Premier Hotels Group II LLC v. Kenneth Mohr, Assessor, Boone County

January 28th, 2022


Complainant, ) Appeal No. 20-44543
) Parcel No. 17-204-00-03-003.00 01
v. )
Respondent. )



          Premier Hotels Group II LLC, (Complainant) appeals the Boone County Board of Equalization’s (BOE) decision finding the true value in money (TVM) of the subject property on January 1, 2019, was $5,100,000.  Complainant asserts the TVM was $4,621,645.  Respondent asserts the TVM was $5,050,000.

The BOE decision is set aside.  The TVM of the subject property on January 1, 2019, was $5,050,000.

An evidentiary hearing was conducted via WebEx on October 28, 2021.  Complainant and Respondent filed post-hearing briefs.  Complainant filed a reply brief.  Complainant is represented by Jerome Wallach.  Respondent is represented by Jennifer Rodewald and Charles Dykhouse.


          Complainant asserts the subject property, a franchise-affiliated hotel, is overvalued.  The net income generated by a franchised hotel property is in part a function of the franchise affiliation and the personal property required to operate a hotel.  It follows that determining the value of the real estate requires separating the value of franchise affiliations and the personal property from the real property value.

To accomplish this, the State Tax Commission and most state courts utilize the “Rushmore Method.”[1] The Rushmore Method removes business value by deducting management and franchise fees from the hotel’s net income.  It removes personal property value by deducting a reserve for replacement along with the contributory value of the in-place personal property.

In post-hearing briefing, Complainant concedes its appraiser did not follow the Rushmore Method and, instead, used “an alternate but accepted approach to value.”  (Compl. Br. at 1) Specifically, Complainant’s appraiser deducted franchise and management fees per the Rushmore Method and then used the “business enterprise approach” (BEA) to make an additional “business enterprise value” (BEV) deduction.  The additional BEV deduction accounts for the difference between “branded” and “non-branded” hotels, and thus deducts a factor previously accounted for in the Rushmore Method through the deduction of franchise fees.

Complainant’s appraiser acknowledged the BEA approach is “substantially more aggressive in attributing value to the personal property” than the Rushmore Method.  (Ex. B at 47)  Complainant states that “for purposes of this proceeding,” and “in light of repeated decisions of the Commission utilizing Rushmore[,]” Complainant “accept[s]” Respondent’s analysis “consistent with Rushmore, but applies the market derived capitalization rate of Complainant’s expert.”  (Compl Br. at 1- 2)   Thus, the remaining factual dispute centers on the appropriate capitalization rate.


  1. The Subject Property.  The subject property consists of approximately 2.53 acres improved with a 77,253 square-foot, five-story hotel building.  (Ex. 2 at 23, 29)  The building was constructed in 2009.  (Id. at 29)  The hotel has 126 rooms, (Id.), and is operated as a Holiday Inn.  (Id. at 30)  The subject property is located at 915 Port Way in Columbia, Missouri.   (Id. at 12)
  2. Assessment and Valuation. The BOE determined “2020 Board of Equalization Value” appraised and assessed values of $5,100,000 and $1,632,000, respectively.
  3. Complainant’s Evidence.  Complainant introduced Exhibits A and B.  Exhibit A is the written direct testimony (WDT) of Reagan Schwarzlose, MAI.  Exhibit B is Schwarzlose’s appraisal report.

Schwarzlose concluded the highest and best use of the subject property was “continued Hotel/Motel High-Rise (4+ stories) use.”  (Ex. B at 45)  Schwarzlose used the cost approach to estimate a deduction for the subject’s personal property consisting of furniture, trade fixtures, and equipment, referred to as “FF&E.”  (Id. at 49)  Schwarzlose used the sales comparison and income approaches, with emphasis on the income approach to conclude the fair market value of the subject property as of January 1, 2019, was $2,500,000.  (Id. at 73)

