Opinion
No. CV08 400 99 16S
September 11, 2009
MEMORANDUM OF DECISION
On May 21, 2008, the Commissioner of Transportation took by eminent domain, pursuant to Conn. Gen. Stat. § 13b-36, a certain parcel of land identified as 72-74 Saw Mill Road (Route 162), West Haven, Connecticut, with a building thereon owned by Charlotte Gallipoli, designated at trial as plaintiff and hereinafter referred to as such.
The subject parcel, conveniently located to I-95 is at the northwesterly corner of Saw Mill Road and Hood Terrace. The visibility of the parcel is limited due to a cliff-like feature of its easterly boundary on Saw Mill Road, however, its topography is level for all intents and purposes. The parcel has approximately 186' of frontage on Hood Terrace.
Situated on the subject parcel is a two-story 12,000 square foot (50' x 120') building with a 6,000 square foot footprint built in 1963. The building is optimally situated towards the northwesterly portion of said parcel, virtually on its northwesterly boundary shared with Metro North railroad tracks. The position of the building affords maximum parking and/or outside storage.
Its use on May 21, 2008 was industrial flex use on the lower level. The second floor consisted of a residential apartment (1,000 square feet) and storage-type area of 5,000 square feet.
The parcel consists of 27,074 square feet; .62 acres and located in a recently enacted Transit Oriented Design (TOD) District.
West Haven Connecticut Zoning Regulations provide: "SECTION 35 — TRANSIT ORIENTED DESIGN (TOD) DISTRICT. STATEMENT OF PURPOSE. The purpose of the Transit Oriented Design (TOD) zone is to capitalize upon the locational attributes of the West Haven train station area., the access and personal mobility provided by high volume transit service connects residential areas and employment centers by encouraging adaptive reuse of exiting structures, entrepreneurship and homeownership by allowing alternative forms of physical development that enhance the existing development fabric and infill underdeveloped areas.
This was a total take. Initially, the Commissioner assessed damages to the plaintiff in the amount of $370,000 which sum was deposited to the court on May 21, 2008 and paid over to the plaintiff on June 25, 2008. The assessment was updated to $400,000.
At trial, the court heard testimony from Charles A. Liberti and Roy L. O'Neil, Jr. on behalf of the plaintiff. John LoMonte testified on behalf of the Commissioner.
It is incumbent on this court to determine market value in order to arrive at fair compensation.
MARKET VALUE is defined as the amount in cash, or on terms reasonably equivalent for which in all probability the property would have sold on the effective date of the application after a reasonable exposure time on the open competitive market, from a willing and reasonably knowledgeable seller to a willing and reasonably knowledgeable buyer, with neither acting under any compulsion to buy or sell, giving due consideration to all available economic the property at the time of the appraisal. (Uniform Appraisal Standards for Federal Land Acquisitions, Appraisal Institute, 2000 Ed.)
In cases of this sort, the court is charged with taking into account the divergent opinions expressed by the witnesses and the claims advanced by the parties. New Haven Savings Bank v. West Haven Sound Development, 190 Conn. 60, 69 (1983).
This court, pursuant to the Connecticut General Statutes and court decisions, is charged with the duty of making an independent determination of value and fair compensation in the light of all the circumstances, the evidence, their general knowledge and their viewing of the premises. Minicucci v. Commissioner of Transportation, 211 Conn. 382, 388 (1989); Birmbaum v. Ives, 163 Conn. 12-21-22 (1972); Feigenbaum v. Waterbury, 20 Conn.App. 148, 153 (1989). It is the court's task to reach a result that gives the defendant, as nearly as possible, a fair equivalent in money as fair compensation for the property taken. Mathis v. Redevelopment Agency, 165 Conn. 622, 623 (1973); Feigenbaum v. Waterbury, supra, at 153-54. The court in this case in determining the value of real property is charged with taking into account the divergent opinions of the witnesses and claims advanced by the parties. New Haven Savings Bank v. West Haven Sound Development, supra, at 69.
"[T]rial courts must be afforded substantial discretion in choosing the most appropriate method of determining the value of a taken property . . . In condemnation proceedings the trial court is more than a trier of facts or an arbiter of differing opinions of witnesses, it is charged with the duty of making an independent determination of value and fair compensation in light of all the circumstances, the evidence, its general knowledge and its viewing of the premises." (Citations omitted; internal quotation marks omitted.) French v. Clinton, 215 Conn. 197, 200-01, 575 A.2d 686 (1990); see also Minicucci v. Commissioner of Transportation, 211 Conn. 382, 559 A.2d 216 (1989). The court is not, as a matter of law, bound by the valuations and valuation methods used by the appraisers, but it can consider the comparable sales of land that were in evidence, as well as the raw data used, in independently determining fair market value. Second Stone Ridge Cooperative Corp. v. Bridgeport, 220 Conn. 335, 342, 597 A.2d 326 (1991). "A determination of value is, from its very nature, a matter of opinion reached by the exercise of sound judgment." Del Vecchio v. New Haven Redevelopment Agency, 147 Conn. 362, 365, 161 A.2d 190 (1960). Where the usual means of ascertaining market value are lacking, other means must, from the necessities of the case, be resorted to from the best available data. Feigenbaum v. New Britain Housing Site Development Agency, 164 Conn. 254, 260, 320 A.2d 824 (1973).
When confronted with conflicting evidence as to valuation, the trier may properly conclude that under all the circumstances a compromise figure most accurately reflects fair market value. See Bennett v. New Haven Redevelopment Agency, supra, 148 Conn. 515-16, 172 A.2d 612.
