[Cite as West Carrollton City Schools Bd. of Edn. v. Montgomery Cty. Bd. of Revision, 2018-Ohio-2324.]




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

 WEST CARROLLTON CITY                                 :
 SCHOOLS BOARD OF EDUCATION,                          :
 Appellee                                             :     Appellate Case No. 27686
                                                      :
                                                      :     BTA Case No. 2015-2319
 v.                                                   :
                                                      :     (Administrative Appeal from Board of
 MONTGOMERY COUNTY BOARD                              :     Tax Appeals)
 OF REVISION, Appellee; GOLDEN                        :
 ARCH LLIMITED PARTNERSHIP,                           :
 Appellant

                                              ...........

                                              OPINION

                             Rendered on the 15th day of June, 2018.

                                              ...........

KAROL C. FOX, Atty. Reg. No. 0041916 and MARK H. GILLIS, Atty. Reg. No. 0066908,
6400 Riverside Drive, Suite D, Dublin, Ohio 43017
      Attorney for Plaintiff-Appellee

CHARLES L. BLUESTONE, Atty. Reg. No. 0060897 and PATRICK J. HEERY, Atty. Reg.
No. 0092060, 141 E. Town Street, Suite 100, Columbus, Ohio 43215
      Attorneys for Defendant-Appellant, Golden Arch Limited Partnership

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


HALL, J.

         {¶ 1} Golden Arch Limited Partnership, d/b/a Delaware Golden Arch Limited

Partnership, appeals from the decision of the Board of Tax Appeals (BTA) that found the

taxable value of Golden Arch’s property to be $1,340,000 for tax year 2014. We find no

error in the BTA’s decision, so it is affirmed.

                                        I. Background

         {¶ 2} The property at issue is a 1.457-acre parcel located at 2757 W. Alex Bell

Road in Moraine, Ohio. The property is improved with a 4,411-square foot building,

constructed in 1996, that houses a McDonald’s restaurant. For tax year 2014 the

Montgomery County Auditor valued the property at $942,280. Golden Arch filed a

complaint with the Board of Revision (BOR) seeking to reduce the value to $661,650. The

West Carrollton City Schools Board of Education (BOE) filed a countercomplaint, asking

the BOR to retain the auditor’s original valuation.

         {¶ 3} The BOR held a hearing. Stephen J. Weis, a certified appraiser retained by

Golden Arch, testified at the hearing and submitted a written appraisal report. He

appraised the property at $645,000 as of January 1, 2014. Golden Arch amended its

complaint to conform with Weis’s appraisal. The BOE cross-examined Weis but did not

present any evidence of its own. The BOR reduced the property’s value to $645,000. The

BOE appealed to the BTA.

         {¶ 4} At the BTA hearing, the BOE presented the testimony and written appraisal

report of Thomas D. Sprout, a certified appraiser. Sprout valued the property at

$1,340,000. 1 Apparently, the recording device used at the BOR hearing stopped


1   As the BTA noted in its decision, it “held a consolidated merit hearing on this matter, as
                                                                                        -3-


recording during Weis’s cross-examination. Golden Arch asked the BTA to supplement

the record by having Weis recreate the cross-examination portion of his testimony. The

BTA agreed and held another hearing at which Weis was cross-examined on his

appraisal.

       {¶ 5} The BTA issued a written decision finding Sprout’s analysis superior to

Weis’s, and the BTA adopted the $1,340,000 valuation proposed by the BOE.

       {¶ 6} Golden Arch appealed.

                                        II. Analysis

       {¶ 7} Golden Arch presents seven assignments of error. Each assignment of error

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

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

                               First Assignment of Error

       The Board of Tax Appeals acted unreasonably and unlawfully, and abused

       its discretion, when it failed to find that Appellant’s appraisal evidence

       constituted competent and probative evidence of the market value of the

       subject property.

                              Second Assignment of Error

       The Board of Tax Appeals acted unreasonably and unlawfully, and abused

       its discretion, when it failed to find that Appellant met its burden of proof,

       when the record contained reliable and probative evidence to support


well as another matter involving a McDonald’s restaurant (BTA No. 2015-2357), which
involved the same counsel, same appraisers and substantially the same appraisal
reports. (The cases were not formally consolidated because they involved unaffiliated
property owners.)” The other case is the subject of a separate appeal (Appellate Case
No. 27679).
                                                                                        -4-


      Appellant’s market value of the subject property.

                              Third Assignment of Error

      The Board of Tax Appeals acted unreasonably and unlawfully, and abused

      its discretion, by finding the appraisal analysis submitted by Appellee West

      Carrollton City Schools Board of Education to be more competent and

      probative evidence of the subject property’s market value than the appraisal

      analysis proffered by Appellant.2

                              Fourth Assignment of Error

      The Board of Tax Appeals acted unreasonably and unlawfully, and abused

      its discretion, by finding the highest and best use analysis advanced by

      Appellee West Carrollton City Schools Board of Education more appropriate

      than the analysis proffered by Appellant.

                               Fifth Assignment of Error

      The Board of Tax Appeals acted unreasonably and unlawfully, and abused

      its discretion, in considering the present use of the subject property in

      determining its market value.

