What We Do

Transportation Corridors

A transportation corridor is a long, narrow strip of property that includes surface, subsurface, and air rights. It often connects two or more areas restricted to surface, subsurface, and air rights, for the deportation of goods and passengers. 

Some examples of transportation corridors are: railroad and mass transit lines, public and private roads, pipelines, including oil, gas, water, and sewer lines, fiber optics, pedestrians pathways, aqueducts and canals, television cables, and electrical transmission lines. 

How to Appraise a Transportation Corridor

There are different methods that can be used when appraising a transportation corridor, including Replacement Cost New Less Depreciation (RCNLD), Corridor Value (CV), Sales Comparison Approach, Across the Fence Value (ATF), Net Liquidation Value (NLV), and Going Concern Value (GCV). [1]

Replacement Cost New Less Depreciation (RCNLD) is based on the principle of substitution and is more commonly referred to as the “cost of assemblage.”  It includes the cost of the part taken, appraisal costs, negations costs, title costs, grading costs, project management costs, and the acquisition and demolition of buildings.  According to Dolman and Seymour, this cost can range from two to six times the Across the Fence (ATF) value.  The Court of Appeals in People v. Southern Pacific Transportation Company (1978) held that “the cost of reproduction is an acceptable approach to a determination of just compensation.”

When several similar commensurate commodities, goods or services are available, the one with the lowest price attracts the greatest demand and the widest distribution.   Corridor Value (CV) is determined by multiplying the ATF value and the enhancement factor.  The enhancement factor is arrived at by dividing the sales price of a corridor by its ATF value.

Sales Comparison Approach is applicable when there are several sales or comparables that have sold in the subject’s market area.  This approach is seldom used since there are relatively few transactions of transportation corridors that sell in the same market area.

The underlying assumption in the Across the Fence (ATF) method is that land in the transportation corridor is equal to the value of adjoining lands.  When using this method, the property is divided down the centerline and each half is joined to the adjacent parcel along with the adjacent property’s highest and best use and unit value.  The ATF is the sales comparison approach modified to the degree that shape, size, topography, and access are disregarded.  The State Board of Equalization, railroad companies, utility companies and public agencies use this method more than others when assessing value of operating and non-operating property, ground rent, and public and private streets.

The Net Liquidation Value (NLV) is the present value of the net amount the owner will realize if the corridor is sold piecemeal over a reasonable time period.  Net proceeds are determined after administrative, marketing, real estate taxes, and cleanup costs are deducted from the gross revenues. 

The Going Concern Value (GCV) is the expected future profits discounted to today’s value at a rate reflecting the quantity, quality, and durability of the income.

Appraising transportation corridors is a challenging endeavor, but can be accomplished by using one or more of the methods outlined above.

Valentine Appraisal and Associates Has Successfully Completed Several Transportation Corridor assignments:

  • Lower Franklin Reservoir Property in City of Los Angeles, CA
  • An Existing Pipeline Traverse Crossing at the BNSF Transportation Corridor in Hesperia, CA
  • 1.9 Mile 50-foot wide Right of Way Corridor in Riverside County, CA
  • 80.48 Mile Transportation Corridor in Siskiyou and Shasta Counties, CA

Palmdale Commercial Building Appraisals

Avigation Easements

Pipeline Easements

Visit Valentine Appraisal and Associates

 [1] Valentine, Gary S. “Appraising a Transportation Corridor.”  Right of Way Nov-Dec. 1998: 6-10.

Our Service Area Cities
Real Estate Appraiser, and Commercial Appraisal / Appraiser Coverage Areas: 93510 Agoura 91301 Agua Dulce, Saugus
91350 Airport Worldway; 90009 Alhambra 91801, 91803 Altadena 91001 Arcadia 91006 91007 ARCO Towers 90071 Arleta
91331 Artesia 90680 Athens 90044 Atwater Village 90039 Avalon 90704 Azusa 91702 Baldwin Hills 90008 Baldwin Park
91706 Bassett 91746 Bel Air Estates 90049. 90077 Bell 90201 Bell Gardens 90201 Bellflower 90706 Beverly Glen ;
90077, 90210 Beverly Hills 90210 – 90212 Biola Univ. (La Mirada) 90639 Boyle Heights 90033 Bradbury 91010 Brentwood
90049 91501 – 91502 / 91506 / 91523 (Glenoaks) 91504 Burbank (Woodbury Univ.) 91510 Cal State Dominguez Hills
(Carson) 90747 Cal State Long Beach (Long Beach) 90840 Cal State Northridge 91330 Cal Tech (Pasadena) 91125 – 91126
Calabasas 91302/91372 Canoga Park 91303 – 91304 Canyon Country (Santa Clarita) 91351 Carson 90745 – 90746 Carson
(CS Univ. Dominguez Hills) 90747 Carson/ Long Beach 90810Castaic 91310 / 91384 Castellemare 90272 Century City
90067 Cerritos 90701 Chatsworth 91311 Cheviot Hills 90064 Chinatown 90012 City Terrace 90063 Civic Center 90012
Claremont 91711 Commerce, 90040 Compton 90220 – 90222 Country Club Park 90019 Covina 91722 – 91724 Crenshaw
90008Cudahy 90201 Culver City 90230 / 90232 Cypress Park 90065 Diamond Bar 91765 / 91789 Dominguez Hills, Cal State
(Carson) 90747 Downey 90240 – 90242 Downtown Los Angeles ;90013 – 90015 / 90017 / 90021 / 9002 Eagle Rock ;9004East
Los Angeles 90022 East Los Angeles 90023 East Rancho Dominguez 90221 Echo Park ;900 Edwards AFB 93523 El Monte
91731 – 91732 El Segundo 9024 El Sereno 90032 Elizabeth Lake 93532 Encino 91316 / 91436 Federal Bldg (Lawndale)
90261 Firestone Boy Scout Res. 92621 Florence 90001 Gardena 90247 – 90249 Glassell Park 90065 Glendale 91201 –
91208 (La Crescenta) 91214 Glendale (Tropico) 91204 – (Verdugo City) 91046 Glendora 91740 – 91741Glenoaks (Burbank)
91504 Granada Hills 91344 Griffith Park 90027 Hacienda Heights (La Puente) 91745 Hancock Park 90004 / 90020 Harbor
City 90710 Hawaiian Gardens 90716 Hawthorne (Holly Park) 90250 Hermosa Beach 90254 Hi Vista 93535 Hidden Hills
91302 Highland Park 90042 Hollywood 90028 / 90038 / 90068 Huntington Park 90255 Hyde Park 90043 Industry, 91744 /
91746 / 91789 Inglewood 90301 – 90303, 90305 Irwindale 91706 Jefferson Park 90018 Juniper Hills 93543 Koreatown
90005 La Canada-Flintridge 91011 La Crescenta (Glendale) 91214 La Habra Heights 90631 La Mirada 90638La Mirada
(Biola Univ.) 90639 La Puente 91744/91746 Hacienda Heights) 91745 (Rowland Heights) 91748 La Verne 91750 Ladera
Heights 90056 Lake Hughes 93532 Lake Los Angeles 93550 / 93591 Lake View Terrace 91342 Lakewood 90712 – 90713 /
90715 Lancaster 93534 – 93536 90260 Lawndale (Federal Bldg) 90261 LAX Area 90045 Leimert Par 90008 Lennox 90304
Littlerock 93543 Llano 93544 Lomita 90717 Long Beach 90802 – 90808, 90813 – 90815, 90822(Cal State Long Beach)
90840 (McDonnell Douglas) 90846 90805 (World Trade Ctr) 90831 – 90832 AIr Port Worldway 90009 ARCO Towers 90071
Arleta 91331 Atwater Village 90039 Bel Air Estates 90049 / 90077 Beverly Glen 90077 / 90210 Boyle Heights 90033
Brentwood 90049Cal State Northridge 91330 Canoga Park 91303 / 91304 Century City 90067 Chatsworth 91311 Cheviot
Hills 90064 Chinatown 90012 Civic Center 90012 Country Club Park 90019 Crenshaw 90008 Cypress Park 90065 Downtown
90013 – 90015 / 90017 / 90021 / 90029 Eagle Rock 90041 East 90023 Echo Park 90026El Sereno 90032 Encino 91316 /
91436 Glassell Park 90065 Granada Hills 91344 Griffith Park 90027 Hancock Park 90004 / 90020 Harbor City 90710
Highland Park 90042 Hollywood 90028 / 90038 / 90068 Hyde Park ;90043 Jefferson Prk 90018 (Koreatown) 90005 (Ladera
Heights) 90056 Lake View Terrace 91342(LAX Area) 90045 (Leimert Park) 90008(Los Feliz) 90027 (Mar Vista) 90066 Mid
City) 90019 (Mission Hills) 91345 (Montecito Heights) 90031 (Mount Olympus) 90046 (Mt. Washington) 90065 (North
Hills) 91343 North Hollywood 91601 – 91602 / 91604 – 91607 Northridge 91324-91325 Pacific Highlands 90272 Pacific
Palisades 90272 Pacoima 91331 (Palms) 90034 Panorama City 91402 (Park La Brea) 90036 (Pico Heights) 90006 Playa del
Rey) 90293 (Porter Ranch) 91326 (Rancho Park) 90064 Reseda 91335 San Pedro 90731-90732 (Sawtelle) 90022 (Shadow
Hills) 91040 Sherman Oaks 91403 / 91423 (Silverlake) 90026 (South Central) 90001 / 90003 /90007 / 90011 / 90037 /
90047 / 90061 – 90062 (Studio City) 91604 Sun Valley 91352 (Sunland) 91040 (Sylmar) 91342 (Tarzana) 91356 (Terminal
Island) 90731 (Toluca Lake) 91602 (Tujunga) 91042 (USC) 90089 (Valley Village) 91607 Van Nuys) 91401- 91403 / 91405
– 91406 / 91411 / 91423 (Venice) 90291 (Watts) 90002/90059 (West Adams) 90016 (West Beverly) 90048 (West Fairfax)
90035 West Hills) 91307 (West Los Angeles) 90025 (Westchester) 90045 (Westlake) 90057 Westwood 90024 Wilmington
90744 (Wilshire Blvd) 90010 (Winnetka) 91306(Woodland Hills) 91364 / 91367 Los Feliz 90027 Los Nietos 90606 Lynwood
90262 Malibu 90265 Manhattan Beach 90266 Mar Vista 90066 Marina del Rey 90292 Maywood 90270 McDonnell Douglas 90846
Mid City 90019 Mission Hills 91345 Monrovia 91016 Montebello 90640 Montecito Heights 90031 Monterey Hill 90032
Monterey Park 91754-91756 Montrose 91020 Mount Olympus 90046 Mount Wilson 91023 Mt. Washington 90065 Newhall (Santa
Clarita) 91321 North Hills 91343North Hollywood 91601 – 91602 / 91604 – 91607 90805 Northridge 91324 – 91325 Cal
State Univ. 91330 Norwalk 90650 Oak Park 91301 Pacific Highlands 9027290272 Pacoima 91331Palmdale 93550 – 93552 /
93591 Palms Palos Verdes Estates 90274 Panorama City 91402 Paramount 90723 Park La Brea 90036 Pasadena 91101 /
91103 – 91107 (Cal Tech) 91125 – 91126 Pearblossom 93553 Phillips Ranch 91766 Pico Heights 90006 Pico Rivera 90660
Playa del Rey 90293Playa Vista 90094 Pomona 91766-91768 Porter Ranch 91326 Quartz Hill 93536 Rancho Dominguez 90220
Rancho Palos Verdes 90275 / 90717 / 90732 Rancho Park 90064 Redondo Beach 90277 – 90278 Reseda 91335 Rolling Hills
90274 Rolling Hills Estates 90274 Rosemead 91770 Rosewood 90222 Rowland Heights (La Puente) 91748 San Dimas 91773
San Fernando 91340 San Gabriel 91775 – 91776 San Marino 91108 San Pedro (0731 – 90733 Santa Clarita (Canyon
Country) 91351(Newhall) 91321 Valencia 91354 – 91355

