Integra – San Diego Appraises Real Estate Trust Portfolio Valued at Over $100,000,000

Integra Realty Resources – San Diego has just completed the appraisal of 20 properties for estate tax purposes with a combined real estate value of over $100,000,000.  The properties, located in and around San Diego county consisted of 6 multi-tenant retail properties, 4 industrial properties and 1 industrial business park, 2 multi-tenant office properties, 1 medical office, 3 multi-family properties, and 2 hotel properties, with a combined square footage of over 500,000 SF.

 

Office Property - 6,500+ SF Rentable Area

Office Property – 6,500+ SF Rentable Area

73,000 SF Rentable Area on 4.30 Acres

73,000 SF Rentable Area on 4.30 Acres

 

66,416 SF Rentable Area - Part of 20 Property Trust Portfolio

66,416 SF Rentable Area – Part of 20 Property Trust Portfolio

 

Regents La Jolla Multi-Family Property Appraised by Integra – San Diego

The subject property consists of 333 individual condominium units within a 574‐unit development known as Regents La Jolla. The 333 subject units are currently operated (rented) as luxury apartments. The improvements were constructed in 1999/2000 and a condominium map was recorded in 2005. 241 of the units in the project were sold as individual condominium units and were not included in this appraisal. The site area (for the
entire 574‐unit development) is 8.49 acres or 369,824 square feet. We valued the subject on an as is leased fee (rental) basis, as well as on a bulk basis assuming condominium sell‐out. 235 of the 333 units have been upgraded with superior quality interiors since the date of original construction. Appraisal done for a financial institution.Photo

Apartment Appraisal in Pacific Beach, San Diego

Pacific-Beach-Apartment-Appraisal-Crown-Point-San-DiegoIRR San Diego has completed a commercial appraisal of an apartment property located in the community of Pacific Beach in San Diego. This multifamily property consists of five dwelling units built in 1970. The building, which is three stories and has approximately 4,020 square feet of rentable area, is located on a 0.08 acre site. The property also has five covered parking spaces, five storage units, and a laundry facility. As of the effective appraisal date, the property is 100% leased. The purpose of this commercial valuation was for loan underwriting purposes for a lender.

If you are in need of a multifamily appraisal, please contact us today at 858.259.4900 or via email at sandiego@irr.com. Also, for market trends on San Diego apartment properties, we invite you to download the latest publication of Viewpoint, the most comprehensive analysis for 2015.

2015 Viewpoint – San Diego Market Update

Hotel-Appraisal-858-259-4900We are pleased to present copies of our recently released IRR Viewpoint 2015, Integra Realty Resources’ signature publication.  In this annual edition, we provide market value trends for investment-grade real estate across the San Diego market. Read More

Multifamily Appraisal in North Park, San Diego

Apartment-multifamily-appraisal-north-park-san-diego

IRR San Diego has completed a commercial appraisal of an apartment property located in the North Park community of San Diego. The multifamily property contains 8 dwelling units that total approximately 6,100 square feet. Each unit has two bedrooms and one bathroom. The improvements were constructed in 1950 and were 100% leased as of the effective appraisal date. The building is located on a 0.16 acre site. The purpose of this commercial valuation was for loan underwriting purposes for a lender.

Integra is one of the leading apartment appraisal firms in the San Diego. We provide our multifamily valuation expertise for a variety of purposes, including estate planning. If you have any questions regarding apartment appraisals, cap rates, or market conditions, please contact us today.

The Difference Between Gross Income and Effective Gross Income

Potential-Gross-Income-Effective-Gross-Income-San-Diego-Real-Estate-AppraiserIn appraising income-producing residential properties (such as apartments), gross income multipliers are used as a method of determining an opinion of value. Depending on your area, however, the multiplier can be based on potential gross income or effective gross income. Here is the difference between the two.

Potential Gross Income

Potential gross income (also known as PGI or gross potential rent) is the total revenue a property could generate if 100% leased at market rent. This may or may not be what is actually happening with the subject property, but many times this is not the case. For example, some rents may be over or under market, or the property may not be 100% occupied. Nevertheless, PGI reflects the the most annual rent a property would collect.

