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Valuation of Partnership Petitioner's Respondent's
Properties Before Discounts: Expert Expert
Estimated Gross Annual Lease Income $15,082,200 $16,345,491
Contingency Loss Reserve 5% 1%
Operating Expenses $6,650,193 $6,920,501
Estimated Annual Lease Income $8,432,007 $9,424,990
Capitalization Rate 8.5% 7.9%
FMV of Partnership Properties $100,000,000 $120,000,000
Less Partnership Liabilities $41,595,787 $41,595,787
FC Partnership Net Liquidation Value $58,404,213 $78,404,213
Per-Unit Liquidation Value $614,781 $825,307
Discounts For:
Minority Interest -- 15%
Lack of Marketability -- 15%
Combined Discount 67.5% 28%
FMV of Decedent's Ownership Unit: $200,000 $594,221
In estimating gross annual lease income of $15,082,200,
petitioner's expert takes into account lease income received from
comparable properties in Midtown South and leases executed by the
FC Partnership proximate in time to December 31, 1989. In
estimating operating expenses of $6,650,193, petitioner's expert
considers operating expenses in prior years, operating expenses
of comparable buildings, and various market studies. Taking into
account a 5-percent contingency loss for vacancies and
noncollection of rent and the above-estimated operating expenses,
petitioner's expert estimates annual net lease income from the
properties of $8,432,007.
Petitioner's expert then capitalizes estimated annual net
lease income by an 8.5-percent capitalization rate, which
provides a fair market value for the Partnership Properties of
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