Pearl Enterprises, LLC v. City of Hartford

PEARL ENTERPRISES, LLC v. CITY OF HARTFORD

No. HHBCV176038651S

Superior Court of Connecticut, Judicial District of New Britain, New Britain

March 20, 2019

UNPUBLISHED OPINION

OPINION

Arnold W. Aronson, Judge Trial Referee

The plaintiff, Pearl Enterprises, Inc., brings this real estate tax appeal challenging the valuation of plaintiff’s property located at 234 Pearl Street, in the city of Hartford (city) on the grand list of October 1, 2016. The city’s assessor determined that the fair market value of the subject property, on the grand list of October 1, 2016, was $ 197 500.

The plaintiff’s appraiser, Patrick A. Lemp (Lemp), was of the opinion that the fair market value of the subject, as of October 1, 2016, was $ 35, 000. The city’s appraiser, Miles B. Andrews (Andrews), was of the opinion that the fair market value of the subject property, as of October 1, 2016, was $ 250, 000.

The subject property was acquired by the present owner, Pearl Enterprises, LLC, by a tax collector’s deed on February 7 2013 through a public auction held on July 25, 2012. The plaintiff was the sole bidder at the bid price of $ 45, 000.

The subject property, built in the year 1900, is a three-story building containing 11, 725 square feet (SF) of gross building area. The site area contains 4, 117 SF or 0.0945 gross acres. The building occupies the whole lot. The building also has common building walls on the north and east side of the adjoining Goodwin Tower office building. "The northerly and easterly property lines are subject to an easement for footings, foundations or other underground supporting devices." (Defendant’s Exhibit A, p. 12.)

Andrews notes the history of the property, as follows.

"According to the property owner, the building was originally used as hall for a fraternal organization. At an unknown date[, ] it was converted for office use, and the current owner’s family occupied it as a law office from the mid-1950s. The interior was renovated in the late 1950s or early 1960s and a new open staircase connecting the first and second floors was built. The most recent work that is apparent to the building includes a membrane roof cover that probably dates from the 1980s and the installation of a new gas fired hot water boiler that appears to date from the late 1970s or early 1980s." (Defendant’s Exhibit A, p. 2.)

Lemp notes that "[t]he building is uninhabitable and in need of complete renovation. There is no sprinkler system and the building is not handicap accessible. Office use is not financially feasible given the repairs required for tenant occupancy versus current office rental rates ." (Emphasis in original.) (Plaintiff’s Exhibit 2, p. 5.)

According to the present owner, the building has been unoccupied since 2012 and is presently just a shell of a building. This observation is confirmed by Lemp who described this building as a dilapidated Class C office building that is in poor condition. See plaintiff’s Exhibit 2, p. 5.

Lemp was of the opinion that the highest and best use of the subject was as follows.

"It is not financially feasible to renovate the subject as an office building as current office rental rates do not support renovation costs. It is not financially feasible to renovate the subject into apartments, unless significant government funds are provided, given the limited size of the subject and ultimately the limited number of apartments. In conclusion, the highest and best use as improved is demolition of existing structure with future commercial development when rental rates support construction costs." (Plaintiff’s Exhibit 2, p. 5.)

In contrast to Lemp’s dire view of the subject, Andrews’ opinion of highest and best use of the subject is as follows.

"An adaptive reuse of the existing building, most likely for residential apartments is the most likely use of the subject building. The definition of highest and best use includes a test of financial feasibility. There is no specific proposal for the property that can be tested. Participants in the Hartford market are aware that the cost of completing a project typically exceeds its value upon completion, yet building shells continue to sell for renovation. The difference between cost and value can be covered by historic tax credits and loan subsidies, most often through the CRDA [Capitol Region Development Authority]." (Defendant’s Exhibit A, p. 16.)

Given Andrews’ opinion of the highest and best use of the subject, Andrews selected the Sales Comparison Approach to value the subject property and in doing so made the following comment: "The subject is a commercial building ‘shell’ that would be viewed by market participants as a candidate for redevelopment and adaptation to a new residential apartment use." (Defendant’s Exhibit A, p. 16.)

Following up on Lemp’s highest and best use of the subject property which took into consideration the demolition of the shell of the building, Lemp selected the sales of four parking lots, three of which were in the vicinity of the subject in the central business district (CBD). The fourth comparable was the taking of a parking lot by the city to supplement parking at the Dunkin’ Donuts baseball field. The sales of the four parking lots within three years of the revaluation date ran from a purchase price of $ 1, 500, 000 to $ 1, 780, 000. These four sales were substantially larger in land size than the subject. The only purpose of selecting these four sales would be to show the value of public parking spaces used in the downtown Hartford area. Otherwise, the selection of these four comparables could not be considered as comparable property to the subject as it existed on October 1, 2016.

Andrews’ comparables, on the other hand, were selected to support his highest and best use of the subject as a residential building with up to twelve apartments. Andrews used three comparables to support his highest and...