Charles T. McCord, Jr. and Mary S. McCord, Donors - Page 62

                                       - 44 -                                         
          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%]).”                     




Page:  Previous  34  35  36  37  38  39  40  41  42  43  44  45  46  47  48  49  50  51  52  53  Next

Last modified: May 25, 2011