                               Sixth Assignment of Error

      The Board of Tax Appeals acted unreasonably and unlawfully, and abused

      its discretion, in finding the capitalization rate advanced by Appellee West


2  The third assignment of error is found only in Golden Arch’s notice of appeal. The only
mention of the third assignment of error in Golden Arch’s merit brief is a parenthetical
statement at the end of the argument supporting the first two assignments of error saying
that we need not rule on the third assignment of error if we agree with the first two
assignments of error. Although we may disregard it because Golden Arch failed to argue
it separately, see App.R.12(A)(2), our review covers the issue that the assignment of error
appears to raise.
                                                                                        -5-


       Carrollton City Schools Board of Education, rather than the rate adopted by

       Appellant, more appropriate to use in calculating the subject property’s

       market value under the income capitalization approach to value.

                             Seventh Assignment of Error

       The Board of Tax Appeals acted unreasonably and unlawfully, and abused

       its discretion, in continuing to recognize Appellee West Carrollton City

       School Board of Education’s appraiser as an expert witness in view of the

       testimony and evidence proffered at the BTA hearing.

       {¶ 8} Golden Arch’s primary argument on appeal is that the BTA should have

adopted Weis’s valuation. We begin by reviewing the standards that apply to BTA

decisions.

                                 A. Standards of review

       {¶ 9} When a case is appealed to the BTA from a board of revision, the appellant

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

by the board of revision. Shinkle v. Ashtabula Cty. Bd. of Revision, 135 Ohio St.3d 227,

2013-Ohio-397, 985 N.E.2d 1243, ¶ 24. This means that the “appellant must come

forward and demonstrate that the value it advocates is a correct value. Once competent

and probative evidence of value is presented by the appellant, the appellee who opposes

that valuation has the opportunity to challenge it through cross-examination or by

evidence of another value.” (Citation omitted.) EOP-BP Tower, L.L.C. v. Cuyahoga Cty.

Bd. of Revision, 106 Ohio St.3d 1, 2005-Ohio-3096, 829 N.E.2d 686, ¶ 6.

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

evidence and make findings, and the BTA reviews the administrative decisions of boards
                                                                                           -6-

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

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

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

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

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

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

deemed proper.” Coventry Towers at 122.

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

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

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

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

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

1270, ¶ 6, referencing Bedford Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 115 Ohio

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

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

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

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

or another value. Id. at ¶ 7.

       {¶ 12} With respect to our review of BTA decisions, we note that Golden Arch’s

notice of appeal was filed before the effective date of recent amendments to R.C.

5717.04, which became effective on September 29, 2017. See Am. Sub. H.B. 49, 2017

Ohio Laws File 14. Before the amendments, parties had the option of appealing decisions

of the BTA to the Supreme Court of Ohio, as well as to the court of appeals for the county
                                                                                          -7-


in which the taxed property was situated. But the statute was amended to eliminate initial

appeals to the Supreme Court of Ohio, and the court of appeals in which a notice of

appeal has been filed now has exclusive jurisdiction.3 See Am. Sub. H.B. 49, 2017 Ohio

Laws File 14, Part 15.

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

       If upon hearing and consideration of such record and evidence the

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

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

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

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

       accordance with such modification.4

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

BTA’s decision is both “reasonable and lawful,” the reviewing court must affirm. NWD 300

Spring, L.L.C. v. Franklin Cty. Bd. of Revision, 151 Ohio St.3d 193, 2017-Ohio-7579, 87

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


3 An exception was made for appeals in which a party files a petition requesting a transfer
of jurisdiction to the Supreme Court of Ohio. The petition must be filed within 30 days
after the notice of appeal has been filed with the appropriate court of appeals, and the
petition must be filed with the Supreme Court of Ohio. If the appeal “involves a substantial
constitutional question or a question of great general or public interest,” the Supreme
Court of Ohio may approve the petition and order the appeal to be taken directly to the
Supreme Court. However, if jurisdiction is not transferred, the appeal proceeds in the
court of appeals. See R.C. 5717.04, as amended in 2017. The remainder of the
amendments to R.C. 5717.04 are non-substantive, except for a line that was added which
stated that “[a]s used in this section, ‘taxpayer’ includes any person required to return any
property for taxation.”
4The amendment to this paragraph is non-substantive, as the only change under the
2017 revision was the insertion of the word “applicable.” Am. Sub. H.B. 49, 2017 Ohio
Laws File 14, Part 15. Thus, the standard of review is unchanged.
                                                                                          -8-

to reverse BTA decisions that are based on incorrect legal conclusions. See, e.g., Satullo

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

Jefferson Local School Dist. Bd. of Edn. v. Zaino, 93 Ohio St.3d 231, 232, 754 N.E.2d

789 (2001). Consequently, questions of law are reviewed de novo. Dublin City Schools

Bd. of Edn. v. Franklin Cty. Bd. of Revision, 139 Ohio St.3d 193, 2013-Ohio-4543, 11

N.E.3d 206, ¶ 13; Terraza 8, L.L.C. v. Franklin Cty. Bd. of Revision, 150 Ohio St.3d 527,

2017-Ohio-4415, 83 N.E.3d 916, ¶ 7.

