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                                      Appellate Court                           Date: 2019.07.18
                                                                                10:41:05 -05'00'




                 Gateway-Walden, LLC v. Pappas, 2018 IL App (1st) 162714



Appellate Court          GATEWAY-WALDEN, LLC, Plaintiff-Appellee, v.                 MARIA
Caption                  PAPPAS, Cook County Treasurer, Defendant-Appellant.



District & No.           First District, Fourth Division
                         Docket No. 1-16-2714



Filed                    August 30, 2018



Decision Under           Appeal from the Circuit Court of Cook County, No. 13-COTO-3720;
Review                   the Hon. Paul A. Karkula, Judge, presiding.



Judgment                 Affirmed.


Counsel on               Kimberly M. Foxx, State’s Attorney, of Chicago (Chaka M. Patterson,
Appeal                   Kent S. Ray, Benjamin R. Bilton, Cristin Duffy, and John J. Coyne,
                         Assistant State’s Attorneys, of counsel), for appellant.

                         Saul Ewing Arnstein & Lehr LLP, of Chicago (Hal R. Morris, David
                         C. Durkin, and Elizabeth A. Thompson, of counsel), for appellee.



Panel                    JUSTICE ELLIS delivered the judgment of the court, with opinion.
                         Presiding Justice Burke and Justice Gordon concurred in the judgment
                         and opinion.
                                              OPINION

¶1       Plaintiff owns commercial office space in Schaumburg (Property). For the purposes of
     2011 property taxes, Cook County valued the Property at approximately $10.4 million.
     Plaintiff disagreed with this valuation and filed suit. After a bench trial, the circuit court
     entered judgment in favor of plaintiff and found that the Property’s fair cash value was $7.3
     million. Defendant appealed. For the following reasons, we affirm the circuit court’s
     judgment.

¶2                                          BACKGROUND
¶3        The Property consists of three separate multi-tenant office buildings. Before 2011, the
     Property was owned by a third party who had a mortgage with Wells Fargo. The previous
     owner failed to meet its mortgage obligations, and Wells Fargo filed a foreclosure action.
     During that proceeding, the circuit court of Cook County appointed a receiver, Daniel Hyman.
     At the conclusion of the foreclosure case, Wells Fargo made a credit bid at the sheriff’s sale.
     The circuit court confirmed the sale to Wells Fargo near the end of February 2011.
¶4        While receiver, Hyman contacted Gerald Nudo. Nudo was a manager at Marc Realty and
     had previously done business with Hyman. Beginning in February 2011, Nudo expressed
     interest in purchasing the Property. Nudo testified that there were a number of offers
     exchanged in mid-2011. There is conflicting testimony about whether Hyman or Nudo
     initiated offers for the Property. Ultimately, Wells Fargo, or its agent, accepted Marc Realty’s
     offer, and the Property was put under contract in November 2011. Marc Realty created
     Gateway-Walden, LLC, the plaintiff, to own and operate the Property. The sale closed in
     January 2012 with a final price of $7.3 million.
¶5        Plaintiff disputed the assessor’s 2011 property tax assessment and filed suit to challenge
     the $10.4 million property valuation; the case proceeded to bench trial. At trial, the parties each
     presented evidence regarding the Property’s value.

¶6                                   Plaintiff’s Expert: Eric Enloe
¶7       Plaintiff presented the expert testimony of Eric Enloe of Integra Appraisal. Enloe had
     appraised the Property in late 2011, not for purposes of this litigation, but rather for Associated
     Bank for loan underwriting purposes. A sales contract was pending on the Property, and the
     bank was considering issuing a mortgage on the Property. (As we will explain, the sale went
     through—plaintiff bought the Property for $7.3 million in January 2012.)
¶8       Enloe opined that the Property had a value of $7.5 million dollars as of December 2011.
     Enloe also made prospective stabilized and completion valuations: $9.5 million as of 2013 and
     $10 million as of 2014. Enloe explained that the disparity in these values had to do with the
     need to stabilize the Property and make capital improvements. Specifically, the Property was
     approximately 29% vacant, which was consistent with the market at the time. He opined that
     the property owner would need to bring the vacancy rate to around 15% before it would be
     considered stabilized. Additionally, Enloe estimated that there would need to be approximately
     $500,000 in expenditures to repair the HVAC system and parking lot.
¶9       In reaching his conclusion, Enloe employed the sales comparison approach (resulting in a
     valuation of $7.2 million for 2011) and the income capitalization approach (from which Enloe

                                                  -2-
       obtained a $7.5 million valuation for 2011, the valuation he adopted). Enloe recognized that
       there was a third common approach, the reproduction cost approach, but explained that he did
       not conduct this analysis because that approach is not particularly relevant when considering
       the purchase of the Property.
¶ 10       Properties are given letter grades that reflect their amenities: security guards, finishings,
       access to local amenities, and the like. “A” properties are the nicest, most modern properties.
       Enloe described the Property as a “B” or “B/C” property in average condition. Enloe also
       stated that his valuations were for a leased fee interest in the Property. He testified that a fee
       simple valuation is free and clear of any other interest. On the other hand, a leased fee interest
       is where a party takes ownership of property subject to existing leases. He testified that there
       was nothing abnormal about valuing a leased fee interest for property that was going to be used
       for leasing office space.
¶ 11       In conducting his sales comparison approach, Enloe used five sales that, in his opinion,
       were comparables. These comparables were multi-tenant leased fee buildings that sold
       between 2009 and 2011. He opined that the market was devastated by the real estate crash, and
       he felt it necessary to use sales that occurred post-recession to get a valuation that reflected the
       current reality; Enloe criticized defendant’s expert for using sales that occurred before the
       crash. In response to defendant’s criticism that Enloe’s comparables were lower quality than
       the Property—including one with a 100 percent vacancy rate—Enloe acknowledged that some
       of his comparables were of a lesser quality than the Property, but he testified that he made
       positive adjustments to compensate.
¶ 12       Though he used the sales comparison approach, Enloe placed the highest emphasis on the
       income capitalization approach. There are various accepted analyses within the income
       capitalization approach. Relevant to this appeal are the “direct capitalization approach” and the
       “discounted cash flow analysis.” The direct capitalization approach determines a net operating
       income and applies that to a capitalization rate to arrive at a value. The discounted cash flow
       analysis is used when there are leases in place; it makes projections about vacancies and
       expenditures over the next 10 years to arrive a present value.
¶ 13       Enloe opined that direct capitalization was more appropriate for long term, single tenant
       buildings, whereas discounted cash flow was better for multi-tenant buildings with lease
       turnover. Enloe used the discounted cash flow analysis in this case due to the number of
       vacancies and the expenses associated with the “lease-up” of the Property. To determine the
       projected income and costs associated with leasing the Property, Enloe used seven lease
       comparables, focusing on “B” office buildings. Using these variable inputs, Enloe used a
       market standard program called ARGUS to arrive at his $7.5 million value.
¶ 14       On cross-examination, Enloe admitted that typically, for tax valuations, the direct
       capitalization method is used and a discounted cash flow is not included. He had not prepared
       his appraisal for tax valuations but rather for a bank that wanted to confirm the Property’s fair
       market value before issuing a mortgage. On redirect, he testified that the discounted cash flow
       analysis is an “accepted and typical approach” that he has seen used in tax appraisals, too.
       More importantly, he testified that both approaches determine a property’s value—which is
       ultimately what matters.




