BRE/HV Properties v. Jake Zimmerman, Assessor St Louis County

April 20th, 2015

State Tax Commission of Missouri


Complainant, )
v. ) Appeal Number 11-13890
Respondent. )







Decision of the County Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE.  Complainant presented substantial and persuasive evidence to rebut the presumption of correct assessment by the Board of Equalization.

True value in money for the subject property for tax years 2011 and 2012 is set at $1,900,000, commercial assessed value of $608,000.

Complainant appeared by attorney Brian Howes.

Respondent appeared by Associate County Counselor Paula Lemerman.

Case heard and decided by Hearing Officer Maureen Monaghan.


Complainant appeals, on the grounds of overvaluation, the decision of the St. Louis County Board of Equalization, which sustained the valuation of the subject property.  The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2011.  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 from the decision of the St. Louis County Board of Equalization.
  2. Evidentiary Hearing. On October 29, 2014 a second amended scheduling order was issued.  Exhibits and written direct testimony was to be filed on or before January 26, 2015.  Objections to any exhibits and rebuttal evidence was to be filed on or before February 26, 2015.  Responses to objections and surrebuttal was to be filed on or before March 26, 2015.  On February 27, 2015, the Hearing Officer ordered the parties to file a request for an evidentiary hearing on or before March 26, 2015.  If no party requested a hearing, the appeal would be submitted on exhibits and taken under advisement.  No request for hearing was made.
  3. Identification of Subject Property. The subject property is identified by map parcel number 15O520023.  It is further identified as 12161 Lackland Road, St. Louis, MO
  4. Description of Subject Property. The subject property consists of a 1.75 acre tract of land improved by a 43,575 square foot, four story extended stay lodging facility with 98 guest rooms, fitness room, laundry, vending area, parking and other amenities.
  5. Sale of Subject. The subject property was purchased by Complainant in 2010 along with 684 other hotels.
  6. Assessment. The Assessor appraised the property at $3,050,000, an assessed commercial value of $976,000.  The Board of Equalization sustained the assessment.
  7. Complainant’s Evidence. Complainant offered into evidence Exhibits A and B.  Exhibit A consisted of an appraisal report by Missouri Certified General Appraiser Daniel P. McCoy.  Exhibit B is Mr. McCoy’s written direct testimony.  No objections were filed and the exhibits were admitted into the evidentiary record.
  8. No Evidence of New Construction & Improvement. There was no evidence of new construction and improvement from January 1, 2011, to January 1, 2012, therefore the assessed value for 2011 remains the assessed value for 2012.  Section 137.115.1, RSMo.
  9. Respondent’s Evidence. Respondent offered Exhibit 1 – the Board of Equalization Decision.  The Exhibit was received into evidence without objection.
  10. Presumption of Correct Assessment Rebutted. Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2011, to be $1,900,000, as proposed.



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

Basis of Assessment

            The Constitution mandates that real property and tangible personal property be assessed at its value or such percentage of its value as may be fixed by law for each class and for each subclass.  Article X, Sections 4(a) and 4(b), Mo. Const. of 1945.   The constitutional mandate is to find the true value in money for the property under appeal.  By statute real and tangible personal property are assessed at set percentages of true value in money. Section 137.115.5, RSMo – residential property at 19% of true value in money; commercial property at 32% of true value in money and agricultural property at 12% of true value in money.

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).

Issuance of Decision Upon Submission of Exhibits

            The Hearing Officer, after affording the parties reasonable opportunity for fair hearing, shall issue a decision and order affirming, modifying or reversing the determination of the board of equalization, correcting any assessment which is unlawful, unfair, improper, arbitrary or capricious.  Section 138.431.5 RSMo; 12 CSR 30-3.080 (2). The filing of exhibits and written direct testimony establishes the basis upon which opportunity for an evidentiary hearing can be held.  The Complainant has the burden to present substantial and persuasive evidence.  The Respondent did not file any objections or file rebuttal exhibits.   Therefore, the Hearing Officer simply considered the exhibits filed and then proceeded to ascertain if said exhibits met the standard of substantial and persuasive evidence to establish the market value of the property.

 Complainants’ 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, 2011.  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).  A valuation which does not reflect the fair market value (true value in money) of the property under appeal is an unlawful, unfair and improper assessment.

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)  True value in money is defined in terms of value in exchange and not value in use.  Daly v. P. D. George Company, et al, 77 S.W.3d 645, 649 (Mo. App E.D. 2002), citing, Equitable Life Assurance Society v. STC, 852 S.W.2d 376, 380 (Mo. App. 1993); citing, Stephen & Stephen Properties, Inc. v. STC, 499 S.W.2d 798, 801-803 (Mo. 1973).   It is the fair market value of the subject property on the valuation date. Hermel, supraMarket value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.

Implicit in this definition are the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:

  1. Buyer and seller are typically motivated.


  1. Both parties are well informed and well advised, and both acting in what they consider their own best interests.


  1. A reasonable time is allowed for exposure in the open market.


  1. Payment is made in cash or its equivalent.


  1. Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.


  1. The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction. Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; See also, Real Estate Valuation in Litigation, J. D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary.


 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).


STC Approved Hotel Valuation Guidelines

Valuing Hotel or Motel Property

In the real estate appraisal industry, the market value of a hotel is considered to consist of four components (1) value of the land; (2) value of the improvements; (3) value of the business or going concern and franchise affiliation; and (4) value of the furniture, fixtures and equipment (i.e. personal property).  John Hancock Mutual Life v. Stanton, 51 STC Proceedings and Decisions, 1996, p. 394. Lesser and Rubin, Understanding the Unique Aspects of Hotel Property Tax Valuation, The Appraisal Journal, January, 1993, p. 17.

