- 16 -
from their May 1988 value of $110 million as set forth in the
1988 C&W report. The $110 million valuation reflected in the
1988 C&W report was based on rapid economic growth experienced in
prior years, the assumption that such rapid economic growth would
continue, and an anticipated steady improvement in the market for
leased office space. Those assumptions were no longer accurate
as of December 31, 1989.
In light of the recession in New York City's economy and the
poor condition of the New York City commercial real estate market
at the end of 1989, we believe respondent's expert errs in using
estimates for lease income from the Partnership Properties that
reflect increases of 5 percent per year.
With respect to the vacancy and noncollection of rent, by
the end of 1989, CUNY, which leased 40 percent of the office
space in the Partnership Properties, had notified the partnership
that it would not likely renew any significant portion of its
leases of office space in the Partnership Properties upon the
scheduled expiration of its leases in 1992, 1993, and 1994. In
light of the decline in economic conditions that was apparent at
the end of 1989, and in light of CUNY's likely nonrenewal of its
leases, we conclude that a 5-percent contingency loss for vacancy
and noncollection of rent is appropriate.
With regard to the estimate of operating expenses, because
petitioner's expert used the lower figure of $6,650,193 to
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011