Yourself Your Lender YOUR HOUSE AS SEEN BY : Your Buyer Your - - PowerPoint PPT Presentation

APPRAISING COMMERCIAL INVESTMENT PROPERTY

Cydney G. Bender-Reents, MAI President Jared M. Calabrese, MAI Senior Appraiser

YOUR HOUSE AS SEEN BY:

Yourself Your Lender

YOUR HOUSE AS SEEN BY: Your Buyer Your Appraiser

YOUR HOUSE AS SEEN BY:

Your Tax Assessor

APPRAISERS

WHAT IS AN APPRAISER? Anyone who provides an

• pinion of value

State Certification – General Certified License Professionally Designated, MAI or SRA

WHO IS AN APPRAISER?

As of January 1, 2015 GENERAL CERTIFIED APPRAISER

Covers All Real Estate With No Regard to Value or Complexity Must have a 4- Year College Degree 3,000 Hours Experience, In No Less Than 2.5 years 300 Hours Education

MAI REQUIREMENTS

13 Courses (Examinations) Comprehensive Exam 4,500 Hours Experience Over 36 Months Demonstration of Knowledge CE; 100 Hours Each 5 Years

MAI

ENGAGING AN APPRAISER

Client

The party or parties who engage an appraiser (by employment or contract in a specific assignment)

User

The client and any other party as identified, by name

• r type, as user of the

appraisal consulting report by the appraiser on the basis of communication with the client at the time

• f assignment

MARKETVALUE DEFINITION

Means the most probable price that a property should bring in a competitive and

• pen market under all conditions requisite to

a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

WHEREBY:

Buyer and Seller are typically motivated; Both parties are well informed or well advised, and acting in what they consider their own best interests; A reasonable time is allowed for exposure in the open market; and Payment is made in terms of cash in U.S. Dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold, unaffected by special or creative financing,

• r sales concessions granted by anyone associated with the sale.

VALUES

Stabilized Value

• Stabilized Rent Levels
• Stabilized Occupancy

As-Is Value

• Actual Occupancy, Rent Levels, Physical Condition

Prospective Market Value

• Value as of a future date
• Projects that are proposed, under construction, or under

conversion to a new use

• Projects not yet achieved sell-out or stabilization

Stabilized As-Is

AS-ISVALUE

Stabilized Value $500,000 Less Rent Loss Vacancy 3,000 SF x $1.00/SF/Month x 3 months ($9,000) Concessions 2,000 SF x $1.00/SF/Month x 2 months ($4,000) Less Leasing Commission 3,000 SF x $1.00/SF/Month x 60 months x 5% ($9,000) Less New Roof ($30,000) Entrepreneurial Incentive @ 10% ($5,200)

As-Is Value $442,800

OTHERVALUES

Liquidation Value Insurable Value Value in Use

APPRAISAL PROCESS HIGHEST AND BEST USE

• Legally Permissible
• Physically Possible
• Financially Feasible
• Maximally Productive

As Vacant

• Demolition
• Conversion
• Expansion
• Renovation
• Continued Use As-Is

As Improved

CASE STUDY

DMV Roseville

CASE STUDY

VALUATION ASSUMPTIONS

Extraordinary Assumptions

Presume as fact something

• therwise

uncertain

Hypothetical Conditions

That which is contrary to what exists

APPROACHESTOVALUE

Cost Approach Income Approach Sales Comparison Approach

COST APPROACH

Land Plus Improvements Depreciated

• Lack of Relevant Land Sales
• Estimating Depreciation
• Properties still trading below

replacement values

Good for Special Use Properties

INCOME APPROACH

Power of IRV

I = Income R = Rate V = Value

Income Rate Value

INCOME APPROACH

Potential Gross Income

• Vacancy

Effective Gross Income

• Expenses

Net Operating Income

VACANCY Sources

• Published Reports
• Historical Rates
• Surveys

Rate Reflects Entire Holding Period

EXPENSES

Same Expense Structure, If Not Then Adjust Self Managed Properties Atypical Maintenance Expense

INCOME

5,000 SF x $1.00/SF/Month x 12 Months = $ 60,000 @ 10% $ 6,000 $ 54,000 @ 25.0% of EGI $ 13,500

NOI = $ 40,500

CAPITALIZATION RATES

Based on 1st Year’s Income Derived from Market Keep Consistent

IRV

Value Income Rate

$506,250 $40,500 8%

SALE COMPARISON APPROACH

Principal of Substitution Similar Highest and Best Use

Size Location Access Exposure Traffic Count Age Condition Quality Parking

Elements of Comparison

COMPARABLE DATA

Obtaining and Evaluating Market Comparables Verification Using REOs as Comparables

• CoStar, LoopNet, MLS
• The Facts
• The Story
• Buyer & Seller Motivated
• Acting in Own Best Interest
• Open Market
• Cash

CASE STUDY

AERIAL

SUBJECT

STREETVIEW

BUILDING EXTERIOR

BUILDING INTERIOR

CHEVRON

9881 GREENBACK LANE, FOLSOM, CA

CASE STUDY

REO Sale

REO SALE

BANKS, BROKERS, AND THE APPRAISERS

Engagement Process Early Information Exchange

DIFFERENCE OF OPINIONS

READDRESSING AN APPRAISAL

ENERGY REGULATIONS

AND BUILDING CODES

TRANSIT ORIENTED DEVELOPMENT (TODS)

PREDICTIONS

Housing peak will occur in 2020 Sacramento Sports and Entertainment Complex will be completed, impact more than just hype.

Sacramento Kings win a NBA Championship in 5 years Sacramento will host NBA All-Star Weekend within 8 to 10 years Sacramento will host NCAA Basketball Sweet 16 within 5 to 6 years

QUESTIONS OR COMMENTS?

CONTACT

Cydney G. Bender-Reents, MAI President C.Bender@benderrosenthal.com Jared M. Calabrese, MAI Senior Appraiser J.Calabrese@benderrosenthal.com 4400 Auburn Blvd. Sacramento, CA 95841 (916) 978-4900 www.BenderRosenthal.com