IRR San Diego Achieves Over $2 Billion in Hotel Valuations

Hotel-Appraisal-858-259-4900Integra Realty Resources (IRR), North America’s largest independent commercial real estate market research, valuation, and counseling firm, has been recognized for surpassing a major milestone in the commercial real estate valuation and appraisal industry.  From January 2009 to date, IRR’s San Diego, CA hospitality specialty practice group has valued hotel and lodging properties with a combined appraised value exceeding $2 billion.

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San Diego Hospitality Summit Recap

san-diego-hotel-appraiserIRR San Diego attended Bisnow’s Hospitality Summit, where developers, investors, and even Padres management shared their views on the San Diego Hotel market. Here is a recap of the event.

Trends

The San Diego tourism market is climbing quickly out of the recession, with occupancy rates above 78% according to Joe Terzi of the San Diego Tourism Authority. With such a strong recovery and a forecast of ever-improving market conditions, hotel owners are holding on to their investments, which is leading to a lack of inventory.  Like other property types where money is chasing few deals, it is a difficult time to buy hotels in San Diego (despite the low cost of capital), which is leading some to believe that San Diego hotels may reach the $1 million per room threshold.

Another trend for hotel properties is to buy in Downtown San Diego, one of the hotter submarkets in the area (which is a similar trend for apartment developers and investors that spoke at the last Bisnow summit). While the panelists agree that it is difficult to build downtown (see below for challenges), this consequently creates no oversupply, but rather opportunities for infill projects. Read More

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.

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.

2014 Mid-Year Update

san diego commercial real estate appraiserIntegra Realty Resources – San Diego, along with its 60+ offices nationwide, has just published mid-year updates to our annual Viewpoint publication – with both a National Overview and over 300 Local Market reports.

In these analyses you will see details about how the San Diego commercial real estate market, as well as markets across the country, is continuing to recover.

Decreasing vacancy rates, moderate/high new construction growth, high absorption rates, and medium/high rental rate growth are all trends revealed in this mid-year compendium of reports.  We’ve also detailed trends across five key property types: office, multifamily, retail, industrial, and lodging.

For a complete look at the data presented in IRR Mid-Year Viewpoint 2014, please click on the links below.

2014 Mid-Year Viewpoint San Diego Office

2014 Mid-Year Viewpoint San Diego Industrial

2014 Mid-Year Viewpoint San Diego Retail

2014 Mid-Year Viewpoint San Diego Multifamily

2014 Mid-Year Viewpoint San Diego Hospitality

Information regarding other markets can be found by clicking here. The national mid-year update can be found by clicking here.

We hope that this market update is valuable to your commercial real estate decisions. As always, if you have any questions regarding our research, our forecasts, or commercial real estate valuations, please contact us directly.

 

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