Florida’s 5th DCA weighs in on the utilization of The Rushmore Approach for Property Tax Valuation

Walt Disney Parks and Resorts US, Inc filed a complaint against the Orange County Property Appraiser and its value of the Disney Yacht & Beach Clubs. The 2015 market value was $336,92,772, an increase of 118% from the previous year’s assessment. The property consisted of 1,197 guest rooms, 70,000 square feet of conference center space, restaurants, retail, a spa and other recreational areas.

The County’s appraiser testified that he utilized the income approach, commonly known as “The Rushmore Method” to value the property. In the County’s income model, they applied an Average Daily Rate to determine the Potential Gross Room Revenue. They then applied a market vacancy factor to account for unsold rooms. In addition to the Room Revenue, the County included “ancillary income” which was comprised of restaurant sales and convention center contracts. An overall expense ratio was applied to these top line income assumptions to arrive at a Net Operating Income. Within this overall expense ratio, a 4% management fee and a 6% franchise fee were included as OCPA’s method to account for “business value”. This NOI was divided by a market-based cap rate that was loaded with the local millage rate. The tangible personal property assessment was then removed from this value indication to arrive at the County’s estimated Fair Market Value.

In their valuation, Disney utilized an alternative income approach that applies an Average Daily Rate less an adjustment for non-taxable intangible items. This adjusted Average Daily Rate is applied to the guest room count with a deduction for a vacancy factor to account for unsold rooms. For the restaurant and retails space, a market derived triple net rent was applied to the rentable space for each component. By adding both together, the Effective Revenue of the real estate was established. An expense ratio derived from market data was applied to the Effective Revenue to arrive at the Net Operating Income attributed to the real estate and tangible personal property. To arrive at an indicated value before a deduction for tangible personal property, a market derived cap rate was loaded with the local millage rate and divided into the Net Operating Income. An estimated value for tangible personal property was then deducted to arrive at the final indicated real estate value.

The appellate court agreed that by using “The Rushmore Method”, the Orange County Property Appraiser’s valuation included the value of Disney’s intangible business assets in its value determination. Stating “Accordingly, we conclude that the Rushmore method violates Florida law because it does not remove the non-taxable, intangible business value from an assessment. Thus, the trial court did not err in rejecting Appraiser’s ancillary income figure, derived using the Rushmore method.”

Although the Fifth District Court of Appeals would have preferred to draft an opinion to give clarity to the issue at hand, they ultimately reversed and remand it back to the Orange County Property Appraiser’s office with instruction to revise their assessment in a manner the complies with the opinion of the Fifth DCA.

We recommend reading the opinion filed on June 19, 2020 in full to absorb all aspects of the opinion.

Should you wish to be provided with a copy of either the trail or appellate court decision, please email FirstPointe Advisors’ Managing Partner, Brian DePotter, CCIM, CMI at or reach out to him directly at (954) 906-8030.

Leave a Reply

Your email address will not be published. Required fields are marked *