On August 28, 2025, the California Supreme Court issued Olympic & Georgia Partners v. County of Los Angeles. The opinion didn’t make general headlines, but for anyone working on hotels, healthcare, senior housing, or any operating real estate where intangibles run alongside the building, it sharpened a question practitioners had been working around for years: what exactly are you valuing?
The deal that produced the ruling
The fact pattern is what makes the case useful. The downtown Los Angeles convention-center hotel, operated under Marriott brands, generated revenue from three streams the parties couldn’t agree on:
- A 14% room-occupancy tax assignment (capped at $246M for the first 25 years and $270M total) with a stipulated present value of $80 million.
- A $36 million one-time key-money payment from Marriott to lock in 50-year management rights.
- Three operating intangibles everyone agreed were nontaxable in principle: flag and franchise ($17M), food and beverage ($13M), and an assembled, stable workforce ($4M).
The majority (Justice Groban writing, joined by Chief Justice Guerrero and Justices Corrigan and Jenkins) held that the occupancy-tax stream and the key money were both includible in assessed value. The reasoning wasn’t that contractual rights are taxable per se. Those particular payments behaved like income from the property itself: the occupancy-tax payment kept flowing every time a room rented and would continue regardless of who owned or operated the hotel. The key money was consideration for the right to brand and manage a desirable physical asset.
On the operating intangibles, the court affirmed remand. Nobody disputed the categories existed. The question was whether deducting management fees had already captured them, and that’s a fact question.
Two justices split. Liu would have included the occupancy tax but excluded key money. Kruger, joined by Evans, would have excluded both. The same record produced three positions.
What the court actually did to Rushmore
Some of the secondary commentary on Olympic has been broader than the opinion. One firm summary called the court’s holding a rejection of the Rushmore Method. That’s not what the court did.
The opinion refused to bless or reject Rushmore as a categorical answer. What it required instead, and this is the operative passage for any practitioner, is evidence. When a property owner identifies and values a nontaxable enterprise asset, the assessor has to show the management-fee deduction actually exceeded that asset’s value. Citing Rushmore’s article, the court said, isn’t proof.
That continues a line that SHC Half Moon Bay and SHR St. Francis had already drawn: management-fee deductions can capture some intangible value, but not on assumption. Olympic raises the standard of proof without changing the rule.
In a property-intensive operating business, a single NOI line typically blends at least five economically distinct things.
Why the unit of account is suddenly the central question
The reason Olympic matters is simpler than the ruling itself. In a property-intensive operating business, a single NOI line typically blends at least five economically distinct things, each of which can land in a different bucket for tax, financial reporting, lending, or litigation purposes:
Where this hits hardest right now
Olympic is going to keep generating disputes because several property-intensive sectors are running unusually hot at the same time. Blending is easier in those conditions, and so is getting it wrong.
(+220 bps YoY)
1% N. America vacancy
occupancy +0.8%
Real property value can still be isolated in these sectors, but the work has to be done asset by asset, with evidence behind each cut.
A practical diagnostic
A blending problem is usually present when one or more of these conditions show up in the file:
- The asset operates under a strong flag, franchise, or management agreement.
- Cash flow includes subsidies, key money, public incentives, or atypical contract economics.
- Ancillary business lines (F&B, retail, services, parking) are folded into a single NOI.
- Comparable data is drawn from assets with materially different operating models.
- The reviewer set will likely include tax authorities, auditors, lenders, opposing experts, or a court.
When two or more of those are present, the unit-of-account question stops being a footnote and becomes the assignment.
The takeaway
For property-intensive going concerns, choosing a method is usually the easier part. The harder work is deciding what belongs in the income stream, what belongs outside it, and what has to be separately identified before any model runs. That work is most likely to be tested in tax appeals, ASC 805 reviews, audit cycles, and litigation. After Olympic, it can’t be solved with a one-page reconciliation.