Estate of Charles a. Boratello, Deceased, C. Norman Borgatello and Josephine E. Donnelly, Co-Executors, and C. Norman Borgatello, Successor Trustee to the Charles A. Borgatello Living Trust - Page 19

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            southern California.8  However, because of the unique character                            
            of the Montecito-Santa Barbara area, we are primarily concerned                            
            only with how the softness in the real estate market was                                   
            affecting capitalization rates in that area.  Mr. Holden reported                          
            that sales in the Santa Barbara area during the time in question                           
            commanded capitalization rates of 9.17 percent and 9.4 percent.                            
            Mr. Marx researched three additional sales in Santa Barbara                                
            during 1993 and 1994 and found capitalization rates ranging from                           
            7.83 percent to 9.4 percent.  On the basis of such data, Mr. Marx                          
            concludes that an overall capitalization rate of 9.25 percent to                           
            9.5 percent is appropriate in valuing MVN and MVS.  He settles on                          
            9.5 percent as the capitalization rate.  Mr. Holden, on the other                          
            hand, went outside the Santa Barbara area in order to justify a                            
            higher capitalization rate for MVN and MVS.  In his view,                                  
            southern California was experiencing a soft real estate market at                          
            the time of the alternate valuation date.  Mr. Holden fails to                             
            explain, however, why any market softness is not already                                   
            reflected in the capitalization rates of the Montecito-Santa                               
            Barbara area comparables.  We are inclined to keep the                                     
            capitalization rate in the instant case within the range of                                

            8     In 1991, the average capitalization rate in southern                                 
            California was 9.06 percent; in 1992 it was 9.59 percent; in 1993                          
            it was 9.70 percent; in 1994 it was 10.66 percent; and in 1995 it                          
            was 10.26 percent.                                                                         

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