Appraisal Economics Inc. valued a non-controlling interest in a holding company that owns a minority interest in a privately held international conglomerate that is headquartered in Russia. The operating company has several dozen subsidiaries in Europe and Asia that specialize in oil and gas, construction, telecommunications, and finance. Our valuation included analyzing the recent sale between third parties of shares of common stock in the underlying operating company. To determine the current value of the operating company’s common stock, we adjusted for changes in the company’s financial performance, industry and economic conditions, and currency exchange rates. The concluded value of the interest in the holding company that owns the conglomerate’s shares reflected incremental discounts for lack of control and lack of marketability. Our valuation was used for gift and estate tax planning purposes.

Please click for more information about our valuations for gift and estate tax purposes and of non-controlling interests in holding companies.

Appraisal Economics Inc. has completed a valuation of a wind park located in the Midwestern United States. The wind park consists of approximately 100 wind turbines with a combined electrical generating capacity of about 150 megawatts, the equivalent of providing clean energy to over 50,000 homes. The assets include the towers, foundations, blades, rotors, generators, and power converters. Electricity is generated and sold to the local power grid via a long-term power purchase agreement, which provides enough revenue to help recoup the substantial cost of construction. Appraisal Economics was engaged by the local taxing authority to estimate the fair market value of the wind park for litigation support related to property taxes.

Please click for more information about our litigation support, power plant, and renewable energy experience.

Appraisal Economics Inc. has determined the fair market values of two minority, non-controlling membership interests in a leading cosmetics company that develops and markets skin care products. Part of our analysis required the valuation of the preferred equity of a related entity. The income and market approaches were utilized to determine the company’s total equity value, and Monte Carlo simulations were used to allocate the total equity value among eight different equity classes including the preferred membership interest. Appraisal Economics applied appropriate lack of control and lack of marketability discounts to the pro rata values and determined the fair market values of the two interests for gift and estate tax purposes.

Please click for more information about our valuations of companies and our work for gift and estate tax purposes.

Appraisal Economics has provided litigation support to attorneys representing a Michigan taxing authority regarding wind farms and tax incentives. Specifically, we considered whether the availability of specific tax incentives necessarily indicates that the value of the property is less than its cost, which would indicate that economic obsolescence exists. Typically, newly constructed wind farms receive federal incentives for renewable energy such as the (i) Production Tax Credit; (ii) Investment Tax Credit; and (iii) Section 1603 Cash Grants. Wind farms typically also benefit from state-level renewable portfolio standards (RPS) that require utilities to purchase a minimum percentage of electricity from renewable sources, generally at higher rates than hydrocarbon-based sources of energy. The federal incentives and the terms of the power purchase agreement must therefore be examined in tandem to identify whether economic obsolescence exists immediately upon completion of construction. Any reduction to the value of the property affects the taxes assessed on the property, and is therefore of significant importance to both the taxpayer that owns the property and the taxing authority.

Please click for more information about our wind power valuation services and litigation support.

Appraisal Economics Inc. has conducted a valuation of an interest in a limited liability company that holds approximately three dozen limited partnership interests in hedge funds and private equity funds, among other illiquid assets. This engagement for a former cabinet-level advisor to the President of the United States was performed for tax planning purposes. Our scope of work included valuing each hedge fund interest and each private equity interest, and marking to market other assets such as an unsecured promissory note due from an individual. Limited partnership interests in hedge funds and private equity funds are generally non-controlling and illiquid, and may require the application of discounts for lack of control and discounts for lack of marketability to determine the fair market value. Selecting credible discounts requires understanding both the economic structure and the legal rights and restrictions of these types of closely held investments.

Please click for more information about private equity and hedge fund valuations, valuing promissory notes, and gift and estate taxes.

Appraisal Economics Inc. has conducted a valuation of an interest in a holding company that owns limited partnership interests in hedge funds, managed futures funds, and private equity funds, and direct investments in two private companies. Our engagement consisted of valuing each hedge fund interest, managed futures fund interest, private equity fund interest, and valuing the investments in the private companies. Then we valued the interest in the holding company for tax purposes. Interests in alternative investments and holding companies are generally non-controlling and illiquid, and may require the application of discounts for lack of control and discounts for lack of marketability to determine the fair market value. Selecting credible discounts requires understanding the economic structure, legal rights and restrictions, and nature of the markets for these types of privately held investments.

Please click for more information about private equity and hedge fund valuations, and gift and estate taxes.

Appraisal Economics Inc. has determined the fair value of an outperformance plan (OPP) granted to employees of a real estate investment trust (REIT). This OPP grants employees shares of the company’s publicly traded common stock based on the achievement of certain absolute and relative performance hurdles at the end of the performance period. These market-based performance conditions are intended to align the goals of the employee grantees with shareholders. In addition to the absolute and relative performance hurdles, which are based on the company’s and peer group companies’ total shareholder return (TSR) adjusted for dividends, the plan also has a complex acceleration feature. Under the acceleration feature, grantees can earn and receive shares of the company’s common stock on earlier dates (before the end of the performance period) if the company has already achieved the maximum absolute or relative TSR target. In addition to determining the fair value of outperformance plan grants, Appraisal Economics Inc. also performs quarterly computations to estimate the numbers of shares that will be awarded under the plan.

Please click for more information about the valuation of performance awards and other complex securities.

Appraisal Economics Inc. has performed a valuation of long-term incentive plan units (LTIP Units) for one of the largest publicly traded real estate investment trusts (REITs). The LTIP Units were granted to employees as equity based compensation and were designed to align the interests of the grantees with company stockholders. The grants have market-based vesting conditions, whereby the LTIP Units will only vest into shares of the company’s common stock if certain total return to shareholder (TRS) targets are met. TRS is a measure of the company’s stock price performance that includes dividends. The LTIP Units have both absolute targets, based on the company’s own TRS performance, and relative targets, based on the company’s TRS performance compared to a peer group of over 100 companies. Our valuation of the LTIP Units accounted for all of these features.

Please click for more information about the valuation of stock-based compensation and performance awards.

Appraisal Economics Inc. has conducted a valuation of carried interest of a private equity firm for litigation support purposes. This high profile case was tried in Federal District Court and involved, among other things, the defendant’s First Amendment rights and allegations against the third largest pension fund in the United States. In addition to determining the value of the carried interest for several private equity funds, we determined the value of the management company and the general partner entities, and damages for lost compensation and lost management fees.

Please click for more information about private equity valuation and litigation support.

Appraisal Economics Inc. has conducted a purchase price allocation of a utility-scale solar operator in New Jersey. Electricity is generated and sold to the local power utility under a long-term power purchase agreement. A private equity firm acquired the company that owns and operates the facility, and hired Appraisal Economics to allocate the purchase price among the financial, tangible, and intangible assets of the company, including the real property, machinery and equipment (solar panels, inverters, and mounting hardware), a power purchase agreement, and goodwill.

Please click for more information about the valuation of power plants and renewable energy facilities, our work for private equity firms, and our experience with purchase price allocations, or to Contact Us.