Estate of Eldon L. Auker, Deceased, Kimberlee J. Auker, Independent Personal Representative - Page 15

                                       - 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  Next

Last modified: May 25, 2011