               IN THE SUPREME COURT OF IOWA
                               No. 14–0093

                         Filed February 12, 2016

                          Amended May 6, 2016


WELLMARK, INC.,

      Appellee,

vs.

POLK COUNTY BOARD OF REVIEW,

      Appellant.


      On review from the Iowa Court of Appeals.



      Appeal from the Iowa District Court for Polk County, Lawrence P.

McLellan, Judge.



      County board of review seeks further review of a court of appeals

decision affirming the district court’s ruling on an appeal from a property

tax assessment. REVERSED.


      John P. Sarcone, County Attorney, and David W. Hibbard and

Ralph E. Marasco Jr., Assistant County Attorneys, Des Moines, for

appellant.



      Deborah M. Tharnish and Christopher E. James of Davis, Brown,

Koehn, Shors & Roberts, P.C., Des Moines, for appellee.
                                        2

APPEL, Justice.

      In this case, we confront difficult issues related to the proper

valuation   of   a   large,   well-built,   and   highly    attractive   corporate

headquarters located in a relatively small metropolitan area for property

tax purposes.

      This case involves the 2011 assessed valuation of Wellmark, Inc.’s

corporate headquarters located in Des Moines (the property). The Polk

County Assessor set the valuation at $99 million. Wellmark protested to

the Polk County Board of Review (the Board). After a hearing, the Board

denied the protest, and Wellmark appealed to the district court.               On

appeal, the district court entered its findings of fact, conclusions of law,

and judgment, finding the valuation of the property for property tax

purposes on January 1, 2011, was $78 million.

      The Board appealed. Among other things, the Board asserted that

the district court improperly relied upon expert testimony based not

upon the current use of the building, namely as a headquarters for a

single owner-occupant, but as a multitenant office building.                   We

transferred the case to the court of appeals.              The court of appeals

affirmed the judgment of the district court.          We granted the Board’s

application for further review.

      The fundamental issue coursing through this case is whether the

Wellmark property should have been valued as if it were a multitenant

office building—the most likely use that would result if the property were

sold in the limited Des Moines market—or whether the Wellmark

property should have been valued according to its current use—a single-

tenant headquarters building—even though there was some question

whether a buyer for that use could be found in response to a

hypothetical “For Sale” sign.
                                        3

        I. Background Facts and Proceedings.

        A. The     Property.       In   March   2010,    Wellmark     completed

construction of its corporate headquarters in downtown Des Moines. The

building is comprised of five 599,880-square-foot stories of above-ground

office space, and two levels of below-ground parking.              An adjoining

parking garage and exercise facility are not included in the present

appeal.

        The record demonstrates that the building is striking and highly

attractive.      The outside of the building is finished with limestone,

sandblasted precast concrete, and glass, with a large U-shaped,

recessed, curved glass wall on the southern exposure.              The building

design allows daylight into all the office workstations.

        The first floor contains a lobby, several entrances, a convenience

store, an art gallery, a full-service restaurant, and a conference center.

The second floor contains an auditorium and facilities to support that

room,     with     approximately    90,000   square     feet   unfinished    and

unoccupied. The third and fourth floors contain open office space. The

third- and fourth-floor space is filled primarily with cubicles with some

private offices.    The fifth floor is designed the same as the third and

fourth floors with an executive office area at the southwest corner.

        Additionally, the property was designed to be energy efficient and

environmentally friendly. The property has achieved LEED (Leadership

in Energy and Environmental Design) platinum certification. 1 LEED is a

green building certification program devised by the United States Green

Building Council. There is no dispute that the structure provides class-A

        1See     U.S.  Green     Bldg.   Council,     LEED    Overview     (2016),
http://www.usgbc.org/leed.   Platinum certification is the highest level of LEED
certification. See id.
                                      4

office space with first-class amenities. It was also undisputed that the

cost to construct the building exceeded $150,000,000.

      The property could fit comfortably into the surroundings of the

suburbs of Chicago, an expanding Sunbelt city, or an East Coast office

park. It is located, however, in the commercial real estate district known

as the central business district (CBD) in downtown Des Moines.                The

Des Moines metropolitan statistical area (MSA) is characterized as a

“third-tier” MSA with an area population of approximately 490,000.

      B. Assessment/Protest.         Although staff at the Polk County

Assessor’s office originally believed the property should be valued in

excess of $100,000,000 for property tax purposes as of January 1, 2011,

the assessment eventually embraced by Polk County after a series of

meetings    and    consultations   with   senior   local   tax    officials   was

$99 million.      In May 2011, Wellmark timely filed a protest of the

valuation with the Board, asserting the taxing authorities assessed the

property for more than the value authorized by law.              See Iowa Code

§ 441.37(1)(b) (2011). In contrast to the assessor’s value of $99 million,

Wellmark asserted that the actual value of the property was $72 million.

In June, the Board denied the protest, noting “[t]he assessed value of

[the] property was not changed because market data indicate[d] that the

property is assessed at its fair market value.” Wellmark appealed to the

district court.

      A bench trial commenced in July 2013. At the beginning of trial,

Wellmark stated without objection that the parties had agreed to a

stipulation, noting among other things that “the only grounds that [the
                                             5

parties were] proceeding on today [would be] that the property [was]

assessed for more than the value authorized by law.” 2

        Four well-qualified appraisers testified regarding the value of the

property: Chris Jenkins and Ted Frandson for Wellmark, and Peter

Korpacz and Bernie Shaner for the Board.                      The appraisers looked to

three    traditional    approaches      to       find   the     property’s   value:   cost,

comparable sales, and income. After arriving at a value based on each of

these three traditional approaches, the appraisers reconciled the three

approaches to reach their final conclusion regarding value.                     The table

below sets forth the valuations of each appraiser under each method of

valuation and their reconciliations of the different approaches:

                        Jenkins         Frandson               Korpacz         Shaner
Comparable-
                       $65,100,000     $65,987,000            $143,800,017    $83,980,000
Sales Approach
Income
                       $68,480,581     $75,209,978            $149,798,817    $87,450,000
Approach
Cost Approach          $71,100,000     $73,123,000            $149,798,812   $122,970,000
Reconciliation         $68,000,000     $70,000,000            $145,000,000   $120,000,000

        The Polk County Assessor valued the property at $99 million using

the cost approach. The record does not contain calculations supporting

this figure, but it appears to have been a result of a series of internal

meetings in the assessor’s office.