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

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

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

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

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

and probative evidence supporting the BTA’s determination.” Dublin City Schools Bd. of

Edn., 139 Ohio St.3d 193, 2013-Ohio-4543, 11 N.E.3d 206, at ¶ 13, citing Satullo at ¶ 14.

Deference is also given to BTA findings about the weight of the evidence, as long as the

findings are supported by the record. Terraza 8 at ¶ 7, citing Olmsted Falls Bd. of Edn. v.

Cuyahoga Cty. Bd. of Revision, 122 Ohio St.3d 134, 2009-Ohio-2461, 909 N.E.2d 597, ¶

27.

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

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

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

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

155, 2017-Ohio-870, 73 N.E.3d 503, ¶ 13. As a general rule, “the value or true value in
                                                                                          -9-


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

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

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

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

best way to determine value, when they are available. (Citations omitted.) Terraza 8, 150

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

       {¶ 17} But where no recent sales of the property have occurred, the BTA has wide

latitude in the matters that it can consider and broad discretion in the weight that it

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

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

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

evidence and the credibility of the witnesses that come before it.’ ” NWD 300 Spring, 151

Ohio St.3d 193, 2017-Ohio-7579, 87 N.E.3d 199, at ¶ 13, quoting EOP-BP Tower, 106

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

courts also apply an abuse of discretion standard to BTA decisions on witness credibility

and the weight their testimony is given. Id. at ¶ 14. An abuse of discretion refers to “an

unreasonable, arbitrary, or unconscionable attitude.” Renacci v. Testa, 148 Ohio St.3d

470, 2016-Ohio-3394, 71 N.E.3d 962, ¶ 32, citing J.M. Smucker, L.L.C. v. Levin, 113 Ohio

St.3d 337, 2007-Ohio-2073, 865 N.E.2d 866, ¶ 16. BTA factual determinations are not

disturbed “ ‘ “if the record contains reliable and probative support.” ’ ” Meijer Stores Ltd.

Partnership v. Franklin Cty. Bd. of Revision, 122 Ohio St.3d 447, 2009-Ohio-3479, 912

N.E.2d 560, ¶ 17, quoting Satullo, 111 Ohio St.3d 399, 2006-Ohio-5856, 856 N.E.2d 954,

at ¶ 14, quoting Am. Natl. Can Co. v. Tracy, 72 Ohio St.3d 150, 152, 648 N.E.2d 483
                                                                                        -10-


(1995).

       {¶ 18} Here, the BTA weighed the probative value of two appraisals and found one

to be more probative than the other. “This decision rests within the core of the BTA’s

competence as fact-finder and deserves the highest degree of deference from this court.”

Meijer at ¶ 18. Most of the assignments of error allege deficiencies in Sprout’s appraisal

and testimony. “But determining the probative value of an appraiser’s testimony lies within

the competence of the BTA,” id. at ¶ 20, and we will defer to the BTA’s determinations as

to these matters.

                    B. The competing appraisals and the BTA’s findings

       {¶ 19} Each expert—Stephen Weis for Golden Arch and Thomas Sprout for the

BOE—performed a comprehensive valuation of the subject property, a McDonald’s

restaurant. They both valued the property at its “highest and best use,” a concept that is

a “crucial element in determining the value of property in the overall market.” Rite Aid of

Ohio, Inc. v. Washington Cty. Bd. of Revision, 146 Ohio St.3d 173, 2016-Ohio-371, 54

N.E.3d 1177, ¶ 34. “Highest and best use” “ ‘is that use which will generate the highest

net return to the property over a reasonable period of time.’ ” Id., quoting IAAO, Property

Assessment Valuation 31 (2d Ed.1996) (International Association of Assessing Officers).

       {¶ 20} Both experts also analyzed the property’s value using the same two

approaches—the sales-comparison approach and the income-capitalization approach.

These different and independent approaches are “two accepted methods of analysis.”

Johnston Coca-Cola Bottling Co., 149 Ohio St.3d 155, 2017-Ohio-870, 73 N.E.3d 503, ¶

15. The sales-comparison approach values the subject property by comparing it with

similar, or comparable, properties that have recently sold and that reflect the subject
                                                                                          -11-


property’s market value. The sale price of each comparable property is adjusted for

factors like market conditions at the time of sale, building size, location, and quality and

condition. Based on the adjusted sales prices, a market price for the subject property is

determined. In the income-capitalization approach, the value of the subject property is the

present worth of anticipated future income derived from the property. This is calculated

by estimating the property’s net annual operating income and then applying a rate of

capitalization that reflects the relative certainty of continuing to earn that income and the

risks of ownership. The net operating income is based on the lease rates of comparable

properties. And the appropriate capitalization rate is determined by looking at the

capitalization rates of similar properties. Because the purpose of the valuation here is to

determine the value for tax purposes, both experts also conducted a tax additur analysis.

This analysis removes real estate taxes from the net-operating-income calculation and

adds a tax additur to the capitalization rate “to reflect the percentage amount of the

subject’s value that is paid in tax each year.” (Sprout Appraisal Report, p. 46; see also

Weis Appraisal Report, p. 45-46).5 After the experts analyzed the property’s value under

each approach, they reconciled the two values into a final opinion of value.

