- 23 -
We also disagree with the respondent’s assumptions on the
projected vacancy rate. Mr. Bollinger assumed a 5-percent rate.
We find this estimate to be overly optimistic. Taking into
account its prior history, there is no indication that the
building would be unusually successful in keeping tenants. On
balance, we think that the projected gross income of the shopping
mall should be reduced by a proposed vacancy rate of 12 percent,
in addition to other expenses. Mr. Bollinger also computed a
"leased fee" projection, taking into account current tenants’
rentals, plus anticipated fees, expenses, and vacancies over an
11-year period. He noted that, at the time of valuation, the
building had an 18.2-percent vacancy rate. This vacancy rate was
constant from April 1991 until December 1992. Mr. Bollinger,
however, estimated a first year vacancy rate of 10 percent,
reducing to a 5-percent rate in all subsequent years. As noted
above, however, we find such a low projected vacancy rate to be
unrealistic.
Mr. Rexroth and Mr. Bollinger both opine that the property
is over-assessed for local taxation. Unlike Mr. Bollinger, Mr.
Rexroth makes an adjustment for the increased expense caused by
the over assessment by adjusting the capitalization rate. (“Thus
the current tax rate applicable to the tax year has been built
into the Overall Capitalization Rate”.) Mr. Rexroth concludes
that the capitalization rate of 11.5 percent should be adjusted
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011