- 15 -
amortization, 5-year call, and 75-percent loan to value, and
(2) an equity dividend rate of 3 percent, which was based on a
12-percent equity yield on 25 percent of value. The appraisers
calculated an overall rate of return of 9.738 percent for
Stonehenge and Fox Hill. The components of this rate were:
(1) A mortgage constant of 7.238 percent, which was based on an
8.5-percent loan with a 25-year amortization, 5-year call, and
75-percent loan to value, and (2) an equity dividend rate of
2.5 percent, which was based on a 10-percent equity yield on
25 percent of value.8 The appraisers ascertained the
capitalization rate of each complex by adding the corresponding
overall rate of return to a tax cap rate of 2.96 percent. The
appraisers then ascertained each complex's market value under the
income capitalization method by dividing its pro forma net income
by its capitalization rate. The appraisers concluded that the
respective values under the income capitalization method for The
Landings, Fox Hill, and Stonehenge were $8,172,000, $9,190,000,
and $4,710,000.
In connection with the income capitalization method, the
appraisers also ascertained the capitalization rates of the
following six properties: (1) The 280-unit complex in Kalamazoo,
Michigan, that sold in June 1990, (2) the 70-unit complex in
8 The appraisers applied an equity dividend rate to The
Landings that was higher than for the other two complexes because
The Landings had the highest vacancy rate.
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011