Estate of Duilio Costanza - Page 25

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          Petitioner’s witness Mr. Rexroth determined that it would cost              
          $602,000 to replace the shopping center building and site                   
          improvements.  From this amount, he deducted approximately                  
          $193,000 to reflect depreciation and obsolescence.  He then added           
          back his estimate of the value of the land upon which the                   
          shopping mall was located to arrive at a cost value of $503,000.            
               On behalf of the respondent, Mr. Bollinger presented a                 
          valuation of $639,000 for the building and other improvements, a            
          deduction of $173,000 for depreciation and obsolescence, and an             
          addition of $120,000 reflecting his valuation of the vacant land.           
          His cost-basis total valuation was $585,000.                                
               We believe that Mr. Rexroth’s valuation is closer to the               
          mark.  His higher "external" obsolescence figure reflects the               
          property’s historical difficulty in filling vacancies and in                
          finding retail tenants.  Taking this form of obsolescence into              
          account, we think that a fair cost valuation would be $530,000.             
               We have concluded that a proper valuation for the property             
          under the comparable sales valuation method is $528,000.  The               
          capitalized earnings approach yields a value of $490,000.  Under            
          the replacement cost method, the proper value is $530,000.  Of              
          the three methods, we give the greatest weight to the capitalized           
          earnings approach.  We agree with Mr. Bollinger’s opinion that              
          the income approach resulted in the most accurate valuation                 
          because an “investor purchasing this building would be basing it            

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Last modified: May 25, 2011