Schwarzlose’s concluded value is based on an initial “going concern” value estimate of $5,170,000 based on an NOI estimate that included deductions for franchise and management fees.  (Ex. B at 62, 65)  Schwarzlose then used the BEA method to make an additional BEV deduction.  (Id. at 66-72)  Schwarzlose’s BEV deduction was based in part on averaging the “net decrease in revenue for a branded versus non-branded hotel, and the deduction for a net gain for a branded hotel in the local market as supported by rent comparables[.]”  (Id. at 71)

In post-hearing briefing, Complainant acknowledges Schwarzlose did not follow the Rushmore Method and asserts it accepts “the Keller analysis, consistent with Rushmore, but applies the market derived capitalization rate of Complainant’s expert.”[2]  (Compl. Br. at 2)  Complainant’s calculation of its proposed value is set forth verbatim:

Net operating income:                                       $              735,664

Complainant’s overall capitalization rate                             11.73

Value before adjustments                                  $            6,271,645


Adjusted (Keller numbers) by FFE value            $          1,650,000

and deferred maintenance

Concluded Value                                              $             4,621,645


(Compl. Br. at 2)

As established, the factual dispute is limited to the appropriate capitalization rate.  Schwarzlose estimated capitalization rate of 11.73% is based solely on market surveys of various types of hotels operating under several franchises.  (Ex. B at 63-64)

  1. Respondent’s Evidence. Respondent introduced Exhibits 1 through 4.  Each exhibit was admitted into evidence.  Respondent’s exhibits are summarized as follows:
Exhibit 1 WDT of Matt Speer, MAI
Exhibit 2 Appraisal Report prepared by Matt Speer and Daniel Craig.
Exhibit 3 WDT of Kenneth Mohr, Respondent.  Respondent testified the Complainant Respondent declared no FF&E on its 2019 business personal property tax declaration.
Exhibit 4 Complainant’s business personal property tax declaration declaring an Econoline 8350 Club Wagon, described as a “2013 Ford Truck.”

Like Schwarzlose, Respondent’s appraiser, Speer, concluded the highest and best use of the subject property was for a hotel.  Like Schwarzlose, Speer used the sales comparison approach but emphasized the income approach.  Unlike Schwarzlose, Speer followed the Rushmore Method by deducting franchise and management fees from the NOI without an additional BEV deduction.

Speer determined market-based income and expense estimates – including management and franchise fee expenses – to conclude the subject property’s NOI was $735,664.  (Ex. 2 at 79)   Speer capitalized the NOI with a 10.98% rate derived from the eight comparable sales used in the sales comparison approach, with support from surveyed rates.  (Id. at 80-82)  Speer excluded the highest and lowest rates from the comparable sales, resulting in rates ranging from 7.90% to 9.35%.  (Id. at 80)  Speer concluded this range of rates supported an 8.50% capitalization rate.  Speer added the 2.48% effective tax rate to calculate the loaded capitalization rate of 10.98%.  (Id.)

Speer divided the NOI of $735,664 by the 10.98% capitalization rate to determine a capitalized value of $6,700,040.  Speer deducted the FF&E value ($1,250,000) and deferred maintenance ($400,000) to estimate the fair market value of the subject property pursuant to the Rushmore Method was $5,050,040, rounded to $5,050,000.  (Id. at 81)  Based on his Rushmore Method income approach analysis, Speer concluded the fair market value of the subject property was $5,050,000 as of January 1, 2019.  (Id. at 83)  Speer’s estimated value is $50,000 less than the BOE value of $5,100,000, a difference of approximately 1% (50,000/5,100,000 = 0.0098).


  1. Assessment and Valuation. Commercial real property is assessed at 32% of its TVM as of January 1 of each odd-numbered year. Section 137.115.5(1)(c).  “True value in money is the fair market value of the property on the valuation date, and is a function of its highest and best use, which is the use of the property which will produce the greatest return in the reasonably near future.”  Snider v. Casino Aztar/Aztar Mo. Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005) (internal quotation omitted).  The fair market value is “the price which the property would bring from a willing buyer when offered for sale by a willing seller.”  Mo. Baptist Children’s Home v. State Tax Comm’n, 867 S.W.2d 510, 512 (Mo. banc 1993).  “True value in money is defined in terms of value in exchange not value in use.” Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 7 (Mo. App. S.D. 2020) (internal quotation omitted).  “Determining the true value in money is an issue of fact for the STC.”  Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008).