                                    i. Weis’s appraisal

       {¶ 21} Weis concluded that the best-and-highest use of the subject property here,


5 A “tax additur” is a component of the capitalization rate that accounts for the negative
effect that property taxes have on the value of the property. When the amount of real
estate taxes is unknown, such as when the taxes are in dispute, the appraiser develops
an adjustment—a “tax additur”—that reflects the “effective tax rate” for the subject
property; this percentage then is added to and becomes a component of the capitalization
rate. Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 144 Ohio St.3d
324, 2015-Ohio-3633, 43 N.E.3d 387, ¶ 26-28, citing Worthington City Schools Bd. of
Edn. v. Franklin Cty. Bd. of Revision, 140 Ohio St.3d 248, 2014-Ohio- 3620, 17 N.E.3d
537, ¶ 8, fn. 2.
                                                                                        -12-


as improved, was as a “Restaurant.”

       {¶ 22} In his sales-comparison analysis, Weis selected six properties in

Montgomery County that had sold between 2012 and 2015. Five of the properties were

restaurants and one was a retail building. Three of the restaurants were fast-food

restaurants and two were sit-down. Three of the restaurants were vacant at the time of

sale, and the retail building was also vacant at the time of its sale. After making

adjustments to the sales prices, Weis derived adjusted values of the comparable

properties that ranged from $67.28 to $150.64 per square foot. He then concluded that

the market value of the subject property was $145 per square foot. Multiplying this square-

footage value by the size of the subject property (4,411 sq. ft.) showed a rounded market

value of $640,000.

       {¶ 23} For his income-capitalization analysis, Weis selected nine restaurant

properties in Montgomery County that were leased between 2012 and 2015. Based on

the adjusted lease rates of these properties, Weis determined that the subject property’s

net annual operating income was $52,891. Weis then determined that the appropriate

rate of capitalization was 8.25%. He based this figure on the subject property’s size,

location, and condition and on the capitalization rates for 32 retail properties in several

Ohio counties as well as national capitalization rates. Next, Weis determined that a tax

additur of 0.15% would be appropriate. He applied the adjusted capitalization rate to the

net annual operating income to get a rounded value of $650,000.

       {¶ 24} In his reconciliation of values, Weis gave the most weight to the sales-

comparison value, “due to abundance of free standing retail building sales.” (Weis

Appraisal Report, p. 48). Weis concluded that the value of the subject property as of
                                                                                       -13-


January 1, 2014, was $645,000.

                                  ii. Sprout’s appraisal

      {¶ 25} Sprout concluded that the highest-and-best use of the property, as

improved, was as a “national fast food restaurant,” a little narrower than Weis’s highest-

and-best use conclusion. (Sprout Appraisal Report, p. 19.)

      {¶ 26} For his sales-comparison analysis, Sprout selected eight properties that

had sold in Ohio between 2012 and 2015—three in the Dayton area, one in Cincinnati,

one in Springfield, two in the Columbus area, and one in Mansfield. Six of the properties

were restaurants, occupied at the time of sale. One of the properties was a vacant former

restaurant in a poor location, which Sprout included to illustrate the sale of what the

subject property was not. After making adjustments to the sale prices of the properties,

Sprout determined that the market value of the subject property ranged from $300 to $325

per square foot. He then multiplied these values by the subject property’s square footage

(4,411 sq. ft.) to arrive at a rounded value of between $1,325,000 and $1,435,000.

      {¶ 27} For his income-capitalization analysis, Sprout used eight comparison

properties in Ohio—four in the Dayton area, one in Lebanon, one in Springfield, one in

Columbus, and one in Mansfield. Based on the adjusted lease prices of the comparable

properties, Sprout determined that the net annual operating income of the subject

property was $117,891— more than double Weis’s income determination. Sprout then

concluded that the appropriate capitalization rate was 7.25%. He based this rate on a

band-of-investment analysis, the capitalization rates of the comparison properties, and

national rates. Sprout then found that a tax additur of 2.98% should be added to the

capitalization rate, giving an adjusted capitalization rate of 10.23%. He applied the
                                                                                          -14-


adjusted rate to the net operating income to get a rounded value of $1,340,000.

       {¶ 28} In his value reconciliation, in contrast to Weis, Sprout gave the most weight

to the income-capitalization value. According to Sprout’s report, this value gives a better

indication of value because “there is an active rental market for properties such as the

subject.” (Sprout Appraisal Report, p. 47). Sprout concluded that the value of the subject

property on January 1, 2014, was $1,340,000, which is also more than double Weis’s

valuation.

