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A key to establishing realistic taxable values for commercial real estate is to exclude intan­gible qualities — such as a commercial brand — and value only the real estate. While this concept is a standard ap­praisal practice and imbedded in most states’ tax codes, it continues to elude many tax appraisers who assess prop­erties by business values that extend well beyond brick and mortar. Assessment Methodology In valuing hotels, apartment com­plexes, malls, shopping centers and other income-producing properties, appraisers most often apply the in­come approach, calculating value based on the real estate’s revenue stream. To value hotel properties, for example, an appraiser would deter­mine income flow using occupancy rates, expenses incurred in service de­livery and maintenance costs. Income approach calculations re­quire an overall capitalization rate or the owner’s annual return on their ini­tial investment. The assessor divides a hotel’s net income from occupied rooms by the total capitalization rate to determine the property’s value. The overall capitalization rate comes from two other calculations. One de­termines a mortgage capitalization rate based upon the mortgage equity ratio, placing a percentage value on the mortgage against the property. The appraiser also must determine an eq­uity capitalization rate from the equity component of the …