                                                    -3-
¶ 15                               Defendant’s Expert: Stephen Jackson
¶ 16       Defendant presented the expert testimony of Stephen Jackson. Jackson conducted a
       retrospective valuation of the Property in 2014. Jackson opined that the Property had a value of
       $12 million as of January 1, 2011. Jackson valued the Property at $12 million under all three
       approaches: the sales comparison approach, the income capitalization approach, and the cost
       approach. While Jackson conducted the cost approach, he testified that it was of almost no
       value to his ultimate opinion. Like Enloe, Jackson relied on the income capitalization
       approach, supported by the sales comparison approach.
¶ 17       Jackson testified that he valued the Property at “market value,” defined consistently with
       the tax code, for a fee simple interest. He acknowledged that the Property was sold for $7.3
       million in January 2012, but he did not give any weight to this sale because, in his opinion, it
       did not appear to be a market value sale.
¶ 18       Jackson categorized the building as a “B” or “A-/B” building in good to average condition
       as of 2014. In conducting the sales comparison approach, Jackson used five sales that he
       believed were comparable. The comparables were multi-tenant office buildings sold between
       2006 and 2009 in arms-length sales; plaintiff heavily criticized Jackson’s use of pre-recession
       sales as a way of avoiding distressed sales. Jackson acknowledged that each of his comparables
       was superior to the Property, and that none of those sales needed capital expenditures. To
       compensate, Jackson testified that he made (significant) downward adjustments to his
       comparables price to arrive at his value of the Property. Plaintiff emphasizes that many of these
       adjustments were extremely significant: for example, $137.39 per square foot was adjusted to
       $49.46 per square foot, and $192.63 per square foot was adjusted to $52.10 per square foot.
¶ 19       While Jackson agreed with Enloe that the best method was the income capitalization
       approach, he believed that the proper analysis within that approach was the direct
       capitalization method, not the discounted cash flow analysis that Enloe used. Jackson
       explained that the discounted cash flow analysis was inappropriate for tax valuation because it
       adjusts for the payment of property taxes. Jackson additionally criticized Enloe for using an
       inflated property tax payment estimate. Specifically, Jackson opined that the property taxes
       assumed by Enloe’s analysis indicated a market value of $14 million—higher than even his
       valuation. Using this inflated number, he said, drives the present value down because it
       presumes significant, unsupported, future expense, which affects present value because you
       work backwards. According to Jackson, that was the biggest problem with Enloe’s discounted
       cash flow evaluation. In contrast, said Jackson, the direct capitalization approach eliminates
       this “circular reference” problem, as it does not consider property taxes when determining
       property value, and it is especially more appropriate when using the income capitalization
       approach for the purpose of determining what those property taxes should be.

¶ 20                                   Remaining Trial and Judgment
¶ 21       At the close of plaintiff’s case-in-chief, defendant moved for a directed finding. On appeal,
       defendant contends it moved for a “directed finding based on plaintiff’s failure to meet its
       burden by clear or [sic] convincing evidence, as well as failure to provide opinion as to value
       on the lien date.” The citation to the record provided for this argument is incorrect, and we
       have found no evidence to support the contention that defendant made these specific
       arguments. The record shows the following regarding defendant’s motion for directed finding:
                   “MS. DUFFY: Your Honor, I would like to make a motion for directed finding.

                                                   -4-
                   THE COURT: Well, no, that will be denied.”
       What is clear from the record is that defendant moved for directed finding, and the trial court
       denied that motion—nothing more or less.
¶ 22       After both experts testified, plaintiff sought to call two rebuttal witnesses: Hyman and
       Nudo. Defendant objected, arguing that these witnesses were not disclosed and that allowing
       them to testify would be a discovery violation. Initially, the court granted defendant’s motion
       to bar and refused to allow the two rebuttal witnesses. On plaintiff’s motion, the court
       reconsidered and allowed Hyman and Nudo to testify. Earlier in the case, the issue of these
       rebuttal witnesses had been raised, and the court had given defendant three weeks to depose
       them, but it does not appear as though that happened.
¶ 23       In any event, Hyman and Nudo testified. Plaintiff called Hyman and Nudo to rebut
       Jackson’s testimony that the January 2012 sale was not a market value, arm’s-length
       transaction.
¶ 24       The court issued a written opinion in favor of plaintiff. In its order, the court made specific
       findings relevant to this appeal:
               “The court further notes that the property actually was sold for $7.3 million.
                                                      ***
                   3. The credible testimony and records produced at trial support the factual
               conclusion that the aforementioned sale was the result of an arm’s length transaction
               between a willing seller and willing buyer as well as a product of constant,
               sophisticated and contemporaneous negotiations.
                   4. Plaintiffs [sic] appraiser most accurately and credibly utilized all appropriate
               commercial real estate market methodology to arrive at his conclusion of valuation
               including but not limited to : [sic]
                   a. Location
                   b. Vacancy Rate
                   c. Real Estate market economic status
                   d. Realistic comparables
                   e. Maintenance/improvement costs
                   f. Income capitalization analysis
                   g. Discounted cash flow accounting
                   5. Plaintiff’s appraisal existed at the relevant point of reference procured for loan
               underwriting. The court found no bias exhibited in the appraiser’s testimony or written
               appraisal.
                   6. Defendant’s appraisal was completed upon request of defendant for anticipated
               use in litigation, his attempt to artificially reconstruct a valuation from 2011 was not as
               useful or reliable as the plaintiff’s.
                   7. The plaintiffs [sic] have rebutted the presumption of correctness of the assessed
               value by clear and convincing evidence[.]”
¶ 25       The trial court valued the Property at $7.3 million. This appeal followed.




