The City of San Francisco says the Ritz-Carlton San Francisco, which filed suit alleging it was overcharged hundreds of thousands in property taxes, must pony up the full amount.
The city asked a Superior Court judge last month to dismiss the allegations and to be reimbursed for legal expenses, the San Francisco Business Times reported. A case management conference set for this week was pushed back to December.
Hotel owner CWI 2 San Francisco Hotel bought the Ritz-Carlton San Francisco at 600 Stockton Street near Union Square in December 2016 for $231.1 million. The seller was an affiliate of Brookfield, based in Toronto.
CWI sued the city in June 2020 alleging the city had pegged its real property value $35.2 million more than it was worth, which comes out to $200,000 a year more in taxes.
Although the purchase price was $231.1 million, the buyer and seller placed a market value of $192.6 million for the hotel.
The city disagreed, and assessed its fair market value at $227.8 million.
CWI appealed the assessment in 2017, arguing that the city didn’t properly deduct intangibles such as the value of the Ritz-Carlton brand from its valuation. A three-person Assessment Appeals Board ruled in favor of the city.
The difference between “real property” and “intangibles” can mean millions of dollars in taxes for hotel property owners, according to the Business Times.
It’s especially important in San Francisco, where the transfer tax on large real property purchases doubled in 2021 from 3 percent to 6 percent, and where accountants look to be as creative as they legally can about the distinction.
Brookfield, the former owner of the Ritz-Carlton San Francisco, bought it back earlier this year with private funds managed by its real estate arm, Brookfield Asset Management, based in New York.
The acquisition was part of a deal in May to acquire CWI’s affiliate, REIT Watermark Lodging Trust, based in Chicago, for $3.8 billion. The global developer picked up three Bay Area hotels: the 336-room Ritz; the 510-room San Jose Marriott; and the 226-room Fairmont Sonoma Mission Inn & Spa.
The Ritz-Carlton’s gross book value – what shareholders would get for the property if it was sold and all its debts paid off, but not necessarily the market price – was $216 million, according to a March regulatory filing.
— Dana Bartholomew
Read more
Commercial
San Francisco
San Francisco hotel market perks up
Commercial
San Francisco
SF’s Sir Francis Drake Hotel rebranded as Beacon after slavery debate