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overall value for the restaurant property, both land and
improvements, was approximately $370,000 on December 15, 1992.
In their capitalization of income analyses, both appraisers
concluded that an independent owner of the property would expect
an effective rate of return of 11 percent. Mr. Schmidt
estimated, in 1991, that the building would produce rentals of
$7.50 per square foot. After adjusting for anticipated vacancies
and expenses, he arrived at a value of $335,000. Mr. Bollinger’s
later report assumed the same space should rent at $8 per square
foot. After adjustments, he arrived at a value of $385,000. Mr.
Schmidt’s appraisal relies on leases negotiated in 1985 and 1982.
Mr. Bollinger’s higher rate is based upon a comparison with three
other restaurants that were leased in 1991 and 1992. We find
that Mr. Bollinger can justify the higher rental rate based upon
more recent data. Nevertheless, both appraisers use other
figures in the capitalization process that seem somewhat
arbitrary. For example, they assume widely differing vacancy
rates and expenses. Each appraiser’s assumptions operate to
support that appraiser’s comparable sales valuations. Neither
appraiser, however, justifies these assumptions in any meaningful
detail. We believe under the facts herein that their comparable
sales analyses are more reliable.
The same considerations apply to the appraisers’ use of the
cost-less-depreciation method of valuation. Mr. Schmidt arrives
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