“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.”  Snider, 156 S.W.3d at 346.  The three generally accepted approaches are the cost approach, the income approach, and the comparable sales approach.  Id. at 346-48.

  1. Evidence. “Although technical rules of evidence are not controlling in administrative hearings, fundamental rules of evidence are applicable.” Mo. Church of Scientology v. State Tax Comm’n, 560 S.W.2d 837, 839 (Mo. banc 1977).  The hearing officer is the finder of fact and determines the credibility and weight of the evidence.  Kelly v. Mo. Dep’t of Soc. Servs., Family Support Div., 456 S.W.3d 107, 111 (Mo. App. W.D. 2015).
  2. Burden of Proof. The taxpayer bears the burden of proof and must show by a preponderance of the evidence that the property was misclassified or overvalued.  Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161 (Mo. App. E.D. 2003).  The BOE’s valuation is presumptively correct. Tibbs, 599 S.W.3d at 7.  The “taxpayer may rebut this presumption by presenting substantial and persuasive evidence that the valuation is erroneous.”  Id. (internal quotation omitted).  The taxpayer also must prove “the value that should have been placed on the property.”  Id.  An assessor advocating a value different than that set by the BOE must also produce substantial and persuasive evidence of his or her proposed value.  See Drury Chesterfield, Inc. v. Muehlheausler, 347 S.W.3d 107, 112 (Mo. App. E.D. 2011) (noting “[t]he burden of overcoming [the BOE] presumption lies with the party challenging the tax assessment”).

“Substantial evidence is that evidence which, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide the case on the fact issues.”  Savage v. State Tax Comm’n, 722 S.W.2d 72, 77 (Mo. banc 1986) (internal quotation omitted).  Evidence is persuasive when it has “sufficient weight and probative value to convince the trier of fact.”  Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. E.D. 2002); see also White v. Dir. of Revenue, 321 S.W.3d 298, 305 (Mo. banc 2010) (noting the burden of persuasion is the “party’s duty to convince the fact-finder to view the facts in a way that favors that party”).

  1. Complainant Did Not Produce Substantial and Persuasive Evidence of Overvaluation.

Complainant accepts Respondent’s NOI but asserts the STC should use Schwarzlose’s estimated capitalization rate.   Schwarzlose’s estimated capitalization rate is based exclusively on surveys.

“Deriving capitalization rates from comparable sales is the preferred technique when sufficient information about sales of similar, competitive properties is available.”  Appraisal Institute, The Appraisal of Real Estate (14th ed. 2013) 493; see also Snider, 156 S.W.3d at 347 (noting the appropriate capitalization rate is that which “can reasonably be estimated from existing market conditions”).  The capitalization rate can also be estimated using the band of investment method, the debt coverage ratio analysis, or investor surveys.  The Appraisal of Real Estate at 495–99.  Investor surveys, however, “are generally used as support rather than as primary evidence of a capitalization rate.”  Id. at 499.

Complainant did not utilize the preferred technique of deriving a market-based capitalization rate from comparable sales. Nor did Complainant utilize the band of investment method or the debt coverage ratio method.  Instead, Complainant’s proposed capitalization rate is based exclusively on a regional survey listing the reported capitalization rates for types of hotels.

Respondent’s capitalization rate is based on actual market data based on comparable sales.  Respondent’s 10.98% capitalization rate is supported by market-specific data derived from verified comparable sales and therefore is a more reliable estimate of the market-based capitalization rate for the subject property.

Complainant’s relatively unpersuasive capitalization rate undermines its value estimate based on Respondent’s estimated NOI.  Complainant did not produce substantial and persuasive evidence showing “the value that should have been placed on the property.”  Tibbs, 599 S.W.3d at 7.  Complainant did not produce substantial and persuasive evidence of overvaluation.