 

 


Pipeline Easements

Pipelines transport products from one point to another. Pipeline title is usually

pipeline2

acquired through an easement. According to Websters, an easement “is the right a property owner grants to another for the use of their property”.

Therefore, a pipeline easement is the right to construct, operate, and maintain a pipeline over the land of others within prescribed geographical limits.

How to Appraise a Pipeline

There are two different ways to appraise a pipeline depending on if it is part of a transportation corridor or within a conforming parcel.

Reviewing published articles and books, interviewing buyers and sellers of property that is encumbered by pipelines, and sending out letters to property owners are all methods that can help when appraising pipeline.

No Acceptable Standard Width for a Pipeline Easement

There is no acceptable standard width for a pipeline easement. It is usually determined through negotiations. Initially, railroads arrived at the easement width by rounding up the diameter of the pipe to the nearest foot, then adding two feet on both sides as a buffer to ensure the pipeline’s integrity and security. But, railroads soon realized that pipeline users were getting free access onto their corridors to service and maintain pipelines, so they reasoned that since automobile lanes on public roads are typically 11 to 12-feet wide, and the width of a standard truck is 8 feet 2 ½ inches, a 10 to 12-foot width requirement to access pipelines seemed reasonable.

Pipeline Easements and Severance Damage

Once the width of the pipeline has been negotiated, and the value has been determined through research and determining the value of surrounding land, severance damages can be analyzed. Severance damages are those damages to the remainder property that are compensable. Severance damages are seldom found for new pipelines in transportation corridors because owners of corridors do not let pipeline companies install their pipeline if it could diminish the value of the remaining portion of the corridor and/or pipeline easements.

Through advance research and preparation, conducting an in-depth search for best comparable data available, and conducting a thorough analysis, your appraisal of pipeline will be supportive and reliable. You can count on us to have your assignment done on time, too.

Sample Pipeline Appraisal assignments completed by Valentine Appraisal and Associates:

• Two Existing Pipelines at the Dominguez Channel in Carson, California

• An Existing Pipeline Traverse Crossing at the BNSF Transportation Corridor in Hesperia, CA

