Bob Mark is the executor of his parents' estate that is being divided equally among his two brothers, Tom and Mike, and himself. The estate consists of cash and marketable securities worth $4.2 million and a duplex apartment building located in the Fort Lauderdale beach area.

The terms of the will gives Mike, the younger brother, the option of keeping the apartment building as part of his equal share of the estate. Thus, Bob must value the apartment building in order to determine how much to "charge" Mike's total share of the estate.

The apartment building is rather unusual because it is located on a deepwater lot with only 50 feet of waterfront exposure rather than the usual 100 feet. In fact, Bob's search of the entire area did not reveal any other waterfront properties with less than 100 feet of dock space.

Bob located three recently sold somewhat comparable buildings, each on a 100-foot deepwater lot. They were similar to the subject property except that each has four apartments instead of two apartments in the subject property. They were also considerably newer. The subject property was 60 years old, whereas the comparable properties were only 25 years old.

The average selling price of the comparable properties was $1.6 million with net annual rental values averaging $64,000 per year per building after property taxes and expenses. The subject property produces net annual rentals of $43,000 after property taxes and expenses.

Bob estimates that the replacement cost of the subject building is $500,000. The average replacement cost of the comparable buildings is $800,000.

To complicate the situation, the owner of the property adjacent to the subject property is willing to pay $1.7 million for it because annexing the subject property would give the owner a large enough lot on which to construct a 50-story condominium complex.

Mike argues that he has no desire to sell the property to the adjacent owner but that he wants to live on the property, and it should therefore be valued accordingly. He backs up his argument by reminding his brothers that their deceased parents hated the next-door neighbor and would never have sold to him under any conditions. In fact, the next-door neighbor had made repeated offers to buy from the parents while they were still alive.

How should Bob value the duplex apartment building? The other two brothers have agreed that they will accept whatever decision he makes.