What you get in 2.0
The valuation professions have been working with fractional interest valuation 1.0, a body of knowledge that has been developed for operating companies over many decades. But the 1.0 methods were never designed for real estate ownership; they still hold applications for real estate holding entities and tenancy-in-common as an afterthought.
This book presents what is essentially an engineered approach to valuing fractional interests; it ends the 1.0 era and takes a bold look ahead with version 2.0. This is a practice upgrade that builds on decades of work on marketability discounting, public partnership trading and option pricing, adapting each specifically for real estate entities. Reliance is placed primarily on income methods using public limited partnership and REIT market returns.
The result is a coherent and explainable process that supports all of the factual and circumstantial variations that can be faced by real estate holding entities. Version 2.0 is complete, coherent, transformative, and built for the success of the next generation.
This book’s scope is much more comprehensive than its 2004 predecessor, Valuing Undivided Interests in Real Property: Partnerships and Cotenancies. In addition to basic case studies using the net asset value method, this transformed version now includes:
The long view, from fractional interest formation through long-term operation and the (inevitable) generational changes that can threaten an original legacy.
The income approach as the key foundation for fractional interest valuation 2.0.
A REIT database and award-winning analysis of impaired control
A Management Risk Classification System for assessing the risk level posed by the property and its management
The extremely useful inside and outside concept that describes differences between the public worlds of real estate and securities markets and the private world of a subject partnership
A comprehensive Subject Interest Control Attributes System for assessing an interest’s ability to mitigate risk.
A much-needed options pricing model adapted for analyzing short-term scenarios.
A chapter on special situations that covers many vexing valuation dilemmas.
An extensive glossary for multidisciplinary term usage not available anywhere else.
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Fractional Interests in Real Estate 2.0 is a gift to business valuation professionals, real estate appraisers and the legal and accounting communities that work with them. Dennis has certainly done some heavy lifting for us as he expertly pulls together these distinct concepts that intersect and intertwine. This excellent reference is highly recommended for its depth and thoroughness.
Deirdre Y. Russell, CFA, JD, CBA