[Cite as Lowe's Home Ctrs., L.L.C. v. Brooklyn City Schools Bd. of Edn., 2020-Ohio-464.]


                             IN THE COURT OF APPEALS OF OHIO

                                  TENTH APPELLATE DISTRICT

Lowe's Home Centers, LLC,                            :

                 Appellant-Appellant,                :
                                                                              No. 19AP-179
v.                                                   :                    (BTA Case No. 2017-39)

Brooklyn City Schools Board of                       :                 (REGULAR CALENDAR)
Education, et al.
                                                     :
                 Appellees-Appellees.
                                                     :


                                           D E C I S I O N

                                   Rendered on February 11, 2020


                 On brief: The Gibbs Firm, LPA, and Ryan J. Gibbs, for
                 appellant. Argued: Geoffrey Byrne.

                 On brief: Brindza McIntyre & Seed LLP, Robert A. Brindza,
                 Daniel McIntyre, David H. Seed, and David A. Rose, for
                 appellee Brooklyn City Schools Board of Education. Argued:
                 David H. Seed.

                              APPEAL from the Board of Tax Appeals

BRUNNER, J.
        {¶ 1} Appellant-appellant, Lowe's Home Centers, LLC, appeals from a decision of
the Board of Tax Appeals ("BTA"), issued on February 26, 2019, modifying a decision of the
Board of Revision ("BOR") and holding that the true value Lowe's parcel No. 433-15-004
on Northcliff Avenue in Brooklyn, Ohio was $12,020,000 on January 1, 2015. We find that
whether the special purpose doctrine applies to a particular property involves factual
questions; consequently, that issue lies within the discretion of the BTA and we defer to
that exercise of discretion. We also find that, even after a 2012 amendment to the Ohio
Revised Code, the requirement to value property for tax purposes "as if unencumbered"
does not mean that an appraiser is to ignore existing encumbrances in favor of an
No. 19AP-179                                                                                                2


assumption that the subject property is vacant or distressed; instead, it means that an
appraiser should impose adjustments to simulate market rent and occupancy instead of
existing encumbrances. Because of these findings, we overrule all 18 of Lowe's assignments
of error and affirm the decision of the BTA.
I. FACTS AND PROCEDURAL HISTORY
        {¶ 2} On March 31, 2016, Lowe's filed a complaint with the BOR alleging that the
Cuyahoga County Auditor's value for the subject property1 exceeded market value for the
property and it alleged a true value of $7,850,070. (Ex. A, BOR Records, Lowe's Compl.)
This would have reduced taxable value by $577,480. Id. Appellee-appellee, Brooklyn City
Schools District, through the Board of Education ("BOE"), filed a counter complaint
alleging that the auditor's value was correct at $9,500,000. (Ex. B, BOR Records, BOE
Compl.) The BOE submitted a number of comparables and maps of the subject property
tending to show its value in support of the auditor's assessment. (Ex. F, BOR Records, BOE
Evidentiary Submission.) Lowe's submitted no evidence. (Ex. E, BOR Records, Dec. 5,
2016 Oral Hearing Journal Summary.) Ultimately, the BOR found that because Lowe's "did
not provide evidence in support [of the] requested value," no change would be made to the
auditor's valuation of $9,500,000. (Ex. E; Ex. G, BOR Records, Dec. 6, 2016 Decision
Notice.)
        {¶ 3} On January 4, 2017, Lowe's appealed the BOR decision to the BTA, again
alleging that the true market value of the subject property was $7,850,000. (Jan 1, 2017
Notice of BTA Appeal.) On November 13, 2017, an attorney examiner of the BTA heard the
appeal. (Nov. 13, 2017 Hearing Tr.) In support of their arguments at the hearing, both
Lowe's and the BOE submitted (among other exhibits) detailed written appraisals of the
subject property. (Lowe's Ex. A, Racek Appraisal; BOE Ex. 6, Blosser Appraisal.) In
addition, the two appraisers testified during the hearing about the value of the property.
        {¶ 4} The first to testify was Richard Racek, Jr. He explained that Lowe's hired him
to perform an appraisal of the subject property for tax purposes as if transferred as a fee
simple interest on January 1, 2015. (Hearing Tr. at 9-10.) He explained that an appraisal


1 Although there does not seem to be any dispute in the record about which Lowe's location is implicated by

this case, the subject property is referred to in the record by two different addresses: 7327 Northcliff Avenue,
Brooklyn, Ohio 44144 and 4900 Northcliff Avenue, Cleveland, Ohio 44144. Compare, e.g., Lowe's Ex. A,
Racek Appraisal at cover with BOE Ex. 6, Blosser Appraisal at cover.
No. 19AP-179                                                                                              3


