- 102 -
seat basis. Carneghi thus concluded that the indicated value for
the theater component under the comparable sales method was
$2,000,000.
We are convinced that Carneghi's appraisal is the best
reflection of the fair market value of the theater component of
the Redwood City Fox. Consequently, we find that the fair market
value of the theater component of the Redwood City Fox as of
December 31, 1986, was $2,000,000.
B. Valuation of Retail/Office Component
With respect to the retail/office component of the Redwood
City Fox, we agree with petitioners that none of the office
buildings considered by the experts were truly comparable.
Unlike the Redwood City Fox, all were free standing structures
with onsite parking. None were constructed in the 1920's, and
none possessed any historical significance. Moreover, an
investor would be free to purchase the properties without the
additional purchase of a theater also. While it is our view that
these differences do not mandate use of the replacement cost
method to value the property, we find that they preclude the use
of the comparable sales approach as a reliable indicator of fair
market value. Furthermore, we think that a willing buyer, such
as a nonprofit entity, would accord value to the retail/office
component of the property on the basis of its income producing
potential. Consequently, and in light of the Jacobs lease, which
all the experts found to be below market, we conclude that the
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