- 20 -
characteristics would be within two standard deviations of
average.
After completing his analysis, he found that JFI differed
from the average REIT by -11.7 percent. Since the average REIT
reflected a minority interest premium of 1.5 percent, JFI would
reflect a minority interest discount of -10.2 percent (1.5
percent - 11.7 percent).
Lack of Marketability
Mr. Keath used the same basic method to calculate a discount
for lack of marketability. From various studies of restricted
stock sales, Mr. Keath estimated that the average discount for
lack of marketability for operating companies was 30 percent.
From this figure, he made adjustments using eight characteristics
to find that JFI reflected a greater discount than the average
REIT of 6.8 percent, resulting in a lack of marketability
discount of 36.8 percent.10
Applying the Discounts
Mr. Keath then applied the 10.2-percent minority interest
discount and the 36.8-percent lack of marketability discount to
the undiscounted value of JFI of $1,818 per share. In his
10 As noted previously, this figure is very close to the
lack of marketability discount of 35 percent used by Mr. Egan.
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