Our Service Area Cities
Real Estate Appraiser, and Commercial Appraisal / Appraiser Coverage Areas: 93510 Agoura 91301 Agua Dulce, Saugus 91350 Airport Worldway; 90009 Alhambra 91801, 91803 Altadena 91001 Arcadia 91006 91007 ARCO Towers 90071 Arleta 91331 Artesia 90680 Athens 90044 Atwater Village 90039 Avalon 90704 Azusa 91702 Baldwin Hills 90008 Baldwin Park 91706 Bassett 91746 Bel Air Estates 90049. 90077 Bell 90201 Bell Gardens 90201 Bellflower 90706 Beverly Glen ; 90077, 90210 Beverly Hills 90210 – 90212 Biola Univ. (La Mirada) 90639 Boyle Heights 90033 Bradbury 91010 Brentwood 90049 91501 – 91502 / 91506 / 91523 (Glenoaks) 91504 Burbank (Woodbury Univ.) 91510 Cal State Dominguez Hills (Carson) 90747 Cal State Long Beach (Long Beach) 90840 Cal State Northridge 91330 Cal Tech (Pasadena) 91125 – 91126 Calabasas 91302/91372 Canoga Park 91303 – 91304 Canyon Country (Santa Clarita) 91351 Carson 90745 – 90746 Carson (CS Univ. Dominguez Hills) 90747 Carson/ Long Beach 90810Castaic 91310 / 91384 Castellemare 90272 Century City 90067 Cerritos 90701 Chatsworth 91311 Cheviot Hills 90064 Chinatown 90012 City Terrace 90063 Civic Center 90012 Claremont 91711 Commerce, 90040 Compton 90220 – 90222 Country Club Park 90019 Covina 91722 – 91724 Crenshaw 90008Cudahy 90201 Culver City 90230 / 90232 Cypress Park 90065 Diamond Bar 91765 / 91789 Dominguez Hills, Cal State (Carson) 90747 Downey 90240 – 90242 Downtown Los Angeles ;90013 – 90015 / 90017 / 90021 / 9002 Eagle Rock ;9004East Los Angeles 90022 East Los Angeles 90023 East Rancho Dominguez 90221 Echo Park ;900 Edwards AFB 93523 El Monte 91731 – 91732 El Segundo 9024 El Sereno 90032 Elizabeth Lake 93532 Encino 91316 / 91436 Federal Bldg (Lawndale) 90261 Firestone Boy Scout Res. 92621 Florence 90001 Gardena 90247 – 90249 Glassell Park 90065 Glendale 91201 – 91208 (La Crescenta) 91214 Glendale (Tropico) 91204 – (Verdugo City) 91046 Glendora 91740 – 91741Glenoaks (Burbank) 91504 Granada Hills 91344 Griffith Park 90027 Hacienda Heights (La Puente) 91745 Hancock Park 90004 / 90020 Harbor City 90710 Hawaiian Gardens 90716 Hawthorne (Holly Park) 90250 Hermosa Beach 90254 Hi Vista 93535 Hidden Hills 91302 Highland Park 90042 Hollywood 90028 / 90038 / 90068 Huntington Park 90255 Hyde Park 90043 Industry, 91744 / 91746 / 91789 Inglewood 90301 – 90303, 90305 Irwindale 91706 Jefferson Park 90018 Juniper Hills 93543 Koreatown 90005 La Canada-Flintridge 91011 La Crescenta (Glendale) 91214 La Habra Heights 90631 La Mirada 90638La Mirada (Biola Univ.) 90639 La Puente 91744/91746 Hacienda Heights) 91745 (Rowland Heights) 91748 La Verne 91750 Ladera Heights 90056 Lake Hughes 93532 Lake Los Angeles 93550 / 93591 Lake View Terrace 91342 Lakewood 90712 – 90713 / 90715 Lancaster 93534 – 93536 90260 Lawndale (Federal Bldg) 90261 LAX Area 90045 Leimert Par 90008 Lennox 90304 Littlerock 93543 Llano 93544 Lomita 90717 Long Beach 90802 – 90808, 90813 – 90815, 90822(Cal State Long Beach) 90840 (McDonnell Douglas) 90846 90805 (World Trade Ctr) 90831 – 90832 AIr Port Worldway 90009 ARCO Towers 90071 Arleta 91331 Atwater Village 90039 Bel Air Estates 90049 / 90077 Beverly Glen 90077 / 90210 Boyle Heights 90033 Brentwood 90049Cal State Northridge 91330 Canoga Park 91303 / 91304 Century City 90067 Chatsworth 91311 Cheviot Hills 90064 Chinatown 90012 Civic Center 90012 Country Club Park 90019 Crenshaw 90008 Cypress Park 90065 Downtown 90013 – 90015 / 90017 / 90021 / 90029 Eagle Rock 90041 East 90023 Echo Park 90026El Sereno 90032 Encino 91316 / 91436 Glassell Park 90065 Granada Hills 91344 Griffith Park 90027 Hancock Park 90004 / 90020 Harbor City 90710 Highland Park 90042 Hollywood 90028 / 90038 / 90068 Hyde Park ;90043 Jefferson Prk 90018 (Koreatown) 90005 (Ladera Heights) 90056 Lake View Terrace 91342(LAX Area) 90045 (Leimert Park) 90008(Los Feliz) 90027 (Mar Vista) 90066 Mid City) 90019 (Mission Hills) 91345 (Montecito Heights) 90031 (Mount Olympus) 90046 (Mt. Washington) 90065 (North Hills) 91343 North Hollywood 91601 – 91602 / 91604 – 91607 Northridge 91324-91325 Pacific Highlands 90272 Pacific Palisades 90272 Pacoima 91331 (Palms) 90034 Panorama City 91402 (Park La Brea) 90036 (Pico Heights) 90006 Playa del Rey) 90293 (Porter Ranch) 91326 (Rancho Park) 90064 Reseda 91335 San Pedro 90731-90732 (Sawtelle) 90022 (Shadow Hills) 91040 Sherman Oaks 91403 / 91423 (Silverlake) 90026 (South Central) 90001 / 90003 /90007 / 90011 / 90037 / 90047 / 90061 – 90062 (Studio City) 91604 Sun Valley 91352 (Sunland) 91040 (Sylmar) 91342 (Tarzana) 91356 (Terminal Island) 90731 (Toluca Lake) 91602 (Tujunga) 91042 (USC) 90089 (Valley Village) 91607 Van Nuys) 91401- 91403 / 91405 – 91406 / 91411 / 91423 (Venice) 90291 (Watts) 90002/90059 (West Adams) 90016 (West Beverly) 90048 (West Fairfax) 90035 West Hills) 91307 (West Los Angeles) 90025 (Westchester) 90045 (Westlake) 90057 Westwood 90024 Wilmington 90744 (Wilshire Blvd) 90010 (Winnetka) 91306(Woodland Hills) 91364 / 91367 Los Feliz 90027 Los Nietos 90606 Lynwood 90262 Malibu 90265 Manhattan Beach 90266 Mar Vista 90066 Marina del Rey 90292 Maywood 90270 McDonnell Douglas 90846 Mid City 90019 Mission Hills 91345 Monrovia 91016 Montebello 90640 Montecito Heights 90031 Monterey Hill 90032 Monterey Park 91754-91756 Montrose 91020 Mount Olympus 90046 Mount Wilson 91023 Mt. Washington 90065 Newhall (Santa Clarita) 91321 North Hills 91343North Hollywood 91601 – 91602 / 91604 – 91607 90805 Northridge 91324 – 91325 Cal State Univ. 91330 Norwalk 90650 Oak Park 91301 Pacific Highlands 9027290272 Pacoima 91331Palmdale 93550 – 93552 / 93591 Palms Palos Verdes Estates 90274 Panorama City 91402 Paramount 90723 Park La Brea 90036 Pasadena 91101 / 91103 – 91107 (Cal Tech) 91125 – 91126 Pearblossom 93553 Phillips Ranch 91766 Pico Heights 90006 Pico Rivera 90660 Playa del Rey 90293Playa Vista 90094 Pomona 91766-91768 Porter Ranch 91326 Quartz Hill 93536 Rancho Dominguez 90220 Rancho Palos Verdes 90275 / 90717 / 90732 Rancho Park 90064 Redondo Beach 90277 – 90278 Reseda 91335 Rolling Hills 90274 Rolling Hills Estates 90274 Rosemead 91770 Rosewood 90222 Rowland Heights (La Puente) 91748 San Dimas 91773 San Fernando 91340 San Gabriel 91775 – 91776 San Marino 91108 San Pedro (0731 – 90733 Santa Clarita (Canyon Country) 91351(Newhall) 91321 Valencia 91354 – 91355

Fiber Optics

fiber-optics-1-copyFiber optics are lines of thin glass that can send digital information by transmitting light signals. Thousands optic fibers are arranged in bundles and optical cables, protected by an outer covering, called a jacket. Optical fibers can be single-mode fibers that transmit infrared laser light, or multi-mode fibers that transmit infrared light from light emitting diodes (LEDs). Optical fibers have the diameter of a single human hair.

Fiber optics were discovered in 1970 and the discovery has revolutionized the telecommunications industry. Today, more than 80% of the world’s long-distance traffic is secured over optical fiber cables and because of the increase of computer use, the current recession has had very little effect on the market for fiber.

Optical fibers can be buried underground or hung from poles above ground like electrical wires. When they are buried, the rule of thumb is that they be placed three to four feet deep and the cables typically encumber an area non-exclusively between three to ten feet wide. Protective cables are designed for approximately a 40-year lifetime, and the glass fiber inside the cable is good for a millennia as long as the coatings and plastics used in the cable remain intact. The biggest failure is damage from backhoes and/or digging up cables. The downside to placing cables underground, according to experts, is that the installation cost to place fiber optic conduits underground is twice as much as the cost to hang fiber optic cable from poles. However, more conduits can be placed underground for little additional cost per conduit, and several times more fiber can be installed simultaneously underground than on poles.

Because the industry has failed to make comparable sales and rental data available for fiber optic lines, appraisers are left to use alternative approaches of value. Methodologies that are used are similar to appraising a transportation corridor.