of a fee simple interest for tax purposes presumes a sale, which would mean that the owner-
occupant is leaving and that the property would transfer unencumbered by a lease. Id. at
11-13. Racek's report observed that there are three traditional methods of valuation: the
cost approach, the sales comparison approach, and the income capitalization approach.
(Racek Appraisal at 27.) Before valuing the property, however, Racek considered the
highest and best use of the property as a guide to determining how to value the property.
Id. at 25-26. Despite recognizing that "the current utilization" of the building (by Lowe's as
a single tenant2 home-improvement store) is the "most profitable use of the subject
property," Racek concluded that valuation for tax purposes required him to assume an
unencumbered sale and that the specific improvements on the site would be "functionally
obsolete for most second generation users." Id. at 26; Hearing Tr. at 11-12. Racek therefore
noted that the building's value was subject to a "substantial amount of accrued depreciation
which is mostly from functional and economic obsolescence." (Racek Appraisal at 26.)
        {¶ 5} Racek testified that he did not evaluate the property on a replacement cost
basis. Id. at 27; Hearing Tr. at 26. Instead, he evaluated it using a comparable sale
approach and an income method by examining rental comparables in order to value it as
income-producing property. (Racek Appraisal at 27.) Through adjusted comparisons of
sales Racek considered to be comparable to the subject location, he obtained a rounded
value of $6,770,000. Id. at 49-51. Racek then used the income capitalization approach. Id.
at 52-56. He considered several adjusted comparable rental properties and then applied
calculated deductions for vacancy, reserve, operating expenses, and management expenses,
and then capitalized the result at what he characterized as an optimistic rate of
capitalization (extrapolated from market yearly income for comparables in relation to their
purchases prices). Id. By this income capitalization process, Racek obtained a value of
$6,810,000. Id. at 56. Having considered the results produced by both methods, Racek
ultimately appraised the subject property at $6,790,000. Id. at 57-58; Hearing Tr. at 52,
63.

2 Lowe's takes issue with the BTA's use of "tenant" to describe Lowe's relationship to the subject property,
accusing the BTA of being "so committed to the idea that the subject property should be valued as if
encumbered by a lease to Lowe's, that it describes Lowe's as the 'current tenant,' despite having previously
stated the store was owner-occupied." (Lowe's Brief at 31.) To head off similar criticism of our use of the
phrase "tenant," we note that Black's Law Dictionary defines the term as "[s]omeone who holds or possesses
lands or tenements by any kind of right or title." Black's Law Dictionary 1695 (10th Ed.2014). That definition
encompasses both renters and fee simple absolute owners.
No. 19AP-179                                                                                           4


        {¶ 6} On cross-examination, Racek admitted that in 2012 he valued the property at
$8,825,000 and that his estimation for market rent for the subject had declined 25 percent
since his 2012 appraisal. (Hearing Tr. at 81-83, 112; BOE Ex. 1, Racek 2012 Appraisal.) He
stood by these conclusions despite simultaneously admitting that the property market as a
whole had improved from 2012 to 2015 after the Great Recession. (Hearing Tr. at 81-83,
112.) He also admitted that he used no comparables from the immediate area around the
store and that a Sam's Club less than one mile away sold in 2013 for approximately
$21,000,000 while another home improvement store paid over $10,000,000 for a vacant
property on which to build near the subject property. Id. at 75, 122, 126-27.
        {¶ 7} BOE's appraiser, Karen Blosser, was the final witness to testify in the hearing.
Id. at 140. Like Racek, Blosser agreed that the appraisal was of a fee simple interest for tax
purposes as of January 1, 2015 and that fee simple ownership means absolute ownership
unencumbered by any other estate or interest.3 Id. at 144. However, in response to
questioning on both direct examination and cross-examination, Blosser repeatedly stated
that while "unencumbered" means one should not appraise the property with a defined
lease in place, it is proper to consider, as an element of value, what the market rent would
be for the property at market occupancy. Id. at 144-45, 212-13, 228-30, 260-61, 268-69.
To do otherwise, she opined, would be to essentially value the property in a vacant
distressed state, which is not reflective of reality in this case, given that market occupancy
in the region was 93 percent. Id. at 198, 236, 265-66, 291-92, 298-99.
        {¶ 8} As a prelude to employing techniques for valuing the subject, Blosser also
considered the highest and best use of the property. (Blosser Appraisal at IV-1 to IV-2.)
She concluded that the current use by the current tenant was the highest and best use. Id.
She then moved on to valuation and employed all three valuation techniques, cost, sales
comparison, and income capitalization. Id. at V to VII. In the cost approach, she used
comparable land sales to value the land of the subject as if it were vacant and unimproved,
then added the calculated replacement cost of the existing improvements discounted in
light of 16 years of accrued depreciation to obtain a value of $11,370,000. Id. at VII-1 to
VII-16. By considering sales that Blosser considered to be comparable when appropriately


