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 20

                                               - 20 -                                                  
            capitalization rates found in the Montecito-Santa Barbara area at                          
            or near the time of the alternate valuation date.  MVN and MVS                             
            are uniquely situated because of the lack of commercial rental                             
            property in the area.  Mr. Holden fails to convince the Court                              
            that his use of widespread, southern California comparables is                             
            appropriate in analyzing MVN and MVS.  We are persuaded,                                   
            therefore, that a capitalization rate of 9.5 percent is in line                            
            with capitalization rates generally in the Montecito-Santa                                 
            Barbara area at the alternate valuation date and is a reasonable                           
            estimation of the appropriate capitalization rate to use in                                
            valuing MVN and MVS.                                                                       
                  As stated above, the discount rate is a derivative of the                            
            capitalization rate.  Messrs. Holden and Marx agree that a 2-                              
            percent adjustment is needed to account for inflation.  Mr. Marx                           
            makes a further adjustment that considers leasing and selling                              
            commissions along with absorption and tenant improvement issues,                           
            which reduces Mr. Marx's capitalization rate adjustment by                                 
            approximately one-half of a percent.  Mr. Holden makes no such                             
            adjustment.  Given the range of estimated adjustments suggested                            
            by the experts, we find that 1.75 percent is a reasonable                                  
            adjustment to the capitalization rate in order to arrive at the                            
            appropriate discount rate.                                                                 

Page:  Previous  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  Next

Last modified: May 25, 2011