Seminar: Xtreme Appraising – Valuing CRE in a Down Market

Are you really prepared to value commercial real estate in a rapidly changing market in 2023?

According to a recent survey by the Real Estate Roundtable, 74% of investors expect property values to fall in 2023. Transaction volume is already down significantly. Rising vacancy rates and operating expenses are negatively affecting net operating income, which will likely lead to falling values. Rising interest rates are reducing cash flow and increasing investor yield expectations, which also lead to falling values.  CRED iQ reviewed 190 appraisals of major properties across all assets classes to determine the impact of current market conditions on asset values. Retail and office led the declines, with an average 41.2% valuation decline in $10 billion in assets. Retail was down 57% while office was on its heels at 48.7%. Add to these dynamics the possibility that your subject property may be performing worse than the general market.

This 7-hour synchronous seminar will address critical issues, often misunderstood even by experienced commercial appraisers, in valuing under-performing property in a declining market.  It is based on a hypothetical case study property, a multi-tenant office building. The primary focus of the case study is to value the property “as is” and “when stabilized”, using all three valuation approaches.

• The property is 50% vacant in a market experiencing 20% vacancy, thus necessitating the proper measurement of a RENT-UP ADJUSTMENT to be incorporated in all three approaches to value the property “as is”.

• The market is forecast to experience on-going, but temporary, EXTERNAL OBSOLESCENCE based on a detailed fundamental market analysis, which will be demonstrated using current methodologies and also incorporated in valuations.

In addition, the case study property also incorporates two other issues that will need to be addressed in the valuations.

• One lease at the property was first negotiated when the market was much stronger. The rent for this lease was recently reduced and the term extended, in a so-called “blend and extend” renegotiation, but is still above market, therefore necessitating a “property rights adjustment”.

• Another lease includes an apparent higher than market rent due to substantial landlord provided concessions, therefore necessitating a measure of “effective rent” for purposes of forecasting the rent at the time of lease renewal.

All of these issues will be discussed and then analyzed entirely in Excel, although attendees do not need to be an Excel expert to benefit from the seminar.

A Special Note About Registering:

• Never attended an Appraisal Institute Offering or not yet updated your password / log-in since October 1, 2019 – follow these simple steps before registering.
• Those seeking credit from states outside of California are strongly encouraged to check directly with their state licensing board(s) to confirm that the specific state(s) will (1) accept virtual / classroom education, (2) accepts education from an out-of-state provider and/or (3) offers reciprocal credit since the offering is approved by the CA BREA.
• This synchronous program is approved for 35 points of Appraisal Institute CEC and 7-hours of BREA (#23CP754601528) and State Board of Equalization (SBE) Training Credit CAR (#102406).
• Instruction will be held via Interactive Technology (ZOOM) and is based on the “live” classroom version that falls under the requirements for synchronous education
• It is the student’s responsibility to have the required equipment – dependable Internet access, computer, webcam and microphone, agrees that attendance will be monitored and to forward their Photo ID/ Driver’s License to the Chapter Office upon completing your online registration.