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Taking into account the comparable partnerships, as well as
other factors regarding the University property’s marketability,
the Hoffman appraisal applied a combined discount for lack of
control and lack of marketability of 50 percent. The Hoffman
appraisal also applied a 5-percent discount for lack of voting
rights. The Hoffman appraisal therefore applied a total combined
discount of 55 percent to the University property in addition to
the discount representing the 25-percent lender interest. The
significant discount that was applied to the University property
was due in part to the high level of debt on the property.
Respondent’s appraisal used a discounted net asset value
approach and reduced the value of the University property by a
10-percent minority interest discount and a 35-percent discount
for lack of marketability. The minority discount was determined
by comparing the University property to closed-end equity funds
and real estate investment trusts and by taking into
consideration the effect of the BLA. The lack of marketability
discount was determined by comparing six separate independent
studies of restricted stock transactions. The discounts that
were applied by respondent’s appraisal allowed for an overall
combined discount of 41.5 percent. The estate’s brief points out
that respondent’s appraisal contains incorrect assumptions about
cashflow and the effect of the BLA.
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