The Ohio Board of Tax Appeals (BTA) improperly valued a Westerville office building occupied by JP Morgan Chase at $44.5 million and must consider in detail the reports submitted by the property owner’s appraiser, who concluded that the building was worth $24.8 million for 2013 and $28.5 million for 2014, the Ohio Supreme Court ruled today.

In related opinions, the Supreme Court vacated two BTA decisions regarding the office complex issued for tax years 2013 and 2014. In per curiam opinions, the Court returned the cases to the BTA with instructions that the BTA follow the guidance of the Court’s 2017 Terraza 8 LLC v. Franklin Cty. Bd. of Revision decision. That decision instructs tax authorities that House Bill 487, enacted in 2012 and applicable to tax valuations beginning with tax year 2013, calls for full consideration of appraisal evidence in addition to sale-price evidence.

The multistory building, known as the Chase Center, was constructed in 1974, expanded over time, and renovated in 1999. The bank sold the building in 2010 to real estate investors and at the same time leased the property back in order to remain in the property. In a subsequent sale in November 2013, the recorded price paid for the property was $44.5 million.

In both cases, the property owner and the Westerville City Schools Board of Education filed competing complaints and argued their cases before the county board of revision (BOR). The school district argued that the 2013 sale price was the property value, while the property owner argued for a lower value based on an appraisal of the property.

The Court unanimously ruled the BTA’s 2013 valuation process was inadequate. For the 2014 dispute, Chief Justice Maureen O’Connor and Justices Terrence O’Donnell, Judith L. French, Patrick F. Fischer, R. Patrick DeWine, and Mary DeGenaro joined the opinion. Justice Sharon L. Kennedy concurred in judgment only.

Building Ownership Changes Hands
The county auditor originally set the value of the property at $35.5 million for both 2013 and 2014. The school district sought an increase to the $44.5 million sale price, while property owner GC Net Lease argued for a lower value based on an appraisal by Samuel D. Koon of the Appraisal Institute, who valued the property at $24.8 million for 2013 and $28.5 million for 2014.

Koon noted that the $44.5 million reported sale price was derived from an allocation of the overall sale price of 18 properties including the Chase Center, but concluded that the allocated amount was not a reflection of the building’s value. The board of revision issued two decisions on the property value for 2013, both of which were appealed to the BTA. For 2014, the BOR adopted the $44.5 million sale price as reflecting the value of the property. GC Net Lease appealed that decision to the BTA.

BTA Examines Building Value
In each case, the BTA noted the change made in state law for valuing property for tax purposes — R.C. 5713.03. But the BTA relied on case law decided before the change in the law, and those cases emphasized the use of the sale price to determine value. The BTA maintained the $44.5 million value for the years at issue, and GC Net Lease appealed to the Ohio Supreme Court, which was required at the time to hear the case.

GC Net Lease contested the BTA’s decision to value the property at $44.5 million for both the 2013 and 2014 tax years. Because of the change in the law, the Court vacated the BTA’s decisions and remanded for consideration of the appraisal evidence in accordance with the Terraza 8 decision.

2016-0902. Westerville City Schools Bd. v. Franklin City. Bd. of Revision , Slip Opinion No. 2018-Ohio-3855.

2017-0792. GC Net Lease @ (3) (Westerville) Investors LLC v. Franklin Cty. Bd. of Revision, Slip Opinion No. 2018-Ohio-3856.

Hear oral argument audio of these cases.

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