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Dr. Shapiro concluded that these 15th-percentile REITs data
should be adjusted downward in petitioner’s favor to remove a
liquidity premium that is inherent in REITs; i.e., a premium that
arises because REIT interests, unlike the assets underlying them,
are publicly traded in reasonably liquid markets. To gauge the
size of this inherent liquidity premium, Dr. Shapiro referred to
an academic study of private placement discounts for a period
ending just before the valuation dates for the subject
partnership interests. Bajaj et al., “Firm Value and
Marketability Discounts”, 27 J. Corp. L. 89 (2001) (hereinafter
the Bajaj study). On the basis of the Bajaj study, Dr. Shapiro
concluded that, for the relevant time period, liquid assets such
as REITs were trading at a premium of about 7.5 percent over
illiquid assets such as the partnership interests. Subtracting
this 7.5-percent liquidity premium from the previously indicated
15th-percentile REITs data, he concluded that the real estate
component of the partnership interests should be valued to
reflect minority interest discounts of 8.3 percent (-.8 minus
7.5) and 6 percent (1.48 minus 7.5), as of April 19, 1996, and
July 2, 1996, respectively.
Dr. Shapiro then compared these results to his own study
which suggested that minority interests in holding companies
trade at a discount of 8.5 percent relative to controlling
interests in holding companies. Adjudging holding companies to
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