                                                    -5-
¶ 26                                             ANALYSIS
¶ 27        We review the trial court’s findings to determine whether they are against the manifest
       weight of the evidence; that is, we will reverse findings of fact only “where all reasonable and
       unbiased persons would agree that it is erroneous and that the opposite conclusion is clearly
       evident.” La Salle Partners, Inc. v. Illinois Property Tax Appeal Board, 269 Ill. App. 3d 621,
       632 (1995). A trial judge, as the trier of fact, is in a superior position to observe the conduct of
       the witnesses while testifying. People v. A Parcel of Property Commonly Known as 1945
       North 31st Street, Decatur, Macon County, Illinois, 217 Ill. 2d 481, 510 (2005). Accordingly,
       findings of fact are entitled to deference—especially credibility determinations. Id.
¶ 28        In a tax-objection proceeding, “[t]he taxes, assessments, and levies that are the subject of
       the objection shall be presumed correct and legal, but the presumption is rebuttable. The
       plaintiff has the burden of proving any contested matter of fact by clear and convincing
       evidence.” 35 ILCS 200/23-15(b)(2) (West 2016). “Clear and convincing evidence” requires
       more than preponderance of the evidence, but not quite as much as proof beyond a reasonable
       doubt. In re D.T., 212 Ill. 2d 347, 362 (2004).
¶ 29        Here, the trial court expressly found that plaintiff rebutted the presumption of validity by
       clear and convincing evidence. It did so because it found that (1) there was an arm’s-length
       sales transaction near the time of the relevant tax year and (2) in any event, plaintiff’s expert,
       Enloe, was more credible, and his valuation more accurately reflected market value.
¶ 30        Defendant raises a number of arguments on appeal. Defendant contends that (1) Enloe
       applied the wrong “methodology” to his valuation, (2) the trial court’s findings were against
       the manifest weight of the evidence, (3) the trial court’s denial of defendant’s motion for a
       directed finding was against the manifest weight of the evidence, and (4) the trial court abused
       its discretion by allowing the rebuttal testimony of Hyman and Nudo.

¶ 31                              I. Sale of the Property in January 2012
¶ 32                         A. Trial Court’s Finding of “Arm’s-Length Sale”
¶ 33       There are three accepted methodologies for valuing real property for taxation purposes,
       which we will discuss shortly. But overriding them all is one bedrock principle of law: A
       recent, arm’s-length sale of the property is the best evidence of its fair market value. As our
       supreme court wrote decades ago: “It goes without saying that a contemporaneous sale
       between parties dealing at arms length is not only relevant to the question of fair cash market
       value [citations], but would be practically conclusive on the issue of whether an assessment
       was at full value.” (Emphasis added.) People ex rel. Korzen v. Belt Ry. Co. of Chicago, 37 Ill.
       2d 158, 161 (1967); see also Walsh v. Property Tax Appeal Board, 181 Ill. 2d 228, 230 (1998)
       (“Fair cash value is synonymous with fair market value and, as such, an arm’s-length sales
       transaction is the best evidence thereof.”).
¶ 34       That principle remains true today. See, e.g., Cook County Board of Review v. Property Tax
       Appeal Board, 384 Ill. App. 3d 472, 479 (2008) (Omni); Board of Education of Meridian
       Community Unit School District No. 223 v. Illinois Property Tax Appeal Board, 2011 IL App
       (2d) 100068, ¶ 36 (Onyx); Kraft Foods, Inc. v. Illinois Property Tax Appeal Board, 2013 IL
       App (2d) 121031, ¶ 43. We have consistently said as much because appraisal methodologies
       are merely estimates—best approximations—while an actual sale between two disinterested



                                                    -6-
       parties, acting in their self-interests without compulsion, removes the question from the
       theoretical guess to actual market reality. See Omni, 384 Ill. App. 3d at 480.
¶ 35       Here, the trial court found that an arm’s-length sale of the Property took place in January
       2012, the month following the relevant tax year, 2011. Defendant says that this finding was
       against the manifest weight of the evidence.
¶ 36       As we summarized above but explain in more depth here, the evidence shows that Daniel
       Hyman was appointed as receiver of the Property in approximately February 2010 and served
       that role for approximately one year. Hyman approached Gerald Nudo (a manager at Marc
       Realty) “and a number of other people” to see if they had an interest in acquiring the Property.
       Nudo’s company, Marc Realty, owned about 50 office buildings, including the one next door
       and one down the street from the Property. Hyman and Nudo knew each other, and Hyman was
       familiar with Marc Realty’s niche. Hyman and Nudo had done business together in the past,
       including once (but no longer, at the time of trial) owning properties together, and Hyman had
       sold Nudo other buildings in the past. Hyman quoted a figure of $9 million for the Property,
       which Nudo found “absurdly high.” Nudo recalled that Hyman “may have called us one more
       time” to discuss a purchase of the Property, but nothing came of it.
¶ 37       Later that year, in the fall of 2011, after Hyman’s role as receiver had ended, Nudo engaged
       in further negotiations with someone named Gary Nussbaum of Transwestern, who had been
       hired as the marketing agent for the servicing agent, C-III Centerline, acting on behalf of the
       Property’s owner, Wells Fargo. Nudo had purchased buildings from Nussbaum in the past.
¶ 38       Ultimately, in November 2011, Nudo submitted an offer of $7.3 million for the Property,
       which Transwestern accepted on behalf of Wells Fargo. (Nudo testified that Wells Fargo is a
       major national entity, and that in the regular course of negotiations, he dealt with Wells Fargo’s
       agents, C-III Centerline and Transwestern.)
¶ 39       Marc Realty created Gateway-Walden, LLC—the plaintiff here—to own and operate the
       Property. The sale closed in January 2012 with a final price of $7.3 million.
¶ 40       The trial court made a specific finding that the property was sold in an “arm’s length
       transaction between a willing seller and willing buyer as well as a product of constant,
       sophisticated and contemporaneous negotiations.” In fact, the court apparently found the
       evidence of the arm’s length transaction so compelling that it found the fair market value to be
       the same as that sale price: $7.3 million.
¶ 41       Defendant says the opposite conclusion is clearly evident, calling the sale “an inside deal
       between long time business partners and friends,” referring to Nudo and Hyman. In addition,
       says defendant, “there was no evidence of widespread marketing” of the Property and “the
       [P]roperty was in a distressed state.”
¶ 42       The biggest problem with this argument is that, while Hyman may have initiated the first
       contact with Nudo—the record is not entirely clear on that point, as witnesses at trial in 2016
       struggled to recall negotiations five years earlier, in 2011—Hyman dropped out of the
       negotiations long before they ended in a deal in the fall of 2011. His role as receiver had ended.
       Nudo was then negotiating with Wells Fargo’s agents, not Hyman. Hyman had no role in that
       final negotiation. He received no commission for that deal (Transwestern did).
¶ 43       Nudo testified that he had no personal relationship with Wells Fargo or its agents, and he
       testified without contradiction that Wells Fargo did not seem to be in any hurry to sell the
       Property, “distressed” as it was or otherwise. As for the existence of widespread marketing, the


