Partial Acquisitions

Report
PARTIAL ACQUISITIONS:
TO MOVE OR NOT TO MOVE
IRWA’s 59th Annual International Education Conference
Charleston, WV
Presented by:
International Relocation Assistance Committee
International Valuation Committee
June 24, 2013
APPRAISAL BASICS
Rick Pino
Partner
Petersen LaChance Regan Pino, LLC
FUNDAMENTAL ELEMENTS
Know purpose and the jurisdiction under which you are performing the
valuation assignment
Establish the basis for valuation development and reporting requirements

Uniform Standards of Professional Appraisal Practice (USPAP)

Uniform Appraisal Standards for Federal Land Acquisitions (UASFLA)

Other entities with eminent domain power
 Non-federal governmental (state, county, municipal)
 Public and quasi-public agency or authorities
 Private entities
Determine critical definitions

Market Value

Real Estate/Real Property

Personal Property
LARGER PARCEL

Unity of title

Unity of use

Contiguity or proximity
HIGHEST AND BEST USE
Tests

Legally Permissible

Physically Possible

Financially Feasible

Maximally Productive
As if Vacant
As Improved
VALUATION METHODOLOGY
Before and After Method
Value of Property Before the Acquisition
(Larger Parcel)
Less the
Value of Property After Acquisition (Remainder)
Value Difference
Value of Part Acquired
(Plus) +
(Less)
Value of the Acquisition
Severance Damages
Special Benefits
Value Difference
CASE STUDY 1
Type of Property:
Newly constructed 21,320 SF retail
building
14,820 SF – Walgreens (drive-through)
6,500 SF – Typical retail space
Pad site for 3,260 SF Wendy’s
137,538 SF (3.16 Acres) Site
Highest & Best Use:
As Vacant – Retail development
As Improved – As developed
Rents:
40.00 – Pharmacy
$28.00 – Typical Retail
Capitalization Rates:
6% - Pharmacy
7% - Typical Retail
AFFECTED PROPERTY
SITE PLAN - BEFORE
ACQUISITION PLAN: FEE, PERMANENT AND
TEMPORARY EASEMENTS
REMAINDER PROPERTY
Type of Property:
Newly constructed 21,320 SF retail
building
14,820 SF – Typical retail space
6,500 SF – Typical retail space
99,137 SF (2.28 Acres) Site
Highest & Best Use:
As Vacant – Retail development
As Improved – As developed
Rent:
$28.00 – Typical Retail
Capitalization Rate:
7% - Typical Retail
CASE STUDY 1 SUMMARY
Change in Highest & Best Use
Value Before:
Value After:
Difference
$ 14,700,000
$ 8,000,000
$ 6,700,000
No Change in Highest & Best Use
Value Before:
Value After:
Difference
$ 14,700,000
$ 12,200,000
$ 2,500,000
CASE STUDY 2
Acquisition:
Washington Street,
Lynn, Massachusetts
Use:
A parking lot
Site:
18,046 square feet, irregular shape
with 99 feet of frontage
Improvements:
52 open parking spaces
History:
Leased with adjacent property
Zoning:
Central business zoning district
Assessment:
$36,000
R. E. Taxes:
$1,206.98
ACQUISITION & AFFECTED PROPERTY
AFFECTED PROPERTY
Acquisition:
Washington Street, Lynn, Massachusetts
Design:
Single story commercial building, plus
adjacent parking lot
Use:
Juvenile court facility
Site:
18,042 square feet, irregular shape with 50
feet of frontage on Washington St. and 50 feet
on Central St., plus adjacent parking lot
Improvements:
18,042 square feet of building area
History:
Recently renovated for $1,971,174 or
$109.25/SF of leasable area and recently
leased for $28.20/SF of leasable area. Gross
rent including tenant imp. costs over term
Zoning:
Central Business Zoning District
Assessment:
$1,321,400
R. E. Taxes:
$43,936.55
JUVENILE COURT BUILDING
BUILDING PLAN
HIGHEST AND BEST USE BEFORE
As Vacant
Assemblage parcel for parking and/or future development
$9.00/SF of land area based on commercial
development and/or parking sales range of $6.05 to
$11.47, with average of $8.47/SF of land area
As Improved
Existing use of the property for juvenile court facility
Build-to-suit rents courthouse facility rents range from
$24.23 to $32.50, with average of $29.77/SF of leased
building area
HIGHEST AND BEST USE AFTER
As Vacant
Assemblage parcel for parking and/or future
development
As Improved
Use of the property for commercial/industrial use
Comparable sales range from $31.74 to $50.97, with
average of $40.61/SF of building area
Rents range from $3.39 to $6.75/SF, with 10% vacancy,
7.5% expense ratio and cap rates 9% to 12%
Requires $180,420 or $10.00/SF for demolition and
removal of existing tenant improvement to return the
space to market standard
VALUE OF DAMAGES
Before and After Method
$2,900,000 (Large Parcel)
(Less) - $541,000 (Remainder)
$2,359,000 (Value Difference)
Value of Portion Acquired = $162,000
MOVE OR NOT TO MOVE ?
TAKE AWAY



