2018-0680, Ventas Realty Limited Partnership v. City of Dover

parking lot. At issue is the City’s April 1, 2014 assessment of the real estate at facility serving both short - term and long - term patients, two garages, and a subject real estate consists of a 5.15 - acre site containing a skilled nursing The trial co urt found, or the record establishes, the following facts. T he

(City), for the 2014 tax year. We affirm. abatement of the real estate taxes it paid the defendant, the City of Dover appeals an order of the Superior Court (Howard, J.) denying its request for an HICKS, J. The plaintiff, Ventas Realty Limited Partnership (Ventas),

defendant. Spector - Morgan on the brief, and Ms. Spector - Morgan orally), for the Mitchell Municipal Group, P.A., of Laconia (Walter L. Mitchell and Laura

Piela on the brief, and Mr. Rauseo orally), for the plaintiff. Hamblett & Kerrigan, P. A., of Nashua (Kevin P. Rauseo and Andrew J.

No. 2018 - 0680 Strafford

http://www.courts.state.nh.us/supreme. release. The direct address of the court ’ s home page is: Opinions are available on the Internet by 9:00 a.m. on the morning of their reported by e - mail at the following address: reporter@courts.state.nh. us. corrections may be made before the opinion goes to press. Errors may be Doe Drive, Concor d, New Hampshire 03301, of any editorial errors in order that requested to notify the Reporter, Supreme Court of New Hampshire, One Charles as formal revision before publication in the New Hampshire Reports. Readers are NOTICE: This opinion is subject to motions for rehearing under Rule p. 2 22 as well 2

expenses to be $9,936,601. Dennehy observed that the subject property’s stab ilized operating expenses.” He calculated the property’s gross operating represent a full year, “provide[d] the most reliable indication of the subject’s valuation date, opining that the expenses for those months, annualized to property’s actual operating expenses for the 11 months before the April 1, p. 2 2014 gross operating expenses for tax year 2014. Dennehy relied upon the The experts differed greatly in their estimates of the property’s projected

Kosich’s capitalization rate. Dennehy used a 1 p. 2 2.6% capitalization rate. At trial, Ventas stipulated to used similar capitalization rates: Kosich used a 13.5% capitalization rat e, and $10,063,865, and Denneh y’s estimate was $10,147,068. Both experts also the property’s projected gross income for tax year 2014: Kosich ’s estimate was Despite their di fferent approaches, the ex perts gave similar estimates of

without any market - based adjustments. and expenses for the 11 months before the April 1, p. 2 2014 valuation date, income, while Denne h y did not. Denne h y used the property’s actual income expenses from 2012, 2013, and 2014 to forecas t the property’s future net Kosich used both market projections and the property’s actual income and The main difference between the approaches of the two experts is that

use as a skilled nursing facility, was $4, 700,000. that the property’s fair market value as of April 1, p. 2 2014, at its hi ghest and best nursing facility, was $1,700,000. In her October 2017 report, Kosich opined market value as of April 1, 2014, at its highest and best use as a skilled value.” In his May 2016 report, Dennehy concluded that the property’s fair comparable properties and they also used similar definitions of “fair market comparison and cost approaches. Both experts examined the same met hod, alth ough the City’s expert also completed analyses under the sales for determining the property’s fair market value is the income capitalization skilled nursing facility. The experts also agreed that the most reliable method Both experts opined that the property’s highest and best use is as a

an equalization ra tio of 95.1%. Integra Healthcare Services. The parties stipulated that in p. 2 2014, the City used nursing home administrator and d irector of Tellatin, an entity affiliated with Care Valuation Advisors, Inc. The City’s expert was Melanie Kosich, a former testified. Ventas’s expert was Raymond A. Dennehy, III, president of Health The trial court held a two - day bench trial at which the parties’ experts

unlawfully taxed the property in excess of its fair market value. abatement pursuant to RSA 76:17 (Supp. p. 2 2018), alleging that the City had the request, and Ventas, thereafter, petitioned the superior court for an abatement of its 2014 taxes. The City presumably denied or failed to act upon a value of $4, p. 3 3 08,500. Ventas alleges that it timely applied to the City for an 3

accept or reject such portions of the evidence as it found proper, including tha t Assoc., 1 p. 3 39 N.H. at 255. As the trier of fact, the trial court was entitled to of fair market value is a question of fact. Society Hill at Merrimack Condo. Appeal of Pennichuck Water Works, 160 N.H. 18, 37 (2010). The determination Assoc. v. Town of Merrimack, 139 N.H. 253, 255 (1994) (quotation omitted); see substantial weight in such bargaining.” Society Hill at Merrimack Condo. considerations that fairly might b e brought forward and reasonably given willing to sell and a purchaser desiring to buy, taking into account all probability would have been arrived at by fair negotiations between an owner Generally speaking, fair market value refers to “the price which in all