                                                   -7-
       record is hazy at best. Nudo was shown some marketing materials, purportedly issued by
       Transwestern regarding the Property, but he testified that he could not remember what
       materials were issued on a property he bought five years ago. Defendant’s expert, Jackson, said
       he had “no third-party knowledge” of marketing materials, though he acknowledged that
       Enloe’s appraisal from December 2011 referenced those materials.
¶ 44       From the record, we could not possibly conclude that the trial court’s factual finding of an
       “arm’s length transaction between a willing seller and willing buyer as well as a product of
       constant, sophisticated and contemporaneous negotiations” was so unsupported by the
       evidence that the opposite conclusion was clearly evident. We uphold that finding.
¶ 45       As such, the record demonstrates that an arm’s-length sale of the Property was
       consummated in the very tax year at issue—2011—and closed less than a month into the
       following year, in January 2012. That “practically conclusive” (Korzen, 37 Ill. 2d at 161)
       determination of fair market value of the Property leaves defendant with a tall hurdle to climb.

¶ 46                              B. Propriety of Nudo, Hyman Testimony
¶ 47        Defendant argues that plaintiff never should have been allowed to call Hyman or Nudo as
       witnesses. Defendant says that they should have been barred because they were not proper
       “rebuttal” witnesses and because of discovery violations. We will take those in order.
¶ 48        Evidentiary rulings are largely within the discretion of the trial court and will not be
       disturbed absent an abuse of discretion. Kayman v. Rasheed, 2015 IL App (1st) 132631, ¶ 62.
       The plaintiff may call rebuttal witnesses if they tend to “ ‘explain, repel, contradict or disprove
       the evidence of [a witness].’ ” Chapman v. Hubbard Woods Motors, Inc., 351 Ill. App. 3d 99,
       106 (2004) (quoting Lagestee v. Days Inn Management Co., 303 Ill. App. 3d 935, 942 (1999)).
¶ 49        Hyman and Nudo were clearly rebuttal witnesses. Defendant’s expert, Jackson, testified
       that he did not believe the January 2012 sale was an arm’s-length transaction, and plaintiff
       called these witnesses for the specific purpose of establishing the circumstances surrounding
       that sale to prove that it was, in fact, an arm’s-length transaction between sophisticated parties.
       This testimony is the type that would tend to repel or contradict Jackson’s testimony. It was
       proper rebuttal testimony.
¶ 50        Next, we consider defendant’s claim that the trial court should have barred these witnesses’
       testimony as a discovery sanction. The purpose of a sanction is not to punish but to coerce
       compliance with discovery rule. Shimanovsky v. General Motors Corp., 181 Ill. 2d 112, 123
       (1998). A just sanction is one that, “to the degree possible, insures both discovery and a trial on
       the merits.” Id. A court’s decision to impose a specific sanction is only warranted where there
       is a “clear abuse of discretion.” Id.
¶ 51        In January 2016, the trial court granted defendant leave to depose Nudo; the notice of
       deposition was sent in February. The parties engaged in discussions pursuant to Illinois
       Supreme Court Rule 201(k) (eff. Jan. 1, 2013). During these discussions, plaintiff tendered
       some documents, and defendant agreed to “forego deposing Mr. Nudo in the ’11 case in order
       to keep things moving.” (Another case, involving another tax year, was also pending.)
¶ 52        Later, defendant moved in limine to bar the testimony of Hyman and Nudo. That motion is
       not in the record, but we have a transcript of the hearing. The basis of the motion was plaintiff’s
       discovery violations. In June, the court entered and continued the motion and ordered plaintiff
       to produce the witnesses for deposition and to produce all documents requested. The court