3 Blosser qualified this by noting that unencumbered does not necessarily mean that the property is free of
limitations imposed by governmental powers. (Hearing Tr. at 144.)
No. 19AP-179                                                                                5


adjusted, she estimated the value of the subject property at $12,180,000. Id. at VI-1 to VI-
34. Blosser also performed a capitalization analysis taking into account occupancy, market
rent, expenses, management fees, reserves, and an adjusted capitalization rate (based in
part on published rates), arriving at a figure of $11,850,000. Id. at V-1 to V-9. Considering
the results of all three approaches and giving the most weight to the capitalization and sales
comparison approaches, Blosser appraised the subject property at $12,020,000. Id. at
VIII-1.
          {¶ 9} On February 26, 2019, the BTA issued its decision. It found the "special
purpose" doctrine applied to this property, which permitted a valuation according to the
property's use. (Feb. 26, 2019 BTA Decision at 2-4.) Consequently, it found Ms. Blosser's
articulation of the highest and best use of the subject property–as currently used by
Lowe's–was the most appropriate starting point for an appraisal. Id. at 4. Because of that,
it found that, "Mr. Racek's opinion of value is not probative of the value of the subject
property as of January 1, 2015." Id. at 4, 6. The BTA rejected Lowe's argument that a
valuation of a property for tax purposes requires the appraiser to assume the property is
vacant, noting that the Supreme Court of Ohio had previously rejected just such an
argument. Id. at 4-5. Ultimately, the BTA found Blosser's appraisal to "best represent[]
the true value in money of the subject property as it existed on [the] tax lien date." Id. at 7.
Accordingly, it found a true value of $12,020,000, which yielded a taxable value of
$4,207,000. Id. This represents an increase in taxable value of $882,000 above the
auditor's assessed taxable value.
          {¶ 10} Lowe's now appeals to this Court.
II. ASSIGNMENTS OF ERROR
          {¶ 11} Lowe's raises eighteen assignments of error:
                [1.] The Board of Tax Appeals erred as a matter of law by
                adopting the Blosser appraisal value, which violated R.C.
                5713.03's mandate of unencumbered valuation by adjusting
                unencumbered sale comparables upward for the fact that they
                were unencumbered at the time of sale.

                [2.] The Board of Tax Appeals abused its discretion and erred
                as a matter of law by applying appraisal industry authority over
                a statute enacted by the Ohio Legislature.
No. 19AP-179                                                                       6


               [3.] The Board of Tax Appeals erred by deviating from the plain
               meaning of a clear and unambiguous statute.

               [4.] The Board of Tax Appeals['] decision violates the
               separation of powers implied by the Ohio Constitution in
               Articles II, III and IV and the United States Constitution.

               [5.] The Board of Tax Appeals' decision and order violates the
               Ohio Constitution's mandate of uniform assessment.

               [6.] The Board of Tax Appeals' decision and order violates the
               Equal Protection clauses under Article I, Section 2 of the Ohio
               State Constitution and the Fourteenth Amendment of the
               United States Constitution by applying the definition of fee
               simple, and interpreting §5713.03 of the Ohio Revised Code, in
               a manner that discriminates against certain taxpayers.

               [7.] The Board of Tax Appeals erred by accepting the Blosser
               appraisal value, which admittedly violated R.C. 5713.03 by
               valuing the subject property as encumbered by a lease through
               a "leased at market rent" valuation.

               [8.] The Board of Tax Appeals failed to adhere to its duty to
               find market value of an existing building by rejecting so called
               "second generation" sale and lease data.

               [9.] The Board of Tax Appeals' adoption of the "special
               purpose" doctrine is a clear error of law as the record contains
               substantial evidence of the unencumbered value of properties
               similar in size to the subject and the subject was not "brand new
               on the tax lien date."

               [10.] The Board of Tax Appeals abused its discretion by
               applying the "special purpose doctrine" when that
               determination is not supported by facts contained in the
               record, and such determination was against the manifest
               weight of the evidence.

               [11.] The Board of Tax Appeals' adoption of the "special
               purpose" doctrine is a cynical abuse of discretion as it is used
               to avoid application of R.C. 5713.03's mandate that property be
               valued in the "fee simple interest, as if unencumbered."

               [12.] The Board of Tax Appeals' claim that the subject property
               was leased as of the lien date is against the manifest weight of
               the evidence as the record definitively shows the subject
               property was owner-occupied at the time of sale.
No. 19AP-179                                                                                7


               [13.] The Board of Tax Appeals erred in its reliance on the Ohio
               Supreme Court's decision in Harrah's Ohio Acquisition Co.,
               LLC v. Cuyahoga Cty. Bd. of Revision, 154 Ohio St.3d 340,
               2018-Ohio-4370 to find an as-encumbered value of the subject
               property.

               [14.] The Board of Tax Appeals[']reliance on the fact that
               "Lowe's was still occupying the property as of the lien date"
               renders its determination an impermissible value-in-use,
               rather than value in exchange, or "true value," determination.

               [15.] The Board of Tax Appeals erred as a matter of law by its
               deliberate adoption of an as-encumbered value of the subject
               property in contravention of the plain and unambiguous
               language of R.C. 5713.03, which requires that all property be
               valued "as if unencumbered."

               [16.] The Board of Tax Appeals' reliance on the Blosser
               appraisal is against the manifest weight of the evidence as
               Blosser's inconsistency on whether property rights
               adjustments were made at all renders her report unreliable.

