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Asset Value
Mr. Egan’s approach was first to select a group of companies
comparable to JFI for which net asset value and market value
(i.e., price of stock) were known. He then calculated the amount
by which the net asset value of these companies was discounted in
reaching market value. Finally, he adjusted this discount and
applied the adjusted discount to the net asset value of JFI to
compute its market value. The comparable companies were publicly
traded, so the market value of each was determined from the sale
price of shares of stock on the date of decedent’s death. Each
sale of stock was of a minority interest. Thus, the discount
from net asset value that Mr. Egan calculated for the comparable
companies reflected the minority interest discount that he was
trying to determine.
From 117 real estate companies and real estate investment
trusts for which data was publicly available, Mr. Egan selected
15 companies that in his view were comparable to JFI. For each
company, he computed market value (i.e., market price of
outstanding shares) as a percentage of net asset value and took
the median of these percentages, which was 41.3 percent. Stated
in terms of a discount, the market value of the median company
equaled its net asset value discounted by 58.7 percent. Mr. Egan
also calculated earnings, cash-flow, and dividends, each as a
percentage of net asset value. The median of these percentages
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Last modified: May 25, 2011