A newly minted estate attorney was reviewing my appraisal of a non-marketable minority limited interest in a real estate partnership which also relied on an independent appraisal of the real estate. The attorney had studied the real estate appraisal as well as my report, and noted that the real estate appraiser used the Market, Income and Asset Approaches. He wondered whether and how I used them in my report, which focused on the discounts for lack of control and marketability.
Great question!
For the LOCD, I explained that I used closed-end fund discounts as a baseline and analyzed various factors to arrive at my discount conclusion. This was the Market Approach.
For the LOMD, I used the various discount studies as a baseline and also analyzed various factors to arrive at my discount conclusion. (I did not use regression analysis, which is a statistically-based application of the Market Approach.) This was also the Market Approach. I also used the Quantitative Marketability Discount Model and option models to double-check my discount conclusion. These rate-of-return based methods were the Income Approach.
I also explained that I did not use the Asset Approach for either discount, because there is no data available to do so. (The only possibility I can conceive is that the use of flotation costs models the cost to cure illiquidity, which I suppose could be called the Asset Approach but is also based on public market studies, which could arguably classify it as the Market Approach).