FWH St Louis Airport v. Jake Zimmerman, Assessor St. Louis County

May 3rd, 2016

State Tax Commission of Missouri


Complainant, )  
v. ) Appeal No. 10-10605
Respondent. )  







Assessment made by the St. Louis County Assessor is SET ASIDE. Complainant presented substantial and persuasive evidence to establish the market value of the property as of January 1, 2009 to be $5,765,000, commercial assessed value of $1,844,800.

Complainant appeared by counsel James Gamble.

Respondent appeared by counsel Priscilla Gunn.

Case heard and decided by Hearing Officer Maureen Monaghan.


            Complainant appeals, on the grounds of overvaluation, the valuation set by the St. Louis County Assessor.  Although this appeal will only impact tax year 2010, the Commission takes this appeal to determine the true value in money for the subject property on January 1, 2009.  The value as of January 1 of the odd numbered year remains the value as of January 1 of the following even numbered year unless there is new construction and improvement to the property. Section 137.115.1 RSMo


The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.


  1. Jurisdiction. Jurisdiction over this appeal is proper.  Complainant timely appealed to the State Tax Commission after their purchase of the property which occurred after the Board of Equalization deadline.
  2. Evidentiary Hearing. The hearing occurred on March 24, 2016 in St. Louis County.
  3. Identification of Subject Property. The subject property is identified by map parcel number 12M530494.  It is further identified as 11237 Lone Eagle Drive, St. Louis County, Missouri. The property is a full service hotel of 159 rooms.  The improvements are located on 3.43 acres and include the hotel, restaurant, pool, meeting rooms, and parking lot.  The hotel was constructed in 1990.  The property was purchased by the Complainant in August 2010.  The total purchase price was $5,250,000; $4,267,000 was allocated to the land and improvements. The property was in fair condition.  The maintenance of the property had been deferred.  The hotel was under the Embassy Suites flag.  A Product Improvement Plan was required with a budget of approximately $5.6 million dollars.  The required improvements were completed in 2012.  The property resold in June 2015 for $19,300,000.
  4. Assessment. The Assessor appraised the property at $8,866,900, commercial assessed value of $2,837,410.
  5. Complainant’s Evidence. The Complainant submitted the written direct testimony of Michael Robinson (Exhibit B) and his appraisal report for the property.  (Exhibit A).  Michael Robinson is a Certified General Appraiser with 15 years of experience.  He appraised the hotel using the Rushmore methodology.   He concluded a market value for the property as of January 1, 2009 of $5,765,000.
  6. No Evidence of New Construction & Improvement. There was no evidence of new construction and improvement from January 1, 2009 to January 1, 2010; therefore, the assessed value for 2009 remains the assessed value for 2010.  Section 137.115.1, RSMo. 
  7. Respondent’s Evidence. Respondent submitted Exhibits 1-7 as rebuttal exhibits.  Exhibits 3-5 were not admitted as cumulative.  Exhibit 6 is an article regarding Embassy Suites as a brand.  Little weight is given to the evidence as it is an article from 2015 and does not contain information relevant for determining value of the subject property as of January 1, 2009. Exhibit 7 is a January 2015 report regarding cap rates for hotels. The report is by HVS which is an authoritative source.  However, the report discusses cap rates over a large period of time and discusses the hotel industry, not a particular market area.  The report contains a hotel cap rate investor survey by PWC listing rates in 2009-2010 at 10%.  The Assessor presented the written direct testimony of Bo Frumson and an appraisal review report.  Exhibit 1 is titled “Professional Qualifications of Bo Frumson.”  Exhibit 2 is the appraisal review.  Any opinion expressed by Mr. Frumson regarding the credibility of the Complainant’s appraiser or any opinion regarding the weight to be placed on the evidence was stricken and not considered by the Hearing Officer.  The Respondent presented no evidence as to value.
  8. True Value as of January 1, 2009. The true value of the property as of January 1, 2009 was $5,765,000.




