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In re Equalization Appeal of USA Lions Gate 1-22, LLC

Tax Court of Kansas

September 11, 2013



Now the above-captioned matter comes on for consideration and decision by the Board of Tax Appeals of the State of Kansas.

Having exercised jurisdiction pursuant to K.S.A. 79-1609, the Board conducted a hearing of this matter on June 24, 2005. The County and Taxpayer each were given full opportunity to present their arguments to the Board. After considering all of the evidence and premises presented by the parties in support of their respective positions, the Board finds and concludes as follows.


The subject matter of this tax equalization appeal is described as follows:

Real estate and improvements commonly known as Lions Gate Apartments, 14631 Broadmoor Street, Overland Park, Johnson County, Kansas, also known as Parcel ID# 046-NP65750000-0001.

The subject property is an apartment complex built in 2000 which consists of 188 one-bedroom units, 140 two-bedroom units and 32 three-bedroom units. The complex consists of 43 two-story buildings with a clubhouse and a swimming pool. The effective date of this ad valorem tax valuation is January 1, 2004.

The subject property is classified as residential real property pursuant to K.S.A. 79-1439(b)(1)(A). In the appeal process the Taxpayer provided actual income and expense information to the County. For the tax year in question, the property had a 37.5 percent economic vacancy rate. (Economic vacancy is the sum of physical vacancy and rent concessions.) The information provided by the Taxpayer to the County indicated that the actual annual income from the subject property was $2, 950, 366 for the year in question. The County did not use actual income and expense data in its valuation model but instead used market rental income and expense data from its mass appraisal system.

During the appraisal process the County considered four transactions involving investment "Class A" apartment complexes (as denominated by the County). Two of those transactions involved apartment complexes that are comparable to the subject property in size, age, number of units, and location. In the first transaction, the property sold for $73, 813 per unit. In the second transaction, the property sold for $65, 361 per unit. The per-unit sale prices of all four "Class A" properties were between $65, 361 and $103, 529. The County considered the four "Class A" sales in its valuation but did not adjust the sales or perform a thorough market analysis of the properties.

The subject property sold in August 2004, approximately eight months after the effective date, for $30 million. The owner signed a Kansas Real Estate Sales Validation Questionnaire asserting that the sale was an arms length transaction. The County testified that it independently verified the validity of the sale. The County provided no evidence of how the sale price was apportioned with respect to personal property and real property. The County also provided no analysis of how the sale should be adjusted to account for changes in conditions between the effective date of the assessment (January 2004) and the date of the sale (August 2004). For these reasons, the August 2004 sale of the subject property offers only limited evidentiary value in the present appeal.

At the hearing of this appeal the County presented one exhibit through the testimony of appraiser Stan Moulder. The parties do not dispute Mr. Moulder's qualifications to give testimony as an expert in the instant appeal. Although Mr. Moulder did not himself prepare portions of the exhibit, he did inspect the subject property prior to the hearing and testified that he was familiar with the subject property and the surrounding area. He also testified that the County used accepted appraisal practice adapted to mass appraisal to estimate the value of the subject property for purposes of ad valorem taxation and considered each pertinent item listed in K.S.A. 79-503a. Mr. Moulder testified that mass appraisal requires a division of tasks, and he identified the County personnel who performed the various tasks in appraising the subject property.

The County's valuation of the subject property for tax year 2004 was $28, 968, 100. That valuation estimate was derived from an income analysis. The County also performed, but did not rely on, a cost analysis of the property. According to the County, the cost analysis yielded an estimated value of $40, 195, 200.

The Taxpayer asserts that the correct value of the subject property for tax year 2004 is approximately $18.7 million. The Taxpayer presented no witnesses at the hearing to support its asserted value.

With its post-hearing brief, the County moved the Board to dismiss the Taxpayer's appeal on the basis that the Taxpayer is a foreign limited partnership which forfeited its privilege to do business in the State of Kansas by failing to file an annual report. On May 15, 2006, the Board ordered that the Taxpayer respond to the County's motion to dismiss within 30 days, which it did by filing its Notice of Substitution of Parties and Request to Vacate Order on Motion to Dismiss. The County was provided ample opportunity to reply to the Taxpayer's response but ...

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