                                  iii. The BTA’s decision

       {¶ 29} The BTA found Sprout’s valuation analysis “to be the most competent and

probative evidence of value.” It found that his highest-and-best-use conclusion as a

national fast-food restaurant is “most appropriate.” And it found that Sprout’s “selection of

comparable properties, under both the sales comparison and income approaches to

value, best represented the market in which the subject property would operate.” “Sprout,”

said the BTA, “mostly relied upon comparables that were operating fast-food restaurants

and that continued to operate as fast-food restaurants after their transfer.” “Weis, on the

other hand, relied upon comparables that were dissimilar from the subject property, i.e.,

‘sit-down’ restaurants, at least one property that had been converted to a different use,

and vacant properties.” The BTA said that this was a “crucial” difference that led Weis to

undervalue the property. As for the capitalization rate, the BTA found that Sprout’s rate

was “reflective of the subject property’s most likely use,” because it was based on other

fast-food restaurants. The BTA criticized Weis’s capitalization rate because “it was

derived from properties that were dissimilar from the subject properly, i.e., general retail,

instead of restaurant or fast-food restaurant properties.”
                                                                                        -15-


       {¶ 30} After reviewing the evidence, the BTA concluded that the BOE had satisfied

its evidentiary burden on appeal. The BTA determined that the subject property’s value

as of January 1, 2014, was $1,340,000.

                    C. Golden Arch’s challenges to the BTA’s decision

       {¶ 31} Golden Arch takes issue with the BTA’s decision, challenging it in five

primary ways. Fundamentally, Golden Arch argues that the BTA should not have given

the most weight to Sprout’s appraisal. Golden Arch also argues that the BTA’s highest-

and-best-use finding is too narrow and that it improperly considered the property’s present

use. Golden Arch further argues that Weis’s capitalization rate is better supported than

the rate used by the BTA. Finally, Golden Arch argues that the BTA should not have

recognized Sprout as an expert.

       {¶ 32} Again, our standard of review: “We must affirm the BTA’s decision if it is

reasonable and lawful. R.C. 5717.04. In making this determination, we must consider

legal issues de novo and defer to findings concerning the weight of evidence so long as

they are supported by the record.” (Citations omitted.) Pavilonis v. Cuyahoga Cty. Bd. of

Revision, Slip Opinion No. 2018-Ohio-1480, ¶ 8.

       {¶ 33} The BTA here considered two competing opinions of value. Although

facially they are widely divergent, the analysis leading to each value is well explained in

each appraiser’s written appraisal report. Many of Golden Arch’s arguments urge us to

re-weigh the appraisal evidence presented to the BTA and reach a different conclusion.

But that is not our role.

                            i. The weight given Sprout’s valuation

       {¶ 34} Golden Arch challenges the BTA’s determination that Sprout’s analysis is
                                                                                         -16-


entitled to more weight than Weis’s analysis. Specifically, Golden Arch disputes the BTA’s

findings that Sprout used a more appropriate methodology to value the property, that

Sprout’s selection of comparable properties “best represents the market in which the

subject property would operate,” and that Sprout’s qualitative adjustments are more

probative than Weis’s qualitative and quantitative adjustments. Golden Arch also argues

that the BTA should not have accepted the sales-breakpoint analysis in Sprout’s appraisal

report. And Golden Arch claims that Sprout’s appraisal methodology and analysis

produce inconsistent results.

                           Selection of comparable properties

       {¶ 35} The appraisal reports and the appraisers’ testimony describe the manner in

which comparable properties were selected. Determining which appraiser selected the

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

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

limited the number of properties that were similar to the subject property in other ways,

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

and resulted in the inclusion of one property that was torn down after its sale and used

for a completely different purpose. On the other hand, Sprout chose properties from a

wider geographical area, which led to more variations in locations, neighborhood,

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

operating fast-food restaurants.

       {¶ 36} Further, although Golden Arch’s argument in its brief places great emphasis

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

based on other factors was entitled to greater weight than geographical location. On the
                                                                                        -17-


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

subject property in characteristics and markets than Weis’s comparables, even if they

were located in a broader geographical area.

       {¶ 37} The BTA gave its reasons for concluding that Sprout’s appraisal was

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

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

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

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

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

narrowly, the BTA, as the finder of fact, was permitted to reasonably conclude that his

comparables were more carefully tailored to this particular use.

       {¶ 38} The BTA’s statement that Sprout’s selection of comparable properties “best

represented the market in which the subject property would operate” is reasonable if the

“market” is defined in this broader sense, rather than as limited to Montgomery County.

And we reject Golden Arch’s assertion that this statement by the BTA “makes no sense

whatsoever” and is “literally impossible.”6

                                       Adjustments

       {¶ 39} Golden Arch also asserts that Sprout’s analysis is inferior to Weis’s because



6 We also reject Golden Arch’s assertions that the Sprout report “strangely chose” an
appraisal method, that the BTA's decision is “not merely unreasonable, but shocking,”
that the Sprout testimony “laughably referr[ed]” to certain building features, that the BTA
engaged in “[s]loppy reasoning,” that Sprout made “outlandish claims,” that the BTA’s
reasoning was “lazy and factually inaccurate,” that the BTA failed “to employ common
sense and good judgment in evaluating [Sprout’s] appraisal report,” or that Sprout
“magically conclude[d]” a higher value than the BOR.
                                                                                          -18-


Sprout’s qualitative adjustments to the sales prices of his comparable properties were

less reliable than Weis’s qualitative and quantitative sales-price adjustments, 7 and

because Sprout did not provide market support for his conclusions.

