- 55 -
lower level of risk. Consequently, Mitten/Reynolds applied a
capitalization rate of 7.5 percent to the modified net operating
income for a value, reflecting the lease, of $1,100,000
(rounded). According to Mitten/Reynolds, the $800,000 reduction
in value reflected the extent to which the Jacobs lease was below
market, as well as the 55-year potential duration of the lease.
6. Mitten/Reynolds--Value Reconciliation
Mitten/Reynolds determined the following values for both
components of the Redwood City Fox under the respective
approaches:
Method Theater Retail/Office Total (incl. Land)
Replacement Cost $3,600,000 $1,800,000 $5,400,000
Comparable sales $3,300,000 $2,000,000 $5,300,000
Income Capitalizationn/a $1,900,000 n/a
After correlating all the values, Mitten/Reynolds estimated the
market value of the theater to be $3,500,000, and the market
value of the retail/office component to be $1,900,000, for a
total of $5,400,000. After reduction for the impact of the
Jacobs lease, which reduced the value of the retail/office
component to $1,100,000, Mitten/Reynolds arrived at a fair market
value of $4,600,000 for the Redwood City Fox as of December 31,
1986.
B. Crocker's Expert
Crocker engaged the firm of Carneghi-Bautovich & Partners,
Inc. (Carneghi-Bautovich), a real estate appraisal firm with
offices in San Francisco and San Jose, to appraise the Redwood
Page: Previous 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 NextLast modified: May 25, 2011