- 19 -
distributions to the limited partners. Again, this
characteristic was not present in the comparables. Lastly,
Dr. Kursh subtracted 25 basis points to account for the
fact that the data for the comparables might include
distressed sales. Dr. Kursh based this adjustment on the
following editor's note in "The Perspective":
Limited partnership investments are
generally illiquid, long term investments.
Sellers of such investments are often con-
sidered distressed for various reasons and find
it necessary to accept discounted sales prices.
As a result, the above price information may
not reflect the intrinsic value of a limited
partnership interest.
After making the above adjustments to the average yield,
Dr. Kursh concluded that a potential purchaser would
require an investment in Hill House to yield a rate of
return of 9.7 percent (i.e., 10.45 + .50 - 1.00 - .25).
For an income stream, Dr. Kursh used the cash
distributions made by Hill House in 1992, $800,000. A
25.235-percent share of the 1992 cash distributions is
approximately $202,000. Because the only liability on the
property was the mortgage that was due to be fully paid on
April 1, 1993, Dr. Kursh believed that the partnership
would realize a substantial increase in income after that
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