Sono Equities LLC v. City of Norwalk
A court can reject appraisers' valuations and reach an independent conclusion. The municipal assessor valued the plaintiffs' Norwalk office at $17.2 million and the plaintiffs' parking lot at $909,700, as of Oct. 1, 2008. The plaintiffs appealed. Patrick Wellspeak opined that the fair market value of the .598-acre office, which has 12 stories and 185,000 square feet, was $12.6 million and that the fair market value of the 1.42-acre parking lot with 88 parking spaces was $850,000. Lack of on-site parking was a critical factor in Wellspeak's conclusion that Norwalk overvalued the office. The parking lot helped the office to comply with zoning requirements that required tenant parking. Currently, approximately 3 percent of the office tenants park in the parking lot, because a municipal parking lot is more convenient. U.S. Postal Service vehicles park in the plaintiffs' parking lot. Wellspeak was unable to find comparable sales of offices in Norwalk that lacked on-site parking. The court criticized his selection of comparable sales of offices in New Haven and Hartford that were not located in the same county as the subject property. "Lack of on-site parking," wrote the court, "does not appear to be a sufficient justification to seek comparables in the New Haven or Hartford office building market." The court found that the potential gross income under the income approach was $4.08 million, if fair market rent was $21 per square feet and rooftop income was included. Wellspeak's vacancy or collection rate of 25 percent was overly high. The court used a 20 percent vacancy or collection rate of $816,853 and deducted that from the potential gross income of $4.08 million to reach effective gross income of $3.26 million. The court deducted operating expenses of $1.7 million from effective gross income, to reach net operating income of $1.56 million. The court divided net operating income of $1.56 million by the capitalization rate of 10.88 percent, to reach a fair market value of $14.3 million. The court found that the fair market value of the plaintiffs' office was $14.3 million and that the fair market value of the parking lot was $909,700.