TWELVE OAKS MOTOR INN, INC.,	)
	)
Complainant,	)
	)
v.	)		Appeal Number 01-89513
	)
JAMES STRAHAN, ASSESSOR,	)
TANEY COUNTY, MISSOURI,	)
	)
Respondent.	)

The evidence on the record persuasively supports a market value of $1,500,000 (assessed value of $480,000) for the subject property as of January 1, 2001. The decision of the Taney County Board of Equalization is SET ASIDE.

Complainant appeals the assessment on the grounds of overvaluation. The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2001.

For the 2001 tax year, Respondent appraised the subject property at a market value of $2,437,036 ($779,850, assessed). On July 2, 2001, the Taney County Board of Equalization reviewed the assessment for the 2001 tax year and reduced the valuation to $2,246,257 ($718,800, assessed).

By agreement of the parties the case was submitted on written statements filed with the Commission. Complainant proposes a market value of $1,500,000 ($480,000 assessed). Respondent did not offer any evidence for consideration.

EVIDENCE

Complainant presented the appraisal testimony and report of Appraisers Brian P. Reardon and Kenny Meyers. They performed an appraisal of the subject real property concluding a value of $1,500,000 as of January 1, 2001. In performing their appraisal, they relied upon the income approach. Their reliance was based upon their opinion that typical investors purchase hotels in anticipation of the income stream that can be generated from operation of the property. The appraisers evaluated the cost approach, but did not develop it due to the significant depreciation experienced by the subject motels. They evaluated the sales comparison approach and did not develop it due to the lack of a credible means of separating real estate value from the business value and the FF&E value in the sales data.

To begin the income approach, they analyzed the revenue stream for the subject properties since the early to mid-nineties and the market revenues for comparable properties on the Schaefer Drive Loop, and on or near Green Mountain Drive. From this analysis, they projected a stabilized occupancy of 72%, a stabilized average daily rate (ADR) of $41.00 and a revenue per available room (RevPAR) of $29.52. These projections indicate a room revenue of $904,375 or $7,796 per room. They projected additional miscellaneous revenues at $12,000 which flows from the rental of the two apartments, telephone revenues and merchandise sales. The total projected revenues are $916,375.

Appraisers Reardon and Meyers evaluated the expense information from the subject motels and industry-wide market surveys complied by the Host Report and PKF Trends. They stabilized expenses at 67.98% of revenue. They calculated a return of FF&E of 4.24%, and a return on FF& E of 1.21% Deducting these expense projections from the projected revenue stream yields a net income attributable to the real property of $187,304.

In order to calculate an appropriate capitalization rate, Appraisers Reardon and Meyers used market extraction analysis. For market rate data, he relied on a capitalization rate study updated in January 2000 that was produced for Johnson, Sedgwick, Shawnee and Douglas Counties in Kansas. He indicated that this study included sales from across the nation and differentiated between luxury/full-service, limited service, and extended stay properties. The appraisers judged that the subject property would be a Class C or D property. The average rate for a Class C property was 11.53% and a Class D property was 13.11%. Under the Kansas study, the appraisers concluded a range of overall rates of 10.5% to 12.5%. The appraisers also derived rates from six comparable Branson properties that sold from 1998 through 2001. The overall rates from these sales ranged from 9.70% to 11.45% and averaged 10.91%. These analyses led Appraisers Reardon and Meyers to the conclusion that the subject property would have an overall capitalization rate of 11.0%, which with the addition of the effective tax rate of 1.38% indicated a tax-adjusted overall range of 12.25% - 12.5%. Applying this capitalization range to the projected net income of $187,304, the appraisers concluded a value of $1,500,000 for the subject property as of January 1, 2001. Complainant=s proposed value breaks down to $12,931 per unit.

Respondent did not offer any evidence for consideration.

1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the Taney County Board of Equalization.

2. The subject property consists of a 4.05 acre parcel improved with two motels. The two properties have a total of 116 guest rooms. The older motel, Twelve Oaks, has 66 rooms, exterior corridors, was built in three phases (1982, 1986, and 1990) and has three separate buildings. It has an outdoor pool, an office, a manager=s apartment, two other apartments, and a maintenance area with two garage doors. The newer motel, Spinning Wheel, for valuation purposes is attributed with 50 rooms. It has exterior corridors and was built in 1993. It has an outdoor pool and a manager=s apartment. The subject property is located at 205 and 215 Shaefer Drive, Branson, Missouri. The parcel identification number is 07-7.0-35-000-000-039.000.

3. The subject motels are not operated year round. The Twelve Oaks Motor Inn is open from mid-March through mid-December for a 271-day season. The Spinning Wheel Inn is open April through mid-December for a 255-day season.

4. Motels are income-producing properties. They are typically bought and sold based upon their ability to produce income.

5. There was no evidence of any new construction or improvements to the subject property in the 2001 calendar year.

6. It is this Hearing Officer=s judgment that Complainant=s appraisal provides the best indication of what buyers and sellers would rely on in negotiating a sales price for the subject property. Accordingly, it is the best evidence of the market value of the subject property as of January 1, 2001.

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. ASubstantial@ 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. APersuasive@ 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. The subject real property had a market value of $1,500,000 as of January 1, 2001.

5. New assessed values are determined January first of each odd-numbered year. Those same assessed values apply to the following even-numbered year unless there is new construction and property improvements. Section 137.115, RSMo Supp. 2003.

The question that must be answered from the evidence submitted is: What was the market value of the subject property as of January 1, 2001? AMarket value@ is defined as A...[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.

The hearing officer sitting as trier of fact in this appeal has the responsibility to review the evidence presented in order to determine what is the best, most persuasive evidence of the market value of the subject property. The subject property in this appeal is an income-producing property. It is exchanged in the marketplace based upon its ability to produce income. Complainant presented an appraisal that relied upon reasonable projections of stabilized income, expenses, and the appropriate tax-loaded capitalization rate. Respondent did not offer evidence for consideration. This Hearing Officer is persuaded that Complainant=s value provides a credible and persuasive indicator of the market value of the subject property.

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

The assessed value for the subject property for tax years 2001 and 2002 is hereby set at $480,000.

If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Taney County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

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 April 21, 2004.

STATE TAX COMMISSION OF MISSOURI

Aimee Smashey

Hearing Officer