Valuing Fractional Interests in Real Estate 2.0

January 2022 Hardcover (485 pages)

Dennis A Webb

Milonguero Press

The central theme of this book is a comprehensive application of the income approach. 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. The resulting methodology, version 2.0, offers a more effective, flexible and persuasive way to think about this practice niche.

Webb provides a complete guide to concepts that, until now, have been very difficult for valuers to convey. His solutions are theoretically sound and entirely practical. As a result, this book is now your single resource for everything – every authority, every method, plus clarity and understanding matched nowhere else.
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What's New

This book is your most important go-to reference for mastering critical, multidisciplinary valuation challenges.

Detailed how-to guidance

  • Complete, authoritative guidance on exactly how to value fractional interests. Includes two complete case studies with detailed report text and special conditions guidance on 22 challenging circumstances.
  • A helpful, annotated 225-word glossary of key terms originating in both professions and across multiple standards.
  • The perfect combination of theoretical and practical to address virtually all fractional interest valuation needs.

Litigation support

  • Keep your knowledge current and gain an edge in the courtroom.
  • Offers both theoretical and entirely practical solutions that will resolve questions about methodology, authority and why your process is directly relevant for the case’s facts & circumstances.

Multidisciplinary project management

  • How to get what you want/need from the business valuer or real estate appraiser.
  • Learn specifics of the other discipline’s process so you can engage productively creatively, so both get what they need.
Table of Case Illustrations

Part I – Introduction to Fractional Ownership

Chapter 1 Fractional Interests and Valuation

    In the Beginning: How Fractional Interests are Created
    Preparing for Generational Change
    The Professional Valuation Landscape
    The Three Keys

Chapter 2 Ownership Structures, Standards and Definitions

    Ownership Structures and Rights
    Levels of Value
    Inside and Outside
    Professional Standards
    Definitions of Value

Part II – Limited Partnership Interests

Chapter 3 Limited Partnership Valuation

    Definitions of Interest
    Valuation Approaches and Scope of Work
    Partnership Description

Chapter 4 Real Estate Appraisal

    Identifying the Problem and Scope of Work
    Summary of Important Data and Conclusions
    Market Area Data and Analysis
    Highest & Best Use
    Approaches to Value
    Reconciliation and Value Conclusion
    Real Estate Asset Overview for the Valuation Report

Chapter 5 Partnership Net Asset Value

    Reconciling Outside and Inside
    Financial Statements
    Other Tangible Assets

Chapter 6 Lack of Control

    Levels of Value
    Market Evidence for Control Impairment
    Management Considerations
    Public Limited Partnership Secondary Market
    Real Estate Investment Trusts
    Discount Reconciliation and Conclusions
    Subject Interest Control Attributes
    Calculating the Minority-Marketable Value

Chapter 7 Lack of Marketability

    Levels of Value
    Market Data Studies
    Estimating the Trading Market Discount
    Value-Influencing Elements
    Methods for Developing the Discount
    Income Methods
    Value Conclusion

Part III – Common Tenancy Interests

Chapter 8 Common Tenancy Valuation

    The Common Tenancy Context
    Valuation Approaches and Scope of Work
    Ownership Interest Description

Chapter 9 Common Tenancy Asset-Level Value

    Reconciling Outside and Inside
    Financial Statements

Chapter 10 Impaired Control and Marketability

    Common Tenancy Issues
    Levels of Value
    The Partition Solution
    Value-Influencing Elements
    Methods for Developing the Discount
    Income Methods
    Partition Time and Cost Method
    Direct Sales Comparison Method
    Option Pricing Models
    Discount Reconciliation
    Value Conclusion

Part IV – Bringing it all Together

Chapter 11 Income Approach Methods

    Methods as Market Mirror
    Asset Methods
    Levels of Value Revisited
    Income Methods
    Yields, Growth and the Build-Up Process
    Restriction Period DCF Modeling

Chapter 12 The Black-Scholes Option Pricing Model

    Extending Methodology to the Short Term
    Market Observations
    Short- and Long-Term Markets
    The Volatility Term
    Black-Scholes Formulae
    Discount Reconciliation

Chapter 13 Special Situations

    Large Percentage Interests
    Multiple Properties
    Non-Income-Producing Properties
    Balance Sheet Considerations
    Classes, Splits and Preferences
    Partner Buyouts
    Tiered Entities
    Short-Term Market Trends
    Temporary Impairments

Chapter 14 PrimusPVXR Overview

    User Dashboard
    The User’s Guided Process
    Special Situations
    User Valuation Summary
    The Algorithm
    Conclusions and Next Steps


Appendices Contents

    A. Real Property Information
    B. Partnership Case Study 1
    C. Real Estate Investment Trust Data
    D. Common Tenancy Case Study 2
    E. The Webb Discount Chart

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