RICHARD J. CONTI
RHODE ISLAND ECONOMIC DEVELOPMENT CORPORATION
Providence County Superior Court
For Plaintiff: William A. Poore, Esq.; Christopher J. O'Connor, Esq.
For Defendant: Paul M. Sanford, Esq.; Benjamin C. Caldwell, Esq.
This matter arises out of the condemnation by Rhode Island Economic Development Corporation (RIEDC or Defendant) of real property previously owned by Richard J. Conti (Conti or Plaintiff). After the condemnation of this property, Conti brought the instant action contesting the adequacy of the condemnation award of $141, 000. The parties stipulated that the only issue before the Court is the property's fair market value as of the date of the taking, May 1, 2002. In July 2012, the case proceeded to a non-jury trial. Jurisdiction is pursuant to G.L. 1956 § 37-6-18.
I Facts and Travel
RIEDC is a Rhode Island Agency with the statutory authority to take property by eminent domain under G.L. 1956 § 42-64-9 (the "Condemnation Statute"). On May 1, 2002, acting under this authority, the RIEDC condemned real property owned by Richard J. Conti for the benefit of Fidelity Investments (Fidelity). At the time of condemnation, Conti was the fee simple owner of the underlying property, located at 33 Lydia Ann Road, Smithfield, Rhode Island and identified as Assessor's Plat 49, Lot 102A (Lot 102A or the "Property").
The Property itself is a 4.71 acre undeveloped lot situated between Washington Highway (Route 116) and Douglas Pike (Route 7). The Property is zoned Planned Corporate Development (PCD), a zoning classification that includes in its permitted uses planned offices, research and development parks, light industrial development, corporate headquarters, and hotel or conference facilities. Although Lot 102A is not directly adjacent to Route 116 or Route 7, Conti had multiple means of accessing the Property. Lot 102A is accessible by Lydia Ann Road, which abuts the north side of the Property, and Conti testified that he would sometimes access Lot 102A by driving on Lydia Ann Road. In addition, the lot is accessible by way of Hanton City Road, which abuts the west side of the Property. Both access roads are unpaved and vary in width from fifteen to twenty feet. In addition, because over time Conti had assembled Lots 102C, 102D, and 102E, which were contiguous with Lot 102A, the Property could also be accessed through those contiguous properties, of which two had frontage along Route 116. Conti testified that he would typically access 102A through his other contiguous properties.
In its petition for condemnation, RIEDC valued Lot 102A at $141, 000. It supported that valuation through the affidavit of Mark F. Bates (Bates), a certified general appraiser licensed by the State of Rhode Island. In that affidavit, Bates stated that his opinion of the fair market value was based on "the required investigation, the gathering of necessary data, and the making of certain analyses." He further stated that each appraisal, including that for Lot 102A, was performed in compliance with the Uniform Standards of Professional Appraisal Practice. Nonetheless, no appraisal report was attached to the condemnation petition. After the condemnation, Conti filed the instant action contesting the adequacy of the condemnation award given to him and alleging that the fair market value of the condemned property was $300, 000, entitling him to an additional $159, 000 in compensation. At trial, each party offered the testimony of an expert real estate appraiser to support its valuation, and the Plaintiff testified regarding his real estate acquisitions in the area and his ability to access the Lot in issue.
RIEDC offered the testimony of its expert real estate appraiser Bates to support the conclusion that $141, 000 was the proper valuation for the condemned property. Bates prepared an appraisal report, dated January 17, 2003, concluding that the highest and best use of Lot 102A was either light industrial use or assemblage with other properties. To analyze the proper valuation of the vacant parcel, Bates applied the sales comparison approach and compared Lot 102A to other vacant lots that had been sold in Smithfield, Rhode Island between April 2000 and September 2001. He concluded that the sales reflected a range of unadjusted prices of $26, 667 to $80, 412 per acre, and an adjusted range of $24, 000 to $45, 960 per acre. According to Bates, this reduction in price reflected the fact that the Property was not directly accessible from a developed roadway. Based on this range, Bates concluded that the fair market value per acre of Lot 102A was $30, 000 per acre. Bates was not, however, able to produce an adjustment grid or table demonstrating the rationale for his adjustments, nor did he otherwise detail the facts upon which he based his appraisal of the subject property.
Bates' appraisal report was subject to cross-examinations from Plaintiff. Plaintiff noted, for example, that Bates' appraisal report was based on the assumption that Lot 102A was zoned "Industrial, " arguably a more restrictive zoning designation than the Property's actual zoning designation, PCD. Further, Plaintiff questioned the applicability of a number of the comparable sales Bates used to arrive at the fair market value of Lot 102A. Specifically he noted that three of the properties used in the comparative sales analysis are zoned R-80: that is, they are zoned for low-density, semi-rural, residential use. That zoning designation also limited those properties to 80, 000 square feet, meaning that each of those comparable properties consisted of less than two acres. Plaintiff argued that the other properties used for comparison were not appropriately compared to Lot 102A because those properties were zoned industrial and were less than half the size of Lot 102A.
Plaintiff additionally noted that Bates did not know that Conti owned and controlled Lots 102C, 102D, and 102E—lots that are contiguous with 102A. Thus, his valuation of the Property used allegedly comparable properties which were more isolated and did not have direct access to developed roadways. This valuation, however, did not consider that Conti could access Lot 102A from one of the contiguous properties. Indeed, Peter M. Scotti testified that even if the Town did not grant a permit to improve Lydia Ann Road, it was reasonably probable that the Town would permit a road to be built through Conti's contiguous lots. When asked by the Court, RIEDC's expert Bates agreed that the Town would be hard-pressed to deny the construction of such a roadway.
Conti retained his own real estate appraisal expert, Peter M. Scotti (Scotti), to prepare an appraisal. Scotti concluded that the highest and best use of Lot 102A was a research and development building, and he appraised the "as is" market value of the fee simple interest in the Property as $300, 000. Scotti concluded that the 4.71 acre property contained 3.71 acres of usable land, which could support a building of approximately 56, 000 square feet. Scotti noted, however, that market forces would likely limit a potential building to 40, 000 square feet. To determine the value of that buildable property, Scotti, like Bates, used the Sales Comparison Approach and based his valuation of the Property on five comparable sales from Smithfield, Lincoln, and Cumberland, Rhode Island with similar available utilities, access to thoroughfares, and zoning designations. Based on these comparable sales, Scotti concluded that the unadjusted range of values equaled $7.50 to $13.29 per building foot, and that the adjusted range of values equaled $7.88 to $12.63. Ultimately, Scotti concluded that $12 per building foot was a reasonable market estimate, resulting in a property value of $480, 000.
Because the Property lacked access to a developed roadway, however, Scotti reduced that estimate by $180, 000. The $180, 000 reduction represented Scotti's estimation of the cost of improving Lydia Ann Road or of constructing a means of ingress and egress through another one of Conti's contiguous lots. That figure was based on cost estimations available in the Marshall and Swift Cost index, a standard industry resource for real estate appraisers. According to Scotti, the Property's "as is" value equals $300, 000, accounting for costs for constructing an access road from Route 116 through Conti's other contiguous properties, approximately $180, 000.
Defendant, however, challenges various aspects of Scotti's valuation. Defendant argues that Plaintiff has failed to establish that a special use permit would be granted to improve Lydia Ann Road, and that Scotti's assumption that a special use permit would be granted to improve the access to Lot 102A resulted in an overestimation of the Property's fair market value. Further, RIEDC noted that three of the five comparable properties used by Scotti in his analysis were located not in Smithfield, but in the neighboring towns ...