Estate of Fred O. Godley, Deceased, Fred D. Godley, Administrator CTA - Page 29




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          respondent.  In addition, the dates of the sales used in the                  
          market approach ranged from 1983 to 1989.10                                   
               For the foregoing reasons, we do not believe respondent’s                
          criticisms of Dvorak’s capitalization rates are well taken.                   
          However, our review of Dvorak’s analysis causes us to question                
          whether Dvorak was justified in his use of higher discount and                
          capitalization rates for HUD-subsidized properties than for                   
          properties operating without HUD subsidies.  We do not believe he             
          was.  In Dvorak’s view, an investor in the subject properties                 
          would require a higher rate of return because of the risk of loss             
          of the HUD subsidies and the above-market rental income stream                
          that such subsidies produced.  However, Dvorak offered no                     
          evidence or analysis to support the existence of, or quantify the             
          extent of any, risk that HUD subsidies on properties of this type             
          might be lost.  The HUD contracts covering the subject properties             
          were generally for 30 years, yet Dvorak asserted the purported                
          risk only in conclusory fashion.  Even if we were to accord some              
          weight to his unsupported opinion regarding this risk, we believe             
          any such increase in risk would be offset by the decreased risk               
          (in comparison to non-HUD-subsidized rental properties) provided              
          by (i) the status of the Federal Government as obligor for most               
          of the contract rents, and (ii) the mandated trust fund accounts,             


               10  Dvorak was valuing the subject property as of two dates,             
          1985 and 1989, for purposes of the equitable distribution                     
          proceedings.                                                                  




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