- 18 -
original.) The Biles report noted that the California motel
could have been classified as a property with a “discrepancy” in
the title. The Biles report concluded that if all these factors
were properly considered, the California motel should be valued
based on “‘Rates and Terms’ of A ‘DISTRESS SALE’, with added
consideration being given to the ‘clouded title’ of the land”.
(Idiosyncratic typography in original.) The Biles report stated,
with little elaboration, that on the basis of all this
information and discussions with lenders in the local market, the
proper capitalization rate to use in applying the income
valuation method was 15.5474 percent, rather than the 9.846
percent indicated by the Ohrmund report. Biles also concluded
that the Ohrmund report had overstated net income from the
California motel by underestimating the ratio of expenses to
gross income as 60 percent; with little elaboration, Biles
concluded that a 75-percent expense ratio was more appropriate.
After making this adjustment, Biles concluded that the annual net
income from the California motel was only $127,361, rather than
the $192,536 indicated by the Ohrmund report. Factoring in his
upwardly adjusted capitalization rate and his downwardly adjusted
net income figure, Biles concluded that the “discounted value” of
the California motel was only $819,200, rather than $1,388,000,
as indicated by the Ohrmund report.
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011