Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

EHP Glendale, LLC v. County of Los Angeles

California Court of Appeals, Second District, Eighth Division

September 18, 2013

EHP GLENDALE, LLC, et al., Plaintiffs and Appellants,
v.
COUNTY OF LOS ANGELES, Defendant and Respondent.

APPEAL from a judgment of the Superior Court of Los Angeles County No. BC 385925, Michelle R. Rosenblatt, Judge.

Cahill Davis & O’Neall, John D. Cahill, Cris K. O’Neall, C. Stephen Davis and Andrew W. Bodeau for Plaintiffs and Appellants.

Sutherland Asbill & Brennan and Douglas Mo for American Seniors Housing Association as Amicus Curiae on behalf of Plaintiffs and Appellants.

John F. Krattli, County Counsel, and Albert Ramseyer, Deputy County Counsel, for Defendant and Respondent.

Kamala D. Harris, Attorney General, Paul D. Gifford, Assistant Attorney General, Felix E. Leatherwood, W. Dean Freeman and Marta L. Smith, Deputy Attorneys General, for the California State Board of Equalization as Amicus Curiae.

FLIER, J.

For a second time, we are asked to review an action for a property tax refund filed by appellants EHP Glendale, LLC and Eagle Hospitality Properties Trust, Inc. (Eagle), against the County of Los Angeles (County). Eagle challenges the property tax assessment for the Glendale Hilton Hotel (hotel or property) by the Los Angeles County Assessor (assessor) following Eagle’s purchase in 2005, an assessment confirmed by the Los Angeles County Assessment Appeals Board (Board). In the first appeal, we reversed the grant of summary judgment to Eagle, finding the trial court improperly rendered the decision on an incomplete administrative record that contained disputed issues of fact. (EHP Glendale, LLC v. County of Los Angeles (2011) 193 Cal.App.4th 262 (EHP Glendale).) On remand, the trial court held a bench trial on the complete record and entered judgment in the County’s favor, affirming the assessor’s and the Board’s assessment (with one exception for a reduction in the purchase price undisputed by the parties). Eagle timely appealed that judgment. We affirm.

FACTS

We set forth the background facts from our prior opinion, which have not changed (EHP Glendale, supra, 193 Cal.App.4th at pp. 264-268 [all footnotes in original]):[1]

1. The Subject Property

“The property at issue is located near the intersection of Brand Boulevard and Glenoaks Boulevard in the City of Glendale (City). The 18-story structure, built in 1991, is operated as a full-service first-class hotel with 351 guestrooms, including 13 suites. The hotel encompasses about 285, 000 square feet of improvements, including a lobby, administrative offices, hotel laundry, two ballrooms, a ‘prefunction’ area, seven meeting rooms, a business center, a fitness facility, a gift shop, an outdoor pool and spa with sundeck, two restaurants, a lounge, kitchen facilities and an approximately 196, 000-square-foot, five-level, below-grade parking garage accommodating over 500 vehicles.

2. Hotel Sale and Purchase

“In January 2005, the Hilton Hotels Corporation (Hilton) offered the hotel for sale. Hilton marketed the property as being located in a prime location, distant from competing Hilton hotels, relatively insulated from new supply, in good physical condition and the only ‘four diamond’ facility in the San Fernando and San Gabriel Valleys.

“In May 2005, Eagle and Hilton entered into a sale and purchase agreement for Eagle to acquire the hotel. As part of the transaction, Hilton and Eagle entered into a franchise agreement for Eagle to use the Hilton franchise in exchange for payment of a royalty and a management contract under which Hilton agreed to continue managing the hotel for two years.

“The hotel purchase closed in June 2005. The purchase price was $79.8 million and included the real property, personal property (e.g., furniture, fixtures and equipment) and certain intangible assets and rights.[2] Under the stipulated facts, the franchise agreement with Hilton and the management contract were among the intangible assets acquired by Eagle during the sale.

3. Postsale Price Refund

“Eagle took title to the hotel subject to a covenant running with the land allowing the Glendale Redevelopment Agency (redevelopment agency) to participate in a percentage of the hotel’s gross revenue. Because Hilton was unable to reach a satisfactory agreement with the City to eliminate the redevelopment agency’s profit participation, Hilton paid Eagle a postclosing refund of $2.5 million under the terms of the purchase agreement. The $79.8 million purchase price was effectively reduced to $77.3 million.

4. Property Reassessment

“After Eagle purchased the property, the assessor reassessed the property as required by Proposition 13. The assessor initially enrolled a total value for the hotel of $79.8 million, allocating $7.8 million to the land, about $68.5 million to improvements and about $3.4 million to personal property.

5. Appeal to Board

“Eagle appealed the enrolled assessment to the Board, contending the market value of the property should be decreased to $51 million. Eagle argued that the assessor’s methodology for appraising the hotel was invalid and that the assessment impermissibly captured the value of nontaxable intangible assets. The Board held a valuation hearing over the course of six days.

A. Eagle’s Valuation

“Eagle argued at the hearing before the Board that the franchise agreement, the management agreement and the assembled hotel workforce had independent value at the time of sale and that the assessor was legally required to deduct those values from the purchase price in the assessment. Eagle further argued that the hotel’s various service centers, such as food and beverage, room telephone and telecommunications services, business center, vending machines, health club, guest laundry and parking facilities, were independent businesses whose value also should have been deducted from the hotel’s purchase price.

“Eagle’s expert appraiser testified he valued the property using all three recognized approaches to value, i.e., sales comparison, income capitalization and cost.[3] Based on all three approaches, his final opinion of the value of the going concern hotel business (including land, improvements, personal property and intangible assets and rights) was $77.3 million.

“As a final step, however, Eagle’s appraiser incorporated a value allocation made by another of Eagle’s experts who appraised the fair market value of (1) the Hilton flag and franchise, (2) the assembled and trained workforce, and (3) the hotel’s various service centers. That analysis resulted in ascribed values of $7.1 million for the franchise, $265, 000 for the assembled workforce and $7.3 million for the hotel’s various service centers, or a claimed total value for intangible assets and rights of $14.6 million.

“From his final opinion of property value of $77.3 million, Eagle’s valuation expert deducted the ascribed value of intangible assets and rights, to account for the ‘going concern’ value of the hotel business. He concluded that the value of the taxable property (including land, improvements ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.