Check out New York Central Lines, LLC v. State of New York, No. 2011-03494 (Dec. 19, 2012), a short opinion from the New York Supreme Court Appellate Division (Second Department) (if you didn’t know that in New York, the trial court of general jurisdiction is the “Supreme Court,” and the intermediate court of appeals is the “Appellate Division” of the Supreme Court, you have not been watching enough Law & Order).
Both the state’s and the property owner’s valuation experts testified that the highest and best use of the property was its current use, a rail corridor. But the two experts differed on the proper method of valuation.
The State’s expert advocated a cost, or reproduction cost less depreciation, approach to valuation, which is employed in valuing “specialty” properties (see generally Matter of Allied Corp. v Town of Camillus, 80 NY2d 351, 357; Matter of Al Turi Landfill, Inc. v Town of Goshen, 93 AD3d 786). However, the Court of Claims properly rejected this approach because, inter alia, the evidence demonstrated that the appropriated property did not constitute a specialty property. Additionally, the Court of Claims properly rejected the State’s lump-sum reduction of the market value of the appropriated property to 15% of the estimated value. Since the opinion of the State’s expert as to this particular issue was not supported with sufficient facts, figures, and calculations, his opinion in this regard lacked probative value (see Matter of County of Dutchess [285 Mill St.], 186 AD2d 891, 891-892; Matter of Northville Indus. Corp. v Board of Assessors of Town of Riverhead, 143 AD2d 135, 136).
On the other hand, the property owner’s appraiser
valued the appropriated property pursuant to a comparable sales approach, which “is generally the preferred measure of a property’s value for assessment” (Matter of Allied Corp. v Camillus, 80 NY2d at 356; see Matter of Al Turi Landfill, Inc. v Town of Goshen, 93 AD3d at 792). The specific comparable sales approach advocated by Rex [the appraiser] was the “corridor valuation” method, which is, at its essence, a two-step process. First, the “across-the-fence” value (hereinafter the ATF value) of the land is estimated based on, among other things, the location of the corridor and market conditions. The ATF value is then multiplied by a “corridor factor.” According to Rex, the “purpose of the corridor factor is to convert [ATF] value into the value of the corridor. Into market value. The corridor factor measures the importance of the corridor.” In other words, when a property’s highest and best use is as a corridor, and the property is to remain as a corridor, that property will generally sell for more than the ATF value of the land, and the corridor factor figures this into the valuation.
The trial court rejected the state’s approach, applied the property owner’s comparable sales method, but did not apply the “corridor factor.” The Appellate Division reversed the latter holding, and sent the case back “for a determination as to the appropriate corridor factor to be applied.”
The court also reversed the trial court’s conclusion that the taking of permanent easements over certain parcels resulted in no loss in value. The state’s appraiser opined that the easements caused a 5% loss, while the property owner’s appraiser testifed to a loss of 50% of value. The Appellate Division concluded that the state’s valuation was the correct one, and that the market value of the 5% loss is to be determined by the ATF value and the applied “corridor factor.”
This comes to us by way of our Owners’ Counsel of America colleague Mike Rikon, who reports that his partner Jonathan Houghton tried the case and prevailed on property owner’s cross-appeal.