Estate of Lewis A. Bailey, Deceased, Frances Jeanette Foster, Executrix - Page 18




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          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.                                         








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