Owner urges lower valuation for 1235 NW 38 bed-and-breakfast; board to issue decision Thursday

Chair Elanor Thompson opened the hearing on BOE 188 for the property known as 485 Fall Creek, a bed-and-breakfast at 1235 Northwest 38, and the appellant proposed a revised fair-market value substantially below the assessor’s figure.

The appellant, identified in the record as the presenter, told the board the property is “not doing well” and said the assessor’s income approach failed to include restaurant cost-of-goods-sold and other operating expenses. The presenter said using actual revenue and a stabilized 85% expense ratio produces an income-indicated value of $3,694,100, or roughly $100,026 per unit for the property’s 36 units.

“...they're including the food and beverage revenue but they're not including the food and beverage expense,” the presenter said, arguing that adding cost of goods sold to the expense side materially lowers net operating income and therefore value.

Assessor staff described a different approach. An assessor representative explained the office used a 79% expense ratio across hotel and restaurant components and noted that hotels and restaurants are often valued on a per-room basis and by market buyer expectations. The assessor’s analyst pointed to comparable downtown properties and an advertised asking price and cap-rate on a current listing to show a higher income and implied value.

“You can say this is to get it sold,” the presenter responded, noting the $5.5 million asking price and a single $4 million offer on the listing and arguing those marketing figures may overstate the property’s true NOI. The presenter said prospective buyers will scrutinize actual historic income and expenses rather than relying on an advertised NOI.

Board members pressed both parties on the line-item income statement. The record shows restaurant revenue of about $1.279 million and significant payroll and labor line items for both the restaurant and the bed-and-breakfast operations; participants debated whether to apply a blended expense ratio or separate ratios for the restaurant and lodging portions.

The chair closed the hearing on BOE 188 and told the appellant that, because of the holiday schedule, the board’s decision day is Thursday and the appellant will be notified by mail. No formal vote was taken on BOE 188 at the hearing.

Why it matters: The board’s valuation will determine the taxable assessment for the property; the central dispute is whether the assessor’s income approach correctly reflected operating expenses and a market buyer’s expectations. The case illustrates how blended-use hospitality properties (restaurant plus lodging) can produce wide valuation swings depending on expense assumptions.

What’s next: The board closed the hearing and said it will render a decision on Thursday; the appellant was told to expect mailed notice following the decision.