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Lunieski concluded that the cost approach was not helpful to him
in ascertaining the Property's fair market value because "no
substitute property could be constructed with the same zoning and
multiple use as the subject". Lunieski concluded that the sales
comparison approach was also of no benefit because "any market
data would not reflect the unique zoning surrounding the subject
property." Lunieski concluded that the income-capitalization
approach was the only approach that could be used to estimate the
Property's fair market value.
In applying the income approach, Lunieski reviewed market
rentals and concluded that the appropriate range of market
rentals was $9 to $18 per square foot. Lunieski ascertained that
the gross potential rent would be approximately $14.50 per square
foot, and, based on this figure, estimated net operating income
at $275,000 ($14.50 multiplied by the Property's 21,269 square
feet). Lunieski used a 14-percent capitalization rate, and
concluded that the fair market value of the Property was
approximately $1,950,000 ($275,000/14 percent with rounding).
Lunieski did not factor in a vacancy and credit loss because, he
ascertained, the Property had 20 years of rental history without
a vacancy.
We find both experts to be helpful in understanding the
industry, but we do not accept either expert's conclusion as to
the Property's fair market value. In contrast with the belief of
both experts, we believe that the sales comparison approach can
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