taxpayers
               waived any issues on appeal by failing to specify the alleged improper
               factor or specific personal property and intangibles included in its
               value conclusions.
District’s Br. at 15-16.


                                                 15
               Before the trial court, Taxpayers argued that the Property’s fair market
value should not include consideration of the Leases because the Leases included
elements that were not subject to real estate tax. Taxpayers offered expert testimony
in support thereof. Thus, at trial, Taxpayers clearly identified the issues that were
before the trial court, and generally referenced those very issues in their Rule 1925(b)
statement. Consequently, “the language of Appellant’s Rule 1925(b) statement is not
vague; it is appropriately concise, given the mandate that the statement ‘should not be
redundant or provide lengthy explanations as to any error.’                      Pa.R.A.P.
1925(b)(4)(iv).” Desher, 212 A.3d at 1185. Accordingly, Taxpayers did not waive
their issues on appeal.


                                 II. Fair Market Valuation
               Taxpayers argue that the trial court erred by including intangible assets
and other personal property in its fair market value determination.
               The law is well established:

               In a tax assessment appeal, the trial court proceeds de novo.
               Once the taxing authority’s assessment is admitted into the
               record, it has made the prima facie case on the assessment.
               The burden then shifts to the appellant to present sufficient,
               competent, and credible evidence to overcome the taxing
               authority’s prima facie case.
               The [Consolidated County Assessment Law (]Assessment
               Law[)13] requires that real property be assessed at its ‘actual
               value.’ 53 Pa.C.S. § 8842. The actual value is a parcel’s
               fair market value, which has been defined as ‘the price
               which a purchaser, willing but not obliged to buy, would
               pay an owner, willing but not obliged to sell, taking into
               consideration all uses to which the property is adapted and
               might in reason be applied.’ Harley-Davidson Motor Co[.]
               v. Springettsbury T[wp.], . . . 124 A.3d 270, 279 ([Pa.]
               2015). The Assessment Law authorizes three approaches to

      13
           53 Pa.C.S. §§ 8801-8868.
                                              16
               a valuation: (i) the cost approach;[14] (ii) the comparable
               sales approach;[15] and (iii) the income approach,[16] which
               divides a subject property’s annual net rental income by an
               investment rate of return. A trial court has discretion to
               decide which method of valuation is most appropriate for a
               given property.
               When determining fair market value, the property tax
               assessment ‘must include all relevant factors having a
               bearing on that value.’ Harley-Davidson, 124 A.3d at 283.
               The assessment must include ‘the entire property and not
               merely its constituent elements.’ Tech One [Assocs. v. Bd.
               of Prop. Assessment, Appeals & Review of Allegheny Cty.],
               53 A.3d [685,] 700 [(Pa. 2012)]. The property must be
               valued based upon its current use even where an appraiser
               opines that the highest and best use of the property is
               different.

Erie-W. Pa. Port Auth. v. Erie Cty. Bd. of Assessment Appeals, 213 A.3d 1041, 1048-
49 (Pa. Cmwlth. 2019) (citations omitted). Importantly, “non-real estate elements
must be separately valued because they are not subject to real estate taxes[,]” and
“they must be . . . backed out of the fair sale price to establish the fair market value
for real estate tax purposes.” Grand Prix Harrisburg, LLC v. Dauphin Cty. Bd. of
Assessment Appeals, 51 A.3d 275, 277-78 (Pa. Cmwlth. 2012).

               The actual or fair market value, while not easily
               ascertained, is fixed by the opinions of competent witnesses
               as to what the property is worth on the market at a fair sale.
               Many factors should be taken into account by the expert
               witness in arriving at his estimate of value.