                                                    -8-
       gave the parties time to complete the rebuttal discovery. At the time of the June order,
       defendant was aware that plaintiff wanted to call both Hyman and Nudo.
¶ 53       In July 2016, defendant filed an emergency motion to compel, and/or for sanctions,
       arguing that plaintiff had failed to produce. On July 19, the court entered and continued the
       motion and ordered plaintiff to “produce discovery requested in the previous order, to the best
       of their ability ***. *** [Plaintiff] will produce affidavit of completeness as to both witnesses
       in compliance with Rule 214. The Parties will coordinate the deposition schedule of the two
       Rebuttal [sic] witnesses.”
¶ 54       The record does not indicate what occurred with regard to this discovery issue between the
       July 19 order and August 30. What we do know is that on August 30, the court granted
       defendant’s motion in limine and barred Hyman and Nudo’s testimony. The next day, plaintiff
       sought reconsideration. That motion is not in the record; we are not even sure whether it was
       oral or written. Nor do we have a transcript of the hearing on the motion to reconsider. We do
       have the order, however. The court granted the motion to reconsider and ordered plaintiff to
       produce the final document and an affidavit of completeness. Ultimately, Hyman and Nudo
       testified at trial.
¶ 55       The record concerning the court’s basis to allow these rebuttal witnesses is incomplete.
       From what we can decipher, defendant contended that plaintiff failed to disclose the witnesses
       and comply with document requests. But none of the disclosures are in the record; the only
       request in the record is a rider to the February notice of deposition for Nudo. We do not have
       the transcript of the hearing where the trial court granted plaintiff’s motion to reconsider.
       Where there is an incomplete record, any doubts arising from that incompleteness are resolved
       against the appellant—here, defendant. See Foutch v. O’Bryant, 99 Ill. 2d 389, 391-92 (1984).
¶ 56       The record shows there was some disagreement between the parties about what was
       tendered and when. The court, in its discretion, attempted to facilitate plaintiff’s compliance
       with discovery. Based on the transcripts we do have, plaintiff produced at least some of the
       documents which defendant was requesting. At first, the court considered plaintiff’s conduct
       and decided to grant the defendant’s motion to bar. We do not know why the trial court decided
       to reconsider that decision, given the lack of a record. Plaintiff says that reconsideration was
       properly granted, and the witnesses allowed to testify because it was defendant who
       consistently said she did not want to depose these witnesses.
¶ 57       But we leave it at this: In the absence of any basis in the record for the trial court’s decision
       to reconsider its sanction, we will not attempt to guess at why the trial court decided to allow
       Hyman and Nudo to testify. Instead, we must assume that the court acted appropriately under
       the law, and we cannot find an abuse of discretion. See id. at 392 (“As there is no transcript of
       the hearing on the motion to vacate here, there is no basis for holding that the trial court abused
       discretion in denying the motion.”).

¶ 58                              II. “Methodology” Used by Expert
¶ 59                                     A. Standard of Review
¶ 60       Defendant raises several challenges to the “methodology” employed by plaintiff’s expert,
       Enloe. We must first determine our standard of review, a subject of dispute. It will help if we
       start with some context. We have summarized Illinois law on the valuation of real property for
       taxation purposes as follows:


                                                     -9-
                    “Illinois law requires that all real property be valued at its fair cash value, estimated
               at the price it would bring at a fair voluntary sale where the owner is ready, willing, and
               able to sell but is not compelled to do so, and the buyer is likewise ready, willing, and
               able to buy but is not forced to do so. [Citation.] ‘Fair cash value’ is synonymous with
               fair market value, and an arm’s-length sales transaction is the best evidence thereof.
               [Citation.] There are three basic methods of evaluating real property: (1) the sales
               comparison approach; (2) the income approach; and (3) the reproduction cost
               approach. [Citation.] In the absence of market value established by a contemporaneous
               arm’s-length sale, the sales comparison approach is the preferred method and should be
               used when market data are available. [Citation.]” Kraft Foods, 2013 IL App (2d)
               121031, ¶ 43.
¶ 61       Defendant claims that all of her challenges to Enloe’s “methodology” should be reviewed
       de novo. That is incorrect. It is an oversimplification. As we just quoted above, Illinois law
       recognizes three methodologies for the valuation of real property—sales comparison, income
       capitalization, and reproduction cost—and generally favors the sales comparison approach
       among them.
¶ 62       We have traditionally conducted de novo review on the question of whether an appraiser
       properly ignored the preferred methodology—the sales comparison methodology—in a given
       case, and we have rejected the refusal to use that methodology when market data was available
       to make sales comparisons. See, e.g., id. ¶¶ 43-44; Omni, 384 Ill. App. 3d at 479 (error where
       appraiser did not apply sales approach); United Airlines, Inc. v. Pappas, 348 Ill. App. 3d 563,
       572 (2004) (same); Chrysler Corp. v. Illinois Property Tax Appeal Board, 69 Ill. App. 3d 207,
       210, 214 (1979) (same).
¶ 63       We have upheld an appraiser’s refusal to use the sales comparison approach only when
       sales data was unavailable due to the unique nature of the property—a fairly rare occurrence.
       See, e.g., Kendall County Board of Review v. Property Tax Appeal Board, 337 Ill. App. 3d
       735, 741 (2003) (not error to exclude sales comparison method, as property was zoned for
       agricultural use with special-use permit for telecommunications; evidence showed no actual or
       potential market); Onyx, 2011 IL App (2d) 100068, ¶¶ 36, 53 (upholding lack of sales
       approach in valuing sanitary landfill, as evidence showed no reliable market sales—recent
       sales had been compelled by federal divestiture order, and landfill was depreciating asset with
       no other appreciable use).
¶ 64       It makes sense to review that question de novo. Illinois law clearly favors the sales
       comparison approach; either that approach was used or it was not used; and if it was not, we
       need only review the record to determine whether there was evidence of reliable, comparable
       sales. We are not required to delve into the minutiae of expert testimony or make credibility
       determinations appropriately left to the trier of fact.
¶ 65       But we are unwilling to take de novo review any further than that, and defendant has cited
       no case law that would support our doing so. As one might expect in the appraisal of property,
       within each of those three valuation methodologies, there are various choices appraisers must
       make—which kinds of sales to compare, for example, or how to capitalize income—and we
       will not subject every choice an expert makes to de novo review, simply because defendant
       refers to each of those choices as “methodology.” We have never done so, and indeed, doing so
       would subject virtually the entire case to de novo review. Indeed, we fully agree with the
       following statement defendant makes in her brief: “a party’s objection to the testimony of an

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       opposing expert on the basis that the expert’s testimony includes improper elements or adopts
       a different theory of valuation goes to the weight, rather than the admissibility, of that
       testimony.” See, e.g., In re Village of Bridgeview, Cook County, Illinois, Special Assessment,
       139 Ill. App. 3d 744, 749-50 (1985) (village’s objection to expert’s consideration of median
       household income, as one factor in computing residential property value, went solely to weight
       of testimony).
¶ 66       For example, in Kraft Foods, 2013 IL App (2d) 121031, ¶ 44, Kraft argued that the
       Property Tax Appeal Board (PTAB) used the wrong kind of comparable sales—leased-fee,
       bulk-sale transactions, not listed on the open market—when employing the favored sales
       comparison analysis. Kraft argued that this was an attack on the “proper methodology” for the
       valuation of the property and thus required de novo review. Id. We rejected the application of
       de novo review, reasoning that the sales comparison approach was, in fact, used—the expert
       claimed that these sales reflected actual market value—and thus Kraft’s argument was not the
       absence of a sales comparison approach but simply an attack on how the expert employed it. Id.
       ¶ 46. That argument, we held, was simply an attack on the weight the fact finder should have
       given to the testimony, properly reviewed under the manifest-weight standard. Id.
¶ 67       With the standard of review clarified, we turn to the various challenges defendant raises to
       the “methodology” employed by plaintiff’s expert, Enloe.