The Survey Method, where information from right of way owners who have allowed leases or easements for fiber optic lines on their corridors is one method where values can be obtained. Further information from users who have fiber optic lines throughout various corridors can help as well. Discussions may include those in private and public sectors.

Across the Fence method where the value of the corridor is similar to the value of adjacent properties may also be used. Across the Board or Region is another method that was developed in the early days of the industry’s growth, when fiber optics had a window of opportunity to beat out the competition and secure laying thousands of miles of fiber optics in agreements that needed to close in a very short period of time. An example of this is when negotiators for Southern Pacific Transportation Company needed an idea of the value of real estate fiber optic lines which encumbered their corridors, so a rough Across the Fence (ATF) value was arrived at and eventually, Across the Board value for fiber optic lines which equaled $10,000 an acre for rural areas and $25,000 an acre for urban areas was agreed upon. These numbers were used for nearly two decades (1980’s-1990’s). Another acceptable unit of comparison for Across the Board approach is price per mile.

The final approach that is used is the Market Approach, which is recognized as the most reliable method for appraising real property for fiber optic lines. This approach requires obtaining comparable leases and easements of fiber optic lines. These are adjusted for necessary market adjustments, including terms and conditions of agreement, changing market conditions, location differences, and differences of physical characteristics between the comparable and subject property.

Because the telecommunications industry continues to grow at a rapid pace and there is a blockage of free flowing information due to confidential agreements, the appraisal of fiber optic lines continues to vary. Until there is some level of uniformity in the units and elements of comparison in appraising real property for fiber optic lines, the marketplace will continue to accept a host of methodologies and approaches of value.

Valentine, G.S. & Hodges, T. (2011, July/August). Fiber Optic Valuation: The need for conformity. Right of Way, 28-32.

(https://dictionary.reference.com/browse/fiber+optics)

Rails to Trails

In 1916 railroad transportation was at its peak.  At that time, railroads were our main source of transportation.  They hauled food to market, moved coal to heat cities, and carried settlers to the Western frontier. Railroads also helped win World War II.  But, in the 1970’s other modes of transportation–like trucking–took over.  Because of this, many railroads went bankrupt and carriers began abandoning rail lines at an alarming rate.  Because rail corridors have gentle grades and often follow rivers and scenic landscapes, the possibility of creating trails from rail lines for recreation and nonmotorized transportation became an opportunity and a solution.  In 1976, Congress attempted to address the abandonment of rail lines by issuing the Railroad Revitalizaion and Regulatory Reform Act (4-R Act).  This law deferred the disposition of railroad rights-of-way for 180 days to allow for possible transfers for public use, including rails-to-trails conversions.  The biggest challenge came from nearby landowners, many of whom believed that they were entitled to repossess the land when it was abandoned.  In 1983, Section 8(d) of the National Trails System Act attempted to address this issue.  This law allows railroad carriers to free themselves of responsibility for unprofitable rail lines by transferring them (by sale, donation, or lease) to qualified private or public agencies for interim use as trails until they are needed again for rail service.  This process is called “rail-banking.”  An interested trail manager (may be a public agency or qualified organization) can request a railbanking order within 30 days after the railroad files an application for an abandonment. Aggrieviated landowners can file a “takings” claim under the federal Tucker Act.  This requires the government to pay “just compensation” if it “takes” private property for a public use.  But, the Supreme Court explained in the 1990 Preseault case (which challenged the federal railbanking law and resulted in eight reported court decisions in the state and federal courts) that “only some rail-to-trail conversions will amount to taking.”  The law on rails-to-trails conversions is still evolving, particularly in the “takings” litigation, but the Rails-to-Trails Conservancy has materials and resources on its website that can help educate and assist in various legal, political, and communication issues that may arise during the course of a rails-to-trails conversion.  

Valentine Appraisal and Associates sample Rails-to-Trails assignments:

  • 80.48 Mile Transportation Corridor in Siskiyou and Shasta Counties, California
  • 2.7 mile Transportation Corridor in Whittier, California

 

Agricultural Property

agriculture1-copyImproved or unimproved land that is devoted to or available for the production of crops and other products of the soil, e.g. fruits, timber, pasture, and buildings for livestock.

(Dictionary of Real Estate Appraisal, 4th edition.)

Convenience Store Appraisals

Convenience Store Appraisals

Convenience store appraisals involve a retail business with primary emphasis placed on providing the public a convenient location to quickly purchase from a wide array of consumable products (predominately food) and gasoline services.  While such operating features are not a required condition, most convenience stores have the following:

convenience store appraisal affordable

Appraising a Convenience Store Characteristics

  • A building with typically less than 5,000 sq. ft.
  • Auxiliary parking/or convenient pedestrian access
  • Extended hours of operation
  • Stock at least 500 units
  • Product mix includes grocery items, beverages, snacks, and tobacco

Upon appraising convenience stores and fuel properties, it is also important to analyze the trade area.

Appraising a Convenience Store Trade Area

The trade area is the geographic area within which the subject convenience store competes for business.  The industry typically recognizes a 2-mile radius in urban areas.  In small rural communities, the trade area often covers a major portion of the town or even an entire city.  Typical features in such property profiles include:

  • store size
  • parking
  • visibility
  • external appearance
  • overall pricing
  • fuel branding
  • fuel service
  • food service
  • weekly hours of operation
  • misc services
  • and restrooms

 These physical characteristics are important to analyze the demand and supply of such products. 

Appraising a Convenience/Fuel Store SSSI

The Service Station Saturation Index or (SSSI) is an important tool in analyzing the retail fuel demand for a given neighborhood.  It determines the percentage of convenience stores that an area can and should have to provide adequate service at a profit.   A balanced market will have a SSSI of 100.  If the SSSI is 200, then there are twice as many stores as can be supported.

affordable convenience store appraisal

Upon first appraising the property, site assessment is an integral part of the appraisal.  It includes the analysis of its access, forecourt (which is an area where fuel dispensers and canopies are located), store envelope (which includes the building footprint), and location criteria.  Site and criteria vary from company to company, depending on the company’s target market and business mall. 

If you are looking for an appraisal of your convenience store, please contact Valentine Appraisal and Associates.

Tennis and Racquet Sport Clubs

It all started in England in 1873.  That was the year lawn tennis was introduced by Major Walter Clopton Wingfield.  In fact, the game of tennis may be traced back to the days of ancient Greeks.  Tennis was brought to the United States and organized in 1881.  In recent decades, the bulging demand and the construction of thousands of tennis courts from public agencies, private clubs, resort operations, and residential developments have occurred.   The different types of tennis courts are outdoor clubs, indoor clubs, indoor/outdoor clubs, resorts, residential tennis facilities, in addition to racquetball, squash, paddle tennis, and platform tennis. 

Before the appraisal is undertaken of a new facility, the appraiser must do some careful research.  Breakeven points are rising as expenses increase the sale.  The measurement of demand is traditionally made in terms of players per tennis court.  For instance, for an appraisal that reports a level of approximately 120 players per court, the figure is based on the total number of existing future tennis players in the area and the total number of courts currently available within an area defined by a 15-minute driving time.  Other appraisers estimate the potential number of players in an area by computing a percent of the number of persons and families with incomes of a certain level.  There does not appear to be any loyalty to clubs, so convenience is an important factor.  The final component of the tennis facility market analysis is a survey of existing competitive tennis facilities and plans for proposed tennis courts serving a particular area.  The appraiser must perform independent research to determine the level of demand in any specific location and the supply of facilities representing the demand. 

Part of the site consideration includes location, size, shape, access, and zoning.  Some of the physical characteristics of a facility that must be considered include design, building type, tennis court layout, tennis court construction, lighting, heating and ventilation, and special equipment. 

Financing of a tennis club has been one of the major impediments to construction of enough courts to meet demand adequately in the United States.  There are many reasons why racquetball courts and tennis courts are not financed.  They include: (1) the property is too specialized; (2) uncertain long-term appeal; (3) difficult to judge management expertise; (4) lack of long-term financing; (5) no prolonged experience to draw from; (6) concern about overbuilding; (7) lack of financial strength of principals; and (8) investors are not interested in this type of property.