Effective Gross Income

Effective Gross Income (of EGI) is the amount of income a property generates after other factors are considered. Depending on the property type, the first factor are expense reimbursements, which are operating expenses that are paid for by the tenant. This could include a portion of the expenses (such as real estate taxes and insurance), or, in the case of an absolute net lease, all of the expenses. Expense reimbursements depend on the terms of the lease, but in the case of multifamily properties the tenant is generally only responsible for paying their pro-rata share of the utilities.

Another item to consider is vacancy and collection loss. Vacancy occurs when all or a portion of the property is not occupied, while collection loss is an estimate of how much rent is expected to not be collected during the projection period. This is typically estimated based on the subject’s historical performance, comparable properties, and/or industry benchmarks.

The last item to consider would be other income, which can include parking, laundry income, vending machines, and other types of income not included in the rent. Similar to vacancy and collection loss, other income is typically based on historical figures and comparable properties.

Summary

In short, potential gross income is the total rent a property could generate is 100% leased at market rent, while effective gross income is a net figure that considers expense reimbursements, vacancy and collection loss, and other income. In estimating these two figures, especially EGI, it is best to determine what income is affected by vacancy. For example, some other income (like rent from a billboard), is not necessarily affected by occupancy. However, items such as expense reimbursements could be affected if there is a higher than typical vacancy rate. When performing due diligence on a property, an appraiser would look at both historical numbers and the property’s competitors in estimating market value for the subject.

If you have any questions about income, multifamily properties, or are in need of a commercial real estate appraisal, please contact us today.

Yield Capitalization – How to Appraise Commercial Real Estate

Yield-Capitalization-Real-Estate-AppraisalWhen appraising commercial real estate based on a property’s income potential, an appraiser uses capitalization to convert income into value. In fact, the definition of capitalization is simply the conversion of income into value.

We have previously discussed direct capitalization, which is the process of converting a single year’s expected income into value in one step, either by dividing net operating income by a capitalization rate (cap rate), or multiplying income by an appropriate factor. Direct capitalization is most commonly used for small commercial properties or properties which have stabilized, predictable income (such as apartment complexes).

Yield Capitalization – What is it?

The other capitalization method used to appraise commercial real estate is yield capitalization, which is defined as the process of converting future benefits into present value. In other words, future cash flows that a property generates are converted into a present value conclusion using an appropriate yield rate. The most commonly used method of using yield capitalization is discounted cash flow analysis, where each future year of income is discounted to present value using a discount rate. While capitalization rates are typically derived from market data (sales that reported a cap rate), discount rates are typically supported by published yield rate data or by interviews with market participants such as investors.

When Does an Appraiser Use Yield Capitalization?

Yield capitalization is often used to value complex commercial properties (such as office towers and shopping centers) or properties which will take several years to become stabilized (such as high vacancy properties, proposed projects, etc.). It is also used to by valuation professionals to estimate value over a given holding period. For example, if an investor plans to purchase a property, hold it for five years, and then sell it, then yield capitalization can be used to determine value based on the projected performance (future cash flows) during the five-year holding period.

What’s the Difference Between Direct and Yield Capitalization?

The main difference between direct and yield capitalization is time. Direct capitalization is based on only a single year’s income, while yield capitalization takes into account several years of cash flows. Depending on the property type, income characteristics, and the overall assignment, one or both methods of capitalization may be appropriate.

Summary

If you have any additional questions about yield capitalization, or if you are in need of a discounted cash flow analysis of commercial real estate, please contact us today.

Recent Mixed-Use Land Appraisal in La Jolla, San Diego County

858.259.4900-La-Jolla-Commercial-real-estate-Appraiser

 

Integra Realty Resources – San Diego has completed an appraisal of commercial land located in La Jolla, San Diego County. The property consists of three contiguous parcels that total 32,139 square feet, or 0.74 acres.  The property is zoned LIPD-3, La Jolla Planned District Zone 3, which permits retail, mixed-use, and multifamily uses with a density up to 29 dwelling units per acre. Based on the subject’s size (and excluding other development regulations), this equates to about 21 units. The purpose of this commercial land valuation was for loan underwriting purposes for a lender.

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