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ATTORNEY FOR PETITIONER: MARILYN S. MEIGHEN MEIGHEN & ASSOCIATES, PC Carmel, IN

ATTORNEYS FOR RESPONDENT: VICKIE L. NORMAN BRENT A. AUBERRY DANIEL R. ROY BAKER & DANIELS LLP Indianapolis, IN _____________________________________________________________________

FILED
of the supreme court, court of appeals and tax court

CLERK _____________________________________________________________________
GRANT COUNTY ASSESSOR, ) ) Petitioner, ) ) v. ) Cause No. 49T10-0908-TA-47 ) KERASOTES SHOWPLACE ) THEATRES, LLC, ) ) Respondent. ) ______________________________________________________________________ ON APPEAL FROM A FINAL DETERMINATION OF THE INDIANA BOARD OF TAX REVIEW FOR PUBLICATION October 20, 2011 FISHER, Senior Judge On July 15, 2009, the Indiana Board of Tax Review (Indiana Board) issued a final determination valuing the Kerasotes Showplace 12 in Grant County, Indiana (the subject property) at $4,200,000 for the 2006 assessment. The Grant County Assessor (Assessor) now challenges that final determination. RELEVANT FACTS AND PROCEDURAL HISTORY The subject property is a 12-screen multiplex movie theater located on approximately seven acres of land near the North Park Mall in Marion, Indiana.

IN THE INDIANA TAX COURT

Oct 20 2011, 11:40 am

Kerasotes Showplace Theatres, LLC (Kerasotes) built the facility in 2000 at a cost of $6,487,110.1 In 2005, Kerasotes sold the subject property, along with sixteen other theaters it owned throughout the Midwest, in a portfolio transaction. Crest Net Lease, Inc. (Crest Net) purchased the portfolio for $200 million, allocating $7,821,835 to the sale of the subject property. As a term of the sale, Kerasotes agreed to lease back the properties it sold to Crest Net. Pursuant to their agreement, Kerasotes paid Crest Net an annual rent of $633,569 (or $17.70 per square foot) for the subject property.2 For the 2006 assessment, the Assessor assigned the subject property an assessed value of $6,137,800. Believing that value to be too high, Kerasotes filed an appeal with the Grant County Property Tax Assessment Board of Appeals (PTABOA). The PTABOA increased the assessment to $7,821,000. Kerasotes subsequently filed an appeal with the Indiana Board. On February 4, 2009, the Indiana Board conducted an administrative hearing on the appeal. During the hearing, both Kerasotes and the Assessor presented appraisals, each of which was completed in conformance with the Uniform Standards of Professional Appraisal Practice (USPAP) and valued the subject property as of January
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Kerasotes' land costs are included in this figure. (See Cert. Admin. R. at 145-

46.) The lease for the subject property is a triple net lease; Kerasotes, as the tenant, is therefore responsible for all expenses except major exterior/structural expenses and management expenses. (See Cert. Admin. R. at 155.) See also APPRAISAL INSTITUTE, THE APPRAISAL OF REAL ESTATE 477 (12th ed. 2001) (explaining that a triple net lease generally requires the landlord to pay for structural repairs, while the tenant pays for utilities, property taxes, insurance, and property maintenance). The lease is valid for a twenty year term, with three five-year extension options available after that.
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1, 2005.3 Each of the appraisals, however, arrived at a substantially different value for the subject property. The parties agree that the difference in the appraisals' values is essentially the result of how much their appraisers relied on the subject property's allocated sales price and contract rent in their income approach analyses.4 generally Pet'r Br. at 2; Resp't Br. at 9 (footnote added).) Kerasotes' appraisal determined that the market value-in-use of the subject property was $4,200,000. In arriving at that value, Kerasotes' appraiser gave the (See

subject property's allocated sales price and contract rent little weight. During the administrative hearing, Kerasotes' appraiser explained that saleleaseback transactions, which are prevalent in the movie theater industry, are typically used as financing tools and, as a result, often represent the sale of more than just the

In 2006, Indiana's real property tax assessments were to reflect a property's "market value-in-use" as of January 1, 2005. See IND. CODE

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Indiana Law