The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determination of the Board of Equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.  Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.

Presumption In Appeal

            There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.  Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958). The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous and what the fair market value should have been placed on the property. Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse, supra.  Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact.  The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

Complainant’s Burden of Proof


In order to prevail, Complainants must present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2009. Hermel, supra. There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a Commission appeal still bears the burden of proof.  The taxpayer is the moving party seeking affirmative relief.   Therefore, the Complainant bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.” See, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003); Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).

Standard for Valuation

            Section 137.115, RSMo, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so. St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993).

Methods of Valuation

            Proper methods of valuation and assessment of property are delegated to the Commission.  It is within the purview of the Hearing Officer to determine the method of valuation to be adopted in a given case.   See, Nance v. STC, 18 S.W.3d 611, at 615 (Mo. App. W.D. 2000); Hermel, supra; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975).  Missouri courts have approved the comparable sales or market approach, the cost approach, and the income approach as recognized methods of arriving at fair market value.   St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. Div. 2 1974).

The Supreme Court of Missouri has also held that evidence of the actual sales price of property is admissible to establish value at the time of an assessment, provided that such evidence involves a voluntary purchase not too remote in time. The actual sales price, between a willing seller who is not obligated to sell and a willing buyer who is not compelled to buy, establishes an outer limit on the value of real property. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526 (App. E.D. 1993).

Sale of Subject Property

            The subject property sold in 2010 and in 2015.  The date of valuation for this appeal is January 1, 2009.  The sale in June 2015 is not relevant to the valuation date of January 1, 2009.  The sale in 2010 is more relevant to a valuation for January 1, 2009.  The subject was purchased by the Complainant’s in August 2010 for $5,250,000.  Such purchase price included furniture, fixtures and equipment.  The price allocated to the land and improvements was $4,267,000.  The sale price was not relied upon by the appraiser as the seller was experiencing financial hardship and there was a threat of foreclosure.

Valuing Hotel or Motel Property

An appraiser has three approaches to utilize in valuing property: cost, sales comparison and income approach. The strengths of each approach should be evaluated to determine which approach would provide supportable estimates.  Buyers of lodging facilities base their decisions on economic factors such as income and return on their investments and therefore the cost approach is given little weight when valuing hotels.  The sales comparison approach is also given little weight as the approach requires comparisons to similar properties and adjustments for any dissimilarities.  The adjustments needed in this approach for hotel properties are numerous and more difficult to quantify.

The income approach is the most appropriate approach for income producing properties such as hotels. Hotels are specialized income producing properties with the income being derived from the land, improvements, personal property and the business operation.  The issue in this case is the valuation of the land and improvements.  Therefore, the appraiser must separate the components.

The methodology of valuation known as the Rushmore Approach is a valuation methodology for hotels. The Rushmore Approach has been recognized by state and federal courts, the Missouri State Tax Commission, and by hotel owners and assessors’ offices, as the most appropriate approach for valuing hotel properties.  The valuation methodology was developed by Stephen Rushmore, MAI, FRICS, CHA.  Mr. Rushmore wrote all five books for the Appraisal Institute on the valuation of hotels and motels.  It has been the standard for valuation of hotels for over twenty years.

Rushmore excludes the value of any income derived from fixtures, furniture and equipment (FF&E) and adjustments are made for replacement of the property and for a return on the FF&E. Rushmore also deducts the expenses for items such as management fees, franchise fees and marketing to address the value derived from the business component.

Stabilized Income

Hotels and motels are almost always valued by an income capitalization approach that takes the property’s stabilized net income and capitalizes it into an estimate of market value. The stabilized net income is intended to reflect the anticipated operating results of the hotel over its remaining economic life, given any or all applicable stages of buildup, plateau, and decline in the life cycle. By determining a hotel’s position in its life cycle the appraiser is able to forecast future income based on historical operating results.

