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acre and $17 million.5 The fact that Ponderosa failed to obtain
development approval approximately 4 years later was a fact that
was not known to the parties to the June 1994 agreement. If
Ponderosa had known or thought that approval was not forthcoming,
it would not have committed its resources and substantial capital
to the Busch property project. Also, as noted above, other
developers expected that the property could be developed. In
that regard, Ponderosa paid an amount approximating petitioner’s
proposed net value ($680,000) in expenses pursuing development
approval and in payments made to keep the June 1994 agreement
open for development at a $150,000 plus per-acre contract price.
The June 1994 agreement price of $150,000 per acre
represents a cash sale price between a willing buyer and willing
seller. The June 1994 agreement, however, did not require
Ponderosa to pay “cash on the barrel head”. The agreement and
trial testimony make it clear that both sides were aware of the
foreseeable risks and the difficulties connected with obtaining
approval for residential development. The political climate in
Pleasanton was also well known to the parties to the June 1994
agreement. The comparable sales prices used by petitioner’s
appraiser for estate tax purposes and by its trial expert reflect
that the $150,000-per-acre price was reasonable when compared
with similar properties susceptible of residential development.
5 The $17 million bid was dependent upon the number of
building lots approved.
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