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

 

Integra – San Diego Appraises Existing Multi-Tenant Office Tower, San Diego

IRR-San Diego recently performed a market value appraisal of the leased fee interest in an office tower property containing 232,000+ SF rentable area, located on a site of .69 acres, in downtown San Diego. This appraisal was performed for loan underwriting purposes for a financial institution.

Restaurant and Parking Lot Appraisal, San Diego Beach Community

Integra San Diego recently completed an appraisal consisting of an existing restaurant property of approximately 2,600 square feet of gross leasable area, on 0.06 acres, or 2,700 Square feet, and a parking lot that is non-contiguous, located approximately 2 blocks away from the restaurant. The parking lot site area is approximately 0.06 acres or 2,748 square feet. The client requested that the two properties be valued separately. The subject properties were in escrow at the time of the appraisal. Both the Sales Comparison Approach and the Income Capitalization Approach were used in this valuation. The purpose of this appraisal was for lending purposes with a financial services institution.

Religious Facility Appraisal in Poway, San Diego County

Religious-facility-church-appraisal-poway-san-diegoIRR San Diego has completed a commercial appraisal of a religious facility property located in Poway in San Diego County. The property consists of three buildings totaling about 13,000 square feet of gross building area. The buildings, built between 1925 and 2013, are 100% occupied by an owner-user. The site area is 2.79 acres. The purpose of this commercial valuation was for loan underwriting purposes for a lender.

If you have any religious facility appraisal questions or needs, please contact us today at 858-259-4900 or sandiego@irr.com.

Hotel Appraisal in Pacific Beach, San Diego

Pacific-Beach-Hotel-Appraisal-San-DiegoIRR San Diego’s Hospitality Practice Group has completed a commercial appraisal of a hotel property located in the community of Pacific Beach in San Diego. The property consists of a non-franchised, limited service hotel that has 24 rooms. The improvements were constructed in 1952, and each room includes a fully equipped kitchens. The subject site area is 0.36 acres. The purpose of this commercial valuation was for loan underwriting purposes for a lender.

If you have any hotel valuation questions or needs, please contact us today at 858.259.4900 or sandiego@irr.com. Also, please be sure to check out our Hospitality page for more information on our hotel appraisal practice.

Hotel Appraisal in Escondido, San Diego County

Hotel-appraisal-escondido-san-diego

Integra San Diego has completed a commercial appraisal of a hotel property located in Escondido in San Diego County. The property is an existing limited-service hotel that contains almost 70 rooms. The improvements were constructed in 1985 and are situated on 1.15 acres of land. The purpose of this commercial valuation was for loan underwriting purposes for a lender.

If you have any hotel valuation questions or needs, please contact us today at 858-259-4900 or at sandiego@irr.com. Also, please be sure to check out our hospitality appraisal page for more information on our specialty practice.

Shopping Center Appraisal in Linda Vista, San Diego

Linda-Vista-Shopping-Center-AppraiserIRR San Diego has completed a commercial appraisal of a shopping center property located in the Linda Vista community of San Diego. The property consists of three buildings totaling approximately 86,000 square feet. The subject site consists of seven parcels totaling 7.75 acres. As of the effective appraisal date, the shopping center is 100% leased to 22 tenants. The purpose of this commercial valuation was for loan underwriting purposes for a life insurance company.

If you have any shopping center valuation questions or needs, please contact us today at 858.259.4900 of sandiego@irr.com.

Carlsbad Flex Market Improves as of 3Q 2014

Carlsbad-Flex-Industrial-AppraiserAfter several years of soft market conditions, the Carlsbad industrial market is strengthening and slowly improving. Due to overbuilding, the Carlsbad market has been very soft for several years, however; vacancy has decreased for industrial and flex product over the past three years. Due to a lack of new construction and increasing demand, vacancy rates are anticipated to continue to decline in Carlsbad for both industrial and flex product.

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Medical Office Tenant Improvements Costs in San Diego

Medical-office-appraiser-san-diego-countyAs the leading commercial real estate appraisal firm in San Diego, IRR San Diego has provided valuation services for numerous medical office properties throughout San Diego County and surrounding areas. As valuation experts, we also have experience in appraising proposed medical offices, which involves analyzing the cost of medical office tenant improvements and determining how the tenant improvements (or TI’s) contribute to the overall property value.

Over time, we have amassed data regarding the cost per square foot of tenant improvements, which we offer today for our readers. Please see below for information on the cost to build out certain types of medical office space (sorted by date).

