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Property's “market rent”. Strachota multiplied this $5 figure by
the Property's square footage (21,269) and applied a 5-percent
vacancy and credit loss to arrive at a “potential gross rental
income” of $101,028. Strachota subtracted $6,832 of operating
expenses from the potential gross rental income, and he divided
the result ($94,196) by a 12-percent capitalization rate to
arrive at his value of $800,000 (with rounding). Strachota
concluded that the income approach was the most reliable
indicator of the Property's fair market value under the facts at
hand and, hence, he concluded, the Property was worth $800,000.
Lunieski appraised the Property for the condemnation
proceeding, concluding that the fair market value of the Property
was $1,950,000 as of January 5, 1989.3 Lunieski inspected the
Property on at least five occasions, and he consulted an attorney
who was experienced with the City's adult zoning and ordinances.
Lunieski concluded that because the Property had a centralized
location and advantageous zoning, a prospective renter would pay
a premium to lease the property. Lunieski concluded that the
City's ordinances enhanced the value of the Property, and that
the Property's highest and best use was rental to an adult
entertainment entity that was qualified to operate a complex.
In arriving at his conclusion of fair market value, Lunieski
considered the same valuation approaches considered by Strachota.
3Lunieski's appraisal was one of the three appraisals on
which Strachota relied.
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