The Income Approach is the reliable approach to use when appraising tennis and racquet clubs and can inform the client of how to capitalize estimated future earnings.  The process is to project gross revenue from all sources and deduct from them the estimated annual operating expenses of all types.  The resulting net income may be converted to application of a capitalization rate, and may include both the direct capitalization analysis and the yield capitalization analysis.  The Sales Comparison and Cost approaches are often used too.  The approaches are then reconciled into a single value.  Be careful that any intangible assets and furniture, fixtures, and equipment are not included in the appraisal of real property. 

Only two typical situations involve appraisals of clubs: (1) the club operates in leased quarters, and (2) the club owns the real estate and other assets.  Leased quarters can be a multiple tenancy or in a freestanding building.  An analysis of contributions of intangible factors to the overall value follow the same methodologies in all cases.  As a simplification, the business value may be estimated as the difference between the Income Approach and the Cost Approach. 

 

 

 

 

Valuation of Wetlands

Recent scientific discoveries and a changing political landscape have radically altered the status of wetlands in the marketplace.  Wetlands have been transformed from an undesirable land form to an important natural resource, and are highly regulated types of real estate.  Wetlands bring to mind distinct images of swamps, bogs, marshes, and other areas where wet, mucky bottoms are filled with fish, wildlife, and insects.  However, some are disguised and during the dry season aren’t wet at all, so properly identifying them is difficult.  Wetland identification and boundary delineation is best left to certified specialists, as five basic types of wetland systems are known.  Their general characteristics are:

(1) Rain System, which consists of ocean and extends to the high watermark along the shoreline.

(2)  Estuarine System, such as salt marshes and mangrove swamps, are located in tidal areas.

(3)  Riverine System, associated with rivers, creeks, channels, and channelized waterways. 

(4)  Lacustrine System, associated with lakes and reservoirs.

(5)  Palustrine System, associated with swamps and bogs, separate from other wetland systems.

The wetlands are valuable because of the physical, legal, social and economic aspects of wetlands and what they provide. 

The three traditional approaches to value, Sales Comparison, Cost, and Income, are developed to estimate the market value of real property and should all be used as data permits when appraising wetlands.

There are different ways in appraising wetlands in the Sales Comparison Approach.

(a)  Hole to Hole Analysis: sales having wetland ratios similar to the property being appraised are identified, and their sales prices are adjusted for differences in wetland ratios based on market-extracted data. 

(b)  Sum of the Parts Analysis: the market values of wetlands and the uplands are estimated separately then added together to estimate a market value as the property has evolved. 

(c)  Residual Analysis: if sales of only one component part are available, then a mixture of the Hole to Hole and Sum of the Parts methods can be combined to come up with Residual Analysis. 

The Cost Approach is like the Sales Comparison Approach, but is based on the economic principle of substitution.  The Income Approach is very seldom used in the appraisal of wetlands except when the wetland is encumbered by a lease. 

Some special considerations should be taken into account when appraising the market value interest of wetland properties: when it includes the presence of timber or mercantile agriculture, endangered or threatened species of plants and animals, or restricting easements and reservations are involved. 

 

 

 

 

Appraisal of Historic Property

There are three major categories which are currently termed “historical properties”: (1) properties that are associated with events or persons important in the past development of the United States, (2) properties that demonstrate styles of architecture, building construction, or engineering, and/or (3) properties that express a particular culture or place. 

 Before commencing the valuation of a historical property, at least nine questions must be asked: 

1.   What is the significance of the property in the history of the United States and to its region, community, or neighborhood, and what is its architectural, and/or cultural significance as it relates to a historical figure or event?

2.   What designations does the property have or is it eligible for in recognition of its significance?

3.   Is the property singly or is it one of a grouping of historical properties?

4.   Is the property eligible for historical rehabilitation tax credits or other tax credits?

5.   Is the property eligible for grants, low-interest loans, and other benefits?

6.   Will the rehabilitated property benefit from heritage tourism?

7.   Is the property encumbered by, or eligible for, a preservation or conservation easement?

8.   Is the property suitable for adaptive uses?

9.   What extraordinary costs for rehabilitation or operation should be considered?

After the abovementioned questions are answered, the highest and best use is determined, and the three traditional approaches (including Income, Sales Comparison, and Cost) are applied.  Finally, a reconciliation of value is concluded.  

Preservation-Conservation Easements

One way to prevent demolition or harmful changes to properties that have historical or architectural significance is to impose sets of building restrictions.  Preservation easements prohibit or limit the changes that owners can make.  The objective of historical preservation easements is to preserve architectural integrity so that the individual properties, whole blocks, and neighborhoods will not be destroyed.  Preservation easements are binding on the donor/owner and all subsequent owners.  Easement donations are considered to be charitable gifts and are income-deductable for tax calculations.  All types of properties are eligible, including owner-occupied single-family dwellings. 

Easements must be donated in perpetuity to a government entity or qualified 501(c)(3) charitable organization, and must protect and preserve land areas for the public, natural habitats, open space, or historically important land area.

The Internal Revenue Service regulations typically do not allow deductions for charitable contributions of property in excess of $5,000 unless the donor obtains a qualified appraisal report. 

 

 

 

 

Appraisal of Self-Storage Facilities

The 2000 US Census reported that the United States population was approximately 281.5 million.  At the same time, the total amount of US self-storage was estimated to be approximately 1.3 million square feet, indicating that there were approximately 4.62 sq. ft. of self-storage space for every person in the United States.  Compare this to the United States population in 1960.  There were 180.6 million people and an estimated storage supply of only 180 million square feet, or approximately 1 rentable square foot of self-storage per person.  According to these statistics, the amount of self storage space in the United States has quadrupled in the last 40 years.  However, as a result of the recent economic recession, we are now experiencing an oversupply of self-storage space throughout the country. 

In order to effectively appraise a proposed or existing self-storage facility, a market analysis is necessary to analyze how the market interacts with a specific property.  Performances in the past, present, and future impact the value of a specific property, and these market trends are always changing.  The analysis starts by defining the market area and identifying who the competitors are.  The existence of competitive properties helps to demonstrate demand trends.  Potential demands can be quantified using demographic statistics meshed with industrial ratios such as total rentable square feet per person.  Self-storage appraisals tend to be rich in value analysis and weak in market analysis.  This is not the case in our appraisal reports. 

After determining the subjects’ highest and best use as a self-storage facility, the three traditional approaches of value including the Cost Approach, Income Approach, and Sales Comparison Approach are utilized before arriving at a reconciliation of value. 

 

Appraisal of Office Buildings

Roots of the office building reach deep into the ancient times.  Any reference to office buildings first appeared in the form of chambers set aside for recordkeeping in palaces of the earliest kings.  Much later, during the Italian renaissance, freestanding dedicated office buildings began to take shape in the great Italian banking houses.  But it wasn’t until the burst of technology innovation in the late 19th century that it reached new heights, and the office building would assume its modern form.

To understand office buildings, it is necessary to recognize the fundamental aspects of the varied building types, including:

  • Location
  • Size and height
  • Class
  • Configuration
  • Building services and equipment
  • Building cost
  • Age
  • Origin
  • Use and ownership
  • Markets

Types of ownership of office buildings tend to include: ownership of land and improvements, leasehold estates, and condominium ownership.  The different types of owning entities of the individual ownership include tenancy, partnerships, corporations, and trusts. 

Appraisal of Wind Farms

Wind is less expensive per kilowatt than solar or other renewable energy and is competitive with some other types of thermal energy as well.  But without federal government incentives, these renewable sources of energy would suffer.  Approximately 7% of electricity generated nationwide is from renewable energy.  Most states have adopted renewable energy standards set between 20% and 25% within a 10 to 15-year timeframe. 

Renewable energy sources are wind farms, solar energy farms, geothermal, biomass energy, and water energy. 

Solar energy projects typically cost $3,000,000 to $5,000,000 per megawatt of installed power, while wind turbine manufacturers indicate an installed cost of $1,000,000 to $2,000,000 per megawatt.  In order to meet the United States goal of 20% wind power by 2030, it will be necessary to install up to 7,000 wind turbines per year, which is a very aggressive goal.