N. H., 170 N.H. 87, 94 (2017). generally asse ssed in the town.” Id. at p. 3 368; see Appeal of Pub. Serv. Co. of percentage of fair market value than the percentage at which property is taxpayer m ust establish that the taxpayer’ s property is assessed at a higher 363, 367 (2003). “To carry the burden of proving disproportionality, the share of taxes f or tax year 2014. See Porter v. Town of Sanbornton, 150 N.H. by a preponderance of the evidence that it paid more than its proportional To succeed on its tax abatement claim, Ventas had the burden of proving

abatement for tax year 2014. This appeal followed. court ruled that Ventas failed to meet its burden of proof to obtain an market value under the income capitalization approach.” Accordingly, the trial thus, decided that Ventas had not “sufficiently proved the property’s fair income the property would have generated on the open market in 2014,” and, accurately reflect the overall value of the property based on forecasted net The trial court concluded that “Dennehy’s approach. . . does not

to be $9,016,402. Ultimately, Kosich estimated the property’s total forecasted operating expenses conducted a similar analysis for other categories of operating expen ses. 2014 expenses and the average expenses of the comparable properties. She the property’s forecasted nursing expenses that fell within its actual 201 p. 3 3 and based upon market trends. Based upon those figures, she assigned a value to nursing facility (30 % to 45%) and applied an inflation rate to nursing expenses account the ratio of total revenue that nursing typically represents for a skilled with the 2013 nursing expen ses of five comparable properties. She took into 2014 for each category of nursing professional and compared those expenses expenses, Kosich used the property’s actual nursing expenses in 2013 and to the different categories of operating expenses. For example, as to nursing applying an inflation factor based upon market trends, Kosich assigned value s By contrast, after examining the expenses of comparable facilities and

comparables, which results in higher expenses per patient day.” but opined that “this reflects t he lower occupancy at the subject than the operating expenses are higher per patient day than in comparable properties, p. 4 4

matter of fact and if the findings could reasonably be made on all the evidence, N.H. at 5 p. 4 42. “Credibility, of course, is for the trial judge to determine as a valuations more credible than Dennehy’s. See Pub lic Serv. Co. of N.H., 170 All of Ventas’ s arguments fault the trial court for finding Kosich’s

‘ market rate,’ and thus, the City’s capitalization of income calculation.” the City’s opinion as to appropriate nursing expenses, which was based on a excessive for this particular property, it was error for the Trial Court to adopt “absent evidence from the City that demonstrated the facility’s expenses were assessment data. As to nursing expenses, in particular, Ventas argues that arbitrarily reduces th e facility’s nursing expenses; and (5) Kosich used post health and safety; ( p. 4 4) Kosich’s appraisal violates public policy because it cause the remaining nurses” to risk losing their licenses or would risk patient patient needs, and whether the suggested cuts to the facility expenses would therefore, “had no idea what a safe staffing level was for this facility, given its [Ventas] offered”; (3) Kosich “had no medical or nursing training” and, properties that Kosich used did not “offer[ ] the same mix of services that medical costs incurred by the facility” (bolding omit ted); (2) the comparable because: (1) Kosich’s appraisal “inappropriately reduced the nursing and appraisal over Dennehy’s appraisal. According to Ventas, doing so was error On appeal, Ventas arg ues that the trial court erred by crediting Kosich’s

capitalized to determine present worth.” Id. market, less the normal and usual costs of operation.” Id. “This figure is then “The net income is the [income] the property would generate on an open Rollsworth Tri - City Trust v. City of Somerswo rth, 126 N.H. 333, 335 (1985). the basis of the future net income the property could produce for the owner.” the fair market value of real estate “measures the present value of property on (1979) (quotation omitted). “The income capitalization approach” to calculating nursing facility at issue. Brickman v. City of Manchester, 119 N.H. 919, 921 determining the value of income - producing property,” such as the skilled capitalization method “is an established and well - accepted method for d etermine the fair market value of the subject property. The income In this case, both experts used the income capitalization method to