Importance of an in-depth BEFORE and
AFTER Highest and Best Use Analysis
Outcome of the analysis may affect the
Agency’s project plan
Proper planning may include advising
agency of changes in use - proactive and
may allow time for exploring other design
alternatives
CONCEPT CORRELATION
Janet Cruppi, SR/WA, R/W-RAC
Michelle Colby, SR/WA, R/W-RAC, R/W- NAC
Moderators
CORRELATION

This same concept is used in relocation
planning

A thorough Non-residential Occupancy
Interview is critical to establish the BEFORE

The AFTER - What is the effect of the partial
acquisition on the business’s:





Access
Deliveries
Parking
Circulation
Ability to operate in a similar manner
REAL LIFE SCENARIOS



Partial acquisition from a cattle ranch,
Thermopolis, Wyoming
Partial acquisition from a restaurant in
Homer, Alaska
Partial acquisition from a custom truck
building facility in Anchorage, Alaska
FAA PERSPECTIVE
Rick Etter
Airports Acquisition Specialist
Federal Aviation Administration
AIRPORT TENANTS & BUSINESSES

Relocate on Airport? Not a displacement for Airfield
Users, e.g. Airlines, other support services.

Relocate Off Airport? On airport business leased
property needed for project, nowhere to move on
airport. Typically displaced.

Off airport service business. Project need several
years in future. Option not to be displaced. May
leaseback acquired property long term.

Closed Airport. Tenant aviation business. Not
displaced, no obligation in lease to continue
operations.
RELOCATE ON AIRPORT - AIRFIELD USERS
Airfield (AOA) Tenant Leases Not
Displaced by Airport Development
(Works/Support for On-airport
Operations)
Example: Airline Hangar to be
Removed for Airfield Construction
 Airfield Lease is Re-negotiated
with Airport
 New Hangar Location
Developed by Airport
 As applicable credit
unamortized value of
Improvements/Moving Expense
Other Issues with Airfield Leases:
 Subtenants? Subject to Airfield
Lease
ON AIRPORT TENANT – WORKS ON &
OFF AIRPORT
Example:
On-airport Rental Car

Airport Lease must be
broken to use land for
project (poor planning)

No on-airport location
available, so displaced for
project

Eligible for Relocation
Assistance and Payments
OFF AIRPORT SERVICE BUSINESS –
AIRPORT CUSTOMERS & BUSINESS
Example:
Off Airport Parking, displaced
business owner desires to stay on
property as long as possible.
Continued Occupancy offers:
Full relocation assistance and
payment eligibility must be offered
and available now when property
purchased. Or;
Leaseback property pending project
development in 5 years.

Subject to an 18 month lease,
with three 12 month renewal
options (extends a maximum of
60 months)

If tenant terminates lease within
initial 18 month period, eligible
for offered relocation eligibility.
FHWA PERSPECTIVE
Marshall Wainright
Lead Realty Specialist
FHWA Resource Center
Federal Highway Administration
CREATIVE SOLUTIONS
Janet Cruppi, SR/WA, R/W-RAC
Michelle Colby, SR/WA, R/W-RAC, R/W- NAC
Moderators
ACQUIRED 1 AC FROM 3.8 AC SITE
SITE CONCEPT PLAN
AFTER CONFIGURATION
QUESTIONS
THANK YOU FOR ATTENDING

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