PARTIAL ACQUISITIONS: TO MOVE OR NOT TO MOVE

IRWA’s 59th Annual International Education ConferenceCharleston, WV

Presented by:International Relocation Assistance Committee

International Valuation Committee

June 24, 2013

Rick PinoPartner

Petersen LaChance Regan Pino, LLC

FUNDAMENTAL ELEMENTSKnow 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

Unity of title

Unity of use

Contiguity or proximity

Tests Legally Permissible Physically Possible Financially Feasible Maximally Productive

As if Vacant

As Improved

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 

Value of the Acquisition(Plus) + Severance Damages(Less) - Special Benefits

Value Difference

Type of Property: Newly constructed 21,320 SF retail building 14,820 SF – Walgreens (drive-through)6,500 SF – Typical retail spacePad site for 3,260 SF Wendy’s137,538 SF (3.16 Acres) Site

Highest & Best Use: As Vacant – Retail developmentAs Improved – As developed

Rents: 40.00 – Pharmacy $28.00 – Typical Retail

Capitalization Rates: 6% - Pharmacy7% - Typical Retail

Type of Property: Newly constructed 21,320 SF retail building 14,820 SF – Typical retail space 6,500 SF – Typical retail space99,137 SF (2.28 Acres) Site

Highest & Best Use: As Vacant – Retail developmentAs Improved – As developed

Rent: $28.00 – Typical Retail

Capitalization Rate: 7% - Typical Retail

Change in Highest & Best UseValue Before: $ 14,700,000Value After: $ 8,000,000Difference $ 6,700,000

No Change in Highest & Best UseValue Before: $ 14,700,000Value After: $ 12,200,000Difference $ 2,500,000

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 recentlyleased for $28.20/SF of leasable area. Grossrent including tenant imp. costs over term

Zoning: Central Business Zoning District Assessment: $1,321,400 R. E. Taxes: $43,936.55

As Vacant

Assemblage parcel for parking and/or future development

$9.00/SF of land area based on commercialdevelopment 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

As Vacant Assemblage parcel for parking and/or future development

As ImprovedUse 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 andremoval of existing tenant improvement to return the space to market standard

Before and After Method $2,900,000 (Large Parcel)

(Less) - $541,000 (Remainder)$2,359,000 (Value Difference)

Value of Portion Acquired = $162,000

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

Janet Cruppi, SR/WA, R/W-RAC

Michelle Colby, SR/WA, R/W-RAC, R/W- NAC

Moderators

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

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

Rick EtterAirports Acquisition SpecialistFederal Aviation Administration

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.

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 AirportNew Hangar Location Developed by AirportAs applicable credit unamortized value of Improvements/Moving Expense

Other Issues with Airfield Leases: Subtenants? Subject to Airfield Lease

Example: On-airport Rental CarAirport 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

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.

Marshall WainrightLead Realty SpecialistFHWA Resource CenterFederal Highway Administration

Janet Cruppi, SR/WA, R/W-RAC

Michelle Colby, SR/WA, R/W-RAC, R/W- NAC

Moderators

THANK YOU FOR ATTENDING