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Forecasting the Discounts of Market Prices from Appraised Values for Real Estate Limited Partnerships

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  • Brad M. Barber
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    Abstract

    A vexing problem for the appraisal industry has been estimating an appropriate discount for the value of real estate limited partnerships (RELPs) relative to their appraised value. This research develops a linear regression model that explains over 80% of the cross-sectional variation in discounts across 60 RELPs using characteristics of each partnership. Among a holdout sample of 41 RELPs, the model provides forecasts of discounts that are superior to assuming no discount or applying a mean discount to all partnerships. Discounts are greatest for RELPs with low current yields, low leverage and high trading ranges for their market prices. Copyright American Real Estate and Urban Economics Association.

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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/1540-6229.00700
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    Bibliographic Info

    Article provided by American Real Estate and Urban Economics Association in its journal Real Estate Economics.

    Volume (Year): 24 (1996)
    Issue (Month): 4 ()
    Pages: 471-491

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    Handle: RePEc:bla:reesec:v:24:y:1996:i:4:p:471-491

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    Cited by:
    1. Gregory Dow, 2014. "Partnership markets with adverse selection," Review of Economic Design, Springer, vol. 18(2), pages 105-126, June.
    2. Chang N. Xuan & Daniel C. Quan, 2002. "Pricing Limited Partnerships in the Secondary Market," Journal of Real Estate Research, American Real Estate Society, vol. 23(3), pages 215-234.

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