        The parties’ experts differed on many points and adjustments in

their analyses.        A key issue was one of methodology.                   The Board’s

experts, Korpacz and Shaner, emphasized the current use of the

Wellmark building as a single-occupant corporate headquarters.                        This


        2Wellmark  filed a motion to strike contending that the Board, in its reply brief,
argued that the district court impermissibly relied on a statutory ground not relied
upon by Wellmark—namely, that the assessment was not equitable. The court of
appeals denied the motion. We agree with the court of appeals and do not give this
issue any further consideration.
                                     6

use was the linchpin of their evaluation. They asserted that the proper

way to value the business was in a hypothetical transaction in which the

buyer would continue the current use.          Recognizing there were no

Des Moines area transactions in which a large office building was

purchased    by   an   owner-occupant    for   sole   use   as   a   corporate

headquarters, Korpacz considered corporate headquarters transactions

identified from a national database in a wide variety of national locations.

While Shaner relied on local multitenant office structures in his

comparable-sales and income analyses as the best available comparisons

in the local area, he ultimately emphasized his relatively high-cost

valuation as the most accurate reflection of the value of the property

when used as a corporate headquarters by a single occupant.                By

emphasizing national sales and by valuating the building at relatively

close to actual cost, the Board’s experts asserted they had provided the

best way to value the building according to its current use, justifying a

valuation well in excess of the $99 million assessment imposed by the

Board.

      The experts for Wellmark disagreed. They believed it very unlikely

that the Wellmark building could be sold on the open market to a single

corporate entity for use as a corporate headquarters. Their position was

based primarily on the realities in the local Des Moines market.

Wellmark’s experts pointed out they were unaware of any occasion in the

Des Moines market when an existing building was purchased by a third-

party corporation for use as a single-tenant headquarters.            Instead,

Wellmark’s experts noted that corporations seeking new locations for

corporate headquarters have generally chosen to construct new built-to-

suit signature structures in the Des Moines area.            To the extent

corporations have acquired local buildings for headquarters use, they
                                        7

have only partially occupied the premises and rented out the balance to

other tenants. Additionally, Wellmark’s experts noted the very large size

of the Wellmark structure further supported the view that even in the

event a corporation was interested in purchasing the building for

headquarters use, it is very likely that a substantial balance of the

property would be rented out to third-party tenants.

      Thus, the Wellmark experts viewed the possibility of a corporation

buying   the   building     for   use    as   a   single-occupancy   corporate

headquarters very unlikely. Given the realities of the local marketplace,

the experts for Wellmark determined the value of the building by using

analysis of multitenant office buildings in the Des Moines market or

similar geographic areas.

      C. District Court Order.          For the most part, the district court

agreed with Wellmark.        The district court found that Wellmark had

produced two disinterested witnesses that indicated the market value of

the property was less than the market value determined by the assessor

and therefore the burden shifted to the Board to uphold the assessment

value. See id. § 441.21(3).

      The district court considered the valuations arrived at by the

experts using the comparable-sales approach. The district court noted it

gave more weight to Wellmark’s experts because they each examined

properties located in Polk County and other municipalities, which was

“essential here in light of each appraiser’s comment that there were

relatively few sales of buildings as corporate headquarters which is the

present use of the Property.” Yet, the district court further noted that

the evaluations of Wellmark’s experts did not involve sales of corporate

headquarters to single occupants, which also represented the present

use of the building.
                                     8

      Korpacz did identify sales of corporate headquarters buildings by

single occupants, but none were local. The district court noted Korpacz’s

conclusions were diminished by the facts that he did not examine any

transaction in Iowa or Polk County and that he used properties from

larger metropolitan markets where there would be more potential buyers.

These sales, the district court found, did not constitute comparable sales

because they did not take into account the availability or unavailability of

a willing buyer in the local marketplace.

      The district court did not feel comfortable relying solely on the

comparable-sales approach. It concluded that the market value of the

property was not “readily established” by the comparable-sales approach

and therefore considered evidence presented involving “other factors.”

See id. § 441.21(2).

      Before making its conclusion as to value, the district court noted it

found it “very difficult to reconcile any of the approaches utilized by the

appraisers in this case” because “each one utilized different properties”

and “made different assumptions with those assumptions being made in

favor of the party that retained them.”     Additionally, the district court

noted, “In some instances there appeared to be different mathematical

methods used to reach [the appraisers’] conclusions . . . .”

      In the end, upon de novo review, the district court found the value

of the property on January 1, 2011, was $78 million. This valuation was

consistent with an approximate cost of $136 per square foot under the

comparable-sales approach, a nine percent capitalization rate under the

income approach assuming the multitenant use of the property, and a

fifty-two percent total obsolescence and depreciation rate under the cost

approach. Additionally, the district court found the valuation resulted in

a tax of $130 per square foot, which appeared to be fair and equitable
                                          9

when compared to other similar corporate headquarters in downtown

Des Moines that were built in the past decade.

      The Board appealed, contending Wellmark’s appraisers failed to

consider the current use of the subject property—a single-tenant, owner-

occupied building—when setting the assessed value. On the other hand,

the Board’s experts, and specifically Korpacz, looked to owner-occupied

properties using each appraisal approach. Therefore, the Board argued,

the district court erred in not relying on the Korpacz valuation.

Additionally, the Board argued that reliance on the income approaches of

Jenkins, Frandson, or Shaner improperly exempted from assessment

and taxation a substantial amount of market value. We transferred the

case to the court of appeals, which affirmed the district court’s judgment.

The   Board    filed   an   application       for   further   review,   making   two

contentions. First, that the court of appeals erred in determining that

the market value of the property could not be readily established using

the comparable-sales approach. Additionally, the Board reprised its first

argument on appeal, contending the court of appeals and the district

court erred by allowing the property to be valued as though it were

hypothetically used as a multitenant, investor-owned building rather

than valuing it based upon its present use as a single-owner-occupied

home office.    We granted further review.             For the reasons expressed

below, we reverse the decision of the district court.

