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After computing the total value of land and improvements
under the cost approach, Mr. Hall then reduced this value by a
20-percent size adjustment. Relying on market data, Mr. Hall
concluded that large or noncontiguous parcels of land generally
sold for lower prices per acre. The majority of the available
data used in the cost approach related to sales of relatively
small parcels of land (generally less than 20,000 deeded acres).
However, True Ranches’ land holdings consisted of large, mostly
noncontiguous parcels (approximately 265,000 total deeded acres).
Thus, Mr. Hall applied the 20-percent size adjustment to
eliminate this disparity.
To check the reasonableness of the size adjustment, Mr. Hall
compared the computed per acre value (after size adjustment) of
True Ranches’ largest parcel (Plains Rangeland--183,990 deeded
acres) to the three largest actual sales for which data was
available (each comprising over 30,000 deeded acres) and
concluded that the per acre values were within a reasonable range
of each other. To further support his discount, Mr. Hall cited a
publication prepared by the University of Wyoming, which stated
that in the mid-1990's, ranches of 600 animal units sold for 16
percent less than ranches with 300 to 400 animal units. True
Ranches’ estimated capacity was 12,500 animal units. Finally,
Mr. Hall testified that the 20-percent size adjustment did not
represent a discount for lack of marketability of the land and
improvements.
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