Stephen Rushmore, president of Hospitality Valuation Services and whom the “Rushmore” approach for valuation of hotel is named, suggests the use of a hotel’s actual operating revenues and expenses for ad valorem valuation. The Valuation of Hotels and Motels for Assessment Purposes, Stephen Rushmore.

The Complainant’s appraiser reviewed the subject’s market to develop income information. The average daily rate (ADR) in the market was $50.86; the subject reported an ADR of $118.44.  The market’s occupancy percentage was 49.3% and the subject reported a rate of 69.69%.  The subject, even though suffering from deferred maintenance, was performing above the market for airport hotels as a whole, limited and full service. The appraiser used the actual income to reflect its performance, given its condition, as of the date of valuation.


Operating Expenses

Allowable operating expenses are ordinary and typical expenses that are necessary to keep the property functional and rented competitively with other properties in the area but do not include interest and principal payments that amortize a mortgage loan, depreciation, income tax, capital improvements, owner’s business expenses, or property taxes. Property taxes are treated as part of the capitalization rate. Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, p. 256-259. Property Assessment Valuation, International Association of Assessing Officers, 1977, p. 215-221. Diamond Savings Association v. A. Roy Pearson, State Tax Commission Appeal No. 92-41024. John Hancock Mutual Life v. Stanton, 51 STC Proceedings and Decisions, 1996, p. 394.

Complainant’s appraiser utilized the actual expenses of the subject property. The appraiser included a deduction for replacement reserves for the personal property as replacement reserves were not included in the actual expenses.  The appraiser also reviewed management fees, advertisement, franchise fees, and return on personal property to account for the business value.

Capitalization Rate

            Complainant’s appraiser reviewed market information and sales for development of a capitalization rate.  The sales reviewed had a range of capitalization rates of 6.9% to 17.6% with an average of 11.5%.  Using sales of hotels to develop capitalization rates includes subjective judgment by the appraiser as each sale property would need to be analyzed for each difference between it and the subject.  The appraiser reviewed a survey reported by Korpacz Real Estate Investor Survey, an authoritative source to develop a cap rate.  The appraiser developed a capitalization rate of 12% to which he applied an effective tax rate to address the property tax expenses.

Weight to be Given Evidence

            The Hearing Officer is not bound by any single formula, rule or method in determining true value in money, but is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled.  The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide. St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).

The Hearing Officer as the trier of fact may consider the testimony of an expert witness and give it as much weight and credit as he may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and accept it in part or reject it in part.  St. Louis County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).

The Hearing Officer finds the Complainant’s report and testimony to be substantial and persuasive.  The Complainant’s appraiser reviewed the subject’s actual information and market information to render an opinion of value utilizing the recognized Rushmore Approach to valuing hotels.  The Complainant’s expert’s opinion of value for the subject property as of January 1, 2009 was $5,765,000.  Although such value exceeds the allocated sale price of $4,267,000, the Certified General Appraiser explained that the seller was suffering financial hardship at the time of the sale.  Respondent did not present evidence from one who had examined or assessed the property.


The assessed valuation for the subject property as determined by the Assessor for St. Louis County for the subject tax day is SET ASIDE. Assessed value for subject property for tax year 2010 is set at $1,844,800.

Application for Review

A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision. The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous.  Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.

          Failure to state specific facts or law upon which the application for review is based will result in summary denial. Section 138.432, RSMo


Disputed Taxes

The Collector of St. Louis County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED this 3rd day of May, 2016.



Maureen Monaghan

Hearing Officer


Certificate of Service


I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 3rd day of May, 2016, to: Complainants(s) counsel and/or Complainant, the county Assessor and/or Counsel for Respondent and county Collector.


Jacklyn Wood

Legal Coordinator


Contact Information for State Tax Commission:

Missouri State Tax Commission

301 W. High Street, Room 840

P.O. Box 146

Jefferson City, MO 65102-0146


573-751-1341 Fax