      II. Standard of Review.

      Our review of a tax protest is de novo. Boekeloo v. Bd. of Review,

529 N.W.2d 275, 276 (Iowa 1995); see also Dolphin Residential Coop., Inc.

v. Iowa City Bd. of Review, 863 N.W.2d 644, 647 (Iowa 2015) (“[A]ppeals

from decisions of the local board of review are triable in equity . . . , and

our review is de novo . . . .”). “[W]e give weight to the [district] court’s
                                    10

findings of fact, [but] we are not bound by them.”       Iowa R. App. P.

6.904(3)(g); Boekeloo, 529 N.W.2d at 276. We are especially deferential

to the court’s assessment of the credibility of witnesses. Boekeloo, 529

N.W.2d at 276.

     III. Introduction to Valuation Issues Related to Distinctive
Properties.
      A. Overview. The valuation of property has never been an exact

science. In colonial times valuing property was known as the “rule of

common estimation.” See Joint Highway Dist. No. 9 v. Ocean Shore R.R.,

18 P.2d 413, 417 (Cal. Ct. App. 1933).        Although valuation for tax

purposes is necessarily expressed in quantitative terms, the appraisal

process has never been and is not now a mathematical exercise.

      Aside from the difficulty of quantitative line-drawing, there are

important conceptual problems that complicate our consideration of this

appeal. A threshold conceptual issue lurking in this case relates to the

proper methodology to be employed for tax purposes when a building has

substantial, even dramatic, features and improvements that the owner

beneficially uses but the value of which might not be objectively

demonstrable through past marketplace transactions.           The classic

example is the New York Stock Exchange building, which was very costly

to build but which the owners claimed could not be sold on the open

market because its unique features were of no value to anyone else.

Does such an expensive property, for property tax purposes, have zero

value because there are no willing buyers? See People ex rel. N.Y. Stock

Exch. Bldg. Co. v. Cantor, 223 N.Y.S. 64, 68–69 (App. Div. 1927) (rejecting

zero value claim), aff’d mem., 162 N.E. 514 (N.Y. 1928). In this case, the

question is whether, for property tax purposes, the value of a building

with all its fine amenities should be based upon the taxpayer’s current
                                         11

use as an owner-occupied headquarters building, even though there may

not be a local market for such a property.        The issue is sometimes

framed as whether the proper approach to valuation is one based on

“value in use” versus a market-based “value in exchange.” See Daly City

v. Smith, 243 P.2d 46, 51 (Cal. Dist. Ct. App. 1952) (“[I]t is not value in

use, either actual or prospective, to the owner that is involved, but value

in exchange . . . that is the test.”).

      But the question is not entirely binary.      If a property exhibits

features that provide unique value to the owner but literally to no one

else, that is one thing. But what if the current use of the property is not

only of benefit to the current owner but also has at least some impact on

the market value of the property? A property currently hosting a very

successful business might draw more in the marketplace than an

identical property with a struggling business.      Is there a distinction

between value-in-use to the owner, fulfilling solely the whim and fancy of

the owner, and value-in-use that impacts what a willing buyer would pay

for the property in the open market? Further, what if the property has

features that are not truly unique but are nonetheless sufficiently

specialized to give rise to only a limited market of purchasers?

      And there is more.         What happens when we try to value a

distinctive but not unique property that has a limited market but there

are no reliable comparable sales upon which to base a market value? If,

for example, a corporate headquarters building with a single occupant

cannot be sold in the local market to another single-occupant

corporation, do we move down market and determine what the property

would fetch if converted into a general office building, for which the local

market is fairly robust? Or do we use appraisal techniques other than

comparable sales—such as income capitalization or reproduction costs—
                                     12

to arrive at the value that would be obtained in a hypothetical sale to a

party that would benefit from current use?

      We next explore these issues as they are discussed in the caselaw.

Because any tax question must be evaluated in the context of the specific

statutory framework in each jurisdiction, the cases cited below are not

intended to present binding authority or even persuasive authority. They

are instead designed to illustrate some of the principles and challenges

facing the court in this Iowa case and to contextualize the implications of

our resolution of the issues presented.

      B. Value in Use Versus Value in Exchange.

      1. General principle. The Board asserts that Wellmark’s experts

erroneously relied upon calculations of value for the property that

assumed that the space would not be utilized as a single-occupant

corporate headquarters but as a multitenant office building if the

property were for sale. The legal question underlying this issue is the

proper methodology that an assessor should apply in determining the

actual value for purposes of taxation of a large, high-quality, state-of-the-

art, LEED-certified, and even beautiful office building constructed and

occupied by a single tenant as a headquarters in a tertiary market where

there are no comparable sales to support valuation of the property.

      The question at least implicates the difference between what is

referred to in the cases and tax literature as “value in use” and “value in

exchange.” See Jerrold F. Janata, Courts Weigh In on “Highest and Best

Use” and Other Valuation Issues, J. Multistate Tax’n & Incentives,

January 2001, at *1, 2001 WL 43749 [hereinafter Janata]; Nancy S.

Rendleman, Charles B. Neely, Jr., & W. Christopher Matton, Toward a

Better Understanding of Value-In-Use in Property Tax Appraisals, J. Prop.

Tax Mgmt., Winter 1997, at 1, 5–10. “Value in exchange” refers to the
                                     13

value to persons generally and focuses on market value based upon a

willing buyer and willing seller. Janata, 2001 WL 43749, at *2. “Value

in use” refers to the value a specific property has for a specific use. Id.

Value in use is based upon the value of the property as it is currently

used, not on its market value considering alternative uses.        Id.   If a

value-in-use approach is applied, the fact that an overbuilt property has

substantial value to the current user impacts valuation for purposes of

taxation.

      One of the frequently cited cases seemingly applying a value-in-use

approach is Joseph E. Seagram & Sons, Inc. v. Tax Commission, 200

N.E.2d 447 (N.Y. 1964).       Seagram constructed a “monumental and

magnificent” structure for $36,000,000 but urged that under an income

approach to value, the building was worth only $17,000,000. Id. at 448.