        {¶ 40} The BTA has held that “qualitative, rather than quantitative adjustments, are

recognized standard appraisal practice.” Insite Wooster, LLC, v. Wayne Cty. Board of

Revision, BTA No. 2014-4149, 2015 WL 11005090, *4 (Sept. 11, 2015), citing Bd. of Edn.

of the Columbus City Schools v. Franklin Cty. Bd. of Revision, BTA No. 2014-2022, 2015

WL 1048721 (Feb. 27, 2015). Here, the BTA specifically referenced the Columbus City

Schools decision for this proposition and rejected Golden Arch’s criticism of the fact that

Sprout used qualitative adjustments as opposed to the quantitative adjustments Weis

applied in his report.

        {¶ 41} Golden Arch does not explain exactly what it thinks is wrong with Sprout’s

qualitative adjustments, other than that they were subjective. We disagree that they were

subjective. Having reviewed the record in its entirety, we do not find Sprout’s adjustments

purely subjective. Both experts testified about their process of making adjustments and

they applied similar factors, like location, size, and so forth, to adjust the sales prices of

the properties. We fail to see how Sprout’s adjustments were more unsubstantiated than

Weis’s.

                            Sprout’s sales-breakpoint analysis

        {¶ 42} Golden Arch contends that the BTA ignored the problems that Golden Arch

raised concerning Sprout’s sales-breakpoint analysis. Golden Arch claims that Sprout’s

income-capitalization approach is “built around some conjectured ‘sales breakpoint


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


analysis,’ ” which Golden Arch calls “a flawed methodology unsupported by verifiable

market research or appraisal industry guidelines that he used to substantiate his income

capitalization approach.”

       {¶ 43} A “sales breakpoint” typically refers to “[t]he amount of gross sales at which

percentage rent becomes payable.” Baldwin’s Ohio Practice Ohio Real Estate Law,

Percentage rent, Section 46:12 (December 2017 Update).8 One Ohio appellate court has

said this about a sales-breakpoint provision in a lease: “A percentage rent was an

additional amount payable by a retail tenant at the Centre when its annual sales exceeded

a level defined in its lease and referred to as a ‘breakpoint.’ The additional rent due was

computed as a percentage of the amount by which the tenant’s sales exceeded the

breakpoint.” Kenwood Plaza Ltd. Partnership v. State Teachers’ Retirement Sys. Bd., 1st

Dist. Hamilton No. C-000730, 2001 WL 1077939, *9 (Sept. 14, 2001). These explanations

agree with the definition that Sprout gave at the BTA hearing that “[a] breakpoint is * * * a

percentage of sales.” (July 12, 2016, BTA No. 2015-2319, Tr. 31). Using Wendy’s

restaurants as an example, Sprout said that “[t]hose leases also a lot of times have a

percentage rent based on a breakpoint. So if they achieve a sale level that’s above that

breakpoint, then the lessee is paying percentage rents to the property owner * * *.” Id. at

17. A sales-breakpoint provision is put in a lease agreement, said Sprout, “because that


8 “Percentage rent” has been explained this way: “Percentage rent is a reflection of the
fact that the commercial location in question is so valuable a location that the traffic
generated warrants a premium to be computed in accordance with the commercial
revenues obtained from business at the site. Percentage rent also gives the landlord
certain protections from the effects of inflation, while protecting the tenant from downturns
in sales.” Baldwin’s Ohio Practice Ohio Real Estate Law, Percentage rent, Section 46:12
(December 2017 Update). “Percentage rent is frequently based on gross sales in excess
of the amount of gross sales which would yield the base rent when multiplied by the
applicable percentage.” Id.
                                                                                             -20-

way if the tenant’s doing well with their sales, the landlord is benefitting as well.” Id. at 32.

How sales breakpoints are determined and the significance of their analysis is complex.

Indeed, after going through a lengthy explanation for the BTA hearing examiner, Sprout

admitted that “it took me a long time to figure that out myself.” Id. at 33.

       {¶ 44} Golden Arch did not spend much time challenging Sprout’s sales-

breakpoint testimony. It asked him whether “a sales breakpoint rent clause [is] much more

common in tenant situations where it’s a mall or a strip center than a fast food restaurant.”

(July 16, 2016, BTA No. 2015-2357, Tr. 24). Sprout disagreed and testified that in his

experience national fast-food companies use sales-breakpoint provisions in typical

restaurant leases, giving Wendy’s as an example.

       {¶ 45} Golden Arch gives no reason why Sprout’s sales-breakpoint analysis is

such a problem. It may well be that a sales breakpoint increase in rent disadvantages a

more successful business because the net operating income is increased, and hence the

income-capitalization value of a specific property will be higher. But the BTA heard

Sprout’s testimony about his sales-breakpoint analysis and heard Golden Arch’s attempts

to undermine it. We leave it to the BTA’s discretion to accord the analysis the weight that

it deserves.

                                Sprout’s inconsistent results

       {¶ 46} Golden Arch claims that Sprout’s appraisal methodology produced

inconsistent results. It cites another case involving a McDonald’s restaurant valuation in

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

Schools v. Montgomery Cty. Bd. of Revision, BTA No. 2016-325, 2017 WL 3034549 (July

6, 2017). In that case, the appraisers valued a McDonald’s restaurant that was “at the
                                                                                       -21-


end of its economic life” and was slated to be demolished and replaced, and the BTA

noted that the restaurant’s age “greatly impact[ed]” its value. The BTA relied on Weis’s

selection of comparable properties, rather than on Sprout’s, in determining the value of

the property.