       14
            Section 8842(b)(1)(iii)(A) of the Assessment Law describes the cost approach as
“reproduction or replacement, as applicable, less depreciation and all forms of obsolescence.” 53
Pa.C.S. § 8842(b)(1)(iii)(A).
        15
           “The comparable sales approach compares the subject property to similar properties with
consideration given to size, age, physical condition, location, and other factors.” Aetna Life Ins. Co.
v. Montgomery Cty. Bd. of Assessment Appeals, 111 A.3d 267, 278 (Pa. Cmwlth. 2015).
        16
           “The income approach or capitalization method is used to appraise income[-]producing
real estate by dividing the annual net rental income (gross income minus expenses) expected from
the property by the investment rate of return (the capitalization or ‘cap’ rate) for that property.”
Cedarbrook Realty, Inc. v. Cheltenham Twp., 611 A.2d 335, 339 n.4 (Pa. Cmwlth. 1992).
                                                 17
Buhl Found. v. Bd. of Prop. Assessment, Appeals & Review of Allegheny Cty., 180
A.2d 900, 902 (Pa. 1962) (citation omitted).17               However, “if an expert uses an
improper factor when fixing the fair market value of real estate, his opinion is not
substantial evidence that can support a finding of value.” Aetna Life Ins. Co. v.
Montgomery Cty. Bd. of Assessment Appeals, 111 A.3d 267, 279 (Pa. Cmwlth. 2015).
                The Pennsylvania Supreme Court has explained that there are

                two basic principles applicable to valuing real property
                which is subject to a long-term lease: First, the ‘economic
                reality’ of the existence of the lease must be considered
                by an appraiser in establishing the market value of
                property encumbered by a lease, since it will be a factor
                which affects the price which a purchaser of the property is
                willing to pay. Second, when the property generates
                income, the capitalization of income approach is an
                appropriate method to use to ascertain its value, and, in
                applying that method, the contract rent received under
                the lease is the relevant income stream which is to be
                capitalized, even if it is below prevailing market rental
                rates.

Tech One Assocs., 53 A.3d at 703 (emphasis added). Thus, “when real estate is
subject to a long-term lease, the portions of the property subject to a leasehold
interest cannot be disregarded in valuing the property. Rather, the ‘economic reality’
of the lease must be considered in establishing the market value of the property.” In
re Consol. Appeals of Chester-Upland Sch. Dist., 200 A.3d 1052, 1059 (Pa. Cmwlth.
2018) (citation omitted), appeal granted, In re Chester-Upland Sch. Dist., 216 A.3d
1031 (Pa. 2019); see also Downingtown Area Sch. Dist. v. Chester Cty. Bd. of
Assessment Appeals, 131 A.3d 152 (Pa. Cmwlth. 2015).                    “[O]nce [an] expert
testifie[s] that he took the leases ‘into consideration but did not make an adjustment,
this failure to make an adjustment, if anything, goes to the weight of his testimony



      17
           Buhl was superseded by statute as stated in Grand Prix.
                                                 18
and not its competency.’” Aetna Life, 111 A.3d at 280 (quoting In re Appeal of Prop.
of Cynwyd Invs., 679 A.2d 304, 309 (Pa. Cmwlth. 1996)).
             “[I]t is well[]settled that all matters of credibility and evidentiary weight
are within the exclusive province of the trial court and that these determinations are
binding on this Court absent an error of law.” RAS Dev. Corp. v. Fayette Cty. Bd. of
Assessment Appeals, 704 A.2d 1130, 1137 (Pa. Cmwlth. 1997). “Nevertheless, as
fact-finder, ‘the trial court must state the basis and reasons for its decision.’” Aetna
Life, 111 A.3d at 279 (quoting Green v. Schuylkill Cty. Bd. of Assessment Appeals,
772 A.2d 419, 433 (Pa. 2001)). “The function of the trial court in a tax assessment
matter is not to independently value the property, but to weigh the conflicting
testimony and values expressed by the experts and, based on the credibility of their
opinions, arrive at a valuation.” Downingtown, 131 A.3d at 157.
             Further,

