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Camp v. Camp12/16/2003
a typical ownership holding period."
With respect to Jon's testimony that the valuation has to be reduced because of concerns about asbestos, underground fuel tanks, and the Americans with Disabilities Act requirements, Raasch testified that he did not see problems in those areas which would lessen the value of the buildings, as they had been remodeled in accordance with the codes then in effect, and that there were no Americans with Disabilities Act problems which would affect the fair market value.
Under Jon's argument, the items under discussion, if his figures and a cap rate of 11 percent are used, would reduce the valuation of the buildings under the income approach by approximately $726,000. However, as mentioned earlier, there is a marked discrepancy between Jon and Raasch on the condition of the buildings and Raasch's appraisal includes a vacancy rate--albeit not as high as Jon finds appropriate. Accordingly, as to vacancy rates, repairs, and improvements, we find these to be matters of disputed fact which the trial court resolved against Jon by its acceptance of the Raasch appraisal. Additionally, the fact that we ultimately use the actual expenses and income, averaged over the 2 most recent tax years for which there were tax returns in evidence, also blunts these complaints. Moreover, the trial court increased the capitalization rate, which increase also has the effect of reducing the valuations. The higher cap rate can be seen as a way of incorporating some of Jon's complaints about repairs and vacancy rates into the final valuation, because a higher cap rate means that for a potential investor or buyer, there is more overall financial risk in owning the buildings than the Raasch appraisal acknowledges, a central point of much of Jon's testimony.
(ii) Expenses of Operation/Management Fee
Under the income approach, the amount of money which is deducted from the income stream for expenses has a direct relationship to the value of the buildings. In other words, the higher the expenses, the lesser the income, and consequently, the lesser the value. It was Raasch's opinion that Jon had overstated expenses, citing as justification for that conclusion the fact that some of Jon's claimed expenses were not found on, or deducted from, the income tax filings. But, no specifics behind this claim were ever articulated, and frankly, we do not find any support for this claim in the evidence. Jon's expenses included a 10-percent-of-gross-rents management fee paid to him (by the written agreement of all partners--including Laurie) plus a 5-percent leasing commission paid to a third party. Jon argues that Raasch has simply ignored the cost of getting and keeping tenants and that Raasch has significantly undervalued Jon's management skills and efforts.
Ultimately, the goal in valuation is to decide what "deal" a willing buyer and a willing seller would strike for the purchase and sale of the properties. See McArthur v. Papio-Missouri River NRD, 250 Neb 96, 106, 547 N.W.2d 716, 724 (1996) ("fair market value is the '"value of the property if offered for sale upon the open market as between one who is ready and willing to sell but is not compelled to sell, and one who is ready, able and willing to buy but is not required to buy"'"). Part of the answer is determined by deciding how the reasonably predictable stream of gross rents can be expected to be reduced by expenses. The trial judge accepted Raasch's opinion on expenses when he accepted his appraisal in all respects except the cap rate. The question is whether the trial judge erred in doing so. In deciding that question, we must remember that the evidence shows that Jon is the foremost developer and landlord in t
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