               [17.] The Board of Tax Appeals['] finding that a hypothetical
               transfer of the subject property could occur both "as if
               unencumbered," as required by [R.C.] 5713.03, and "leased at
               market" as applied by Blosser is both legally and factually
               impossible.

               [18.] The Board of Tax Appeals erred by adopting a "sale-
               leaseback" valuation for the subject property in direct
               contravention of the Ohio Supreme Court's holding in "State
               Farm" [Columbus City School Bd. of Edn. v. Franklin Cty. Bd.
               of Revision, 151 Ohio St.3d 100, 2017-Ohio-7578].

       {¶ 12} App.R. 16(A)(7) requires "[a]n argument containing the contentions of the
appellant with respect to each assignment of error presented for review and the reasons in
support of the contentions, with citations to the authorities, statutes, and parts of the record
on which appellant relies." (Emphasis added.) Rather than argue assignments of error
individually, however, Lowe's argues propositions of law, which it loosely (and sometimes
duplicatively) associates with the individual assignments of error. (Lowe's Brief at 20, 27,
30, 33, 44, 53, 57.) This approach renders our usual assignment-of-error-focused review
protocol required by the rule impracticable. Moreover, reading Lowe's brief, despite the
large number of assignments of error (18), propositions of law (7), and issues presented for
No. 19AP-179                                                                               8


review (6), it is apparent that there are essentially two dispositive questions to answer in
this appeal: First, did the BTA err when it concluded that the "special purpose" doctrine
applied? (Assignments of Error 8-11, 14.) Second, when the BTA accepted Blosser's
appraisal as more appropriate than Racek's, did the BTA violate the statutory requirement
that taxed real property be valued according to "the true value of the fee simple estate, as if
unencumbered[?]" R.C. 5713.03. (Assignments of Error 1-7, 12-13, 15-18). We address
these questions in order.
III. DISCUSSION
   A. Standard
       {¶ 13} In deciding an appeal from a BTA decision, we consider the record and
evidence introduced in the proceedings below, and it is required that we "shall affirm" if the
BTA's decision is "reasonable and lawful" but that we "shall reverse and vacate the decision
or modify it" if it is "unreasonable or unlawful." R.C. 5717.04. Consequently, we review
legal issues de novo but defer to the BTA's factual findings. Lunn v. Lorain Cty. Bd. of
Revision, 149 Ohio St.3d 137, 2016-Ohio-8075, ¶ 13. In other words, neither this Court nor
any appellate court designated by R.C. 5717.04 constitutes a " 'super' board of tax appeals."
Hercules Galion Prods., Inc. v. Bowers, 171 Ohio St. 176 (1960). "If the parties present
competing appraisals at the BTA, '[t]he weighing of evidence and the assessment of
credibility as regards both of the appraisals are the statutory job of the BTA,' and that body
'is vested with wide discretion' in carrying out that function." Bd. of Edn. of the Westerville
City Schools v. Franklin Cty. Bd. of Revision, 146 Ohio St.3d 412, 2016-Ohio-1506, ¶ 28,
quoting EOP-BP Tower, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 1, 2005-
Ohio-3096, ¶ 9; see also, e.g., Wolf v. Cuyahoga Cty. Bd. of Revision, 11 Ohio St.3d 205,
207 (1984).
   B. Applicability of the "Special Purpose" Doctrine
       {¶ 14} The Supreme Court has explained:
               As a general matter, the Ohio Constitution provides, "Land and
               improvements thereon shall be taxed by uniform rule
               according to value * * *." Value in the context of ad valorem
               taxation of property is defined in terms of the exchange value
               rather than the current-use value. The general rule is as
               follows:
No. 19AP-179                                                                          9


               In the last analysis the value or true value in money of any
               property is the amount for which that property would sell on
               the open market by a willing seller to a willing buyer. In
               essence, the value of property is the amount of money for which
               it may be exchanged, i.e., the sales price.

               State ex rel. Park Invest. Co. v. Bd. of Tax Appeals, 175 Ohio
               St. 410, 412, 195 N.E.2d 908 (1964).

Rite Aid of Ohio, Inc. v. Washington Cty. Bd. of Revision, 146 Ohio St.3d 173, 2016-Ohio-
371, ¶ 24. As expressed in the current version of R.C. 5713.03, the market value should be
considered as a "fee simple estate, as if unencumbered."
       {¶ 15} However, the high court in the Rite Aid decision went on to explain an
exception to the general rule:
               But the rule of market-exchange valuation is not a rule without
               exception. * * *

               We have recognized a[] permissible example of use valuation
               [in the "special purpose" doctrine]. The lead case is Dinner Bell
               Meats, Inc. v. Cuyahoga Cty. Bd. of Revision, 12 Ohio St.3d
               270, 12 Ohio B. 347, 466 N.E.2d 909 (1984). In Dinner Bell
               Meats, two competing appraisals employed differing cost
               approaches based on their respective findings that the property
               was "special purpose" in nature. The court concluded that "in
               utilizing the 'cost approach' for a 'special purpose' building,"
               the appraiser "simply considered the utility of the properties in
               conjunction with the highest and best use of the meatpacking
               facility." Id. at 272. In holding that the approach was a proper
               cost approach and not a prohibited "current use" appraisal, the
               court acknowledged the general principle that " 'the special
               purpose exception is applied to a building in good condition
               being used currently and for the foreseeable future for the
               unique purpose for which it was built,' " a doctrine necessary to
               prevent "the owner of a distinctive, but yet highly useful,
               building" from "escap[ing] full property tax liability." Id.,
               quoting Fed. Res. Bank of Minneapolis v. State, 313 N.W.2d
               619, 623 (Minn.1981).

