Three Approaches to ValueSAMA

May 2012

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What is happening in SK?

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Cost Approach

• Highlights– Historically, we have completed the Cost Approach

in SAMA with all appraisers (80 to 100) but in order to make it a more efficient process we set up our procedures so all the Cost Analysis was completed by 20 Appraisers.

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Cost Approach

• We had fully documented procedures that were used by the Appraisers to take a Municipality from start to finish.

• The project started in February 2012 and ended in December 2012.

• Incorporated a ‘piecewise’ time adjustment instead of linear

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Cost Approach

• The existing stratifications were tested first and then consider other stratifications if necessary.

• Approximately, 800 Municipalities were completed ranging from small hamlets to high valued Rural Municipalities

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Cost Approach

- Cost Analysts were located across the province in Regional offices so we had 2 forms of communication to deal with issues quickly- 1. ‘One on One’ meetings every week- 2. Weekly conference calls involving all Staff

involved in the project

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Vacant Land Example

Base Year Land rate$/SF

ASR COD Value(9076 SF)

2006 $0.66 1.00 22.9% $5 990

2011 $3.93 1.01 8.7% $30 290

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Residential Improvement Example

• Population: 500• Standard B class house with a basement,

basement finish, attached garage, deck• 2012 improved value = $88 980• 2013 improved value = $149 570

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Resort Property

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Lakefront LandBase Year Land rate

$/SFASR COD Value

(12 353 SF)

2006 $23.44 1.00 22.5% $134 000

2013 $45.99 1.00 13.5% $376 200

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MRA

• The MRA team developed a Global model for 9 Municipalities. This model helped us understand market relationships and price trends across a wide spectrum of sales.

• A Guideline was developed to ensure consistency across market areas. – Also assists in handling features with no or few

sales or that generates unexpected results often due to few sales.

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MRA

• After the Global model was developed one municipality was chosen to develop a market area model which became the starting point for the other market area models.

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MRA

• Three years of sales were used in all the MRA models (2008 -2010).

• The following enhancements were made to the models that will be presented in 2013:– Addition of vacant land – Addition of row house, townhouse, semidetached

and mobile homes

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Land value was determined by:

• Example: Fully serviced lot• Land Size: 8160 SF X $3.14/SF = $25 692 • X Land Servicing (0)• X Neighbourhood (1.53)• X Abuts Apartment (1)• X Abuts Greenspace (1)• X Abuts Railway (1)• X Abuts Highway (0.95)• = $37,343

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Improved value

• Example: this is a one storey house, no basement, 3 car attached garage built in 2008

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Improvement

• Main living area: 1763 SF X $98.82/SF = $174 219

• PLUS Basement Area: 0• Plus Basement Finish: 0• Sum = $174 219• X Construction Type (1)• Equals $174 219

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Improvement

• Attached Garage: 1128 SF X $42.82 = $48 300• Deck: 192 SF X $18.57 = $3565• Extra Plumbing: 4 X 1325 = $5300• Sum: 48 300 + 3565 + 5300 = $57 165 • ($174,219 + $57,165) X 1.453 (Construction

Quality) X 1.0 (Condition Rating) X 1.0 (Poor quality factor) = $ 336,201

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Improvement

• $336,201 + 4000 (A/C) = $340,201• $340,201 X .98585 (age adjustment) X 1.0

(Building Neighbourhood Adjustment) X 1.0 (Abuts Highway) = $335,387

• MRA Land Value $37,343• MRA Improvement Value $335,387• MRA Total Value = $372,730 ($217 800)

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INCOME APPROACH

• General Commercial• Models were completed in 4 Cities and

selected commercial properties in their surrounding Rural Municipalities

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General Commercial

• Base rents were calculated for each tenant with structural maintenance being accounted for

• Rent stratification followed to derive the typical rents for a particular property type

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General Commercial

• Once the typical rents were complete then a non linear model structure was used to develop a rent table for the municipality

• Time adjustment was also checked with a regression model

• Vacancy analysis was completed • Capitalization rates were then calculated

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General CommercialBuilding Type

Size SF Effective year built

2012 Rent/Cap

2012 Assessment

2013 Rent/Cap

2013 Assessment

Warehouse 2700 1960 $2.70/ 13.5%

$41 400 $5.15/ 11.9%

$90 800

General Retail

14040 1988 $7.60/ 13.5%

$662 300 $10.65/ 11.9%

$1 169 800

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Income – Multi Family

• Multifamily models were created and applied Provincially in all SAMA jurisdictions

• Average rents were calculated • Then the Effective Gross Income Multiplier

was developed• Vacancy study was also conducted based on

the vacancy reported by the property owners

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Example: Average Quality 4 Plex

• 2013 Revaluation• Suite Size Floor Location # of units Rent/Mo PGI• 1 BR Bsmt 1 $583 $ 6,996• 2 BR Bsmt 1 $676 $ 8,112• 2 BR Main 2 $689 $16,536• Total 4 $31,644• Market Vacancy 2.00% -$ 633• Effective Gross Income $31,011• EGIM 8.69 • EGI x EGIM = Value• $31,011 x 8.69 = $269,486 ($269,500) ($124 000)

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Income-Limited Service Hotels– Calculate a weighted average daily rate (rack rate) – Occupancy is developed by weighted average daily

rate and annual income from the rooms– Review expenses to develop the NOI– Review all allowable expenses– Stabilize expenses over the reporting period– Typical rate for rooms, occupancy, room expenses eg

cleaning, supplies for the rooms and property expenses eg utilities, taxes, management, reserves for replacement

– Combine all limited service and develop a model – develop a cap rate

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Limited Service Hotel - Comparison# Units Effective

Year Built2012 Cap Rate

2012 Assessment

2013 Cap Rate

2013 Assessment

240 1999 9.2% $4 140 600 10.1% $7 811 400

200 2001 9.2% $3 105 400 10.1% $ 4 812 900

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One Final Laugh

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