¶ 68                             B. Lack of Reproduction Cost Approach
¶ 69        First, defendant argues that plaintiff’s expert, Enloe, failed to use the reproduction cost
       approach. Though we have typically only seen de novo review when determining whether the
       sales comparison approach was properly disregarded, it is fair to say that the reproduction cost
       approach is one of the three methodologies recognized in Illinois for valuing property. See id.
       ¶ 43. Thus, because this challenge is truly an attack on “methodology,” we will review this
       challenge de novo out of an abundance of caution.
¶ 70        We find no error, however. Enloe used the sales comparison approach, the preferred
       approach under Illinois law because it relies on actual sales data. See id. He placed the most
       weight on the income capitalization approach, which is particularly suited to a valuation of the
       property in question here—a multi-tenant commercial property—because that approach is
       based “on the property’s income-producing potential.” Id.; see also United Airlines, 348 Ill.
       App. 3d at 566 (“The income capitalization approach is used when the property is most
       valuable as rental property.”); Ellsworth Grain Co. v. Illinois Property Tax Appeal Board, 172
       Ill. App. 3d 552, 557-58 (1988) (market value may be reflected by using an income formula
       where the property is rented or rentable). Defendant’s expert, Jackson, employed each of these
       methods, as well.
¶ 71        Though Enloe failed to use the reproduction cost approach and defendant’s expert,
       Jackson, did use it, Jackson himself stated that he placed almost no weight on it because he did
       not consider it to be appropriate for this property. Jackson was correct to place little weight on
       that method in this case, and we find no error in Enloe’s exclusion of that method altogether.
¶ 72        The reproduction cost method “focuses on what it would cost to recreate the property with
       the same value.” United Airlines, 348 Ill. App. 3d at 566; see also Willow Hill Grain, Inc. v.
       Property Tax Appeal Board, 187 Ill. App. 3d 9, 14 (1989). That method “should be
       emphasized only in the context of some special-purpose property, which is defined as property
       of such a nature and applied to such a special use that it cannot have a market value.” Kraft

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       Foods, 2013 IL App (2d) 121031, ¶ 43; see also Chrysler Corp., 69 Ill. App. 3d at 212. This
       law has been settled for over a century. See City of Chicago v. Farwell, 286 Ill. 415, 420 (1918)
       (generally, reproduction cost should be emphasized only in the context of some special
       purpose property, which is property “of such nature and applied to such special use that it
       cannot have a market value”).
¶ 73       One example is railroad property; our supreme court approved the use of the reproduction
       cost approach as one—but not the only—method of valuing such property because “the
       concept of market value [had] little practical application,” given that “railroads [were] not
       bought and sold on the market.” People ex rel. Hillison v. Chicago, Burlington & Quincy R.R.
       Co., 22 Ill. 2d 88, 101 (1961); see also Kendall County Board of Review, 337 Ill. App. 3d at
       741 (replacement cost method was appropriate for property zoned for agricultural use with
       special-use permit for telecommunications; evidence showed no actual or potential market).
       Thus, when a property is of such unique nature that its market value literally cannot be
       quantified, an appraiser may resort to the reproduction cost method. See Willow Hill Grain,
       187 Ill. App. 3d at 14-15 (replacement cost method should be used “only when there is no
       actual or potential market for the property in question, and even then it should be only one
       factor in the valuation process and not the sole, conclusive method of valuation”); Chrysler
       Corp., 69 Ill. App. 3d at 212-13 (“[t]he key” to use of reproduction cost method “is whether the
       property is in fact so unique as to not be salable”).
¶ 74       But “[h]eavy reliance upon the reproduction cost method of valuation has been frowned
       upon by the courts” (Chrysler Corp., 69 Ill. App. 3d at 211) because most properties, even
       unique ones, have some actual or potential market value. See, e.g., Willow Hill Grain, 187 Ill.
       App. 3d at 15 (grain facility, though unique, had comparable sales comparisons and thus,
       “reliance on the replacement cost method of valuation in the instant case was error”); Chrysler
       Corp., 69 Ill. App. 3d at 211-15 (automobile assembly plant was not so unique as to preclude
       sales comparisons, and thus reliance on reproduction cost method was reversible error); United
       Airlines, 348 Ill. App. 3d at 572 (though “rental of an airport terminal may be considered
       property of special use,” sales comparisons were available, and thus it was error to rely on
       reproduction cost method over sales comparison approach).
¶ 75       Here, there is no question that a market exists for the property in question; each of the
       experts so testified and produced comparable sales for consideration, and each of them used
       the sales comparison approach to buttress their income capitalization methods. Thus, heavy
       reliance on the reproduction cost method would have been obviously inappropriate, as
       defendant’s expert, Jackson, himself admitted. We are not suggesting that it was error for
       Jackson to include the reproduction cost method along with the sales comparison and income
       capitalization methods. These methods are all estimates, and they serve as a check on each
       other. But neither could we possibly hold that Enloe’s exclusion of that method was a flaw in
       his methodology, much less one that was sufficient to warrant reversal. We find no error here.