               Later, in Meijer, Inc. v. Montgomery Cty. Bd. of Revision, 75
               Ohio St.3d 181, 1996 Ohio 223, 661 N.E.2d 1056 (1996), we
               affirmed a BTA decision over arguments similar to those
               advanced and rejected in Dinner Bell Meats. In the context of
               resolving a battle of appraisals, the BTA in Meijer, Inc. declined
               to adopt the larger amount of obsolescence found by the
               owner's appraiser. The BTA found "nothing about the present
No. 19AP-179                                                                           10


               property [that was] obsolete or useless to the owner due to
               changing business conditions." Meijer, Inc. v. Montgomery
               Cty. Bd. of Revision, BTA Nos. 93-M-731, 93-M-732, and 93-
               M-733, 1995 WL 59106, *11 (Feb. 8, 1995). Indeed, "[t]he
               owner, by purchasing the land and constructing the building,
               evidences a market need for such a property. Therefore the
               costs of purchase and construction evidence that a prospective
               purchaser was willing to pay at least the costs of the property
               as newly constructed." Id. at *12; see also Oakwood Club v.
               Cuyahoga Cty. Bd. of Revision, 70 Ohio St.3d 241, 1994 Ohio
               347, 638 N.E.2d 547 (1994) (invoking Dinner Bell Meats to
               overrule the property owner's contention that the county's
               appraiser had performed a value-in-use analysis for its golf-
               course facility).

               In both Dinner Bell Meats and Oakwood Club, we disclaimed
               that use valuation was being performed. * * * But in 2009, we
               acknowledged that those earlier cases did embody a type of use
               valuation. Meijer Stores, 122 Ohio St.3d 447, 2009-Ohio-3479,
               912 N.E.2d 560, at ¶ 24 ("we have also held that the
               constitutional prohibition does not bar consideration of
               current-use value in the context of the 'special-purpose
               property' doctrine").

Rite Aid at ¶ 28-31.
       {¶ 16} Consistent with an in-use valuation and the special purpose doctrine, Blosser
determined that the highest and best use of the subject property was the current use, as a
home improvement store by Lowe's. (Blosser Appraisal at IV-1 to IV-2; Hearing Tr. at 234-
36.) Racek also recognized that the current use of the building was the "most profitable use
of the subject property," but he concluded that valuation for tax purposes required him to
assume an unencumbered sale and that the specific improvements on the site would be
"functionally obsolete for most second generation users." (Racek Appraisal at 26; Hearing
Tr. at 11-12, 24-25). In short, both experts agreed that the subject property was of such a
size and design that it was most valuable when used in the way it was being used–as a
Lowe's big box store. But these experts diverged in their opinions thereafter because
Blosser adopted that philosophy in selecting and adjusting comparables while Racek
rejected it.
       {¶ 17} The Supreme Court has confronted a similar situation:
               The testimony of the appraisers, the expository passages of
               their appraisal reports, and the values they determined for the
No. 19AP-179                                                                             11


               property reflect a fundamental dispute. [Meijer's appraiser]
               looked at the big-box store as adding only modest market value
               because the structure would not be easily adaptable to the
               needs of a potential buyer, a factor that he opined would impair
               the property's marketability. According to [Meijer's appraiser],
               most potential buyers would be hard-pressed to utilize such a
               large space for their own business and would probably have to
               significantly renovate or even tear down the existing structure
               in order to use the property. [Meijer's appraiser] called this
               limitation on the property's marketability "external
               obsolescence" and looked at second-generation purchasers and
               tenants to determine value by the sales-comparison and
               income-capitalization approaches.

               By contrast, [the school board's appraiser] looked at Meijer's
               own use as the touchstone for determining market rent and
               comparable sales. When asked, in the context of his income
               approach, who would lease the space, [The school board's
               appraiser] answered: "Meijer." Accordingly, "market rent" for
               [the school board's appraiser] consisted in part as what rent
               Meijer itself would be willing to pay to an owner other than
               itself. Comparable sales in [the school board's appraiser]'s view
               included sales by developers who built big-box retail facilities
               on a build-to-suit basis and then sold them to third parties.

