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

REAL ESTATE ECONOMICS, Vol. 24 No. 4 Winter 1996

Posted: 22 Mar 1996

See all articles by Brad M. Barber

Brad M. Barber

University of California, Davis

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.

JEL Classification: R32

Suggested Citation

Barber, Brad M., Forecasting the Discounts of Market Prices from Appraised Values for Real Estate Limited Partnerships. REAL ESTATE ECONOMICS, Vol. 24 No. 4 Winter 1996. Available at SSRN: https://ssrn.com/abstract=9203

Brad M. Barber (Contact Author)

University of California, Davis ( email )

Graduate School of Management
One Shields Avenue
Davis, CA 95616
United States
530-752-0512 (Phone)
530-752-2924 (Fax)

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