Appraising U.S. Post Office

[Boleggz]

Has anyone ever appraised a post office? I'm finding it hard to get any data on the post office-Can anyone help????

 

[Mountain Man]

Yes, have done some. Also have done some churches, elder care, and c-stores lately. If your mentor has the data sources, they are not that difficult.

 

[Ray Miller]

I have done post offices in the small rural towns around wisconsin for the last four or five years.

You get get a lot of the data. You can get contract lease data from the Post Office in Wahsington D. C. on what they are paying for leases. there are a few investment compaines who buy up the leases and the buildings for post offices. they have the lease data in there file.

If you are doing this appraisal for one of the investment houses they may have the data at hand. Just ask them. Its been a bout a year since I did my last set, I would have to go back in to my files to pull up the data for you. Post office lease, income approach remains steady for the most part. Good investment. Lease average around 10 years.

 

[RDmgmt]

They're a special animal, and there is a loyal following of investors that buy them they even have associations like american postal owners. com

Typically you will be dealing with the Leased Fee intrest, you need to be vey careful the lease terms many are gross and older ones are generally ten year terms with five year options. Market rent is determined by looking at the alternitve usses for the building, be it retail or office, depending on the location and H&B use, rarely is a Post Office the H&B Use conclusion.

I haven't done one in a few years, but there is a lot of data out there, it just hard to uncover, often times the local post master can be a good source of info.

The typical data sources like Loopnet can help you find brokers in your region that may be handling some POs that can help with cap rates, which tend to be toward the lower end, given the credit strength of the tenant.

 

[Michigan CG]

They're a special animal, and there is a loyal following of investors that buy them they even have associations like american postal owners. com

Typically you will be dealing with the Leased Fee intrest, you need to be vey careful the lease terms many are gross and older ones are generally ten year terms with five year options. Market rent is determined by looking at the alternitve usses for the building, be it retail or office, depending on the location and H&B use, rarely is a Post Office the H&B Use conclusion.

I haven't done one in a few years, but there is a lot of data out there, it just hard to uncover, often times the local post master can be a good source of info.

The typical data sources like Loopnet can help you find brokers in your region that may be handling some POs that can help with cap rates, which tend to be toward the lower end, given the credit strength of the tenant.

I agree with everything except the highlighted portion. GSA properties are a regional market, not a local one. If the property has a newer lease with options then you want other GSA facilities as comparables. The leases are almost always gross leases in the $20+ range.

If the property is in a small community you will find nothing comparable locally, especially if the building is new.

I have appraised 20+ GSA facilities and use comps from six different states. New GSA buildings are like Walgreens or Rite Aid. They are built by a developer, and then sold to someone site unseen because of the tenant. Cap rates around 7.5 is my experience.

 

[RDmgmt]

In determining market rent, the objective is generally not what is the building worth to a single user, but rather to the market. In any neighborhood (or zip code usually), there is only one post office, so there is no competitive force based on the type user; Post offices are not typically highly specialized facilities, many smaller rural PO are basic wood framed buildings that could easily be used for retail or office.

If the post office leaves the building, to a new facilty down the road, the owner will need to find a new tenant who will not be in the same business as the former tenant. Relying on rents for Post Office across counties doesn't determine the rent for a local office, in the Boston area, the Post office in downtown might be paying $60/SF while 10 miles away the PO rents might be $25/SF, the rents are driven by the market, not the tenant.

Properties like pharmacies have rents that are total unrelated to market rents as well, the developer finds a sites, gets approval from WAG or CVS, etc builds to their specs and based on the costs incurred, with some negotiaions, develops a rent that provides a reasonable return for the developer. These newer leases are more like bonds and are pure NNN, the base term is usually twnety five years and then five ten year renewal options. The landlord has no obligations once commencement has begun. Lease rates for pharmacies vary dramatically, but the diffrences are not truely market driven.

While some Post office are custom built, many are not, we have PO's in strip malls, office buildings, and even converted single family homes in MAssachusetts. Leases after, the intital term are often on five year renewals, and whoile an arguement can be made that once established, they rarely move, relocation is always a possiblity and therefore the risk of termination exists. I would not want to be the appraiser that states, of a lease that has less than two years remainning even with several options available, that market rent is $20/SF based on other post office rents throughout the county and then have the subject PO move and the owner is faced with area office and retail rents in the $8 to $10/SF range.

 

[Artyman1200]

Loopnet returned 58 results for GSA properties in the U.S. A starting point for some rent comps anyway...

 

[Michigan CG]

RD,

My comparison to pharmacies might not have been a great example in that they are NNN leases where GSA is typically Gross.

However I have 25+ comparables of GSA facilities with new leases that have sold for cap rates of 8% or less, bought site unseen many times.

If a GSA only has 2 years left then it becomes a sticky situation and comparing to market rents in the community has to be a consideration.

GSA in a single family home -- I have never heard of that before. I learned something new today.

 

[RDmgmt]

I also think you we need to differentiate all GSA properties from the specific subset of Post Offices, which are also to be differentiated from Postal distribution centers.


Here are two rural PO that sold in MA in few years ago (2003), neither is very specialized one was renting at $10/SF at the time of sale and renewed shortly after for $14/SF the other was leased at $17/SF going in cap rates were 6.9% and 7.8%. I can't find the picture of one that sold a few years earlier that was clearly orginally a cape style home built in the early 1940's and used as a PO today.

Anyways, I think the orignal poster needs to carefully exaime his subject, if its a brand new masonary building buoilt to PO specs with ten + years on the lease its one thing, if its an older rural PO on its fourth otpion in a community that has grown significantly in the last ten years and the PO has outgrown the building, its another.

 

[Boleggz]

Thanks for the feedback-Sorry it took so long-My mentor has a few sites for me to go on and research the data.