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Carneghi considered the comparable sales approach, which was
based on contemporaneous sales of “similar old theater buildings”
like the Redwood City Fox, to be more reliable. Consequently,
Carneghi accorded the value indicated by the comparable sales
approach all the weight and accorded no weight to the value
indicated by the replacement cost approach. Carneghi thus valued
the theater portion of the Redwood City Fox at $2,000,000.
b. Retail/Office
For the retail/office component of the Redwood City Fox,
Carneghi arrived at the following values under the following
appraisal methods:
Replacement Cost Approach $1,460,000
Comparable Sales Approach $1,470,000
Income Approach-Direct Capitalization $1,130,000
With respect to the replacement cost approach, Carneghi again
stated that valuation under this method “is not considered a good
indicator in valuation of a renovated older building with
specialized improvements.” Carneghi found that valuation under
the comparable sales approach was a “good indicator” of value,
but that the approach did not “consider” the below-market Jacobs
lease. With respect to the income capitalization approach, which
utilized both the market rent estimate and the rent generated by
the Jacobs lease, Carneghi found that the approach
is considered a good indicator for the subject property
which is impacted by a below market lease. However,
this approach may be unduly impacted by the below
market rent although the upside income potential was
accounted for in the selection of the capitalization
rate.
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