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adjustment reflects both a minority discount and a (smaller)
liquidity premium, he then proceeded to identify (and eliminate
the effect of) the liquidity premium in order to determine the
minority discount. Based on his opinion that, as of the
valuation date, the prevailing “illiquidity” discount for
privately placed restricted stock was approximately 7 percent, he
calculated a 7.53-percent liquidity premium.29 Based on that
liquidity premium of 7.53 percent and his selected price-to-NAV
discount of 1.3 percent from his REIT sample, Dr. Bajaj added the
two percentages to calculate a minority discount of 8.83 percent
(i.e., he increased the price-to-NAV discount to reflect the
elimination of the effect of the liquidity premium), which he
rounded to 9 percent.
Using the same procedure as Dr. Bajaj, but substituting an
illiquidity discount of 18 percent for his 7-percent figure, we
arrive at a liquidity premium of 22 percent and therefore
conclude that the minority discount imbedded in the 1.3-percent
price-to-NAV discount selected from the REIT sample is 23.3
percent, which we shall apply to MIL’s real estate partnership
interests. We have substituted 18 percent for 7 percent because,
as discussed infra in section V.D.5.a., Dr. Bajaj has not been
clear in distinguishing between the apparently different (but
29 As Dr. Bajaj explains his calculation: “If an illiquid
security trades at a discount of 7% relative to a liquid asset,
this suggests that the liquid asset is trading at a premium of
about 7.53% relative to the illiquid asset (1/[1-7%]).”
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