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income due to vacancies or uncollectibility. Dvorak normally
would have used a 5-percent rate, but he reduced it to 3 percent
because the risk of uncollectibility was low, given that the
Federal Government was the obligor with respect to most of the
rent. However, although Dvorak testified that he understood the
actual vacancy rates were low and that there were usually waiting
lists of tenants at Monroe and Charlotte, he admitted that he was
unaware of the HUD guaranty to pay 80 percent of the rent for 2
months following a vacancy when he made the determination to use
a 3-percent vacancy rate.8 In light of Dvorak’s view that the
reduced risk of uncollectibility required a 2-percent adjustment
to the vacancy rate, we believe that the reduced risk of loss
from short-term vacancies provided by the HUD guaranty requires
another 2-percent reduction in the vacancy rate assumption,
resulting in a vacancy rate adjustment of 1 percent. We note
that a vacancy rate assumption of 1 percent was used by Keith,
whose expert reports are not disputed by either party in this
proceeding.
(b) Rental Rates
Respondent disputes Dvorak’s use of an estimated figure for
1989 rental receipts, on the grounds that it is less than actual
1989 rents. Because actual 1989 figures were not available to
him when he did his appraisal (originally for use in the
8 Indeed, the owner could apply for additional payments
beyond the first 2 months.
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