- 66 -
Income - All triple net
Contract income-Western space + Office11,205 sq.ft. at $0.27 $3,000
Market rent-Eastern space-Ground floor2,611 sq.ft. at $1.20 3,133
Market rent-Eastern space-Mezzanine2,475 sq.ft. at $0.60 1,485
Monthly Gross Potential Income 16,291 $0.468 $ 7,618
X 12 X 12
Annual Gross Potential Income $5.61 $91,418
Less: Vacancy and credit loss at
Leased space 0.0% $ 0
Eastern space 5.0% 2,771
Effective Gross Income $88,647
Less: Landlord expenses
Reserves 1.0% of effective gross income$0.05 $ 886
Management 3.0% of effective gross income0.16 2,659
Total expenses $0.22 $ 3,546
Stabilized Net Operating Income $5.22 $85,102
Overall Capitalization Rate 0.0750
Indicated Stabilized Value $1,134,688
Rounded $1,130,000
6. Carneghi--Value Reconciliation
a. Theater Value Conclusion
Under the replacement cost approach, Carneghi estimated a
value of $3,740,000 for the theater. Under the comparable sales
approach, he estimated a value of $2,000,000. With respect to
the replacement cost approach, Carneghi stated:
The Cost Approach is considered a poor indicator
of value in this case. No deduction was made in the
Cost Approach for functional obsolescence. However,
the theater was designed for film exhibition and
therefore has some disutility for performance use.
Renovations and upgrading will be required as discussed
in this report, and the Cost Approach does not fully
account for this. Also, for older special purpose
buildings, estimating physical obsolescence is
subjective. This approach is considered highly
unreliable for older special purpose buildings like the
subject.
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