Colorado Board of Assessment Appeals (BAA) Confirms Rental Management Program as Intangible Asset

This ruling by the Colorado Board of Assessment Appeals confirms our theory on the valuation of hotels that manage third-party-owned condominiums through their rental management programs.
The Colorado Board of Assessment Appeals (BAA) returned an order last week lowering the 2017 real estate value of the Lodge at Vail. The Lodge at Vail is a lodging property located at the base of the ski mountain in Vail Village. The property features 80 hotel guestrooms and a reported 74 residential condominium units that are individually owned. Eagle County, the taxing authority, was seeking an assigned value of $41,104,470, while the petitioner was seeking a value of $23 million. The largest reason for the difference in values between the two parties was due to the income and expenses associated with the rental of the third-party-owned residential condominiums. When not being occupied by their owners, the condominiums may be placed into a rental program. The owners of the units can choose from many different rental programs, such as Airbnb, VRBO,, or local property management groups. One option, which is preferred by most owners, is to include the unit in a rental management program (RMP) owned by an affiliate of the hotel operator. Revenues generated by the rental unit are split between the condominium owner and the managing agent based on the terms of the RMP agreement.

Eagle County argued that any of the revenue generated by the rental management agreement that was managed by a hotel affiliate RMP entity was in fact attributed to the real estate of the hotel. The petitioner argued that the income associated with the operation of the management of the rental programs was an intangible asset. The petitioner’s counsel engaged HVS to perform an appraisal of the hotel real estate component of the Lodge at Vail. Within this appraisal, HVS isolated and removed income and expenses associated with all intangible assets, including the revenue and expenses associated with the RMP received or incurred by the hotel.

HVS took the position and the BAA concurred in its ruling that RMP has no ownership rights associated with the condominium, and the RMP income to the managing agent is created through a contractual agreement with the condominium owner. HVS has consistently taken the position in its appraisals that income generated by RMPs at lodging facilities should be valued as an intangible asset, which must be excluded when valuing the real property component of the associated hotel. 

The Board was convinced and ruled that the $3.6 million in income generated by the RMP constituted an intangible asset. The Board stated that while this income may be considered in valuation of the property outside of taxation, it did not reflect additional value to the subject hotel’s real estate. According to Steve Rushmore, President and Founder of HVS, “This ruling by the Colorado Board of Assessment Appeals confirms our theory on the valuation of hotels that manage third-party-owned condominiums through their rental management programs. The real property rights of the condominium belong to the condominium owner, and any income generated through management of the units pursuant to a rental management program agreement must be identified as a non-taxable intangible asset.”


  1. Congratulations !!! To all, job well done.

  2. This is great, Brett, really informative, and also definitive!

  3. Wow! Great stuff, Brett!

  4. This is a HUGE deal, Brett. Excellent job!!!

  5. Interesting read - great job!

  6. Jerry JeschkeJanuary 17, 2019

    This is an issue that assessors and property owners are struggling with across the United States. We are located in a tourist area and have been valuing condominiums, single family residences, duplexes and other properties that are rented nightly to generate revenue. We have found that some nightly rental properties have going concern component in addition to the real and personal property - but not all. Property owners that rent nightly are being assessed as commercial property and taxes are much higher which causes a bit of a problem if the assessor is using an income approach to value the property. Valuing the property using the income without segmenting the income into real property income, personal property income and going concern income causes the assessor to over value the property. We are also finding unqualified residential certified appraisers valuing single family residences that are specifically designed to be rented nightly. While the properties look like houses, they are, in fact, small hotels. We are seeing houses constructed with as many as 12 bedrooms specifically designed to be used for nightly rental. Residential appraisers accepting the assignments don't have sufficient training to understand the income approach aspects of the assignment and tend to under value the property by comparing it to other single family residential property that is not necessarily zoned for nightly rental. Unfortunately if it looks like a duck and quacks like a duck, it isn't necessarily a duck. In any case you should be congratulated on your efforts. I first learned how to segment lodging property values in a seminar taught by Mr. Rushmore. That seminar opened my eyes to the entire issue of going concern included in real property values.

  7. Nice job, congrats on the ruling!

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