12. Capitalization
1. Valuation/Capitalization: It is proper to capitalize
the property's net income (value of an asset capable of producing the known
income of the property). State v. Shaddock, 75 Nev.
392, 399, 344 P.2d 191 (1959) (#25)
2. Valuation/Capitalization: It is proper to use testimony
of capitalization of income. Dep't. of Highways v. Campbell,
80 Nev. 23, 28, 388 P.2d 733 (1964) (#32)
3. Valuation/Capitalization: A certified public accountant
may give his opinion on the value of an asset producing the net income realized
from the subject property when capitalized at various rates, but may not express
his opinion on the market value of the property without foundation testimony
establishing such expertise. Eikelberger v. State
ex rel. Dep't Hwys., 83 Nev. 306, 308-310, 429 P.2d 555 (1967) (#39)
4. Valuation/Capitalization: Absent foundation information
about the relevant capitalization rate, a capitalization witness should not
be permitted to express an opinion on market value by use of the income approach
to value. Id. at 309 (#39)
5. Valuation/Capitalization: "Market value is ascertained
by the income approach by the mathematical process of dividing the estimated
annual income from the highest use of the property by a capitalization rate
appropriate to the type of investment risk involved. A slight variation in the
capitalization rate profoundly affects the value to be attributed to the property.
Accordingly, unless the components of the formula, the annual income and the
capitalization rate, are determined with reasonable certainty, the resulting
value is speculative, and of little use to the trier of the fact." Id.
at 309 (#39)
6. Valuation/Capitalization: "We have doubt about
the propriety of the testimony allowed in State v.
Shaddock, supra, (#29) since the appropriate capitalization rate
to be used in the income approach to market value depends upon the nature of
the investment risk. It seems to us that some evidence on that point may be
necessary before a witness may capitalize income. However, that question is
not presented for decision here." Id. at 308, n.1 (#39)
7. When billboards "cannot be relocated to comparable, income-generating sites" within the market area, the bonus value approach to value does not sufficiently compensate the advertising companies for their leasehold interests, and the income capitalization methodology should be used. Nat'l Adv. Co. v. State, Dep't of Transp., 106 Nev. Adv. Op. 10 (2000).
8. "As noted by the district court, the bonus value approach is based on the assumption that the Advertising Companies may keep the benefit of their bargain with the Damontes if they can relocate their billboards under a comparable lease at market value to another comparable site. The evidence in this case, however, clearly establishes that these billboards were in valuable, unique locations, and that the billboards could not be relocated to a comparable site within the market area." (Id. at 7)
9. "If the billboards cannot be relocated to a comparable site, as is the case here, then the state must compensate the billboard owners for the valuable interests taken, that is, the value of their leasehold interests, taking into account the irreplaceable, lost rental income." (Id. at 7, n. 8)
10. "In order to determine the value of the leasehold interests...the advertising rental income must be considered under the income capitalization approach, which adjusts the anticipated net income to present value through the capitalization process." (Id. at 7, n. 7)