Although the opinion is cryptic, the majority noted that Seagram did not

build the structure for commercial rental income and that the income

capitalization approach produced a “false result.” Id. Therefore, the cost

to construct the building was a factor to consider in valuation, at least in

the years soon after construction. Id. Further, “the hypothetical rental

for owner-occupied space need not be fixed at the same rate as paid by

tenants.” Id. The dissent, in contrast, indicated that if the tenants of the

building were willing to pay more for space in the Seagram Building than

for similar space elsewhere, that would be fully reflected in the

capitalization of earnings. Id. at 450 (Burke, J., dissenting).

      2. Strict value in exchange requiring actual comparable sales.      In

contrast to Seagram, other courts have hewed more closely to the value

in exchange or market approaches to value for purposes of taxation.

Some have strongly emphasized the role of actual comparable market

transactions in arriving at valuation for tax purposes.
                                    14

      A leading case is Wisconsin ex rel. Northwestern Mutual Life

Insurance Co. v. Weiher, 188 N.W. 598 (Wis. 1922). In Weiher, the court

was confronted with determining the proper valuation for property tax

purposes of “a fine substantial, artistic building gracing half a block in

the city of Milwaukee built to meet the peculiar needs of its owner, and

not well adapted for other uses.” Id. at 599. The Weiher court held that

Wisconsin law “requires that property shall be assessed with reference to

purposes for which it may be sold rather than the purposes to which it

presently may be devoted.” Id. (quoting Wis. ex rel. Oshkosh Country Club

v. Petrick, 178 N.W. 251, 252 (Wis. 1920)).

      A similar approach was taken in F & M Schaeffer Brewing Co. v.

Lehigh County Board of Appeals, 610 A.2d 1 (Pa. 1992).           In F & M

Schaeffer, the court considered the value of a 791,000-square-foot

brewery.    Id. at 2.    The taxpayer valued the property using the

comparable-sales approach at $9.5 million.       Id. at 3.   The assessor,

however, determined value by analyzing the annual brewing capacity of

the plant and achieved a value of $34 million. Id.

      The Pennsylvania Supreme Court rejected the assessor’s approach.

Id. at 7. The Pennsylvania court emphasized that the statute required

the court to determine “actual value” of property; that the legislature

mandated the use of comparable sales, income, and cost approaches to

making that determination; and that “a property’s use and its resulting

value-in-use cannot be considered in assessing fair market value” of the

property. Id. at 4.

      A more recent illustration of relatively strict insistence on value in

exchange as reflected in actual market transactions is Pacific Mutual Life

Insurance Co. v. County of Orange, 232 Cal. Rptr. 233 (Ct. App. 1985).

As in this case, the property being appraised was a five-story building
                                     15

used as a corporate headquarters by an insurance company. Id. at 234.

The property had distinctive qualities, including an architectural style of

an inverted pyramid and a large central atrium. Id. The taxpayer argued

that the property, if sold in the local market, would likely be utilized as a

general office building. Id. at 237. The court in Pacific Mutual agreed

with the taxpayer, indicating that the use of the property as an office

building was the most likely market result. Id. The implication of Pacific

Mutual is that the highest and best use of property for purpose of

valuation ordinarily can be no higher than that for which there are

comparable sales in the marketplace.

      Even in a jurisdiction that embraces a strict value-in-exchange

theory, the use of a property still may be germane to value under the

theory that the current use of the property would impact what a willing

buyer would pay for the property in the marketplace.          For example,

property may have more market value when used for a reservoir than

when it is open grassland. Joint Highway, 18 P.2d at 417. The potential

use, however, may influence how the market values the property. See

City of Stockton v. Ellingwood, 275 P. 228, 231 (Cal. Dist. Ct. App. 1929)

(a use of property may make it more valuable to purchasers generally).

      The strength of the actual value-in-exchange approach is its

emphasis on objective marketplace transactions that tend to cabin the

subjectivity in the valuation process. The obvious problem, however, is

that extremely valuable and costly properties for which there are no

current buyers or sellers may largely escape taxation.

      3. Use of hypothetical transaction to value property where current

use has limited or no relevant comparable sales.          There is another

approach in the caselaw, however, to the problem of limited or no

comparable sales for property with specialized uses.         A court could
                                    16

decide not to look for comparable sales of a different or broader use in

evaluating the property but instead simply assume for valuation

purposes that there is a hypothetical buyer who would purchase the

property and continue the current use. See James C. Bonbright, 1 The

Valuation of Property 59 (1937).

      The concept of a hypothetical buyer can be particularly important

in cases involving large but specialized industrial properties that are not

generally bought and sold in the marketplace but also have been

employed in the context of a sale of corporate headquarters. The obvious

impact of utilizing a hypothetical buyer theory is to shift the focus away

from comparable sales and focus on other theories of valuation, usually

replacement cost.

      The notion of a hypothetical buyer even when there was no active

market for property at its present use was applied in CPC International

Inc. v. Borough of Englewood Cliffs, 473 A.2d 548 (N.J. Super. Ct. App.

Div. 1984).   The court considered the value of a complex of buildings

comprising the international headquarters of CPC International. Id. at

550. The court described the buildings as “an artful blend of function

and aesthetics.” Id. at 551. Although the gross area within the buildings

was 251,000 square feet, only 160,500 were available for use as office

space.   Id. at 550.   The structure had 34,000 square feet of terraces,

interconnecting bridges, escalators that occupied five or six times the

space of elevators, and a “Cadillac” climate control system. Id. at 551.

The taxpayer in CPC asserted that the likelihood of finding a buyer with

comparable requirements was so remote that the downward adjustment

in valuation was required. Id. at 552. The tax court agreed, reducing the

assessment of the building for functional obsolescence because “[t]he
                                    17

building layout and expensive heating system all represent excessive

costs which are not fully returnable in the market.” Id. at 551.

       The court in CPC disagreed.     Id. at 551–52.   Citing New Jersey

caselaw, the court held that no reduction from taxable value would be

allowed for special-purpose characteristics because those characteristics

were built into the structure by the taxpayer without regard to the

recoverability of their costs and there was no realistic suggestion that the

property was for sale. Id. at 552. While recognizing that the overbuilt

characteristics might not be recognized in the income or selling price of

the building, the CPC court noted that the improvements were installed

not to produce income or increase selling price but for the owner’s own

use.   Id. at 553.   As a result, the court held that there should be no

reduction in valuation for the overbuilt character of the property. Id. As

noted by a later Connecticut court, under CPC, there is no requirement

of “an actual likely purchaser in the marketplace.” Gen. Motors Corp. v.