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Proposed Hotel Appraisal in San Diego

proposed-hotel-appraisal-san-diego-downtown

IRR San Diego has completed a commercial appraisal of a proposed hotel property located in San Diego. The property is a 0.63 acre site currently developed with an limited-service hotel, but the owners plan to redevelop the property as a multi-occupancy structure with a hotel, residential condominiums, retail, and a restaurant.  The project is expected to be delivered in approximately two years. The purpose of this commercial valuation was for loan underwriting purposes for a lender.

Market Rent Studies: Three Ways Appraisers Determine Market Rent

San-Diego-Market-Rent-Study-Commercial-AppraiserOne of the many services Integra San Diego provide are market rent studies, working with a tenant or landlord (and sometimes both in the same study) to provide an opinion of market rent for their property.  There are three methods commercial appraisers use when determining market rent for a property.

Lease Comparables

One of the best methods to estimate market rent for a property is researching recently leased space that has similar characteristics as the subject. In a perfect world, if a commercial appraiser was estimating market rent for a suite in an office property, then a suite down the hall that leased two weeks ago would be a great comparable to use. However, solid data like this may not be available, so an appraiser would expand their search to find other comparable properties, and then make adjustments similar to adjustments made in the sales comparison approach.

Lease Listings

Another source used to determine market rent are lease listings. Similar to lease comparables (where a lease is actually signed) active lease listings are also useful because they provide an indication of what rent landlords are typically looking for in a particular submarket.  Most times, active listings set the upper limit of the rental range because contract rents are usually less than asking rents. Similar to lease comparables, lease listings can also be adjusted to the subject; however, depending on the market, an additional downward adjustment would need to be made for the active listing status.

Market Participant Interviews

Another method used in market rent studies is interviewing local market participants such as commercial real estate brokers, property managers, and property owners. Not only can these individuals provide information on recently leased space or space currently on the market, but they can also identify specific characteristics about properties that make it more or less desirable (such as superior access, low parking fees, etc.). This can be especially helpful if there have not been many lease transactions or active listings in the area. A knowledgeable broker or property manager who is active in a particular submarket will have a general indication or range of market rent. This combined with lease comparables and lease listings helps the appraiser provide a more accurate opinion of market rent.

Summary

There are several methods used by commercial appraisers to determine market rent, and ideally all of these methods would be used to arrive at the most accurate estimate. Whether you are a tenant looking to renew or your lease, or a landlord looking to establish an asking rate, it is best to utilize an appraisal firm that are experts in determining market rent for commercial property.

If you have any questions about market rent studies or are in need of commercial valuation services, please contact us today.

3 Common Commercial Real Estate Appraisal Questions

San-Diego-Commercial-Appraisal-QuestionsRecently, we discussed the ways to help prepare for a commercial real estate appraisal, which included providing as much income/expense information as is available and helping the appraiser inspect the entire property.

There are many questions that can be asked regarding a commercial appraisal. Here are some of the more common.

What if I don’t have any income or expense information?

As stated previously, appraisers generally ask for three years of income and expenses. If three years are not available, then provide as many years as you can because some information is better than none. If no information is available, then inform the appraiser and he or she will state this in the report. If there is no historical information, the appraiser will generally use market rent and market expenses, which are based on comparable properties and industry benchmarks.

Do I have to meet the appraiser at the property?

Sometimes, the owner or property representative is out of the area or unavailable to physically be at the property during the appraiser’s inspection. As long as the appraiser has full access to the subject property, then an owner or representative does not have to necessarily be present. However, it is important to 1) let the appraiser know of any important issues prior to the inspection (such deferred maintenance) and 2) be available for follow up in case issues or questions arise after the inspection.

What happens if not all of the property is inspected?

There are some assignments where portions of the property are not able to be fully accessed. For example, in a hotel appraisal or apartment appraisal some of the units may be occupied and unable to be accessed. If you know that an appraiser cannot access the entire property in advance, please let them know. The appraiser will state this in the report and will generally add an extraordinary assumption to the report, assuming that the condition of the areas not inspected are similar to those that were.

Do you have any other questions about the appraisal process? If so, or if you have any need for a commercial real estate appraisal in San Diego County, please be sure to contact us directly. Also, please be sure to check out our YouTube page, where we provide education on the appraisal process as well as answer other frequently asked questions.