Meijer Stores L.P. v. Franklin Cty. Bd. of Revision, 122 Ohio St.3d 447, 2009-Ohio-3479,
¶ 7-8. In the 2009 Meijer case, the Supreme Court affirmed a decision of the BTA adopting
the school board's appraisal, finding that the "special purpose" doctrine set forth in Dinner
Bell Meats, Inc. v. Cuyahoga Cty. Bd. of Revision, 12 Ohio St.3d 270 (1984), and a 1996
decision, Meijer, Inc. v. Montgomery Cty. Bd. of Revision, 75 Ohio St.3d 181 (1996), applied
to permit the value-in-use appraisal. Meijer, 2009-Ohio-3479, at ¶ 21-28.
       {¶ 18} The Supreme Court also encountered a somewhat similar situation in Target
Corp. v. Greene Cty. Bd. of Revision, 122 Ohio St.3d 142, 2009-Ohio-2492. In that case,
Target presented an argument similar to the one Lowe's seeks to use now, that the big box
store design (over 100,000 sq. ft.) has a high degree of built-in obsolescence because such
structures are really only maximally useful to the first generation user for whom they are
built. Id. at ¶ 4-5. As a result of this conclusion, the Target appraisers used comparables
that had been sold or leased to second-generation users. Id. at ¶ 6. Based on that rationale,
they reached a much lower valuation than that proposed by the auditor. Id. at ¶ 2. As the
county did not present any competing appraisal or evidence, the BTA adopted the valuation
No. 19AP-179                                                                          12


proposed by Target and the Supreme Court affirmed. Id. at ¶ 9, 17-18. In so doing, however,
the Supreme Court offered an enlightening discussion about why it would not apply the
"special purpose" doctrine:
               [T]he county's reliance on Meijer implicates the special-
               purpose-property doctrine that we articulated in Dinner Bell
               Meats. In that case, two competing appraisals employed
               differing cost approaches based on their respective findings
               that the property was "special purpose" in nature. Id. at 271, 12
               OBR 347, 466 N.E.2d 909. We concluded that "in utilizing the
               'cost approach' for a 'special purpose' building," the appraiser
               "simply considered the utility of the properties in conjunction
               with the highest and best use of the meatpacking facility." Id.
               at 272. In so holding, we acknowledged the general principle
               that "'the special purpose exception is applied to a building in
               good condition being used currently and for the foreseeable
               future for the unique purpose for which it was built,'" a doctrine
               necessary to prevent "the owner of a distinctive, but yet highly
               useful, building" from "escap[ing] full property tax liability."
               Id., quoting Fed. Res. Bank of Minneapolis v. State
               (Minn.1981), 313 N.W.2d 619, 623.

               While one may speculate on whether, for purposes of tax
               valuation, the Target store at issue might validly be considered
               as special-purpose property, we have never in the past
               disturbed a determination of value by the BTA based on such
               speculation. To the contrary, each of the decisions in which we
               have alluded to the special-purpose doctrine involves an
               appraisal offered in support of the value that was ultimately
               determined and our affirmance of the BTA's reliance on that
               evidence. Meijer, 75 Ohio St.3d 181, 1996 Ohio 223, 661 N.E.2d
               1056; Dinner Bell Meats, 12 Ohio St.3d 270, 12 OBR 347, 466
               N.E.2d 909; Oakwood Club v. Cuyahoga Cty. Bd. of Revision
               (1994), 70 Ohio St.3d 241, 1994 Ohio 347, 638 N.E.2d 547. Far
               from furnishing precedent for second-guessing the BTA, to
               date, our case law concerning special-purpose property has
               shown deference to the factfinding expertise of that tribunal. In
               the present case, as already discussed, the county presented no
               evidence in support of its theory that the Target store might
               qualify as special-purpose property.

Target at ¶ 16-17.
       {¶ 19} The "special purpose" doctrine is a legal exception to a legal rule about how
to value property for tax purposes. But, having reviewed the relevant caselaw, it is clear
that whether a particular property has the characteristics to qualify for the "special
No. 19AP-179                                                                                               13


purpose" doctrine is a question of fact to be resolved by the BTA. Here, the BTA found the
exception to apply based on the size and type of the Lowe's property involved, the fact that
it was still in profitable use by its creator and would remain in such use for the foreseeable
future. (Feb. 26, 2019 BTA Decision at 2-4.) While we understand that Racek and Lowe's
dispute that conclusion, we discern no basis for concluding that the BTA abused its
discretion in reaching it.4
        {¶ 20} We overrule Lowe's eighth, ninth, tenth, eleventh, and fourteenth
assignments of error.
    C. Whether the BTA Erred in Accepting the Blosser Valuation which
       Incorporated Market Rent as a Component
        {¶ 21} For many years, it has been the law in Ohio that, "[f]or real property tax
purposes, the fee simple estate is to be valued as if it were unencumbered." Alliance Towers
v. Stark Cty. Bd. of Revision, 37 Ohio St.3d 16 (1988), paragraph one of the syllabus. When
that rule was only established by caselaw (not statute), some decisions of the Supreme
Court also found an exception: in the case of a recent sale of the subject property, the sale
price could be taken as conclusive of value and did not need to be adjusted to take account
of existing encumbrances. See, e.g., Cummins Prop. Servs., L.L.C. v. Franklin Cty. Bd. of
Revision, 117 Ohio St.3d 516, 2008-Ohio-1473, ¶ 24; Berea City School Dist. Bd. of Edn. v.
Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 269, 2005-Ohio-4979, ¶ 5-16. However, in
2012, House Bill No. 487 effectively inserted statutory language to require that the auditor
assess the "true value of the fee simple estate, as if unencumbered." 2012 Am.Sub.H.B. No.
487.5 With that addition to the statutory text, it became clear that, without exception, the
estate to be valued when considering the value of a subject property is the fee simple estate,
as if unencumbered. See Lowe's Home Ctr., Inc. v. Washington Cty. Bd. of Revision, 154


