The appraisal is 140 pages, thorough and well-reasoned. DiStefano draws from a variety of well documented sources for his assessment of the current situation (dated Feb 2010). However, to expect that he has window into the future will leave one disappointed. I recreated his model and recalculated the Brightwater valuation using actual 2010 experience and more conservative assumption about the future. In a nutshell, sales have been slower than he expected and prices have been significantly lower. For example, DiStefano projects price increases of 2% for 2010, actual has been -5%. He projects 38 units sold in last 9 months of 2010, actual will be around 20. Include the fact that the inventory pool is 10 units lower due to sales and you can easily see that the $219mm appraised value has to come down. How much? It’s a very levered project sensitive to assumptions about the future so your guess is as good as mine. But in a scenario where you push sales volume out a year or two, and assume flat pricing in 2011 and 5% annual thereafter, $219mm drops to $162mm.
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