Linden City, 22 N.J. Tax 95, 124 (2005). Instead, a court will “presume

that a hypothetical buyer exists ‘whose requirements are reasonably

accommodated by the property in question.’ ” Id. (quoting CPC Int’l, 473

A.2d at 552).

       A similar approach was taken by a court in Connecticut. In Aetna

Life Insurance Co. v. City of Middletown, the court considered the value of

the corporate headquarters of a large insurance company.                No.

CV960078839S, 2002 WL 377147, at *1 (Conn. Super. Ct. Feb. 14,

2002). Like here, the property was distinctive. It had many amenities, a

fitness center, lecture hall, conference rooms, convenience store, hair

salon, cafeteria, and a well-lit central court with a large granite water

fountain. Id. at *2. Because the headquarters was an extremely large

building (nearly 1.5 million square feet), which was not common in the
                                     18

real estate market, the court found no comparable sales.         Id. at *7.

Rather than value the building based on other usages that would have

been reflected in comparable local sales, the court engaged in a

reproduction-cost analysis. Id. at *9; see also Gen. Elec. Co. v. Fairfield,

No. CV020392891S, 2005 WL 2081269, at *5 (Conn. Super. Ct. July 22,

2005) (declining to value national headquarters of General Electric based

on multitenant market value, but instead concluding that the cost

approach was the most reliable method of determining market value);

Beneficial Facilities Corp. v. Peapack & Gladstone Borough, 11 N.J. Tax

359, 363, 376 (1990) (evaluating a corporate headquarters with Italian

Palladian style architecture, extensive use of bricks, arched windows,

false chimneys, light wells for underground corridors, archways, patios,

fountains, and copper roofs under cost approach), aff’d per curiam, 13

N.J. Tax 112 (N.J. Super. Ct. App. Div. 1992).

      An Oregon court took a similar approach in Freedom Federal

Savings & Loan Association v. Department of Revenue, 801 P.2d 809 (Or.

1990) (en banc). In that case, the Oregon court considered the value of

the headquarters building of a savings and loan association. Id. at 811.

The taxpayer argued that there was no immediate market for the

building as a corporate headquarters and that it should be valued as a

multitenant office building.    Id. at 812.   The court rejected the theory

although there were no comparable sales available to assist in the

valuation of the structure and financial institutions do not usually buy

their headquarters buildings but instead build them to their own

specifications.   Id. at 813.   Nonetheless, the Oregon court determined

that the cost approach was the best method to evaluate the structure.

Id. In applying the cost approach, the court also declined to reduce the

value for “inutility” because the property was overbuilt for a multitenant
                                    19

office building, noting that there was no overbuilding while the property

was used as a corporate headquarters. Id.

      The notion of hypothetical market transactions where there are no

comparable sales of specialized property is particularly important in the

context of large industrial properties. A leading case is Ford Motor Co. v.

Edison Township, 10 N.J. Tax 153 (1988), aff’d, 604 A.2d 580 (N.J.

1992).   In that case, the court considered the value of an automobile

assembly, manufacturing, warehouse, and office complex.         Id. at 158.

The taxpayer asserted that there was no demand for an automobile plant

and that the property should not be evaluated based on current use but

instead as a general manufacturing facility.      Id. at 161.   The court

emphasized that property should generally be evaluated by “the actual

condition in which the owner holds it.” Id. at 165. The Ford Motor court

made an analogy to the law of eminent domain, noting that in this field,

      it has long been accepted . . . that if the property were being
      employed, at the time of the taking, in the use which is
      asserted to be the highest and best, that proof of actual use
      satisfies the requirement of showing the existence of a
      demand for that use.

Id.

      The court emphasized that there was nothing in the record to

suggest that the facility was unmarketable for its current use. Id. at 166.

It further noted that the taxpayer’s approach “would permit valuable

features presently being used to entirely escape their just share of the

burden of taxation.” Id.

      A similar case is Nestle USA, Inc. v. Wisconsin Department of

Revenue, 795 N.W.2d 46 (Wis. 2011).         In that case, the Wisconsin

Supreme Court considered the value of a plant used to manufacture

infant formula.   Id. at 48.   Nestle argued that there were no sales of
                                    20

comparable manufacturing facilities and that as a result, the property

should be valued as a general food processing plant.       Id. at 51.   The

Wisconsin court rejected the taxpayer’s suggestion, noting that the fact

that there were no comparable sales did not demonstrate that there was

no market for the plant as an infant formula manufacturer. Id. at 57.

The court emphasized that the taxpayer failed to offer evidence that no

market existed for an infant formula manufacturing plant.         Id.   The

evidence did not establish that there was no market for an infant formula

manufacturing plant, only that there were no comparable sales to assist

in the evaluation of the property. Id.

      Another case involving these principles is STC Submarine, Inc. v.

Department of Revenue, 890 P.2d 1370 (Or. 1995) (en banc).         In that

case, the property was used for a manufacturing facility for marine fiber

optic cable. Id. at 1370. STC’s three existing competitors already owned

their own plants. Id. at 1371. As a result, STC argued that the property

should be valued as general-purpose industrial property and not as a

manufacturing facility for marine fiber optic cable. Id.

      The Oregon court rejected the taxpayer’s argument. Id. at 1372–

73.   The court reasoned that there was a possibility that existing

competitors or new entrants to the market would purchase the property.

Id. at 1372.   According to the court, “[t]he building’s special features,

designed to accommodate [its current] use, are part of the property’s

value-in-exchange, because they increase the amount at which the

property would change hands in the marketplace.” Id. at 1374.

