QUEENE ANNE HOSPITALITY,	)		Appeal Nos. 01-89505 & 01-89506
HOSPITALITY PROPERTIES,	)		Appeal Nos. 01-89507 & 01-89508
165 HOSPITALITY PROPERTIES,	)		Appeal No. 01-89509
Complainants,	)
	)
v.	)
	)
JAMES STRAHAN, ASSESSOR,	)
TANEY COUNTY, MISSOURI,	)
	)
Respondent.	)

 DECISION AND ORDER

HOLDING

The evidence on the record most persuasively supports the following market values for each of the subject properties as of January 1, 2001:

An evidentiary hearing was held on May 14, 2002, before State Tax Commission Hearing Officer Aimee Smashey, at the Taney County Courthouse in Forsyth, Missouri. Complainants were represented by Mark Fletcher, Attorney. Respondent was represented by William McCullah, County Counselor for Taney County.

ISSUE

The question that must be answered from the evidence submitted is: What was the market value of the subject properties as of January 1, 2001?

SUMMARY

There are five properties under review in these appeals, each improved with a motel and located in Branson, Missouri. The parcel improved with the Queene Anne Motel I consists of a .522 acre irregularly shaped tract on the southwest side of Highway 76. The motel improvements consist of two connected buildings with 40 motel units and other site improvements. The subject property is located at 3510 West Highway 76, Branson, Missouri. The parcel identification number is 7-7-35-0-0-30.06. The parcel improved with the Queene Anne Motel II consists of a 2.73 acre irregularly shaped tract about a quarter mile west of Highway 76. The motel improvements consist of three buildings connected by common walks comprising 87 motel units and other site improvements. The subject property is located at 245 Schaefer Drive, Branson, Missouri. The parcel identification number is 18-1-2-2-1-3.02. The parcel improved with the Rosalee Inn consists of a .98 acre tract on the north side of Gretna Road. The motel improvements consist of a 49 unit motel building with 17,641 square feet of gross floor area and other site improvements. The subject property is located at 550 Gretna Road, Branson, Missouri. The parcel identification number is 18-1-2-1-2-1. The parcel improved with the Payless Inn I consists of a 1.07 acre rapidly sloping tract on the south side of Highway 76. The motel improvements consist of two buildings with 71 motel units comprising 25,127 square feet in gross floor area on six levels and other site improvements. The subject property is located at 1900 West Highway 76, Branson, Missouri. The parcel identification number is 17-3-6-2-6-10.001. The parcel improved with the Payless Inn II consists of a 1.757 acre tract on the east side of highway 165. The motel improvements consist of an 85 unit motel building comprising 28,882 square feet of gross floor area on three levels and other site improvements. The subject property is located at 730 South State Highway 165, Branson, Missouri. The parcel identification number is 18-1-11-1-2-4.

Complainants appealed the assessments on the grounds of overvaluation. The 2001 assessment histories on the subject properties are:

Complainants' Evidence

Complainants presented the appraisal report and testimony of certified appraiser Kelly Trimble on each property and the testimony of George Shipman, President of each of the Complainant corporations. Mr. Trimble performed his appraisals using each of the three recognized approaches to value and on all but one property placed primary reliance on the value indicated by the sales comparison approach.

Respondent's Evidence

Respondent, James Strahan, presented his own testimony, the property record cards on each of the subject properties and, on the Queene Anne I and II properties, an appraisal report that he had solicited from certified appraiser Jerry Jeschke. Said appraisal opined a value lower than the value opinion offered by Complainants' appraiser for such properties. Respondent testified that he rejected Mr. Jeschke's conclusions because the appraiser utilized distress sales in reaching his conclusions.

FINDINGS OF FACT

1. Jurisdiction over these appeals is proper. Complainants timely appealed to the State Tax Commission from the decisions of the Taney County Board of Equalization.

2. Each of the five motel properties in these appeals have been purchased by Complainant since 1998 but there was insufficient evidence in the record to validate the subject sales as arm's-length, open market transactions which were free from duress.

3. The subject properties are physically deteriorated to some point, have deferred maintenance, and are of advanced age for a motel property especially in the Branson motel market. Tr. 11. They do not meet the current market standard in room size, layout, construction, or market tastes. Id. Since the properties meet market needs less adequately than when they were new, they are no longer capable of commanding a similar income stream. Id., at 12.

4. The income data available on comparables and the subject property operations prior to transfer was often inconsistent, inaccurate, and unreliable. Tr. 25 - 26.

5. The market surrounding the tax date has been active for older motel properties in secondary locations and there are many comparable sales available for comparison. Tr. 24. The availability of good comparable sales data provides good support for a value indicated under a sales comparison approach and is a good rationale for applying more weight to such an approach.