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. Therefore such stabilized net income excludes from consideration any abnormal relation of supply and demand and any transitory or nonrecurring conditions that may result in unusual revenues or expenses of the property. The process of deriving the stabilized net income for a lodging facility requires the appraiser to look into the future and estimate operating revenues and expenses. This is accomplished by forecasting or predicting trends in historical performance based on the hotel’s current position in an economic life cycle. Most types of real estate exhibit a pattern or life cycle in their ability to generate income over a period of time. Usually a property’s net income will start low and rise quickly, reaching a plateau before slowly declining. By determining a hotel’s position in its life cycle the appraiser is able to forecast future income based on historical operating results.

New hotels show a normal upward growth in occupancy which results in a stabilized occupancy level, income and expense, higher than actually demonstrated by historical performance. An older hotel which shows declining performance over several years is in the downward phase of its life cycle and a stabilized occupancy level, income and expense, somewhat lower than actually demonstrated by historical performance would be appropriate.

Finally a hotel which shows an historical operating performance which oscillates up and down is considered to be at the peak or plateau portion of its life cycle. With hotels which are in such a plateau, the historic net income does not significantly understate what can be considered a stabilized level of income. In hotels with oscillating income, the stabilized income will fall into a range between the highest income reported and the lowest income reported. These divergences cannot be considered unacceptable, particularly over a period of time where the smoothing impact of averaging tends to minimize the differences. Rushmore and Rubin, The Valuation of Hotels and Motels for Assessment Purposes, The Appraisal Journal, April 1984, p. 275-277. Crown Center Hotel Complex, Inc. v. Robert Boley, 49 Proceedings and Decisions, State Tax Commission, 423-435-436.

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.

The return on personal property to be deducted from a hotel’s income and expense statements can be calculated by (1) using the market value of the personal property as shown on the assessment rolls; (2) actual appraisal of the personal property; or (3) using the depreciated book value of the personal property. Because of the rapidity with which short-lived items are depreciated, the depreciated book value can be considered a “floor” on the value of the personal property. Its use in the return on personalty calculation thus results in the most conservative (i.e., lowest) estimate possible for a return on personal property, given any benefit of the doubt to the value of the hotel’s real estate component. Chattel mortgages for hotel furniture, fixtures and equipment are generally not available in the marketplace. Therefore, interest rates on hotel mortgages establish a minimum required rate of return on personalty. Return on personalty is determined by adding the capitalization rate for the real property to the tax load or effective tax rate per $100 of the personal property and multiplying same by the assessed value of the personal property. In attempting to segregate personal property from real estate, the primary consideration in valuing the personal property is its actual contributory value, not its hypothetical replacement cost new less depreciation. Lesser and Rubin, Understanding the Unique Aspects of Hotel Property Tax Valuation, The Appraisal Journal, January 1993, P. 33, Crown Center, supra, p. 439, John Hancock, supra, p. 396.

Periodic replacement of furniture, fixtures and equipment is essential to maintain the quality, image, and income potential of a lodging facility. An appraisal should reflect these expenses in the form of an appropriate reserve for replacement. The deduction of a reserve for replacement from the stabilized statement of income and expense can therefore be used to account for the return of personal property. Lesser and Rubin, Understanding the Unique Aspects of Hotel Property Tax Valuation, The Appraisal Journal. January, 1993, p. 21, 22. Crown Center, supra, p. 440.

Management companies generally offer their brand names, corporate identities, and reservation systems solely in conjunction with their management expertise. The process of isolating the value of a hotel’s business is based on the premise that by employing a professional management agent to handle the day-to-day operation of the property, an owner maintains only a passive interest, while income attributed to the business has been taken by the managing agent in the form of a management fee. Therefore, deduction of a management fee from the stabilized net income removes a portion of the business component from the stabilized income stream. Additionally, lodging facilities operated with a franchise affiliation provided by a third party are subject to the payment of franchise fees. Deducting the franchise fees from the stabilized net income removes the remaining business component from the income stream. Lesser and Rubin, Understanding the Unique Aspects of Hotel Property Tax Valuation, The Appraisal Journal, April 1984, p. 280-291; Crown Center, supra at p. 438. John Hancock, supra at p. 397.  The business value component of a hotel is accounted for through the franchise fee and the management fee. If these two items are calculated as expense items, no additional calculation is necessary to remove their impact from net operating income. Going concern value can be treated in one of two ways: The appraisers can leave the management and franchise fees in the expenses calculations, in which case no further calculation is necessary. Or, alternatively, they may remove those fees from the expenses and treat them separately. John Hancock, supra. p. 397.

Complainant Proves Value

Complainant presented substantial and persuasive evidence to establish a fair market value as of January 1, 2011, to be $1,900,000 for the subject property.  Complainant’s appraiser developed an opinion of value relying upon the Rushmore methodology of valuing a hotel.  The appraiser reviewed the historical as well as the market for occupancy rates, revenues and expenses, including management and franchise fees.  The appraiser appropriately accounted for personal property.  The appraiser reviewed the market to establish an overall capitalization rate.

The appraiser also developed the sales comparison approach.  The sales comparison approach was not given great reliance and participants in the hotel market look to the income to establish market value.  The sales comparison approach provides a means of checking the reasonableness of the Rushmore income approach for hotel valuation.  The cost approach was not developed.



The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Louis County for the subject tax day is SET ASIDE.

The assessed value for the subject property for tax years 2011 and 2012 is set at $608,000.

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 20th day of April, 2015.




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 20th day of April, 2015, 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