The three most important geographic characteristics that dictate placement of any likely renewable energy project include (1) availability of resources, (2) availability of land, and (3) proximity to a power grid.  One of the most important characteristics of a utility scaled wind farm is a power purchase agreement.  This is where a utility has committed to buy power that the wind farm may generate.  Historically, energy land sales in Southern California show a significant trend in that premiums for entitled tracts earmarked for solar or wind farms, or other renewable energy, and in close proximity to transmission capacity bring premiums to land values.  It may be pointed out that the premium should not be attributed to the land, but should be attributed to the entitlements for a wind farm or other renewable energy.   

In order to appraise a wind farm, a site area must be determined, entitlements for a wind farm must be secured, and turbine sizes must be accounted for.  Each turbine has a capacity of 1.5 to 3.0 megawatts, and their heights are 280 to 300 feet.  A discounted cash flow model must include land costs, construction costs (site entitlements, off-site costs, installed costs of wind turbines), and any ITC or PTC offsets.  Permitting and construction schedule must be considered, and projected installed power output and projected PPA rate and reversion considered as well.  Subsequent to this, the appraiser then calculates net present value using a discounted cash flow model per yield capitalization approach. 

Remember, what is important in the valuation of a wind farm is (1) the presence of a power purchase agreement, and (2) the eligibility of a developer for production tax credits or other subsidies to offset construction costs. 

Appraisal of Religious Facilities

In general, religious facilities tend to operate on a local basis.  Other than a mega-facility, most religious facilities draw members from a very localized market.  As a particular neighborhood evolves, the likely users of a given facility generally will be consistent with the neighborhood.  Individuals typically practice their religion near their home and with individuals whose beliefs, socioeconomic standards, and values are similar.  Thus, trends in an area tend to influence the valuation of partaker facility.  In general, there are four basic groups that tend to exist geographically as follows: (1) Baptists in the South; (2) Lutherans in the upper Midwest farm belt; (3) Roman Catholics in the Northeast; and (4) Mormons in Utah and other Rocky Mountain states. 

Because many religious facilities fulfill more than just worship service function, peripheral areas and activities are expanding.  Many of the following features may be found in religious facilities today.  In some properties, only a few of these items will be present:

Sanctuary, chapel, narthex, baptistry, mikba, belltower, meeting rooms, administrative office, choir room, quiet room, cry rooms, library, classrooms, kitchen, gym, theater, concert hall, community center, media room, bookstore, restaurant, daycare center, nursing home, family life center, outreach facilities, field activities, parking garage, amusement park, game room, dance hall, rectory, parsonage.

Facilities are generally consistent with the desires and beliefs of the group proposing the facility.  Religious groups that profess to live the simple life tend to gravitate to more traditional architecture.  Others that are progressive or consider themselves modern, tend toward a more contemporary look.  After analyzing the religious facility and its area/neighborhood influences, an appraiser must be certain that the highest and best use is a religious facility, and after determining this, then the three traditional approaches to value (including Cost, Sales Comparison, and Income Approach) are applied.  Finally, a reconciliation of these values is arrived at for a conclusion of the market value. 

 

Appraisal of Recreational Vehicle Parks

Despite concerns of dwindling energy supplies, recreational vehicles continue to be popular with millions of travelers and campers. 

There are five basic types of recreational vehicles: (1) motorhome, (2) travel trailer, (3) truck camper, (4) tent trailer, and (5) 5th-wheel trailer.

There are different types of recreational vehicle parks, including overnight parks, extended-stay parks, destination parks, and other types of parks.  In order to be prepared to analyze the highest and best use properly, a market analysis must be completed.  This provides an understanding for a potential client base in the particular area.  Locational features including distance to population centers, climate, and recreation amenities will determine the type of clientele the park will attract.  Both location and demographic factors have a significant impact on the quality and quantity of income a park will generate.  In the valuation of an RV site, the appraiser needs to analyze two distinct entities: the underlying land and the individual sites or spaces that comprise the facility.  These items need to be analyzed separately.  The utility of the RV site may be affected by the topography, configuration, size, and soil conditions, and by the availability of adequate utilities.  Land with few physical barriers is more desirable and less costly to develop.

Three types of spaces or sites are found in most RV parks: pull-through, back-in, and group spaces. 

A thorough discussion of the improvements is needed to support the selection and analysis of comparable properties.  Some likely park improvements typically include sanitary facilities, registration, roads, laundry, park store, recreation facilities, and other improvements. 

Recreational vehicle parks are usually bought and sold on the basis of their income potential.  In fact, of the three traditional approaches to value, the Income Approach is the most applicable because it most closely follows the actions and expectations of investors and owner-operators.  The Cost Approach is flawed by difficulties finding comparable land sales and estimating depreciation.  The Sales Comparison Approach is often given secondary weight because although it can be a powerful valuation tool, it is often difficult accessing sales information.  Still, as per the Sales Comparison Approach, units of comparison include price per space, gross income multiplier, and gross profit multiplier. 

After determining the value of the RV park as a going concern, segregating real estate from non-realty values is often required.  Most of the value in a recreation vehicle park is represented by real estate.  The bulk of non-realty value present is usually attributed to the intangible assets such as goodwill. 

Avigation Easement

avigation-01-copyAn easement is the right a property owner grants to another for a specific use of their property. This right is acquired through purchase or condemnation. An avigation easement is the right a public or private agency acquires to use the airspace above a specific height for the flight of aircraft.

What is an Avigation Easement?

According to Baker v. Burbank-Glendale-Pasadena Airport Authority (1990) case, an “avigation easement” is required “when the noise, vibration, fumes, fuel particles and inconvenience caused by low-flying aircraft interfere with the use and enjoyment of the underlying property…”

What is the purpose of an Avigation Easement?

An airport might like to acquire an avigation easement over neighboring properties to prevent construction of buildings and towers, planting of trees, installation of lighting, or any other development that might interfere with takeoff and landing of aircraft. An Avigation Easement also protects against liability of any other nuisance such as noise, fumes, and vibration that may interfere with the use and enjoyment of the property.

Height restrictions with an Avigation Easement

In City of Los Angeles v. Japan Air Lines Co., LTD. (1974), the court stated that federal regulations require jets and other large aircraft to be operated at an altitude of at least 1500 feet above terrian, yet currently the County of Orange in Southern California has no height restriction.

Noise Levels with an Avigation Easement

In Baker v. Burbank-Glendale-Pasadena Airport Authority (1990) it was determined that noise levels should not exceed 65 decibels.

How to Obtain an Avigation Easement

Although the most common form of obtaining an avigation easement is through purchase or condemnation, avigation easements can be acquired by prescription as well, meaning the rights to the air space can be obtained for free if the air space has been used without complaint from adjacent land owners for at least 5 years in California (15 in Connecticut and 10 in the state of Washington).

Other Restrictions for an Avigation Easement

When an avigation easement is acquired, there are certain restrictions that can be put into place such as in Burbank (City of Burbank v. Lockheed Air Terminal, Inc.) a local ordinance prohibits takeoffs between 11 p.m. and 7 a.m.

Appraising an Avigation Easement

When appraising an avigation easement, compensation is paid to the land owner for rights to the air space. Compensation for an Avigation Easement is based on the fair market value of the property “before” the easement and “after” the avigation easement. The difference between the “before” and “after” value of the property is the value of the avigation easement.

Valentine Appraisal and Associates has appraised more than 10 avigation easements in recent years. Please feel free to contact us at (661) 288-0198 as we are experts in avigation easements.

