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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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