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could be built upon. At that time, the Cathead property was not
listed for sale, and there were no known offers to purchase. An
appraisal of the Cathead property, as of December 30, 1992, was
performed by Juan Carbonell and Michael Tarnow (the Carbonell and
Tarnow report). The Carbonell and Tarnow report based its
valuation on a sales comparison approach6 and assumed that the
waterfront lots could be sold over a 5-year period. The retail
sales prices realized during each year of the sale period were
discounted by 9 percent to estimate their net present value.7 On
the basis of the considerations above, the Carbonell and Tarnow
report valued the entire Cathead Property at $3,417,092. Of this
amount, $870,000 was attributed to the house owned by decedent
and Mr. Hoffman.
As of December 31, 1993, Clubside’s liabilities consisted of
accounts payable of $499 and the following promissory notes:
Note Payable Amount Interest Rate Maturity Date
Melissa Hoffman Trust $24,000 7.61% 1/01/2012
Matthew Hoffman Trust 24,000 7.61% 1/01/2012
Elisabeth Hoffman Trust 24,000 7.61% 1/01/2012
Hoffman Associates 278,147 7.61% 1/01/2012
6The Carbonell and Tarnow report compared the Cathead
property to other properties with similar uses and utility that
had recently been sold. Next, dollar adjustments were made to
account for the differences between the Cathead property and the
comparables. The adjustments were totaled and factored into the
sales prices of the comparables to indicate a probable sales
price for the Cathead property.
7The 9-percent discount rate was arrived at by taking the
prime interest rate (6 percent) plus 1 percent and adding 1
percent each for risk and nonliquidity factors.
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