and determining the weight to be given evidence. Id. as resolving conflicts in the testimony, measuring the credibility of witnesses, same evidence. Id. Th us, we de fer to the trial court’ s judgment on such issues person could have reached the same decision as the trial court based upon the have ruled differently than the trial court, but rather, whether a reasonable of Effi ngham, 171 N.H. 305, 309 (2018). We do not decide whether we would lack evidentiary su pport or are legally erroneous. Marist Bros. of N.H. v. Town We will uphold the trial court’ s factual findings and rulings unless they

p. 5 5 p. 4 42 (2018). of expert witnesses. Pub lic Serv. Co. of N.H. v. Town of Bow, 170 N.H. 539, 5

present evidence of comparable rentals to substantiate his claim that the income derive d from insufficiently profitable leases” where the expert failed to available on the market as distinguished from contract rent, that is, actual failed to demonstrate “that the income figures represented the rental income (upholding rejection of the taxpayer’s appraisal, in part, because the taxpayer figures.” See Appeal of Net Realty Holding Trust, 128 N.H. 79 p. 5 5, 80 0 (1986) income, Dennehy [did] not establish or consider those necessary market subject property that would contribute to its inability to obtain market level market - based income and expenses t o reflect the specific features of the that “[w]hile these explanations may provide justification for adjusting . . . actual income and expenses of the subject property.” The trial court concluded actual income an d expenses of the comparable properties are different from the income capitalization approach.” Instead, “he merely explain[ed] why the comparable properties as evidence of market projections, as required under the income and expenses of comparable properties, he [did] not utilize the tax year. The court noted that “while Dennehy [did] not comple tely ignore the analyze “how the property would perform on the open market” during the 2014 the property’s future net income.” The court observed that Dennehy failed to such information, his report did “not pro vide sufficiently reliable evidence of actual income and expenses compared to market rates, ruling that without The trial court faulted Dennehy for failing to explain how the property’s

Serv. Co. of N.H., 170 N.H. at 97. specific findings to support its rejection of [that] ap praisal[ ].” Appeal of Pub. appraisal “did not result in [a] credible opinion[ ] of market value and made Ventas’s burden of proof. Specifically, t he court found that Dennehy’s appraisal; rather, it determined that Denne h y’s appraisal failed to meet Contrary to Ventas’s contention, the trial court did not “adopt” Kosich’s

disproportionate result.” Id. (quotation and brackets omitted). tax burden, the flawed methodology does not, in and of itself, prove the “W hile it is possible that a flawed methodology may lead to a disproportion ate entitlement to a petition for abatement.” Id. (quotation and brackets omitted). 739. “D isproportionality, and not methodology, is the linchpin in establishing that Kosich’s methodology was flawed, we disagree. See LLK Trust, 1 p. 5 59 N.H. at argues that it met its burden of proving disproportionality solely by showing proof, not the City. See Porter, 150 N.H. at 367. To the extent that Ventas was flawed, Ventas does not prevail i n this appeal. Ventas had the burden of Moreover, even if we were to agree with Ventas that Kosich’s methodology

evidence.” Id. measuring the credibility of witnesses, and determining the weight to be given court’s judgment on such issues as resolving conflicts in the testimony, Town of Wolfeboro, 1 p. 5 59 N.H. 734, 739 (2010). “However, we defer to the trial proper weight to be accorded” Kosich’s testimony and report. LLK Trust v. they must stand.” Id. (quotation omitted). Ventas’s assertions “concern the p. 6 6

operating expenses per patient day than the comparab les.” with Dennehy’s report in which he stated that “the subject property has higher consistent with what is prevalent in the market.” This assertion is inconsistent In addition, Ventas asserts that the property’s “actual expenses are

the market. expenses is proper when the subject property differs from other properties in stand for the proposition that use of actual expenses instead of market V.V.P. Partnership, p. 6 647 A.2d 990 (Pa. Commw. Ct. 1994). None of these cases Quarry & Construction Co., 394 S. W.2d 300 (Mo. 1965), and In re Appeal of Royal Gardens Co. v. Concord, 114 N.H. 668 (1974), City of St. Louis v. Union other properties in the market.” To support this assertion, Ventas relies upon data in his calculations” was proper because “the subject property differs from Ventas argues that Dennehy’s use of “actual expenses versus market

interview of the facility’s administrator. testified that the subject facility was operated “competently” based upon his building the best they could, and provide appropriate care.” Dennehy further adjusted expenses appropriately to take care of patients, take care of the functional limitation s of the property,. . . competent management had competitive position of this property, and understanding the physical and operating expenses because, in his opinion, “given the occupancy, given the comparables.” Dennehy testified that he did not adjust the property’s actual that, as a result, it “has higher operating expenses per patient day than the “the subject property has a lower occupancy rate than the comparables,” and The record supports these findings. Dennehy observed in his report that

