A court may consider income and expenses when ruling on the fair market value of an office complex. The municipal assessor for the City of Norwalk found that the fair market value of the plaintiffs' property was $49 million, as of Oct. 1, 2008. The 4.3-acre property has an office complex that was constructed in 1985. The ground floor includes a lobby, a cafeteria, a fitness area and a conference room. The property has five elevators, one of which is a private elevator to the penthouse on the seventh floor. The property is located near the Metro-North train station, which has service to Stamford and to Manhattan. The plaintiffs' appraiser, Eric Michel, opined that the property has a net rentable area of 238,879 square feet and that market rent is $25 per square foot. Michel found that total expenses were $2.67 million. Michel applied a capitalization rate of 8.85 percent to net operating income of $2.69 million and found that the fair market value was $30.5 million. The city's appraiser, Michael Fazio, opined that the property has a net rental area of 256,974 square feet and that market rent is $25 per square foot. Fazio added utility and expense reimbursements to reach effective gross income of $7.06 million. Fazio deducted operating expenses of $2.67 million. Fazio applied a capitalization rate of 8.89 percent and found that the fair market value was $49.39 million. The court found that the net rentable area was 243,586 square feet. The court multiplied 243,586 by $26 per square foot to reach potential gross income of $6.33 million. The court deducted 10 percent, or $633,324, as a vacancy collection factor. The court also deducted net operating expenses of $2.67 million, which resulted in net operating income of $3.02 million. The court applied a capitalization rate of 8.89 percent and concluded that the fair market value was $34.05 million, as of Oct. 1, 2008.

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