In re Equalization Appeal of Prieb Props., L.L.C.

In re Equalization Appeal of Prieb Props., L.L.C.

Opinion

 [*124]  [**58]   Greene, C.J.: The taxpayer, Prieb Properties, LLC, (Prieb or Taxpayer), seeks  [***5] judicial review of  [**59]  an order of the Court of Tax Appeals (COTA) that established the value of its commercial real property in Topeka, arguing that COTA erred in failing to recognize that it was barred by res judicata or collateral estoppel from departing from its prior decision setting value on the same property, that COTA was not properly constituted for its ruling, and that COTA erred either in its findings of fact or conclusions of law in relying on build-to-suit lease rental rates for probative evidence of market rent. We reject Prieb's argument on the effect of COTA's prior ruling and the challenge to COTA's legal status when its order was issued, but we conclude that build-to-suit lease rental rates are not probative of market conditions and thus reverse and remand with directions.

Factual and Procedural Background

Prieb owns a 45,814-square-foot building on about 4 acres of land located on Wanamaker Avenue in Topeka's prime retail corridor, and it currently leases the building to Best Buy Co., Inc. When Shawnee County valued the property at $4,291,900 for tax year 2006 and $3,850,000 for 2007, Prieb appealed these values to COTA, contending the property should be valued at $2,520,000  [***6] for each of these tax years. After an evidentiary hearing, COTA established the value of the property at $3,337,000 for 2006 and $3,850,000 for 2007. Judge Kubik dissented, wrote a separate opinion, and embraced the Taxpayer's proposed value for both tax years. After reconsideration was denied by COTA, Prieb seeks our review of COTA's valuation order.

 [*125]  The record on appeal reflects that the property was burdened by a lease agreement dated August 15, 1996, for a term of 15 years, which required that lessor construct and deliver to tenant an expansion of the building—then configured within 27,000 square feet—to its current size of 45,814 square feet. The parties do not dispute that this lease arrangement was a typical first generation "build-to-suit" lease agreement with lease rental rates established accordingly. For 2006 and 2007, the lease provided for a rental rate of $10.50 to $11 per square foot.

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