Dark Store Valuation: The Michigan Precedent
In 2014, the Michigan Court of Appeals first addressed the dark store valuation theory and confirmed the Michigan Tax Tribunal’s valuation of a Lowe’s store utilizing the sales comparison appraisal approach. Lowe’s Home Ctrs. v. Twp. of Marquette, (Unpublished, Mich. App. 2014). The Tribunal had adopted the comparable sale values of vacant and available (or “dark”) retail stores proffered by the taxpayer. This analysis reduced the Lowe’s store’s assessed value. The result in Lowe’s led to protests by municipalities throughout the state. In response, legislators introduced several bills that attempted to control the Tax Tribunal’s analysis of properties like those addressed in Lowe’s. See 2015–2016 HB 5578; 2017–2018 SB 578 and HB 4397.
Dark Store Valuation: The Newest Case
In 2016, the Tribunal issued an opinion which essentially followed the Lowe’s analysis, valuing a Menard’s store using the sales comparison approach. Menard, Inc. v. City of Escanaba, 14-001918-TT. The city of Escanaba appealed that decision to the Court of Appeals. In Menard, Inc. v. City of Escanaba, 315 Mich App 512 (2016), the Court of Appeals ruled that the Tribunal should have applied the cost approach. Menard filed an application for leave to appeal to the Supreme Court, which the Court denied in October. Menard, Inc. v. City of Escanaba, 901 NW2d 901 (2017).
Menard indicates that the Tribunal should consider whether the cost approach is applicable in a particular appeal. If the cost approach is applicable, the Tribunal should apply it and reconcile that value with the value determined using the sales approach.
Query whether the continued decline of bricks-and-mortar retail stores will confirm that the Lowe’s analysis was appropriate and whether the instruction in Menard to apply the cost approach led to an artificially high assessment of the property.
There appears to be a new rash of store closures, including Toys R Us nationwide. This should make it evident if this methodology is confirmed by market evidence.
[A version of this post was first published by the State Bar of Michigan’s Real Property Law Section in its January 2018 e-Newsletter]
Michigan Real Estate News Roundup – May 10, 2018
/in Weekly Roundup /by David NykanenThis Week in Michigan Real Estate: May 7 – May 13, 2018
/in This Week in History /by David NykanenMay 8, 1820: First Property Tax Imposed
On May 8, 1820, the Northwest Territory imposed the first tax on property. The Northwest Territory included the land now comprising the State of Michigan. If unpaid, the delinquent taxpayer was subject to imprisonment. The penalty for non-payment of the property tax was amended in April 1825. The 1825 amendment limited the penalty to the seizure of the property subject to the tax, rather than imprisonment of the taxpayer.
For more about the history of the State of Michigan, the e-book version of the 1889 book “The History of Detroit and Michigan” is available for free via Google’s book-scanning project.
For more of my posts on Michigan real estate history, click here.
Michigan Real Estate News Roundup – May 3, 2018
/in Weekly Roundup /by David NykanenThis Week in Michigan Real Estate History – April 30 – May 6, 2018
/in This Week in History /by David NykanenMichigan Real Estate News Roundup – April 26, 2018
/in Weekly Roundup /by David NykanenMichigan Real Estate News Roundup – April 19, 2018
/in Weekly Roundup /by David NykanenMichigan Real Estate News Roundup – April 12, 2018
/in Weekly Roundup /by David NykanenDark Store Valuation Controversy Revisited
/in Property Valuation /by David NykanenDark Store Valuation: The Michigan Precedent
In 2014, the Michigan Court of Appeals first addressed the dark store valuation theory and confirmed the Michigan Tax Tribunal’s valuation of a Lowe’s store utilizing the sales comparison appraisal approach. Lowe’s Home Ctrs. v. Twp. of Marquette, (Unpublished, Mich. App. 2014). The Tribunal had adopted the comparable sale values of vacant and available (or “dark”) retail stores proffered by the taxpayer. This analysis reduced the Lowe’s store’s assessed value. The result in Lowe’s led to protests by municipalities throughout the state. In response, legislators introduced several bills that attempted to control the Tax Tribunal’s analysis of properties like those addressed in Lowe’s. See 2015–2016 HB 5578; 2017–2018 SB 578 and HB 4397.
Dark Store Valuation: The Newest Case
In 2016, the Tribunal issued an opinion which essentially followed the Lowe’s analysis, valuing a Menard’s store using the sales comparison approach. Menard, Inc. v. City of Escanaba, 14-001918-TT. The city of Escanaba appealed that decision to the Court of Appeals. In Menard, Inc. v. City of Escanaba, 315 Mich App 512 (2016), the Court of Appeals ruled that the Tribunal should have applied the cost approach. Menard filed an application for leave to appeal to the Supreme Court, which the Court denied in October. Menard, Inc. v. City of Escanaba, 901 NW2d 901 (2017).
Menard indicates that the Tribunal should consider whether the cost approach is applicable in a particular appeal. If the cost approach is applicable, the Tribunal should apply it and reconcile that value with the value determined using the sales approach.
Query whether the continued decline of bricks-and-mortar retail stores will confirm that the Lowe’s analysis was appropriate and whether the instruction in Menard to apply the cost approach led to an artificially high assessment of the property.
There appears to be a new rash of store closures, including Toys R Us nationwide. This should make it evident if this methodology is confirmed by market evidence.
[A version of this post was first published by the State Bar of Michigan’s Real Property Law Section in its January 2018 e-Newsletter]