Boscov’s is appealing in county court a decision by the Lebanon County Board of Assessment denying the company’s request to lower the assessed value of four properties it owns at the Lebanon Valley Mall.
The unanimous vote of “no change” by the assessment board following a hearing on Oct. 6 prompted Reading-based Boscov’s to file an appeal in the county’s Court of Common Pleas on Oct. 31. The county’s assessment board is administered by the three county commissioners.
The no-change vote means Boscov’s assessed value remains at $5.5 million instead of the $4.4 million company officials believe the four properties are actually worth. Emails to Boscov’s chairman and CEO Jim Boscov requesting an interview for this article were not returned as of publication.
If the court finds in favor of Boscov’s in a still-to-be-determined hearing date, the retailer’s assessed value for those four units would drop by $ 1.1 million, according to Daniel L. Seaman, chief county assessor for Lebanon County Assessment.
Seaman estimated that Lebanon City School District tax revenue would lower by $24,450; West Lebanon Township tax revenue would drop $6,050; and Lebanon County tax revenue would go down by about $4,300, saving Boscov’s $34,800 in taxes.
Boscov’s is looking to lower the assessed value of its main store, its furniture outlet, and two buildings it owns and leases, the Jack Williams Tire Center and Popeyes restaurant, which are both located along Route 422.
While the entire mall – which is owned by Boscov’s – is located in North Lebanon and West Lebanon townships, the four disputed properties reside within West Lebanon Township. A West Lebanon Township employee told LebTown that the township’s board president declined to be interviewed for this article.
At the October hearing before the county assessment board, York-based appraiser Ryan Hlubb and Richard Nuffort, Boscov’s legal counsel, said their calculations of those properties’ current market value (CMV) should be $6.14 million instead of $7.67 million.
In presenting his case to the assessment board, Hlubb referenced six comparable reports of commercial real estate properties that were retail department store properties and located in rural areas – much like Lebanon’s Boscov’s, he said – and that one of the six is familiar to the commissioners since it’s based in Lebanon County.
“You’re probably very familiar with the former Kmart that was converted to Target. Target acquired that,” said Hlubb. “It is the highest sale in the data set at $42 a square foot. There was some convenience for them to come to market quicker and location preference and a building they could adapt to.”
Read More: Target nabs Kmart lot for first Lebanon County store in $5 million transaction
In noting the differences between the former Kmart and Boscov’s buildings, Hlubb said the Boscov’s building is 20 years older than the former Kmart and, as an attached structure, has “cohabitation issues” within its design.
“It wouldn’t necessarily appeal like the Kmart would, but could be reasonably adapted to at a different cost. But that kind of sets the upper limit to value,” Hlubb told the board during the hearing.
Hlubb also highlighted a Bucks County-based mall – which he said is located in a much stronger retail market than Lebanon’s – that is valued at $20 a square foot and a former Bon Ton property in York County valued at $38 a square foot that was repurposed as self-storage units.
“So a lot of what you see is these buildings when they don’t have the same original user that converted to something else,” said Hlubb. “When Target came into adapt, the ceiling heights were better than a 1970s Kmart and they were able to work with that superstructure, which is why they were willing to pay more. Plus, I would argue that that trade area is better than this immediate environs where Target wanted to be.”
Noting that commercial property values for retail department stores average between $20 and $30 a square foot both regionally and across the commonwealth, Hlubb said he assigned a value of $27.50 to Boscov’s 142,000 square feet of space for the main retail store and the furniture outlet at the Lebanon Valley Mall. That, he added, computes to a CMV of $3.91 million.
Utilizing an income approach to determine the CMV of the two leased properties, Hlubb said the tire center and restaurant total $2.23 million.
The income approach, sometimes referred to as the income capitalization approach, is a type of real estate appraisal method that allows investors to estimate the value of a property based on the income the property generates. It’s used by taking the net operating income (NOI) of the rent collected and dividing it by the capitalization rate.
“So we essentially add them up,” said Hlubb. “They are the components of the value to those properties and that concludes at 6.14 (million) for the two components – and that’s my high level.”
West Lebanon Township solicitor Paul Bametzreider said at the hearing that the township supervisors are concerned about the assessment being lowered.
“This is a large revenue base for them, a big part of the revenue base,” said Bametzreider. “They’ve informed me that there was already an assessment downward, not too long ago, and they’re concerned that another assessment downward will occur. I don’t have any kind of expert testimony at this time, but they are concerned, and they are watching, and we’ll have to see what happens from here.”
Assessment Board chairperson Jo Ellen Litz immediately noted that the previous reassessment involving Boscov’s, which occurred in 2013, involved vacant stores throughout the entire mall.
Seaman told LebTown during an interview that the prior reassessment of the entire mall about a decade ago has no relationship to Boscov’s current lower assessment request. The county calculates CMV by taking the current assessed value ($5,520,800) divided by .719, the latter a number that’s determined by state government officials.
In voting for no change in Boscov’s current appeal, Litz told LebTown that there are stark differences between what happened 10 years ago – when shops were sitting empty and retailers were filing for bankruptcy – and the current status of those four properties.
“I have no indication that they are currently undergoing a stabilization issue like they did when Sears was filing for bankruptcy,” said Litz. “When that happened, that was all over the news, but I have no indication that’s the case now.”
Litz added the opposite, in fact, is true since the four current properties are fully occupied.
“These properties are at 100 percent capacity; Boscov’s is full, and Williams was sold to a thriving and upcoming chain (Mavis Tire Supply), so why would we reduce them when we are in a time when real estate is prime,” she said. “The sale of real estate is really high. I believe we had similar shopping centers or malls and they had comparable assessments, but we thought this is something that we should not be reducing at this time. From everything we saw, that end of the mall is doing quite well.”
Commissioner Mike Kuhn said he felt Hlubb didn’t make a strong enough case during his presentation to the assessment board.
“Based on all of the information they presented that day, I didn’t feel in my judgment at that time that there was enough of a case to lower their assessed value,” he said.
Commissioner Robert Phillips said he based his no-change vote on the disparity between Boscov’s figures and those established by the county’s assessment office.
“The number on their appraisal and our number were too far apart,” said Phillilps. “I decided if they felt that it was important enough or if their appraisal had enough credibility and that they were willing to go to the Court of Common Pleas, then that’s where it would end up.”
Phillips added that very few of the vast number of hearings the assessment board conducts annually are appealed in county court.
As the county waits to receive a new assessment report for those four entities, Seaman said a court date is at least 60 to 90 days away from the date the report is received. Seaman noted there’s also the possibility that the case will settle between the parties before the case goes before the judge.
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