Appraisal Economics Inc. has determined the fair value of a profits interest in the real estate development of one of the tallest buildings in Manhattan. When completed, the building is projected to be one of the most expensive office towers in the world. Our engagement consisted of analyzing the projected economics of the project, including construction costs, joint venture terms, rental rates and vacancies, future capitalization rates, and myriad other complexities associated with a project of such magnitude. The valuation of this complex security included traditional discounted cash flow analysis and option pricing analysis, based on the terms of the profits interest. We valued the put rights, call rights, and redemption rights inherent in the profits interest. Also included in our analysis was valuation of promote interests embedded in the development project.
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