             although it is the role of the trial court to determine the
             credibility and weight of the evidence before it, our
             [S]upreme [C]ourt has noted that there is a difference
             between credibility as a matter of personal veracity and as a
             matter of substantive reasonableness.
                   The language chosen by the trial court . . .
                   implies that its evaluation of the expert’s
                   testimony involved a credibility determination.
                   In this regard, it is important to distinguish
                   between credibility as a matter of personal
                   veracity and as a matter of the substantive
                   reasonableness of a witness’s testimony.
                   While the trial court’s determinations
                   concerning the former are unreviewable by an
                   appellate court, the same is not true of the
                   latter. See McKnight [Shopping Ctr., Inc. v.
                   Bd. of Prop[.] Assessment, Appeals and Review
                   of Allegheny C[ty.]], . . . 209 A.2d [389,] 392
                   [(Pa. 1965)] (rejecting the trial court’s
                   conclusion that expert testimony was not


                                           19
                   credible, where such conclusion rested on an
                   incorrect factual assumption). . . .

Koppel Steel Corp. v. Bd. of Assessment Appeals of Beaver Cty., 849 A.2d 303, 305-
06 (Pa. Cmwlth. 2004) (footnote omitted) (quoting Green, 772 A.2d at 434 n.11); see
also Masalehdan v. Allegheny Cty. Bd. of Prop. Assessment, Appeals & Review, 931
A.2d 122 (Pa. Cmwlth. 2007). Accordingly, “[i]f the trial court rejects an expert’s
testimony for specified reasons, an appellate court may review the validity of those
reasons.” Aetna Life, 111 A.3d at 279.
            Here, the trial court found both experts credible. However, the trial
court rejected the substantive reasonableness of Shonberg’s opinion on fair market
value. Regarding the competing expert opinions, the trial court explained:

            Although [the trial court] found neither expert’s approach to
            valuation perfect, in the end, [the trial court] found
            Glowacki’s calculation of fair market value based on the
            income approach more credible. [The trial court] found
            Shon[]berg’s explanation of the recent $15,768,000 sale as
            attributable in large part to the non-real estate aspects of the
            [P]roperty, hard to swallow, particularly since the deed (and
            transfer taxes paid thereon) does not except out any amount
            for intangibles.
            In accordance with Tech One Associates . . ., in order to
            determine the market value of property, the leased fee and
            the leasehold must be considered. [The trial court]
            decline[s] Shonberg’s analysis under the cost approach
            because he did not consider the value of the leased fee and
            leasehold interests.
            Furthermore, as suggested by the court in Downingtown . . .
            , [the trial court] believe[s] that the income approach is
            the best method of calculating the actual value of this
            type of income producing property. As previously noted,
            employment of this method should include a consideration
            of both the landlord’s leased fee and the tenant’s leasehold
            interest. . . . To examine a property in its unencumbered
            form is to ignore the economic realities of commercial
            real estate transactions. Similarly, [the trial court]
            cannot simply ignore the fact that the current lease nets
                                          20
            the owner of the subject property approximately 1
            million dollars per year in rental income. To the extent
            that [Taxpayers] argue[] that there are elements in the leases
            that are extraneous to the real estate, [the trial court] find[s]
            the economic value of those intangibles de minim[i]s.
            Although teasing out the real estate and intangible aspects
            of the business is murky science at best, [the trial court]
            cannot simply don blinders, as Shonberg advocates, and
            ignore the fact that the lease enhances the fair market
            value of the [P]roperty.