LoMonte testified that damages to the plaintiff was $400,000. He predicated his opinion on two evaluation methods. Using the sale comparison method, he analyzed three comparable sales, none of which were located in West Haven, Connecticut. These comparables were substantially dissimilar to the subject property requiring substantial adjustments to arrive at $45.00 per square foot of ground floor. Yet, LoMonte introduces arbitrarily without substantiation $25.00 per square feet for the second story.
There are three classical approaches to value used in appraising real estate. They are described as follows:
COST APPROACH: "That approach in appraisal analysis which is based on the proposition that the informed purchaser would pay no more than the cost of producing substitute property with the same utility as the subject property. It is particularly applicable when the property being appraised involves relatively new improvements which represents highest and best use of the land or when relatively unique or specialized improvements located on the site and for which there exist no comparable properties on the market."
DIRECT SALES COMPARISON APPROACH: "That approach in appraisal analysis which is based on the proposition that an informed purchaser would pay no more for a than the cost to him of acquiring an existing property with the same utility. This approach is applicable when an active market provides sufficient quantities of reliable data which can be verified from authoritative sources. The direct sales comparison approach is relatively unreliable in an inactive market or in estimating the value of properties for which no real comparable sales data are available. It is also questionable when sales data cannot be verified with principals to the transaction."
INCOME APPROACH: "That procedure in appraisal analysis which converts anticipated benefits (dollar income or amenities) to be derived from the ownership of property into estimate. The income approach is widely applied in appraising income-producing property. Anticipated future income and/or reversions are discounted to a present worth figure through the capitalization process."
Real Estate Appraisal Terminology; 3rd Edition, 1993. Compiled and Edited by Byrl N Ph.D. American Institute of Real Estate Appraisers. Society of Real Estate Appraisers.
Using the income approach, LoMonte developed seven market rents, ranged from $7.00 per square foot to $4.25 per square foot, five of which were on a net net net (NNN) rental basis, the other two being on a modified gross basis. LoMonte then selected the lowest rent basis rather than a median or average rent to calculate a Pro-forma Operating Statement. Lo Monte did not calculate his Pro-Forma Operating Statement on a NNN rental basis but utilized a gross rental operations statement. This resulted in an unreliable skewed valuation.
Furthermore, LoMonte testified that various adjustments to the pro-forma Operations Statement to account for the deletion of certain expenses could result in a market value of perhaps $440,000 or $459,000 or $491,000. This variation is unreliable.
In addition LoMonte opined that the subject is in average condition and is not investment property, further affecting the reliability of the income approach.
This court does not credit LoMonte valuations.
The plaintiff presented Ray L. O'Neil, Jr., as an expert real estate appraiser. O'Neil arrived at a market value of $650,000 using the sales comparison method to evaluate the land value of the subject parcel and the cost approach to evaluate the building on the subject parcel.
It is generally conceded among real estate appraisers that the cost approach to evaluate real estate is not ideally applicable to older buildings such as the subject building which is about 63 years old.
There are too many variables to adjust. Furthermore, the Marshall-Schiff Evaluation Guide is based on averages and is not site specific.
Most importantly, this court disagrees with the depreciation element introduced by O'Neil. O'Neil testified that the building had a useful life expectancy of 35 years despite being 63 years old. He somehow determined that the building had utilized 22 years of useful life expectancy and had 13 years of useful life expectancy left. O'Neil then used the assessor depreciation rate of 40% as a starting point. The figure of 40% was unsubstantiated and presumably the assessor used a blanket assessment categorized for all the buildings of a certain range of age and the assessor depreciation rate was not site specific. O'Neil then added 5% for a final depreciation rate of 45%. This method is seriously flawed. This court does not accept the valuation of $650,000 suggested by O'Neil.
This court has analyzed the real estate appraisal submitted by Liberti, which it accepts in parts and modifies in parts.
Using the sales comparison, Liberti introduced a utility factor of 7% based on the subject parcel being in a T.O.D. district. This is entirely speculative because the T.O.D. has not been developed and is in the embryo stage. There is no historical date to support an adjustment for being in a T.O.D. district. Further this site being immediately adjacent to the railroad tracks, may very well become part of the planned translation and therefore would not be developed pursuant to the T.O.D. district regulation.
This Court reduces the sale comparison valuation by 7% (7% x $630,000 = $44,100. $630,000 less 44,100 = $585,900). The court could accept a valuation amount of $595,000 for the land and first floor based on the sale comparison method as modified by this court.
As regards to the second story, this court believes that Liberti Storage Rental Grid is not quite accurate. The rental rate should be no more than 2.25 per sq. ft. because comparables indicated includes elevators and 2.50 or 2.48 would also include something for land value.
Further, experience suggests a minimum 3 1/2% for management fees and 3 1/2% for reserves and repairs. Therefore:
6,000 x $2.25 = $13,500.00
Less Insurance = $600.00
Management = 472.50
Reserves = 472.50
Taxes — 2,400.00
3,945.00
3,945.00
$9,555.00
$9,555 ÷ 8.20 cap rate = $116,525.00
Land and first floor = $585,900.00
Second story = $116,525.00
$702,425.00
This court determines the market value of the subject premises in the amount of $700,000. Judgment may enter in favor of the plaintiff in the amount of $700,000 less $370,000 which was deposited with the Clerk of the Court, in the excess amount of $330,000.
In addition, the court awards an appraisal fee re Liberti in the amount of $5,700.00. The court does not award any appraisal fee for O'Neil.
The court also awards interest at the rate of 3.5% to be calculated from June 25, 2008 to the date of payment on the excess of amount of $330,000.
Judgment shall also include taxable costs.