Real Estate Appraiser, and Commercial Appraisal / Appraiser Coverage Areas: 93510 Agoura 91301 Agua Dulce, Saugus 91350 Airport Worldway; 90009 Alhambra 91801, 91803 Altadena 91001 Arcadia 91006 91007 ARCO Towers 90071 Arleta 91331 Artesia 90680 Athens 90044 Atwater Village 90039 Avalon 90704 Azusa 91702 Baldwin Hills 90008 Baldwin Park 91706 Bassett 91746 Bel Air Estates 90049. 90077 Bell 90201 Bell Gardens 90201 Bellflower 90706 Beverly Glen ; 90077, 90210 Beverly Hills 90210 – 90212 Biola Univ. (La Mirada) 90639 Boyle Heights 90033 Bradbury 91010 Brentwood 90049 91501 – 91502 / 91506 / 91523 (Glenoaks) 91504 Burbank (Woodbury Univ.) 91510 Cal State Dominguez Hills (Carson) 90747 Cal State Long Beach (Long Beach) 90840 Cal State Northridge 91330 Cal Tech (Pasadena) 91125 – 91126 Calabasas 91302/91372 Canoga Park 91303 – 91304 Canyon Country (Santa Clarita) 91351 Carson 90745 – 90746 Carson (CS Univ. Dominguez Hills) 90747 Carson/ Long Beach 90810Castaic 91310 / 91384 Castellemare 90272 Century City 90067 Cerritos 90701 Chatsworth 91311 Cheviot Hills 90064 Chinatown 90012 City Terrace 90063 Civic Center 90012 Claremont 91711 Commerce, 90040 Compton 90220 – 90222 Country Club Park 90019 Covina 91722 – 91724 Crenshaw 90008Cudahy 90201 Culver City 90230 / 90232 Cypress Park 90065 Diamond Bar 91765 / 91789 Dominguez Hills, Cal State (Carson) 90747 Downey 90240 – 90242 Downtown Los Angeles ;90013 – 90015 / 90017 / 90021 / 9002 Eagle Rock ;9004East Los Angeles 90022 East Los Angeles 90023 East Rancho Dominguez 90221 Echo Park ;900 Edwards AFB 93523 El Monte 91731 – 91732 El Segundo 9024 El Sereno 90032 Elizabeth Lake 93532 Encino 91316 / 91436 Federal Bldg (Lawndale) 90261 Firestone Boy Scout Res. 92621 Florence 90001 Gardena 90247 – 90249 Glassell Park 90065 Glendale 91201 – 91208 (La Crescenta) 91214 Glendale (Tropico) 91204 – (Verdugo City) 91046 Glendora 91740 – 91741Glenoaks (Burbank) 91504 Granada Hills 91344 Griffith Park 90027 Hacienda Heights (La Puente) 91745 Hancock Park 90004 / 90020 Harbor City 90710 Hawaiian Gardens 90716 Hawthorne (Holly Park) 90250 Hermosa Beach 90254 Hi Vista 93535 Hidden Hills 91302 Highland Park 90042 Hollywood 90028 / 90038 / 90068 Huntington Park 90255 Hyde Park 90043 Industry, 91744 / 91746 / 91789 Inglewood 90301 – 90303, 90305 Irwindale 91706 Jefferson Park 90018 Juniper Hills 93543 Koreatown 90005 La Canada-Flintridge 91011 La Crescenta (Glendale) 91214 La Habra Heights 90631 La Mirada 90638La Mirada (Biola Univ.) 90639 La Puente 91744/91746 Hacienda Heights) 91745 (Rowland Heights) 91748 La Verne 91750 Ladera Heights 90056 Lake Hughes 93532 Lake Los Angeles 93550 / 93591 Lake View Terrace 91342 Lakewood 90712 – 90713 / 90715 Lancaster 93534 – 93536 90260 Lawndale (Federal Bldg) 90261 LAX Area 90045 Leimert Par 90008 Lennox 90304 Littlerock 93543 Llano 93544 Lomita 90717 Long Beach 90802 – 90808, 90813 – 90815, 90822(Cal State Long Beach) 90840 (McDonnell Douglas) 90846 90805 (World Trade Ctr) 90831 – 90832 AIr Port Worldway 90009 ARCO Towers 90071 Arleta 91331 Atwater Village 90039 Bel Air Estates 90049 / 90077 Beverly Glen 90077 / 90210 Boyle Heights 90033 Brentwood 90049Cal State Northridge 91330 Canoga Park 91303 / 91304 Century City 90067 Chatsworth 91311 Cheviot Hills 90064 Chinatown 90012 Civic Center 90012 Country Club Park 90019 Crenshaw 90008 Cypress Park 90065 Downtown 90013 – 90015 / 90017 / 90021 / 90029 Eagle Rock 90041 East 90023 Echo Park 90026El Sereno 90032 Encino 91316 / 91436 Glassell Park 90065 Granada Hills 91344 Griffith Park 90027 Hancock Park 90004 / 90020 Harbor City 90710 Highland Park 90042 Hollywood 90028 / 90038 / 90068 Hyde Park ;90043 Jefferson Prk 90018 (Koreatown) 90005 (Ladera Heights) 90056 Lake View Terrace 91342(LAX Area) 90045 (Leimert Park) 90008(Los Feliz) 90027 (Mar Vista) 90066 Mid City) 90019 (Mission Hills) 91345 (Montecito Heights) 90031 (Mount Olympus) 90046 (Mt. Washington) 90065 (North Hills) 91343 North Hollywood 91601 – 91602 / 91604 – 91607 Northridge 91324-91325 Pacific Highlands 90272 Pacific Palisades 90272 Pacoima 91331 (Palms) 90034 Panorama City 91402 (Park La Brea) 90036 (Pico Heights) 90006 Playa del Rey) 90293 (Porter Ranch) 91326 (Rancho Park) 90064 Reseda 91335 San Pedro 90731-90732 (Sawtelle) 90022 (Shadow Hills) 91040 Sherman Oaks 91403 / 91423 (Silverlake) 90026 (South Central) 90001 / 90003 /90007 / 90011 / 90037 / 90047 / 90061 – 90062 (Studio City) 91604 Sun Valley 91352 (Sunland) 91040 (Sylmar) 91342 (Tarzana) 91356 (Terminal Island) 90731 (Toluca Lake) 91602 (Tujunga) 91042 (USC) 90089 (Valley Village) 91607 Van Nuys) 91401- 91403 / 91405 – 91406 / 91411 / 91423 (Venice) 90291 (Watts) 90002/90059 (West Adams) 90016 (West Beverly) 90048 (West Fairfax) 90035 West Hills) 91307 (West Los Angeles) 90025 (Westchester) 90045 (Westlake) 90057 Westwood 90024 Wilmington 90744 (Wilshire Blvd) 90010 (Winnetka) 91306(Woodland Hills) 91364 / 91367 Los Feliz 90027 Los Nietos 90606 Lynwood 90262 Malibu 90265 Manhattan Beach 90266 Mar Vista 90066 Marina del Rey 90292 Maywood 90270 McDonnell Douglas 90846 Mid City 90019 Mission Hills 91345 Monrovia 91016 Montebello 90640 Montecito Heights 90031 Monterey Hill 90032 Monterey Park 91754-91756 Montrose 91020 Mount Olympus 90046 Mount Wilson 91023 Mt. Washington 90065 Newhall (Santa Clarita) 91321 North Hills 91343North Hollywood 91601 – 91602 / 91604 – 91607 90805 Northridge 91324 – 91325 Cal State Univ. 91330 Norwalk 90650 Oak Park 91301 Pacific Highlands 9027290272 Pacoima 91331Palmdale 93550 – 93552 / 93591 Palms Palos Verdes Estates 90274 Panorama City 91402 Paramount 90723 Park La Brea 90036 Pasadena 91101 / 91103 – 91107 (Cal Tech) 91125 – 91126 Pearblossom 93553 Phillips Ranch 91766 Pico Heights 90006 Pico Rivera 90660 Playa del Rey 90293Playa Vista 90094 Pomona 91766-91768 Porter Ranch 91326 Quartz Hill 93536 Rancho Dominguez 90220 Rancho Palos Verdes 90275 / 90717 / 90732 Rancho Park 90064 Redondo Beach 90277 – 90278 Reseda 91335 Rolling Hills 90274 Rolling Hills Estates 90274 Rosemead 91770 Rosewood 90222 Rowland Heights (La Puente) 91748 San Dimas 91773 San Fernando 91340 San Gabriel 91775 – 91776 San Marino 91108 San Pedro (0731 – 90733 Santa Clarita (Canyon Country) 91351(Newhall) 91321 Valencia 91354 – 91355

Appraisal Review

In virtually every trade and profession, certain persons review, criticize, critique, inspect, examine, cross-check, retest, question, judge, or comment on the work of others.  The essence of appraisal review is to investigate, analyze, and verify the logic, procedures, and methodologies used in appraisal reports to insure that the preparation is competent and thorough, and results in a reasonable estimate, which instills confidence in the reliability of the appraisal report for the client. 