¶ 76                                  C. Use of Fee-Simple Valuation
¶ 77       Defendant next argues that Enloe did not, in fact, use the sales comparison approach
       because he improperly used a leased-fee valuation of the comparables instead of a fee-simple
       valuation. (In other words, Enloe used sales comparables that were multi-tenant buildings with
       existing leases.) Of course, as we have said, the failure to use a sales comparison approach in a


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       case such as this one, where a market for the Property clearly exists, would be reversible error.
       See, e.g., Kraft Foods, 2013 IL App (2d) 121031, ¶ 43; United Airlines, 348 Ill. App. 3d at 572.
¶ 78        But that is not the case here. Enloe clearly conducted a sales comparison analysis. He
       testified about it at length during trial. He included it in his written valuation report. Defendant
       even cross-examined him about the veracity of his sales comparables at trial. Defendant is
       simply arguing that Enloe used the wrong kind of comparables. As we discussed above, that is
       precisely the argument Kraft made in Kraft Foods, 2013 IL App (2d) 121031, ¶¶ 44, 46—that
       the expert used the wrong comparables—and we recognized this alleged attack on
       “methodology” for what it was, a challenge to the weight the fact finder should have given to
       the expert’s choice. Just as we reviewed that question under the manifest-weight standard, so
       too will we review defendant’s challenge here under that standard.
¶ 79        The thrust of defendant’s argument seems to be that only a fee-simple valuation can
       produce a fair market value. We do not find this contention supported by the law, the expert
       testimony, or the trial court’s finding at trial. Enloe testified that the only difference between
       fee-simple and leased-fee valuations is the existence of leases on the comparable properties at
       the time the interest is valued; he testified that both are market valuations of the property. The
       trial court accepted this testimony, making a written finding that Enloe used “realistic
       comparables” in arriving at his conclusion.
¶ 80        Of course, defendant’s expert, Jackson, disagreed with Enloe, but it was up to the trier of
       fact to settle the competing expert contentions, and it did just that. We have been cited no
       authority for the proposition that a leased-fee valuation in this context is so glaringly
       inappropriate that we must overturn the trial court’s acceptance of it. We cannot say that the
       opposite conclusion was clearly evident.

¶ 81                             D. Prospective vs. Retrospective Analysis
¶ 82        Defendant next complains that Enloe’s analysis was faulty because it was prospective in
       nature, not retrospective like Jackson’s. Recall that Enloe did not enter the picture after a tax
       objection was filed and litigation proceeded; he was hired by a bank in late 2011 to appraise the
       Property for loan underwriting purposes, and plaintiff bought the Property shortly thereafter, in
       January 2012. Obviously, to protect its interests before lending millions of dollars to a
       borrower, the bank would have been interested in the then-current fair market value of the
       Property as well as the projected fair market value of the Property going forward. That is what
       Enloe did: he valued the Property as of December 2011 and then projected the value for
       December 2013 and December 2014.
¶ 83        It is worth noting here that plaintiff did not principally rely on those future valuations at
       trial but focused on the December 2011 valuation. And contrary to defendant’s
       characterization, the December 2011 valuation was not prospective. It gave the then-current
       fair market value based in part on previous sales of comparable properties. We are not sure
       how that could be considered “prospective” in any sense of that word. But on the other hand, it
       is true that the value did not go back to the date of January 1, 2011. So perhaps in that sense, it
       was not wholly retrospective, either, with regard to the valuation of the Property for the tax
       year 2011—the question in this case.
¶ 84        Regardless, the trial court preferred Enloe’s analysis because it reflected the value of the
       Property contemporaneous with the arm’s-length sale—that it “existed at the relevant point of
       reference for loan underwriting” purposes and thus exhibited “no bias,” as opposed to the

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       analysis by Jackson, who came to this matter in 2014 for the purposes of litigation and
       “attempt[ed] to artificially reconstruct a valuation from 2011” that the trial court found “not as
       useful or reliable.”
¶ 85        We cannot say that the trial court’s conclusion was so unsupported or faulty that the
       opposite conclusion was clearly evident. First, it would have been perfectly sensible for the
       trial court to reason that Enloe would have no bias—no reason to undervalue the Property for
       the bank. The very reason a bank orders an appraisal on property is to ensure that the purchase
       price matches or at least roughly matches the property’s actual value.
¶ 86        Second and more importantly, consider again that over and above all methodologies used
       to estimate a property’s value, the best and “practically conclusive” evidence of a land’s value
       is an actual, recent purchase of that property in an arm’s-length transaction. Korzen, 37 Ill. 2d
       at 161; Omni, 384 Ill. App. 3d at 480; Kraft Foods, 2013 IL App (2d) 121031, ¶ 43. We would
       utterly contradict that principle if we then turned around and rejected a valuation of the
       property that supported that very purchase.
¶ 87        Defendant has provided no support, other than her expert’s criticism, for the proposition
       that the December 2011 appraisal should be rejected. The trial court heard that criticism and
       decided, instead, that it found Enloe’s valuations to be more credible and persuasive. That
       finding was not against the manifest weight of the evidence.

¶ 88                                  E. Valuation as of January 1, 2011
¶ 89        Related to the argument we just addressed is defendant’s contention that, as a matter of
       law, Enloe’s December 2011 valuation was deficient because it did not establish a market
       value as of January 1, 2011. Defendant couches this as a basis for a directed verdict in this case.
       We already explained that we can find nothing in the record showing that defendant moved for
       a directed verdict on this basis. Defendant orally moved for a directed verdict—saying that and
       nothing more—and the court denied it—saying that and nothing more. Supra ¶ 22. Defendant
       has not cited to the record for a written motion for directed verdict, nor have we located one. In
       any event, for the reasons that follow, we reject the contention.
¶ 90        Defendant relies on the fact that taxing status is determined as of January 1 (see In re
       Application of Rosewell, 120 Ill. App. 3d 369, 373 (1983)), that the owner, as of January 1 of
       the tax year, is the one who is liable for the taxes (see First National Bank of Highland Park v.
       Mid-Central Food Sales, Inc., 129 Ill. App. 3d 1002, 1005 (1984)), and that the tax lien
       attaches as of January 1 of the taxing year (see 35 ILCS 200/21-75 (West 2016)).
¶ 91        But none of those sources remotely suggests that a valuation of property must be made
       effective the first day of that tax year. And to suggest otherwise is, again, to ignore the bedrock
       principle that the best and nearly conclusive evidence of a property’s value is a recent,
       arm’s-length sale. The law, quite obviously, does not favor only arm’s-length sales that occur
       on precisely the first day of the relevant tax year. There is nothing magical about January 1.
¶ 92        Pursuant to the objection statute, the objector’s burden is to “show[ ] [that] an assessment
       [is] incorrect or illegal” by clear and convincing evidence. Id. § 23-15(b)(3). Plaintiff did that,
       in the trial court’s view, based in part on an appraisal in December 2011 that supported an
       arm’s-length sale of the Property. Nothing in that statute, or in any other, requires a specific
       effective date of the valuation.