Direct Capitalization: An Introduction to Cap Rates

858.259.4900-San-Diego-Commercial-Appraiser-direct-capitalizationIn the income capitalization approach to value, direct capitalization is a method used to convert a single year’s expected income into value. This method is done in one step, by dividing the net operating income estimate by an appropriate income rate.

Direct capitalization is generally used when the property is operating on a stabilized basis. For example, the property is leased at market rents and has a market occupancy rate. This method is also used when there is a sufficient supply of comparable sales to extract capitalization rates, and/or there are enough other methods for determining capitalization rates.

Direct capitalization is less useful when the property is not stabilized. Examples of a property not being stabilized include high vacancy and irregular income/expenses expected in the near future. Additionally, direct capitalization is also less useful when there is not a sufficient supply of comparable sale data.

The advantages of direct capitalization are that it is simple to use and easy to explain, it often expresses the way the market thinks, and it provides strong market value support when there is enough sale data. Disadvantages include the fact that it does not consider individual cash flows beyond one year and that there must be enough sufficient comparable data.

The most basic method of direct capitalization is applying an overall capitalization rate to relate value to the entire property income (i.e., net operating income). The formula for this is as follows: San-Diego-Commercial-Appraisal-Cap-Rate Overall capitalization rates can be estimated with various techniques, which depend on the quantity and quality of data available.  Examples of these techniques include:

  • Comparable sale data (cap rates from comparable sales)
  • Band of investment—mortgage and equity components
  • Band of investment—land and building components
  • Debt coverage analysis
  • Analysis of yield capitalization rates
  • Surveys (Broker, Investors, Owners, etc.)

If you have a stabilized income producing property in San Diego, then direct capitalization may be one of the methods to value your commercial real estate. If you have any questions about direct capitalization, or if you have any San Diego commercial real estate appraisal needs, please contact us today. You can also check out our YouTube Channel, which includes various topics on the commercial appraisal process.

Preparing for a Commercial Appraisal: Two Ways to Help Appraisers Produce an Accurate Report

Encinitas-Commercial-AppraiserThere are many components involved in a commercial appraisal. From researching zoning and market conditions to confirming sale and lease data, much of the report preparation is done by appraisers in their office away from the subject property. While this is true, the parties involved with the subject property – whether it is an owner, attorney, accountant, or broker – all play a very important part in helping the appraiser provide an accurate valuation. Here are two ways to help appraisers produce an accurate report.

Property Information

One of the ways to help is to provide as much information about the property as possible, especially if it is an income producing property such as a shopping center or a multi-tenant office. Here are some important items that appraisers will need:

  • Rent Roll: A report showing the current rent information of each tenant is important as it may differ from the lease. For example, the landlord may not enforce rental increases even though they are stated in the lease.
  • Leases: Ideally, it is best to provide the entire lease (as opposed to just the first page with the pertinent information) because it gives the appraiser a chance to review how expenses are handled, information regarding options (if any), and other addenda items such as tenant improvement allowances, free rent, etc.
  • Operating History/Profit and Loss Statement: This includes historical information regarding the subject’s income and expenses (e.g. taxes, insurance, repairs and maintenance, etc.). Generally, an appraiser would like three years of history, year-to-date information, and a projected budget (if available) to look for trends or anomalies. This operating history is typically found in financial reporting software, but can also be found on the Schedule E form of a Tax Return.

Property Inspection

The second way to help an appraiser produce an accurate report involves the property inspection. The objective of the inspection is to take pictures and measurements of the building as well as see the property’s physical and location characteristics (such as deferred maintenance, traffic, surrounding neighborhood influences, etc.).

Typically, it is best for an appraiser to inspect the interior and exterior of the entire property. Therefore, the owner should contact every tenant to let them know of the appraiser’s arrival and that they will be taking pictures and measurements. This may not be possible with all commercial real estate appraisals such as hotel appraisals and apartment appraisals (due to units being occupied or unavailable), so the next best scenario would be to see a representative sampling of each type of unit. For example, if a 20-unit complex includes 10, two-bedroom units and 10, one-bedroom units, then the appraiser should inspect two to three of each type.

Summary

The parties involved with a property being appraised play an important role in helping an appraiser produce an accurate and credible report. Providing as much information as possible as well as assisting the appraiser with inspecting the entire property are important pieces to the appraisal process.

If you have any questions about the appraisal process or real estate valuation, or if you are in need of San Diego appraisal services or valuation consulting, please contact us today.

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