There are various types of appraisal reviews:

A technical review is performed by an appraiser in accordance with Standard 3 of USPAP. 

An administrative review is recognized as a compliance review, usually performed by a client or user and may not necessarily be performed by an appraiser, nor is it bound by Standard 3 of USPAP.  It may just be a preliminary review as part of a technical review process later on. 

The reviewer may suggest several courses of action.  For example:

  •  Additional market data be obtained
  •  Specific pages be corrected for compliance
  •  Interviews be scheduled with people familiar with the property
  • Opinions be obtained from experts in related disciplines

When a field review is needed, the review appraiser conducts a field inspection.  Suggested criteria to measure reviewer performance include:

  • Technical ability
  • Timing
  • Quality of review
  • Conclusion

The appraisal review includes various processes:

  • Real estate to be appraised
  • Property rights involved
  • Use of the appraisal
  • Definition of value
  • Date of value estimate
  • Scope of the appraisal
  • Other limiting conditions

Furthermore, general data consists of information on social, economic, governmental, and environmental factors that affect value.  Also, highest and best use is concluded, taking into consideration what is legally permissible, physically possible, and financially feasible.  Then the three traditional approaches of value are analyzed for reasonableness and accuracy. 

The common reporting deficiencies in an appraisal report include:

  • Poorly written report which is not convincing to the client or reviewer
  • Lacks organization that limits comprehension by the reader
  • Lacks a favorable impression of the appraiser
  • Avoids the main issues and/or inconsistencies within the report
  • Lack of analysis
  • Lack of guidance throughout the report
  • Discrepancies between data analyses, which erodes confidence in its conclusions
  • Reasoning is not straightforward and reasonable
  • Incomplete information of a sale or comp
  • Lack of reconciliation of different value

Finally, the reviewer’s role is to determine if an appraisal report (1) meets acceptable standards in the criteria of the client and users of the report; (2) conforms to the Uniform Standards of Professional Appraisal Practice (USPAP); (3) complies with governmental regulatory requirements; and (4) concludes with a reasonable and reliable market value estimate. 

The client generally wants the appraisals to:

  • Identify market trends
  • Clearly describe the property
  • Explain apparent legal obligations that go with the land, including    covenants, conditions, restrictions, easements, and zoning
  • Provide detailed sales, rental, and investment information regarding similar properties in the same market
  • Outline both property and market risk parameters
  • Provide valuable market trend information
  • Notify the client of any potential environmental hazards
  • Serve as a valuable management tool for portfolio planning and advising third-party clients

 

 

Syndication (group investing)

Appraisals for Syndication or Group Investing

A syndication is the joining of two or more persons for making an investment. A syndicate suggests that one or more of the parties will take an active part in the operation and management of an investment, and one or more of the parties will be passive. The parties who supply the principal amount of investment capital are typically the passive investors, although an active investor may also supply a portion of the capital. The active investor may receive an overriding and/or management fee for its services in addition to return on any cash it invests.

Syndication is a term used to describe multiple-party ownership of an investment. It means that investors of limited resources pool their financial resources together with experienced and skillful management to benefit from projects frequently or only available to wealthy investors and institutions. Many syndication organizations prefer the word “group investment.”

A syndicate may be formed as any of many different legal entities: tenancy in common, joint tenancy, joint venture, general partnership, limited partnership, common law in trust, real estate investment trust, corporation, limited liability company, or investment association or club.

People invest in real estate for many reasons, including to increase in spend able cash flow, take advantage of favorable treatment of tax laws, acquire equity through leverage, hedge against inflation, benefit from appreciation and property values, secure capital at low risk, and to achieve overall higher investment yield.

The selection of a project for syndication involves careful consideration of the investment. Investors such as entertainment personalities, physicians, dentists, and airline pilots with high incomes are generally interested in properties that have good potential for future growth and appreciation, and favorable tax cuts. Retired persons and individuals whose income is more limited are generally interested in supplementing their current income and are more concerned with stability and freedom from risk as opposed to potential growth and tax aspects. Some of the most popular types of projects for syndication include residential income properties, shopping centers, high-rise office buildings, speculative land, new construction versus existing, rehabilitation of older properties, governmental finance or subsidized projects, industrial plants, agricultural production, hybrid projects, non-specified funds, personal property, oil and mineral exploration, commodities speculation, and motion pictures.The type of entities associated with syndications are numerous. The consideration in choosing a form of entity is based on liability aspects, legal certainty, operational considerations, marketability, and tax concerns. These different types of entities include tenancy in common, joint tenancy, trust, joint venture agreements, corporations, condominium, limited partnership, limited liability company, and miscellaneous other forms of entity.

Stages of real estate syndication fall in the following six categories:

  1. Acquisition. This includes letter of intent, contract to purchase, escrow instructions, loan documents, and general due diligence for acquisitions.
  2. Marketing. This includes advertising, brochures, letter to investors, subscription letters, and marketing package.
  3. Qualifications. This includes application, amendments to the applications, appraisal, and tax opinion.
  4. Entity Support. This includes instruction letter, offering circular or prospectus, summary of investment, certificate of fictitious firm name, entity documents, and subscription agreements.
  5. Management Support. This includes the management contract, rental agreement, surface contracts, manager’s contract, agreements for suppliers, and leases.
  6. Dissolution. This includes the resale documentation, abandonment of fictitious firm name, and dissolution of entity agreement.

There are several ways to analyze an offering:

  • Ignore the hype
  • Track record
  • Syndication
  • Search our conflicts of interest
  • Liquidity
  • Exit strategy and projections
  • Market direction

Appraisal of Affordable Housing

Major affordable housing development programs and initiatives are as follows:

  1. Public housing
  2. Section 202 housing
  3. Section 221(d)3 and Section 221(d)4 Mortgage Insurance       Program
  4. Section 236 Rental Program
  5. Section 8 Certificate and Voucher Program
  6. Market to Market Program
  7. HOPE VI Program
  8. Rural Housing Development Program
  9. HOME Investment Partnerships
  10. Community Reinvestment Act

The Low Income Housing Tax Credit (LIHTC) Program is by far the most important of the current affordable housing development programs.  It is the current iteration of affordable housing development and has been generally recognized as the effective means of providing necessary incentives to promote development. 

From a real estate perspective, the principle advantage of the Low Income Housing Tax Credit Program is its flexibility.  It is adaptable to a wide variety of property types:

  • New construction
  • Developments with a variety of bedroom counts
  • Projects of various size (as small as ten units and as large as hund of units)
  • Specialized assisted-living properties
  • To develop programs for troubled properties
  • To preserve properties at risk
  • To privatize public housing

The Low Income Housing Tax Credit Program offers market-quality housing at rents that are affordable to low-income residents whose available income is constrained.  Affordability standards are based on HUD median incomes and allowable percentage to be paid for rent.  The development must remain affordable for an extended period of time, and therefore has to be carefully underwritten and financed.  There is no assumption of additional rental subsidies.  The program is structured to produce the development that will offer limited direct cash return to its investors.  The principle motivation for the investor is a tax credit that can be used to offset federal income tax obligations directly.  The exact amount of tax credit is dependent on the specific nature of the project.  The program was originally structured so that the annual tax rate per year is approximately 4% of the cost of acquisition and 9% of the cost of new construction or a substantial rehabilitation period.  The project includes federal subsidies or tax exempt financing, the tax credit rate is reduced to no more than 4% for all components of the project.  The tax credits are taken over a 10-year period even though the holding period is longer.  Therefore, approximately 40 to 90% of the project cost, depending on the program, will generate tax credits that can be sold to investors to offset development cost. 

Over the years, a wide variety of programs and incentives have been used.  They include many of the following:

Land contributions 

  • Exclusive rezoning and density allowances
  • Direct construction assistance
  • Special financing including tax-exempt below-market interest rates
  • Debt write-downs and soft second financing options
  • Income subsidies
  • Auxiliary appreciation of other tax benefits
  • Federal and state income tax credit
  • Limited time restrictions after which the housing reverts to market-rent housing 

One way of looking at the major subsidy types is to consider that each can be categorized as either a capital-based subsidy or an income-based subsidy.

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