      A third possible approach is to consider all proffered theories of

valuation in arriving at a proper assessment and simply to make a

judgment call of market value.     A representative case is Supervisor of

Assessments v. U.S. Fidelity & Guaranty Co., No. 1263, 1978 WL 1493
                                         21

(Md. Tax Feb. 1, 1978). In that case, the trial court was to determine the

value of the headquarters of United States Fidelity and Growth Company,

a large insurance company. Id. at *1. The building itself was unusual,

attractive, and of superior quality. Id. The taxpayer recognized that the

property cost $56,000,000 to build but asserted that its market value

was $26,000,000. Id. at *3. The Maryland trial court raised the question

of whether the building should be valued as a prestigious home office

building of a major insurance company or as a commercial office building

available for rental with an anticipated profitable net income. Id. at *4–5.

In that case, the court seems to have given some credence to the

testimony of all experts in arriving at a middling value of $36,000,000.

Id. at *5.    The approach of the Maryland trial court seems somewhat

undisciplined, but perhaps its candor should be applauded for avoiding

exaggerated claims of certainty and recognizing that valuation is, at best,

an educated guess. Cf. Joint Highway, 18 P.2d at 419 (noting that an

expert opinion that failed to recognize potential but not active demand for

property should be “weighed accordingly”).

      IV. Relevant Iowa Statutes and Caselaw.

      A. Iowa Statutes Related to Valuation.                  With the above

discussion providing context, we now turn our focus specifically to Iowa

tax statutes. Traditionally, Iowa statutory law provided that property be

taxed at “actual value.” “Actual value” was defined statutorily to mean

“value in the market in the ordinary course of trade.” Iowa Code § 1305

(1897). “Value in the market,” however, was not further defined in the

statute.

      In     1959,   the   legislature   replaced   the   “value-in-the-market”

approach for a broader “actual-value” framework for property tax

purposes. The 1959 legislation provided,
                                    22
      In arriving at said actual value the assessor shall take into
      consideration its productive and earning capacity, if any,
      past, present, and prospective, its market value, if any, and
      all other matters that affect the actual value of the property
      ....

1959 Iowa Acts ch. 291, § 21 (codified at Iowa Code § 441.21 (1962)).

      The 1959 statutory provision embraced an open-ended, totality-of-

circumstances approach to valuation. In considering “actual value,” the

assessor was required to take into account productive and earning

capacity, market value, and “all other matters” that affected “actual

value.” The meaning of “actual value” was not further defined. The lack

of legislative direction in the new statute gave assessors broad discretion

in determining the methodology to use in determining actual value.

      The legislature again revised the provisions related to the meaning

of actual value in 1967 which remains part of our present Code today.

See Iowa Code § 441.21(1) (2015). This time, the legislature provided a

comparatively detailed framework for assessors in determining the actual

value of property. The 1967 legislation provided,

      The actual value of all property subject to assessment and
      taxation shall be the fair and reasonable market value of
      such property. “Market value” is defined as the fair and
      reasonable exchange in the year in which the property is
      listed and valued between a willing buyer and a willing
      seller, neither being under any compulsion to buy or sell and
      each being familiar with all the facts relating to the
      particular property.      Sale prices of the property or
      comparable property in normal transactions reflecting
      market value, and the probable availability or unavailability
      of persons interested in purchasing the property, shall be
      taken into consideration in arriving at its market value.

1967 Iowa Acts ch. 354, § 1 (emphasis added) (codified at Iowa Code

§ 441.21(1) (1971)).

      As is apparent, the 1967 legislation restored the emphasis of prior

law on “market value.” The legislature recognized, however, that there
                                       23

could be some circumstances where the market value of taxable property

could not be readily established.           Thus, the legislature enacted an

alternate approach to establishing actual value.                Specifically, the

legislature provided,

      In the event market value of the property being assessed
      cannot be readily established in the foregoing manner, then
      the assessor may consider its productive and earning
      capacity if any, industrial conditions, its cost, physical and
      functional depreciation and obsolescence and replacement
      cost, and all other factors which would assist in determining
      the fair and reasonable market value of the property but the
      actual value shall not be determined by use of only one such
      factor.

Id.

      Under the 1967 legislation, then, market analysis is the preferred

method of determining actual value.          If market analysis can provide a

reliable estimation of value, the process is at an end.          “Other factors”

may be considered if, and only if, market value cannot be readily

established through the preferred market analysis. Once that threshold

has been crossed, the assessor may consider a broad range of factors,

but cannot rely solely on one such factor in determining “the fair and

reasonable market value” of the property, or “actual value.”

      Although the 1967 legislature in its alternative approach to actual

value incorporated the other-factors approach generally embraced in the

prior statute, the legislature imposed limits on it.            Specifically, the

legislature   declared   that   the   following   shall   not   be   taken   into

consideration: “special value . . . of the property to its present owner, and

the good will or value of a business which uses the property as

distinguished from the value of the property as property.” Id.

      As with all tax statutes, this provision must be read carefully. The

legislature did not prohibit consideration of all special value or all good
                                    24

will or value of the business in valuing property. Instead, the legislature

prohibited only use of special value “to its present owner” and good will

or value of a business “distinguished from the value of the property as

property.” Id. Thus, where the special value is not limited “to its present

owner,” or where good will or the value of a business which uses the

property impacted the value of the “property as property,” the

prohibitions do not apply.

      B. Iowa Caselaw Addressing Valuation Issues.

      1. Caselaw prior to 1967.    An illustrative case involving the law

prior to 1967 is Bankers Life Co. v. Zirbel, 239 Iowa 275, 31 N.W.2d 368

(1948).   In Bankers Life, we considered the valuation for property tax

purposes of the Bankers Life Building in Des Moines.       Id. at 276, 31

N.W.2d at 369. The Bankers Life property was considered the ultimate

in beauty and utility of design, featuring a gymnasium, an auditorium,

extra elevators, a pneumatic tube system, panel heating, auxiliary

lighting, and an unusual-capacity air conditioning system. Id. at 277–

78, 285, 31 N.W.2d at 369–70, 374.