4 It is unnecessary to address it in the body of this decision, but we note that Lowe's also advances a policy
argument suggesting that the BTA's designation of a "big box" store like Lowe's as within the special purpose
doctrine is a slippery slope and that few such properties would not be within the special purpose doctrine.
(Lowe's Brief at 52.) But in so arguing, Lowe's fails to consider the converse of its argument and the point of
the special purpose doctrine–to avoid underassessing structures that have great value to the original builder
and very little value to successor users. Meijer at ¶ 25. So, to flip the policy argument on its head, if such
structures were not within the special purpose doctrine, then business could build "big box" style structures
unique to their preferred floor plans, which have great profit value to the original owner but relatively little
value to future users or posterity, and yet avoid being adequately taxed for this sub-optimal economic
behavior. If businesses such as Lowe's built with future users and the communities they inhabit as part of
their business and consideration, the special purpose doctrine would cease to apply.
5 Archived online at 2011 Ohio HB 487.
No. 19AP-179                                                                            14


Ohio St.3d 463, 2018-Ohio-1974, ¶ 19 (stating, "it is plain that a lease is an encumbrance
and that R.C. 5713.03's directive to value the realty 'as if unencumbered' means to value the
realty as if it were free of encumbrances such as leases").
       {¶ 22} But Lowe's interprets this to mean that not only should the subject property
not be valued in light of the terms of an existing actual lease (which does not exist in this
case because the subject property is owner-occupied), it should also not be valued in
consideration of market occupancy and what rent it would fetch in the market. In essence,
Lowe's would value an owner-occupied property like the subject in this case as if it were
vacant on the tax lien date, rather than occupied at market occupancy and rented at market
rent. The Supreme Court has rejected this view:
               Although the subject property is owner-occupied, [the school
               board's appraiser] appraised it as if it were generating income
               under a hypothetical lease, under what he believes would be
               current market rates. Finding that owner-occupied property
               cannot be valued this way, the BTA declined to consider [the
               school board]'s appraisal. The BTA found that [the school
               board's appraiser]'s methodology represented a leased-fee
               valuation that " 'taint[ed] the validity of the entire report.' "
               2016 Ohio Tax LEXIS 585, 2016 WL 2907629 at *6, quoting
               JGT Ents., Inc., 2002 Ohio Tax LEXIS 393, at *7-8. Continuing,
               the BTA stated that "by performing a leased fee appraisal
               analysis of the owner occupied subject, [the school board's
               appraiser] has overstated the total value of the subject
               property; accordingly, we will not consider [the school board's
               appraiser]'s conclusions to value under his leased fee analysis."
               Id.

               The BTA's refusal to consider [the school board]'s appraisal
               was legal error. We addressed the propriety of appraising
               owner-occupied property as if it were leased in Meijer Stores
               Ltd. Partnership v. Franklin Cty. Bd. of Revision, 122 Ohio
               St.3d 447, 2009-Ohio-3479, 912 N.E.2d 560, ¶ 21-23. After
               recognizing that a property owner may be able to realize the
               value of its property by encumbering it with a lease, we
               concluded that an appraiser may take that possibility into
               account when valuing it. Id. at ¶ 23; see also Saratoga Harness
               Racing, Inc. v. Williams, 697 N.E.2d 164, 166-167, 91 N.Y.2d
               639, 674 N.Y.S.2d 263 (1998) (approving the same approach in
               the valuation of a horse-racing facility). Appraising property in
               this way is consistent with R.C. 5713.03's directive to determine
               "the true value of the fee simple estate, as if unencumbered," so
               long as the appraisal assumes a lease that reflects the relevant
No. 19AP-179                                                                             15


               real-estate market. See Appraisal Institute, The Appraisal of
               Real Estate 441 (14th Ed.2013) ("When the fee simple interest
               is valued, the presumption is that the property is available to be
               leased at market rates"); Ohio Adm.Code 5703-25-07(D)(2)
               (authorizing use of income-capitalization approach in valuing
               real estate). Although the BTA ultimately may disagree with
               [the school board's appraiser]'s factual assumptions about the
               lease terms, his methodology was not defective as a matter of
               law, and the BTA should have considered it.