                                                   - 14 -
¶ 93       Plaintiff made an offer on that Property in the middle of the relevant tax year—2011—and
       Enloe appraised the Property for the lending bank later in that same tax year. Plaintiff bought
       the Property less than a month into the following year. To suggest that the December 2011
       valuation should be rejected out of hand—as a matter of law—is simply not credible.
¶ 94       The fact that Enloe’s valuation was made in December 2011 merely went to the weight of
       his testimony. Defendant was free to attack the December 2011 valuation, as she did.
       Defendant could certainly have pointed out, if it was possible to do so, that some reason existed
       why there should be a material difference between the valuation of the Property in December
       2011 versus January 2011. Of course, we would never foreclose the possibility that some
       major intervening event might substantially change a property’s value mid-year—say, for
       example, the collapse of the mortgage industry in 2007, or the September 11, 2001, attacks on
       our country, to name a few recent events that prompted economic strife—and nothing
       prevented defendant from making such an argument. But we saw nothing of that nature in this
       case. Absent that, we can think of no reason, nor has defendant given us one, why a valuation
       that supported a recent, arm’s-length sale could be so unreliable that we would say, as a matter
       of law, that we must reject it. See Chrysler Corp., 69 Ill. App. 3d at 215 (fact that appraisals for
       property were from previous tax year (1971) than one at issue (1972) did “not render them
       meaningless,” given lack of any evidence of “significant improvements that might affect the
       value made to the property during the year in question”).

¶ 95                               F. Discounted Cash Flow Analysis
¶ 96       Defendant next contends that Enloe’s employment of the income capitalization
       methodology was flawed because he used the discounted cash flow analysis, rather than the
       direct capitalization approach, in valuing the property. We review this question, as well, under
       the manifest-weight standard. See Kraft Foods, 2013 IL App (2d) 121031, ¶ 46.
¶ 97       “Appraisers use a [discounted cash flow] analysis to estimate the value of
       income-producing property that does not have a stabilized stream of income. [Citation.]
       Generally, a [discounted cash flow] analysis is based on the principle of anticipation,
       forecasting the annual cash flows expected over the holding period, and discounting those cash
       flows at a required rate of return to derive an indication of present value.” Equitable Life
       Assurance Society of the United States v. County of Ramsey, 530 N.W.2d 544, 549 (Minn.
       1995).
¶ 98       The discounted cash flow analysis predicts future income streams, which Enloe testified
       was appropriate here, given that the Property was an income-producing property with lease
       turnover. As he described it:
               “So we analyzed the leases in place, but in looking—you know, analyzing this, given
               the amount of vacancy we performed a discounted cash flow where we projected that
               the vacant space would lease-up. And really the discounted cash flow which factors in
               lease-up of vacant spaces, the associated cost with re-tenanting the building, i.e., tenant
               improvements, free rent, leasing commission and the lease-up of the property, you
               know, the discounted cash flow is the method that a buyer would rely on in making a
               purchasing decision.”
¶ 99       Enloe acknowledged that, in utilizing the accepted income-capitalization methodology in
       tax appraisals, another approach—the direct capitalization approach—is used more often than
       the discounted cash flow analysis, but he had seen the discounted cash flow analysis used in

                                                    - 15 -
        tax appraisals, too. He testified that the discounted cash flow analysis was an accepted and
        typical approach in utilizing the income-capitalization methodology, including in tax
        appraisals.
¶ 100       Defendant’s expert, Jackson, likewise stated that the discounted cash flow analysis “has its
        place in the income capitalization approach.” But he criticized its use in tax appraisals because,
        he said, one of the costs it takes into account is property taxes—which in Jackson’s view made
        the analysis circular.
¶ 101       That strikes us as a perfectly reasonable criticism of the use of the discounted cash flow
        analysis in tax appraisals. But it does not follow that an imperfection in the analysis requires us
        to reject the analysis as a matter of law. Defendant cites no support for that principle. The
        parties have cited no Illinois decision on point, nor have we found any. Indeed, plaintiff directs
        us to two decisions from state supreme courts that upheld the use of the discounted cash flow
        analysis in determining the valuation of real property for taxation purposes. See Wheelabrator
        Bridgeport L.P. v. City of Bridgeport, 133 A.3d 402, 418 (Conn. 2016) (“the trial court
        improperly rejected the discounted cash flow approach to valuing the property for tax
        assessment purposes as a matter of law”); Equitable Life Assurance Society, 530 N.W.2d at
        554 (“the court did not abuse its discretion in determining the market value of the subject
        property based solely on a [discounted cash flow] analysis.”).
¶ 102       So we are in no position to reject the discounted cash flow analysis as a matter of law.
        Rather, the criticism of this approach offered by defendant’s expert was relevant to the weight
        of Enloe’s testimony and analysis. The trial court heard it, digested it along with all of the other
        evidence, and ultimately sided with plaintiff. We cannot find that the opposite conclusion was
        clearly evident.

¶ 103                                          CONCLUSION
¶ 104        We have tried to cover everything in defendant’s somewhat meandering account of errors
        that occurred at trial. We have given careful consideration to every issue raised that could
        remotely rise to the level of reversible error. The trial court heard all of the evidence and found
        Enloe more credible than Jackson for the reasons we have outlined. But it is also fair to say that
        the trial court was moved primarily by the fact of the arm’s-length sale of the Property that
        occurred during and just after the end of the relevant tax year, ultimately determining that the
        fair market value of the Property was precisely the amount of that sale. The law supports the
        trial court’s judgment in both of those determinations.
¶ 105        Having reviewed each claim of error and having found none, and finding the trial court’s
        judgment well supported by the record, we affirm the judgment.

¶ 106      Affirmed.




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