      The taxpayer claimed that valuation should be based on market

value. Id. at 280, 31 N.W.2d at 371. However, we noted that the statute

(at the time) was a multifactored statute in which actual value was not

necessarily the same as market value. Id. We noted that our state was

different from that in the Wisconsin case of Weiher, where the statute

simply declared that property should be valued at “full value which could

ordinarily be obtained therefor at private sale.” Bankers Life, 239 Iowa at

283, 31 N.W.2d at 372 (quoting Weiher, 188 N.W. at 598). Based on a

totality-of-factors approach, we concluded that we were not prepared to

say that the valuation of the building with a twenty-four percent discount

from actual cost was insufficient. Id. at 286, 31 N.W.2d at 374.
                                     25

       2. Cases interpreting special value or use under the current statute.

After the 1967 legislation, of course, the framework for considering

valuation for property tax purposes was altered.          An important case

under the new statute was Maytag Co. v. Partridge, 210 N.W.2d 584

(Iowa 1973). There, we were called upon to consider the proper valuation

of the Maytag manufacturing facility in Newton. Id. at 586. With respect

to Plant No. 2, the parties did not discover any comparable sales. Id.

Therefore, valuation was based necessarily not on comparable sales but

on the other-factors statutory test. Id. at 596.

       One of the important questions in Maytag was how the equipment

on the premises, which was considered part of the real estate for tax

purposes, should be valued. Id. at 586. One possibility was the value of

the equipment if sold on the used equipment market. Id. at 588. On the

other hand, the equipment arguably had more value than the sum of its

parts. Id. at 589. Maytag had a complete line of machinery in place and

functioning   as   an   integral   part   of   a   profitable   manufacturing

establishment. Id. We concluded that when an assessor considers the

use being made of property with a complete line of equipment as part of a

profitable enterprise, the assessor is merely following the rule that he

must consider conditions as they are in the valuation process.          Id. at

590.   By so valuing the property, the assessor was not violating the

statutory provision prohibiting considering special value or use because

the equipment was not “of peculiar value to the owner.” Id. at 591. The

equipment in place would have value to other competent home appliance

manufacturers that might acquire the property and operate the plant.

Id. We contrasted the use of Maytag equipment, which gave value to the

property, with “features and fancies” of personal delight to the owner that

added no value to the property for others. Id.
                                    26

      After Maytag, we again turned to the question of valuation of a

prestigious office building in Equitable Life Insurance Co. v. Board of

Review, 281 N.W.2d 821 (Iowa 1979). In that case, we considered the

value of the Equitable Life Insurance headquarters in downtown

Des Moines.     Id. at 823.    The taxpayer suggested that “no other

insurance company would want to occupy a building so closely identified

with Equitable” and therefore the Board improperly considered the

building’s current use in its evaluation. Id. at 824–25. While we noted

that the argument was contrary to Equitable’s experts, who valued the

premises based on similar use, we held that whether the prior use of the

building by Equitable as a signature corporate headquarters would scare

off potential buyers was a question of fact to be determined by the fact

finder. Id. at 825.

      We considered other issues surrounding an office building in Ruan

Center Corp. v. Board of Review, 297 N.W.2d 538 (Iowa 1980). One of the

issues in that case was whether improvements made by tenants should

be considered in determining the value of the building. Id. at 541. The

improvements included such common things as new carpet and paneling

but also included more unusual improvements such as a bank vault and

an area for computers installed by Wellmark’s predecessor, Blue Cross.

Id. at 541–42. While we recognized that the tenant improvements might

not have value to every possible tenant, they were nonetheless not

unique to a specific property owner and thus were not within the scope

of the statutory prohibition of consideration of special value or use. Id.

at 542.

      We contemplated whether it was improper to consider intangibles

in valuing property in Merle Hay Mall v. City of Des Moines, 564 N.W.2d

419 (Iowa 1997).      In that case, the taxpayer challenged sales prices
                                    27

considered in the valuation process for including intangibles such as

name recognition, the assembled work force, and the ability to attract

anchor stores. Id. at 423–24. We held that unless prohibited under Iowa

Code section 441.21(1) (1993), intangibles may be considered in valuing

the real estate with which they are associated. Id. at 424.

      Finally, we revisited the question of whether valuation of property

at its current use improperly included intangibles in Soifer v. Floyd

County Board of Review, 759 N.W.2d 775 (Iowa 2009).           In Soifer, we

emphasized that we had adopted “a narrow interpretation” of special use

or value that cannot be considered in valuating real property for tax

purposes. Id. at 786 n.6. We emphasized that in order for intangibles to

be excluded, they must have value to the owner that simply would not be

enjoyed by another party.    Id. at 787.   The fact that a valuable going

concern is located on the property and tends to increase the value of the

property does not mean that intangibles have been impermissibly

considered in the valuation process. Id. at 788.

      3. Caselaw involving comparable property. We have had a number

of cases dealing with what might be considered comparable sales under

the preferred-market test in the Iowa statutory regime.          We have

generally held that comparable sales are not strictly limited to a specific

geographic area. For instance, in Bartlett & Co. Grain v. Board of Review,

we held that in a highly competitive industry, sales of terminal elevator

properties in the geographic area that includes the Midwest were

sufficiently similar to amount to comparable sales. 253 N.W.2d 86, 90

(Iowa 1977).   We have similarly held that assessors cannot artificially

limit searches for comparable sales to the city in which the property is

located, declare there are no comparable sales, and then seek to employ

an other-factors analysis in determining value.      Compiano v. Bd. of
                                    28

Review, 771 N.W.2d 392, 396 (Iowa 2009); Carlon Co. v. Bd. of Review,

572 N.W.2d 146, 149–50 (Iowa 1997).

      We have also held that comparable sales do not need to be

identical, but only similar to the subject property. The key case on this

issue is Soifer, 759 N.W.2d at 775. In Soifer, we considered the value of

property in Charles City where a McDonald’s franchise was located. Id.

at 778.   We noted that comparable properties did not need to be

identical, but only similar. Id. at 783. Factors to be considered include

size, use, location, and character.      Id.    We declared that whether

properties were sufficiently similar to be comparable was generally left to

the sound discretion of the district court. Id. Specifically, we found that

although sales of franchise properties might be the most similar based

upon current use of the property, that did not mean that sales involving

non-franchise restaurants were not similar.          Id. at 783–84.    We

concluded that when the properties are reasonably similar and an expert

says they are sufficiently comparable for appraisal purposes, the sounder

course was to leave dissimilarities to examination and cross-examination

rather than exclude the testimony altogether. Id. at 784. The mere fact

that sales might be considered comparable, however, did not necessarily

mean that valuation based on them was credible. Id.