Respondent asserts the STC should set aside the BOE value of $5,100,000 and reduce the TVM to $5,050,000, consistent with Speer’s estimated value.  Unlike Appeal 20-44542, where Respondent’s proposed value was slightly higher than the BOE value, Respondent’s proposed value in this case is lower than the BOE value.  Even though the difference is slight, Respondent’s proposed value effectively concedes, as a factual matter, that the $5,100,000 BOE value overvalues the subject property by $50,000.  Respondent’s proposed value is, in effect, an admission the BOE overvalued the subject property by $50,000 and that the TVM was $5,050,000 on January 1, 2019.   See The Empire Dist. Elec. Co. v. Coverdell, 344 S.W.3d 842, 852 (Mo. App. S.D. 2011) (holding a factual admission is “conclusive”); Norris v. Barnes, 957 S.W.2d 524, 529 (Mo. App. W.D. 1997) (holding a defendant’s statement that the plaintiff’s medical bills were $28,000 was a “conclusive” admission”).


          The BOE decision is set aside.  The TVM of the subject property on January 1, 2019, was $5,050,000.   The TVM set by this decision and order applies only to the even-numbered year (2020) in this assessment cycle. 12 CSR 30-3.015.

Application for Review

A party may file an application for review of this decision within 30 days of the mailing date set forth in the certificate of service for this decision.  The application “shall contain specific detailed grounds upon which it is claimed the decision is erroneous.”  Section 138.432.  The application must be in writing, and may be mailed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, or emailed to  A copy of the application must be sent to each person 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.

Disputed Taxes

The Collector of the Boone County, and 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 the disputed taxes have been disbursed pursuant to a court order under the provisions of section 139.031.

SO ORDERED January 28, 2022.


Eric S. Peterson

Senior Hearing Officer
State Tax Commission


Certificate of Service

I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on January 28, 2022, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.


Elaina Mejia
Legal Coordinator


Contact Information for State Tax Commission:
Missouri State Tax Commission
421 East Dunklin Street
P.O. Box 146
Jefferson City, MO 65102-0146
Fax 573-751-1341


[1] See Yogijikrupa Hospitality-C LLC, v. Assessor, Taney County, Mo., Appeal No. 19-89506, 2021 WL 4977443, at *5 (Mo. St. Tax Comm’n 2021) (noting “[t]he STC has long recognized the Rushmore Method under the income approach for the valuation of hotel properties”); Glenpointe Assoc. et al. v. Township of Teaneck, 31 N.J. Tax 596, 645 (2020) (holding the Rushmore method is generally used to value hotels); Wisconsin & Milwaukee Hotel, LLC v. City of Milwaukee, 936 N.W.2d 403 (Wis. App. 2019) (holding the “Rushmore approach to value hotels” complied with state law); CHH Cap. Hotel Partners, LP v. D.C., 152 A.3d 591, 597 (D.C. 2017) (affirming a judgement concluding the Rushmore method is a “well-established and broadly accepted” method “well-conceived to yield a fair and accurate estimate of market value” and “fully supported by the evidence”); RRI Acquisition Co. v. Supervisor of Assessments of Howard Cty., 2006 WL 925212, at *5 (Md. Tax Feb. 10, 2006) (applying Rushmore and holding a deduction for return on FF & E from income as well as a deduction of the invested capital from value is an impermissible duplication under standard appraisal practice); Marriott Corp. v. Bd. of Cty. Comm’rs of Johnson Cty., 972 P.2d 793, 796 (Kan. App. 1999) (holding the Rushmore method was the appropriate method to value a hotel and noting it “has been accepted in a number of litigated matters and rejected in none that have been brought to our attention); In re J.F.K. Acquisitions Group, 166 B.R. 207, 209 (Bankr.E.D.N.Y.1994) (utilizing the Rushmore method and noting the appraiser who developed the method is an “eminent expert in the field of hotel appraisers”).


[2] Complainant refers to Respondent’s appraiser as “Keller,” in reference to his affiliation with the Keller, Craig & Associates appraisal firm.