A prior sale price is typically the basis for a real property valuation but not always. A couple of recent decisions issued by the Ohio Supreme Court.
In Warrensville Hts. City School Dist Bd of Edn. V. Cuyahoga Cty Bd. of Revision, Slip Opinion No. 2016-Ohio-78, the property at issue was Thistledown Racetrack. Harrah’s Ohio Acquisition Company, L.L.C. bought the property out of bankruptcy for $43,000,000. The purchase included equipment, inventory, deposits, advertising and marketing materials transferable permits intellectual property rights, goodwill, and insurance proceeds, among other things. The sale was also contingent on Harrah’s ability to obtain Thistledown’s racing license from the racing commission.
The board of education argued that the entire $43,000,000 from the bankruptcy sale was the appropriate value for the property. Harrah’s argued that the sales price reflected the purchase of other assets in addition to real property and that Harrah’s bought Thistledown hoping to obtain a license to operating video lottery terminals. It offered testimony and appraisal evidence that $13,800,000 was the appropriate value for the real property portion of its purchase. The Board of Tax Appeals agreed. The Ohio Supreme Court, citing that the sale used by the board of education was through a bankruptcy court and therefore not arm’s length, and upheld the board of tax appeals, stating that it properly used the appraisal evidence wit valuing the property.
In Columbus City School Bd. of Edn. V. Franklin Cty. Bd. of Revision, Slip Opinion No. 2016-Ohio-757, the property was a Comfort Inn hotel owned by Buckeye Hospitality, Inc. (“Buckeye”). Buckeye filed a complaint seeking a reduction of the value assigned to its property and the Board of Revision, along with the Board of Tax Appeals, agreed, with an adjustment. The board of education appealed, arguing that the purchase price from 2007 sale was the appropriate value.
Buckeye used a state certified appraiser with extensive experience appraising hotel properties. The appraiser testified at the hearings and cited the substantially and continually declining income stream as his reason for not using the sale price as indicative of the hotel property’s value. While everyone recalls that the economic crash occurred in the fall of 2008, the softening of the real estate market preceded that crash and was a factor in the lower appraisal amount. The Ohio Supreme Court agreed, holding that evidence rebutting a sale price’s prima facie indication of value may be contained in an appraisal report and an appraiser’s testimony.
As these two cases illustrate, while a recent sales price may be strong evidence of a property’s value it is not always controlling and other evidence, such as an appraisal, can overcome that presumption.