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income capitalization approach is the most appropriate method for
valuing the retail/office component of the Redwood City Fox.
Under the income capitalization approach, with consideration
given to the impact of the Jacobs lease, the experts47 estimated
the following fair market values for the retail/office component
of the Redwood City Fox:
Value Estimate
Mitten/Reynolds $1,100,000
Carneghi 1,130,000
Mansbach 631,000
As was the case with the theater component, Mansbach's
estimated value is significantly lower than the other experts'
estimates. As was also the case with the theater component, in
evaluating Mansbach's opinion, we find several errors48 that seem
47 Ingram/Ewing did not estimate a value for the
retail/office component of the property under the income
capitalization method.
48 The first problem is the amount of market rent Mansbach
estimated the property would command. Mansbach cites the BOMA
survey, which indicated median market rent on a full service
basis of $1.26 per square foot per month for office space and
$1.40 per square foot per month for retail space in the Bay Area
in 1987. However, Mansbach estimates the market rent for the
property, both the ground floor and the upper floors, to be $1.00
per square foot per month on a full service basis. Mansbach
bases his estimate on "[d]iscussions with several brokers * * *
[which] revealed that average market rents in the Redwood City
area in 1986 were typically lower than as reported in the BOMA
survey." These brokers told Mansbach that rents for both retail
space and office space, including ground floor commercial space,
in the immediate subject area "generally averaged at $1.00 per
square foot on a full service expense structure." These same
brokers provided Mansbach with four leases that Mansbach
considered comparable to the Redwood City Fox. All the
(continued...)
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