Experts’ Opinions on Golf Course Valuation Not Up to Par
A Tax Court judge rejected the opinions of both parties’ experts after both failed to present sufficient evidence of value at trial. The property under appeal for the 2008 and 2009 tax years, the Bear Brook Golf Club, is a 183 acre 18 hole semi-private golf course in Fredon Township, New Jersey, with an assessment of $7,325,900 for each year. The property, zoned for agriculture and residential uses, is deed restricted for open space or recreational uses, and both parties conceded that the highest and best use of the property was continued use as a golf course.
At trial, the golf club’s expert utilized the income approach to value, while the Township’s expert relied on the cost approach. The golf course’s expert created a pro forma revenue from the club’s golf fees, pro shop sales, food/beverage sales, and miscellaneous income by set percentages calculated from the “overall rent” to “gross revenue” of nine leased courses. The expert then created a capitalization rate using the band of investment method to capitalize the “rental” generated by the pro forma approach. The Township’s expert utilized four land sales ranging from 20 acres to 74 acres to establish his land value before relying on Marshall & Swift Cost Estimators to value the improvements.
The judge held both parties failed to overcome the presumption of correctness necessary to increase or decrease the appealed assessment. The opinion identified the inability of the golf club’s expert to provide any relevant supporting data for his “cap rate” analysis. The judge also concluded that the golf club was a special purpose property for which the cost approach was the appropriate method to value the property. However, the judge found that the Township’s expert failed to provide the comparable sales necessary to value the land as part of the cost approach. Specifically, the expert failed to make any adjustments to the comparables for size which were noticeably smaller than the subject, and three of the four sales were deed restricted sales that were potentially not market rate sales because they were purchased by the New Jersey Department of Environmental Protection for conservation purposes. Thus, the judge affirmed the 2008 and 2009 assessments.
A copy of the New Jersey Tax Court’s opinion in Gale & Kitson Fredon Golf, L.L.C. v. Twp. of Fredon, Docket Nos. 007539-2008; 004341-2009 (Tax Ct. 2011), can be found here.
For more on opinions discussing expert testimony, please see the following blog posts:
