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petitioner’s data that indicates that warehouses in good or
excellent condition, as the Kmart property is, are estimated to
have economic lives of approximately 50 years. Assuming a 45- to
50-year life for the Kmart improvements, Thomson was overly
optimistic to conclude that the building would have useful life
value. We also accept petitioner’s data that indicate that
demolition costs average $2 per square foot. Using Thomson’s
estimated values of $6 million and $5,700,000, then deducting the
costs of demolition at $2 per square foot, the result would be
lower than petitioner’s claimed value of $5,300,000.
Petitioner, on the other hand, presented evidence of
generally consistent values for the property, using four
different methods. The comparable sales approach used in the
Realty appraisal and approved of by Hulberg, yielded a value of
$5,200,000. The income approach methods yielded values of
approximately $5,420,000 and $5,100,000. As a further cross-
check, Hulberg calculated the present cash-flow of the Kmart
lease through 2022, using a 3-percent reversion rate for the
land, a 10-percent discount rate for the income stream and the
net land value, and deductions for the demolition costs and sales
expense, resulting in a fair market value of $5,212,000 for the
property. Throughout all of these different valuation methods,
petitioner’s experts consistently used discount rates within 1
percentage point of each other. Discount rates between 10
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