      {¶ 47} Golden Arch says that the result in the Brookville case should lead us to

reject Sprout’s appraisal in this case. There are flaws in this reasoning, including that

each case is factually different, that we do not have the record and evidence from the

Brookville case, and that the BTA’s rejection of the valuation provided by an appraiser in

one case does not automatically impugn that appraiser’s qualifications or his opinion in

another case. Appraisers make judgments based on the facts of each case, and those

facts differ. Accordingly, we find no merit to Golden Arch’s claim that Sprout’s

methodology is inconsistent.

                          ii. The highest-and-best-use finding

      {¶ 48} Golden Arch’s next major argument is that the BTA’s conclusion as to the

property’s highest-and-best use is too narrow. Golden Arch says that the BTA effectively

valued the property as “special purpose” property.

                               Special-purpose property?

      {¶ 49} Golden Arch focuses much of its argument on the fact that the two

appraisers expressed different opinions about whether the W. Alex Bell Road McDonald’s

restaurant was a special-purpose property. But even though Sprout believed that it could

have been treated as such, he did not value the property as special-purpose property. So

Sprout’s observation that the property could have been classified as a special-purpose

property was inconsequential to the BTA’s decision. Indeed, the BTA noted in its decision
                                                                                         -22-


that “although the property owner faults Sprout’s conclusion that the subject property fit

the definition of ‘special-purpose property,’ we find no error there given that he testified

that he did not appraise the property as if it were a ‘special-purpose property.’ ”

                                          Rite Aid

       {¶ 50} Golden Arch contends that the BTA ignored Rite Aid of Ohio, Inc., v.

Washington Cty. Bd. of Revision, 146 Ohio St.3d 173, 2016-Ohio-371, 54 N.E.3d 1177.

In Rite Aid, the BTA adopted the property owner’s lower valuation, finding that the

county’s comparables, “while potentially appropriate,” were drawn from an unnecessarily

narrow pool of properties. The Ohio Supreme Court agreed. The Court concluded that

the county’s appraiser had essentially and unjustifiably treated the subject property as a

special-use property and that therefore the BTA “was justified in rejecting” the county’s

appraisal and adopting the property owner’s. The Court also criticized the county’s

argument that properties encumbered by a lease at the time of sale could be compared

with unencumbered properties, without adjustment for this difference, “[p]recisely

because the lease affects the sale price and value.” Id. at ¶ 20.

       {¶ 51} But Sprout’s appraisal does not treat the subject property here as special-

purpose property, and the appraisal incorporates very specific information about existing

leases on comparable properties in determining whether adjustments in value are

appropriate. So we see no conflict between Rite Aid and the BTA’s decision here.

                                   The BTA’s precedent

       {¶ 52} Golden Arch also claims that the BTA ignored its own precedent. In NWD

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

87 N.E.3d 199, the Ohio Supreme Court affirmed the BTA’s valuation of a luxury, high-
                                                                                          -23-


rise residential condominium building. Sprout and another appraiser had provided

competing appraisals giving different values. In Sprout’s analysis, he selected as

comparable properties a variety of vacant land parcels designated for mixed-use in the

nearby market rather than vacant land parcels designated for residential use (which is

what the other appraiser did). The BTA found that Sprout’s comparables were more

appropriate and reflective of the subject property’s market. The BTA commended Sprout

for “ ‘consider[ing] a wider variety of commercial development’ ” and faulted the other

appraiser for “ ‘utiliz[ing] only sales of properties ultimately developed into apartments.’ ”

NWD 300 Spring at ¶ 9, quoting BTA Nos. 2015-106 et al., 2015 WL 11018757, *4 (Dec.

23, 2015). Golden Arch says that the BTA’s decision in the present case directly

contradicts its decision in NWD 300 Spring.

       {¶ 53} As we have already pointed out, every valuation case is factually different.

We do not have the record and evidence from the NWD 300 Spring case. The BTA’s

acceptance of an analysis provided by an appraiser in one case does not mean that the

BTA must accept the same analysis in another case. The facts on which an appraiser

makes judgments differ in every case. Therefore we find no merit in Golden Arch’s claim

that the BTA ignored its own precedent.

                              iii. Consideration of present use

       {¶ 54} Golden Arch’s next major argument is that the BTA erred by applying the

holding in Johnston Coca-Cola Bottling, 149 Ohio St.3d 155, 2017-Ohio-870, 73 N.E.3d

503. Golden Arch says that that case involved the valuation of an enormous bottling plant,

which is unlike the subject property here.