would incur the same expenses in 2014 as it did in the prior year.” market in 2014, [Ventas] provides no way to determine whether the facility “[w]ithout forecasting the cost and deman d for these services on the open in 2014 when compared with other facilities.” The court concluded that these characteristics would impact the facility’s expenses on the open market drugs, an d higher levels of laboratory work, Denne h y does not explain how result of higher levels of admissions and discharges, higher uses of intravenous court observed that “even though the facility may experience higher costs as a “constitute the expenses the facility would incur on the open market.” The Dennehy’s report failed to demonstrate that the property’s actua l expenses The trial court determined that, with respect to expenses in particular,

shopping center’s projected gross and net income). err by allowing certain deductions for such vacancies when calculating finding that rental unit vacancies would increase in the future, master did not Brickman, 119 N.H. at 921 (holding that because evidence supported implied evidence that at least some of the rates had fallen below market - level); taxpayer’s rental in come represented market levels and there was other p. 7 7

the property was conveyed. The court s tated that this fact “cast[ ] further assessed the property. Ventas used this value for transfer tax purposes when that the property’s value was $4,308,500, the same value at which the City had At the time of the 2015 transfer, Ventas represented to the City assessor

assessment for transfer tax purposes to assess Ventas’s credibility. property’s 20 14 value. Rather, the court relied upon Ventas’s use of the City’s However, the trial court did not rely upon the transfer as evidence of the reflect the property’s 2014 value, and should not have been considered. relevant. Ventas asserts that the 2015 transfer was not arms - length, does not transfer of ownership of the property from Ventas to a relat ed entity to be Ventas next argues that the trial court erred by considering the 2015

burden of proof. trial court’s determination that Dennehy’s appraisal failed to meet Ventas’s erroneous as a matter of law, we uphold them. Id. Accordingly, we uphold the regarding Denne h y’s appraisal are supported by the record and are not Pub. Serv. Co. of N.H., 1 p. 7 70 N.H. at 99. Because the trial court’s findings supported by the record,” as to why it rejected Dennehy’s appraisal. Appeal of In sum, the trial court “made numerous, specific findings which are

conclusion.” Dennehy’s report supports these findings. Estimate,’ he provides only conclusory assertions to explain how he came to his Denne h y refers to data from the preceding 11 months as the ‘Stabilized property would earn in 2014.” Additionally, the court found that “while years,” which is “insufficient to accurately forecast . . . the net income the roughly the same period of time rather than figures from separate consecutive over a period of prior years[,] . . . his analysis compares two figures from project market expenses for the 2014 tax year based only on actual income (Emphasis added.) The court concluded that “even if Dennehy could accurately

December 2013). derived from eight months of the same year (May 2013 through year s. Rather, these figures are likely similar because they are will closely track the income and expenses of prior consecutive some support that the income and expenses of the following year identical expenses in two consecutive years, which might provide the similarities between these two figures are not a result of nearly

court determined, last eight m onths of 2013, in fact, the two time periods overlapped. Thus, the for those months as “consistent” with the property’s operating expenses for the observed that, although Dennehy described the property’s operating expenses and expenses for only the 11 months preceding April 1, 2014. The court market value was flawed because he relied upon the property’ s actual income The trial court also found that Dennehy ’s approach to calculating fair p. 8 8

BASSETT, HANTZ MARCONI, and DONOVAN, JJ., concurred.

In re Estate of King, 149 N.H. 226, 230 (2003). Ventas raised in its notice of appeal, but did not brief, is deemed waived. See cons ideration, see Vogel v. Vogel, 137 N.H. 321, 322 (1993). Any issue that Dartmo uth College, 160 N.H. 452, 459 (2010), or do not warrant extended are insufficiently developed for our review, see Sabinson v. Trustees of To the extent that Ventas makes other arguments in its brief, they either

credibility. reliance upon Ventas’s use of the City’s assessment t o judge Ventas’s inaccuracy of that assessment not credible. We find no error in the trial court’s assessment for transfer tax purposes made its assertion s regarding the split,” the court dete rmined that the fact that Ventas used the City’s $4,30 p. 8 8,500 because “the property transfer occurred a s a result of a corporate taxes.” While acknowledging that the property was not actually transferred for doubt on [Ventas’s] position that it is paying a disproportionate amount of