Harrah's Ohio Acquisition Co., L.L.C. v. Cuyahoga Cty. Bd. of Revision, 154 Ohio St.3d
340, 2018-Ohio-4370, ¶ 26-27. In other words, "as if unencumbered," means that if the
subject property is encumbered, the appraiser adjusts for the effects of those
encumbrances. It does not mean, however, that the appraiser must assume that the
property is vacant or ignore the fact that the property could be leased at a market rent.
Thus, such adjustments are adjustments to account for market rent and occupancy levels,
not adjustments to simulate vacancy.
       {¶ 23} We also note that the Harrah's decision has been repeatedly relied on by the
BTA to reject arguments identical to what Lowe's now asserts, and none of those cases have
been reversed. For example, the BTA has remarked, "[t]o the extent that the property
owner argued that any consideration of the income that could be generated from the subject
property through a market lease is contrary to law, we disagree. The Supreme Court
specifically rejected such argument in Harrah's." Lowe's Home Ctr., Inc. v. Washington
Cty. Bd. of Revision, BTA No. 2014-4606, 2019 Ohio Tax LEXIS 2125, *13 (Sept. 10, 2019).
       {¶ 24} On another occasion, the BTA stated "[w]e first address Lowe's argument that
R.C. 5713.03 that requires we accept its view that real property in Ohio must be valued as if
it were vacant on tax lien date. This board confronted a similar argument * * * [and] rejected
the argument, citing to the Supreme Court's recent decision in Harrah's * * * where it found
no error in an appraiser valuing an owner-occupied property as it were generating market
rate income under a hypothetical lease." Lowe's Home Ctrs., LLC v. Lorain Cty. Bd. of
Revision, BTA Case No. 2017-1023, 2019 Ohio Tax LEXIS 1900, *4 (Aug. 12, 2019); see also
Lowe's Home Ctrs., LLC v. Cuyahoga Cty. Bd. of Revision, BTA Case No. 2017-39, 2019
Ohio Tax LEXIS 342, *11-13 (Feb. 26, 2019) ("Under this valuation standard, Lowe's argues,
a property must be assumed to be vacant on tax lien date[.] * * * The Supreme Court
specifically rejected such argument in Harrah's.").
No. 19AP-179                                                                              16


       {¶ 25} For the same reasons, the BTA has also rejected claims that the proper
comparables are those properties which are sold as vacant. Columbus City Schools Bd. of
Edn. v. Franklin Cty. Bd. of Revision, BTA Case No. 2017-278, 2019 Ohio Tax LEXIS 411,
*4 (Mar. 11, 2019) (noting that "we fundamentally disagree with the appraisers' selection of
mostly vacant, comparable properties under the sales comparison approach. A review of
the appraisers' testimony highlights a belief that appraising the fee-simple interest requires
the use of vacant properties").
       {¶ 26} Lowe's also seeks to discredit Blosser's comparables, arguing that
adjustments to encumbered comparables was necessary to "remove the effect of the
encumbrance." (Lowe's Brief at 36-38.) But the Supreme Court has held that R.C. 5713.03
does not prescribe standards to be applied in a comparable-sales analysis. Lowe's, 2018-
Ohio-1974, at ¶ 20. Second, although in determining the value of an unencumbered parcel,
lease-encumbered comparable parcels should generally be adjusted, the Supreme Court
has also made clear on several occasions that such adjustments to comparables may be
unnecessary if the special purpose doctrine applies. Rite Aid, 2016-Ohio-371, at ¶ 20-31;
Lowe's Home Ctrs. v. Washington Cty. Bd. of Revision, 145 Ohio St.3d 375, 2016-Ohio-
372, ¶ 25; Steak 'n Shake, Inc. v. Warren Cty. Bd. of Revision, 145 Ohio St.3d 244, 2015-
Ohio-4836, ¶ 39-40. We have already determined that the BTA did not abuse its discretion
in finding that the special purpose doctrine applies here. See supra at ¶ 14-20.
       {¶ 27} Relying on the Harrah's decision, we overrule Lowe's first, second, third,
fourth, fifth, sixth, seventh, twelfth, thirteenth, fifteenth, sixteenth, seventeenth, and
eighteenth assignments of error.
IV. CONCLUSION
       {¶ 28} Whether the special purpose doctrine applies to a particular property
involves factual questions about the nature of the property and its owner and lies within the
discretion of the BTA. We find no basis to reverse the BTA's discretionary determination
to apply the special purpose doctrine in this case and accordingly overrule Lowe's eighth,
ninth, tenth, eleventh, and fourteenth assignments of error. For over 30 years it has been
the law in Ohio that for real property tax purposes, a property is to be valued as a fee simple
estate as if it were unencumbered. It has also been understood for some years that "as if
unencumbered" does not mean that one is to assume the subject property is vacant or
distressed but, instead, means an adjustment in value to simulate market rent and
No. 19AP-179                                                                             17


occupancy is appropriate. The "unencumbered" language added to the Ohio Revised Code
in 2012 implied some changes to the precedent previously set by caselaw but not to such
principle. We, therefore, overrule Lowe's first, second, third, fourth, fifth, sixth, seventh,
twelfth, thirteenth, fifteenth, sixteenth, seventeenth, and eighteenth assignments of error,
and affirm the judgment of the Board of Tax Appeals.
                                                                        Judgment affirmed.
                       BROWN and BEATTY BLUNT, JJ., concur.