       {¶ 55} In Johnston, the Ohio Supreme Court reaffirmed that the “present use”
                                                                                          -24-


method of evaluation cannot be the basis of valuing real property for tax purposes,

because it “ ‘excludes, among other factors, location and speculative value which

comprise market value * * *.’ ” Id. at ¶ 13, quoting State ex rel. Park Inv. Co. v. Bd. of Tax

Appeals, 32 Ohio St.2d 28, 33, 289 N.E.2d 579 (1972); Rite Aid at ¶ 27. Which is not to

say that present use must be ignored. Rather, as the Court stressed in Johnston,

“[a]lthough present use generally cannot be the only measure of value, in a proper case

it may be considered in determining true value for tax purposes.” Johnston at ¶ 14. The

key point is that the present-use value may not be considered “to the exclusion of other

factors relevant to exchange value.” Id. at ¶ 15. The Johnston court found that the BTA

referred to the property’s present use as a bottling company but that “it did so in the

context of deciding which comparables identified by the appraisers were ‘more analogous’

under the sales-comparison approach.” Id. at ¶ 16. This consideration of present use was

not improper.

       {¶ 56} Here, the BTA observed that Sprout did not value the subject property

based solely on its present use as a McDonald’s restaurant: “[W]e find that Sprout

properly considered the subject property’s current use as a McDonald’s restaurant and

developed the sales comparison and income approaches to value to determine the

subject property’s exchange value.” Johnston supports this finding, said the BTA. On this

record we cannot disagree.

                                 iv. The capitalization rate

       {¶ 57} Golden Arch argues that the BTA should have chosen Weis’s capitalization

rate of 8.25% over Sprout’s 7.25% rate.

       {¶ 58} The BTA faulted Weis’s capitalization rate because he derived it from
                                                                                           -25-


properties that were unlike the subject property:

       * * * Weis’s capitalization rate raises concerns given that it was derived from

       properties that were dissimilar from the subject properly, i.e., general retail,

       instead of restaurant or fast-food restaurant properties. As such, we cannot

       confirm that his capitalization rate appropriately captures the market in

       which the subject property would operate. However, Sprout’s capitalization

       rate was based upon fast-food restaurants and, therefore, reflective of the

       subject property’s most likely use.

       {¶ 59} Both appraisers consulted local and national capitalization rates to derive

their respective rates. Sprout looked at seven fast-food restaurants in Ohio, three of which

were in the Dayton area. The capitalization rates of these properties ranged from 5.45%

to 6.77%. Sprout also consulted the PwC Real Estate Survey, “a national publication

indicating typical capitalization rates within the net lease market traded in the U.S.,” which

he included with his report. (Sprout Appraisal Report, p. 45). This survey shows a range

of 6.0% and 8.5%. Finally, Sprout conducted a band-of-investment analysis, which

showed a range of 6.77% to 7.27%. As for Weis, he looked at 32 properties across Ohio,

only ten of which were restaurants and of those ten only nine were fast-food. And like

Sprout, Weis consulted a source for national capitalization rates. This source used

various techniques to determine the capitalization rate in the retail, restaurants (all types),

and restaurants (fast food) sectors.

       {¶ 60} Which capitalization rate is more accurate? Who knows. But the evidence

supporting Sprout’s rate of 7.25% is reliable and probative. And the BTA’s decision to

adopt this rate as the appropriate capitalization rate for the subject property was
                                                                                          -26-

reasonable. See Dublin City Schools Bd. of Edn., 139 Ohio St.3d 193, 2013-Ohio-4543,

11 N.E.3d 206, at ¶ 13; Terraza 8, 150 Ohio St.3d 527, 2017-Ohio-4415, 83 N.E.3d 916,

at ¶ 7.

                             v. Sprout’s qualifications as an expert

          {¶ 61} Finally, Golden Arch argues that the BTA should not have “continu[ed] to

recognize” Sprout as an expert. Golden Arch suggests that it discredited or impeached

Sprout such that the BTA should have doubted whether Sprout “ha[d] experience in

appraising fast-food restaurants” or was “familiar with the neighborhood in which the

Subject Property is located.”

          {¶ 62} In its decision, the BTA rejected Golden Arch’s argument that Sprout was

not an expert:

          We note that, at this board’s hearing, the property owner stipulated to

          Sprout’s qualifications as set forth in his appraisal report; however, in its

          post-hearing   briefs,   the   property    owner    attempts    to   impugn

          Sprout’s qualifications and claims that he misled this board about his

          qualifications. We find no merit to this argument and recognize Sprout (and

          Weis) as an expert qualified to render an opinion on the subject property’s

          value.

The BTA provided a detailed discussion of how it weighed the experts’ opinions and

methodology, including specific criticisms of Weis’s analysis. Golden Arch obviously

disagrees with Sprout’s conclusions, but nothing in the record suggests that Sprout was

unqualified, that his choice of comparable properties or his calculations were

unreasonable, or that his valuation should have been disregarded because he lacked
                                                                                            -27-


appropriate qualifications.

                                        III. Conclusion

          {¶ 63} The BTA said in its decision that “inherent in the appraisal process is the

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

on which to rely, making adjustments to the data to make it “usable,” and interpreting and

evaluating all the information to form an opinion. Similarly, the BTA must use its judgment

in determining which evidence presents the most credible valuation. Here, the BTA relied

on credible evidence from an appraiser who presented support for his positions. Based

on the record before us, we conclude that the BTA’s determination was reasonable and

lawful.

          {¶ 64} All of the assignments of error are overruled. The BTA’s decision is affirmed.

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



WELBAUM, P.J. and FROELICH, J., concur.


Copies mailed to:

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