R.R. at 5a-6a (emphasis added; citations and footnotes omitted).
            The trial court exercised its discretion to determine the appropriate
valuation method for the Property. Here, Missouri River and Current Owner, two
real estate investment trusts holding the Property as an income-producing investment,
have been the only Property owners since 1998. See R.R. at 252a. This Court has
explained that “[t]he income approach is the most appropriate method for
appraising a property typically purchased as an investment . . . , because such a
property is valued by a purchaser for its ability to produce income.” In re Appeal of
V.V.P. P’ship, 647 A.2d 990, 992-93 (Pa. Cmwlth. 1994) (emphasis added); see also
1198 Butler St. Assocs. v. Bd. of Assessment Appeals, Cty. of Northampton, 946 A.2d
1131 (Pa. Cmwlth. 2008).
            Relative to the personal property and intangibles, Shonberg conceded
that the FF&E’s value is de minimis, and acknowledged that the Facility’s staff was
also of limited monetary value.        Shonberg and Taxpayers did not provide a
justification or a legal basis for considering the residents as intangible property. As
the trial court noted, “[n]obody owns the residents. They’re free to come and go as
they want.” R.R. at 288a. Finally, Taxpayers did not address the trial court’s
concerns regarding ownership of resident medical records.                   Given these
considerations, substantial evidence supported the trial court’s finding that the value
of the FF&E and intangibles was de minimis. Accordingly, the trial court did not err


                                           21
when it gave greater weight18 to and credited Glowacki’s income approach which
reflected the Property’s income-producing nature.
               For all of the above reasons, the trial court’s order is affirmed.19



                                             ___________________________
                                             ANNE E. COVEY, Judge




       18
            Although Shonberg testified that he considered the leases and, thus, his testimony was
competent, his failure to make adjustments for the leases goes to the weight of his testimony, and
“the trial court has exclusive province over all matters of credibility and evidentiary weight.” Aetna
Life, 111 A.3d at 279.
        19
            Relying solely on Section 8854(a)(6) of the Assessment Law, 53 Pa.C.S. § 8854(a)(6),
Taxpayers also assert in their Reply Brief that the Board’s brief to this Court, which incorporates by
reference the District’s brief, violates the Board’s statutory duty to defend its assessment. That
Section pertains to appeals to the courts of common pleas and provides that a tax board:
               shall have the power and duty to present a prima facie case in
               support of its assessment, to cross-examine witnesses, to discredit or
               impeach any evidence presented by the taxable person, to prosecute
               or defend an appeal in any appellate court and to take any other
               necessary steps to defend its valuation and assessment.
53 Pa.C.S. § 8854(a)(6) (emphasis added).
        Notably, Section 8854(b) of the Assessment Law, addresses appeals to this Court, and
simply provides: “The [B]oard, or any party to the appeal to the court of common pleas, may appeal
from the judgment, order or decree of the court of common pleas.” 53 Pa.C.S. § 8854(b). At the
trial court’s hearing, the Board offered Maas’ testimony to support its assessed value for the
Property. The trial court ultimately adopted Glowacki’s higher assessed value as the Property’s fair
market value. Presumably, the Board agreed with the trial court’s decision and, therefore,
incorporated by reference the District’s argument in requesting this Court affirm the trial court’s
order. This Court discerns the Board did not err by doing so.


                                                 22
             IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Missouri River Corp.                       :
                                           :
                   v.                      :
                                           :
Erie County Board of Assessment            :
Appeals, Erie County, PA                   :

Interested Parties:                        :
City of Erie School District, City of      :
Erie and Erie County                       :

Parcel No.: 17-040-037.0-210.00            :
Property Address: 1012 W. Bayfront         :
Pkwy., City of Erie, Erie County           :

Appeal of: Missouri River Corp.            :
(Sunrise Senior Living, Inc., tenant and   :
agent) and NHI-REIT of Bickford,           :
(Bickford Master Buckeye, LLC,             :
tenant and agent), successor-in-interest   :
to Missouri River Corporation              :   No. 639 C.D. 2019

Missouri River Corp.                       :
                                           :
                   v.                      :
                                           :
Erie County Board of Assessment            :
Appeals, Erie County, PA                   :

City of Erie School District, City of      :
Erie and Erie County                       :

Parcel No.: 17-040-037.0-210.00            :

Appeal of: Missouri River Corporation :        No. 640 C.D. 2019
and NHI-REIT of Bickford              :

                                        ORDER
             AND NOW, this 2nd day of March, 2020, the Erie County Common
Pleas Court’s April 29, 2019 order is affirmed.


                                        ___________________________
                                        ANNE E. COVEY, Judge
