Hilton Hotel Assessment Reduced Following Trial
In this commercial tax appeal involving a Hilton hotel, the taxpayer challenged the assessments on its property for the 2010 and 2011 tax years. The subject property operates as a 355 guest room Hilton Hotel and executive conference center. The standard method for valuing a hotel’s real property component is the income approach, which takes a property’s net income (gross income minus gross expenses) and capitalizes it into an estimate of value. However, this basic approach has been found deficient to capture a hotel’s true value.
Valuation experts, like those employed by the parties in this matter, frequently rely on the “Rushmore Method” of valuation to determine the market value of a hotel based on its component pieces. The four separate components comprising a hotel are the land, improvements, personal property, and the going business concern. The Rushmore Approach separates the business component by deducting management and franchise fees from the hotel’s stabilized net income.
The court found that plaintiff produced sufficient valuation evidence to overcome the presumption of validity attached to the assessments. Examining the information provided by each expert, the court chose the most reliable calculations from each report to establish a new market value which reduced the assessment for each year under appeal.
A copy of the Tax Court’s opinion in BRE Prime Properties LLC v. Hasbrouck Heights may be found here.
For more blog posts on tax appeal litigation involving hotels and casinos, please see the following:
Morristown Hotel Wins Freeze Act Application and Refund
NJ Supreme Court: Failure to Name Correct Plaintiff Not Fatal to Tax Appeal
