At least one court has held that only the actual cost of disposition can be deducted from the value of the property, not an assumed amount. See In re Vienna Park Properties, 132 B.R. 517 (Bankr.S.D.N.Y. 1991). In the present case, the only evidence of actual cost of sale in connection with the foreclosure is the amount contained in the auditor's report, $13,342.41, just over 2% of $640,000.00.
455 B.R. 443, 449. See In re Vienna Park Properties, 132 B.R. 517 (Bankr. S.D. N.Y. 1991) (appraiser properly used direct capitalization method to value apartment complex where the property was subject to one-year leases with lack of certainty of rental rates, occupancy, and inflation over prolonged projected period and where property required significant repairs.). Nearly all of the wide delta between Korroch's direct capitalization at $1,289,364 and Askew's direct capitalization value of $5.2 million can be explained by Askew's adjustment of the Inn's historical operating expenses to what he terms "market-based" expenses, i.e. industry averages for a hotel's various cost centers.
The difference between the two methods is the time period that the projection is made over: "the direct capitalization method covers a short period of time (a "snapshot") whereas the [discounted cash flow] method covers a longer period of time." In re Vienna Park Properties, 132 B.R. 517, 520 (Bankr. S.D.N.Y. 1991). a. Discounted Cash Flow
Basically, the Court's valuation of the property in this case came down to comparing the professional judgment of each appraiser. See, e.g., In reVienna Park Props., 132 B.R. 517, 521 (Bankr.S.D.N.Y. 1991). After doing so, the Court found the Debtor's expert more convincing and his appraisal much more realistic.
The lack of evidence by the debtor regarding the value is fatal: this Court will not assume factors or discounts not in evidence. See In re Vienna Park Properties, 132 B.R. 517, 520 (Bankr.S.D.N.Y. 1991) ("This Court need not determine whether it is appropriate to deduct liquidation costs because the Debtor has failed to adduce any evidence at trial on the nature or amount of costs of liquidation of the Property."). Thus, before the Court is some evidence of the value of the assets, evidence that the corporation is a going concern, and evidence that control rests with one person.