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estimate operating expenses, as opposed to the $6,920,501
estimate respondent's expert used, we use petitioner's expert's
figure.
With respect to the appropriate capitalization rate to be
used in determining the 1989 value of the Partnership Properties,
based on New York City's economic condition as of December 31,
1989, and the evidence indicating that lease rates for commercial
office space would not likely increase for a number of years, we
believe that application of an 8.5-percent capitalization rate
more accurately reflects the December 31, 1989, New York City
real estate investment environment.
At trial, respondent's expert acknowledged that with regard
to comparable sales (used in his report for corroboration of his
calculation of fair market value), adjustments for date of sale,
size, condition, and use of the buildings would be appropriate.
Respondent's expert, however, does not make any such adjustments
in his calculations.
Respondent's expert considers three properties sold
approximately 3 years prior to December of 1989, two properties
sold approximately 1 year prior to December of 1989, and one
property sold 5 months after December 1989. These properties
were located in different neighborhoods throughout New York City.
Each was substantially smaller than the Partnership Properties
and sold for significantly less than respondent's expert's
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