      4. Iowa cases where value cannot be readily established by market

data. In several cases, we have noted that a party cannot move to other-

factors valuation unless a showing is made that the market value of the

property cannot be readily established through market transactions. In

Compiano, expert witnesses relied on income capitalization to establish

value but did not show that there were no comparable market

transactions to establish market value.        771 N.W.2d at 398–99.   We

concluded that this technique amounted to a substitution of a new
                                         29

approach for that adopted by the legislature. Id. at 398. Similarly, in

Carlon, we held that the burden of persuasion rests on the party seeking

to show that market data cannot readily establish market value before

proceeding to the other-factors approach to valuation.              572 N.W.2d at

150.

       V. Application of Principles to Wellmark Property.

       A. Whether Market Value Was Not Readily Established.                      We

begin our discussion with the question of whether the market value of

the Wellmark property could not be “readily established” through market

analysis. See Iowa Code § 441.21(2) (2011). We conclude that in this

case, the value of the building simply could not be readily established by

a comparable-sales analysis.           On the one hand, Wellmark’s experts

utilized    transactions   from      similar     geographic     markets,   but   the

transactions involved office buildings dedicated to multitenant use.

Further,    Wellmark’s     experts     were     required   to    make   substantial

adjustments with respect to comparable sales in order to support their

analysis.

       On the other hand, the Board’s expert, Korpacz, presented single-

occupant sales of large office buildings in large metropolitan areas that

are simply not very indicative of the value of property in the much

smaller Des Moines market.            Further, some of his comparable sales

involved    property   subject    to    a      long-term   lease,   thus   clouding

comparability and raising the question of whether the buyer was

interested in the property or the income stream generated by an

advantageous lease.        We therefore conclude that the district court

correctly considered other factors in its effort to establish the value of the

properties.
                                      30

      B. Application of Other-Factors Approach.          We now turn our

attention to application of the other-factors approach in this case.

      On balance, based on our de novo review of the entire record, we

conclude that the $99-million valuation of the building is supported by

the record.     We embrace the view that the property should be valued

based on its current use. That is the principle articulated in Maytag and

Soifer, where we valued a large manufacturing concern and a franchised

restaurant. In those cases, we resisted efforts by the taxpayers to depart

from their current use in the valuation of their property. We decline to

employ a use other than current use here as well.

      Our approach does not incorporate the value of prohibited

intangibles into the appraisal. Although the legislature has prohibited

consideration of special value and good will, we have narrowly construed

these exceptions. Soifer, 759 N.W.2d at 786 n.6. If improvements to a

property are not merely valuable to the specific owner but would be of

value to others, such improvements should be recognized in the

valuation     process.   As   in   Equitable Life,   the office space   and

improvements on the Wellmark property “could readily be used by any

large enterprise desiring to house its home office under one roof.”

Equitable Life, 281 N.W.2d at 825.

      It is true, of course, that the market for the Wellmark property for

use as a single-tenant office building may be limited. But we think the

fact that the property is currently being successfully used as a single-

tenant corporate headquarters cannot go unnoticed. Current use is an

indicator that there is demand for such a structure. See Ford Motor, 10

N.J. Tax at 166–67.       While no specific potential buyer has been

identified, we do not think there has been a showing of no market, but

only of no active market. We adopt the view of other jurisdictions that
                                    31

under the circumstances, value should be based on the presumed

existence of a hypothetical buyer at its current use. CPC Int’l, 473 A.2d

at 552.

      Further, we find it ironic that the taxpayer, having expended more

than $150 million on its new corporate headquarters, now urges that the

property is worth less than half of that amount for tax purposes.       As

noted by one court, “[g]iven a profit-minded owner with available

experience and resources, and a competent builder, the cost of

construction is likely to represent the value of the newly-finished

product.” Blakely v. Bd. of Assessors, 462 N.E.2d 278, 283 (Mass. 1984)

(quoting Joseph E. Seagram & Sons, Inc. v. Tax Comm’n, 238 N.Y.S.2d

228, 234 (App. Div. 1963) (Breitel, J., concurring)). We further note that

under the approach advocated by Wellmark, very expensive and costly

properties such as large manufacturing concerns could escape fair

taxation on the ground of lack of a local market for a specific use.

      Based on our de novo review of the record, we conclude that the

cost approach provides the best mechanism for determining market

value. There is no dispute that the building is appropriate as a corporate

headquarters for an insurance company. There is also no dispute that

the actual cost of the building was in the neighborhood of $150 million

and that there had been very little physical deterioration of the structure

as of the date of the assessment.     Courts have often applied the cost

approach in determining the value of a single-tenant corporate

headquarters property when comparable sales were not available. See

Gen. Elec., 2005 WL 2081269 at *5; Aetna Life Ins., 2002 WL 377147 at

*8; CPC Int’l, 473 A.2d at 552; Beneficial Facilities Corp., 11 N.J. Tax at

378; Freedom Fed. Sav. & Loan, 801 P.2d at 812–13.
                                         32

       In order to overcome the Board’s assessment, we must be

convinced that substantial functional obsolescence occurred on the day

that the doors of the building opened.           As in Bankers Life, where the

Board valued the property with a twenty-four percent obsolesce factor,

we do not think any reasonable depreciation of this new building can

bring the value below the $99 million established by the Board. Bankers

Life, 239 Iowa at 286, 31 N.W.2d at 374.

       We recognize, of course, that there is no science in this

determination, only judgment based on the record before us. No doubt

the potential market participants for a 600,000-square-foot building are

limited.    Nonetheless, we cannot say that there is no market for

corporate-headquarters-type buildings of this size, even if located in

Des Moines. A substantial discount in market value because of the lack

of an active market strikes us as unjustified by the current record. We

therefore agree, based upon our de novo review of the record, with the

Board’s assessment of $99 million. 3

       VI. Conclusion.

       For the above reasons, the decision of the district court is reversed.

       REVERSED.




       3Because   of our conclusion that the Board met its burden on the valuation
question, we need not address whether the testimony of Wellmark’s experts shifted the
burden of proof to the Board under Iowa Code section 441.21(3)(b). For the purposes of
this appeal, we assume without deciding that the burden did shift but was satisfied by
the Board.
