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We agree with petitioners that the Redwood City Fox was
possessed of much architectural significance and was a unique
property. However, we do not agree that the presence of both
theater space and commercial space mandates reliance on the
replacement cost method to value the property.
When dealing with an older, historic structure such as the
Redwood City Fox, it is questionable whether the replacement cost
method can be used to provide a true indication of the fair
market value of the property. Crocker's expert, Carneghi,
recognized in his appraisal report that the replacement cost
approach is considered "highly unreliable for older special
purposes buildings" like the Redwood City Fox.44 This
unreliability is demonstrated by the variation in the amount of
accrued depreciation utilized by the experts.45 A further
problem recognized with the use of the replacement cost method is
the assumption that one would actually reproduce the improvements
involved. United States v. Toronto, Hamilton & Buffalo
Navigation Co., 338 U.S. 396, 403 (1949). It is questionable
whether a willing buyer, such as a public entity or philanthropic
44 Jacobs' expert, Reynolds, also stated in his appraisal
report that the replacement cost method is commonly used to value
proposed or new buildings.
45 Ingram/Ewing used 19 percent for the theater and 15
percent for the retail/office component. Reynolds used 55
percent for theater, and 25 percent for the retail/office
component. Carneghi used 45 percent depreciation for the
theater, and 34 percent for the retail/office component.
Carneghi subsequently testified that the replacement cost method
was inappropriate under the circumstances.
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