6. Complainants' appraisals which place primary reliance upon the value indicated in the sales comparison approach provide the most persuasive indication of the market values of the subject motels as of January 1, 2001, in that such appraised values were driven by recent market sales of motels comparable in age, location, condition, and size to the subject motels.

7. The value indicated for the Payless Inn II by the Complainants' sales comparison approach is the best indication of its market value as of January 1, 2001.

CONCLUSIONS OF LAW

1. Complainant, as movant in the appeal, has the burden of presenting substantial and persuasive evidence that its proposed value is indicative of the market value of the subject property on January 1, 2001, in order to have that value accepted. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897.

2. Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

3. 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).

4. Market value is defined as:

...[t]he most probable price which a property would bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1. buyer and seller are typically motivated;

2. both parties are well informed or well advised, and acting in what they consider their best interests;

3. a reasonable time is allowed for exposure in the open market;

4. payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and

5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Federal Register, vol. 55, no. 163, August 22, 1990, pages 34228 and 34229; also quoted in the Definitions section of the Uniform Standards of Professional Appraisal Practice, 1996 ed.

5. Operational distress for a property caused by decreased demand in the market is distinguishable from the distress or duress that causes a buyer or seller to act atypically. It is the latter which disqualifies a sales transaction from consideration as an open market transaction indicative of a market-driven value.

6. Missouri Law does not provide that an appraisal for assessment purposes should be artificially set higher than the value it could command after exposure in the open market as of the tax date merely to satisfy an economic presumption in the appraiser's analysis. In Missouri assessment cases, the appraiser may feel obligated to note a jurisdictional exception to this interpreted USPAP requirement/assumption.

Recent Sales of the Subject Properties

Each of the five motel properties in these appeals have been purchased by Complainant since 1998. The real property of Queene Anne Motel I and II, sold in July of 2000 for $450,000 and $1,100,000, respectively. Complainants' Exhibit D-1, at 1. The real property of the Payless Inn I and Rosalee Inn sold in 1998 for $725,000 and $450,000, respectively. Complainants' Exhibit D-2, at 1. The real property of the Payless Inn II sold in May of 2001 for $700,000. Complainants' Exhibit D-3, at 1.

Respondent raised questions about the validity of these sales as open market transactions specifically inquiring about the presence of duress. There was no testimony about the nature of the subject sales or circumstances surrounding any of the subject sales from George Shipman, President of Queene Anne Hospitality Corporation, Hospitality Properties, Inc., 165 Hospitality Corporation, and Yukon Management Corporation (the management corporation for each of the Complainant corporations). Complaint for Review of Assessment filed on each appeal; Complainants' Exhibits D-1, D-2, and D-3, at 1. Complainants' appraiser indicated that he was familiar with the Payless I/Rosalee sale and the Payless II sale and did not view them as distress sales. He indicated that the characterization of the Queene Anne sales as distress sales may be fair. Tr. 6 - 7. Complainants' appraiser ultimately decided not to use the subject sales because he anticipated the duress question would come up and had plenty of good comparables sales available for comparison. Tr. 7. Accordingly, this Hearing Officer concludes that there was insufficient evidence in the record to validate the subject sales as arm's-length, open market transactions which were free from duress.

Valuation Evidence

The subject properties in these appeals are income-producing properties. Such properties are exchanged in the marketplace based upon their ability to produce income, which typically is an argument for applying increased weight to the value indicated under an income approach methodology. In these appeals however, the testimony on the record indicates that the income data available on comparables and the subject property operations prior to transfer was often inconsistent, inaccurate, and unreliable. Tr. 25 - 26. Alternatively, Complainants' appraiser noted that the market is active for older motel properties in secondary locations and that there were many comparable sales available for comparison. Tr. 24. The availability of good comparable sales data provides good support for a value indicated under a sales comparison approach and is a good rationale for applying more weight to such an approach.

This Hearing Officer notes that in the appraisal of the Payless Inn II property, the appraiser opted to place greater reliance upon the value indicated under the income approach because "...the objective of this appraisal is the market value of the subject property under the hypothetical assumption that taxation is equitable. It is our opinion based on our analysis of several motels in this market that taxation is generally not equitable in this property type in this market and results in lower general values. It is our opinion, therefore, that the market value of the subject under this hypothetical condition is better indicated by the results of the income capitalization approach." Complainants' Exhibit A-3, at 50. This Hearing Officer has no intention of adopting a hypothetical value over a value indicated by actual market forces. As indicated previously, the legal standard for review of a property tax assessment on an overvaluation issue is: What was the market value of the property as of the tax date? If there are uniformity issues within the commercial subclass that would merit a reduction lower than the market value as of the tax date, then Complainant should present proof of such lack of uniformity, but in no case does Missouri law provide that an appraisal for assessment purposes should be artificially set higher than the value it could command after exposure in the open market as of the tax date merely to satisfy an economic presumption in the appraiser's analysis.

The market values concluded for the subject properties are: