Church - Dom? Adjustment

[Eli]

They are ecclesiastical buildings in NBC. And the value TODAY reflects the value of a sale that lies in the future (three years). The comps do not reflect a discount TODAY.
Just like valuing lots that will take time to absorb, a discount would be appropriate. The owner will take a haircut compared to the identical property that sells on day 1 but his/hers sell at the end of three years.

I would go into the closest area I could find for comps with similar exposure times. I would also likely rely on the cost approach heavily. It sounds like you are trying to compare apples to oranges and I would be very qualitative if I was going down that road and rely on the cost approach. Don't forget the brokers.

 

[Gobears81]

They are ecclesiastical buildings in NBC. And the value TODAY reflects the value of a sale that lies in the future (three years). The comps do not reflect a discount TODAY.
Just like valuing lots that will take time to absorb, a discount would be appropriate. The owner will take a haircut compared to the identical property that sells on day 1 but his/hers sell at the end of three years.

When I value development land (*edit-transitional land*), the exposure time (backward looking) could be 10 years in some cases. The sales used have been marketed for an extended period. So is my job to determine the anticipated price in 10-years and discount it back? The market could be CONSIDERABLY different in that time frame. It is to assume that the property has been marketed for roughly 10-years prior to the effective date and what it would sell for if the sale is consummated on the effective date.
In the route which you are proposing, an owner would purchase it today for theoretically a price less than what it would have sold for if marketed for the three years prior, list it for three years, then sell it again? That doesn't sound like too many church purchasers that I have encountered-that sounds like a use value. Also, wouldn't you need to factor in operating/ holding costs and rental income in your DCF analysis? I'm sure that there are some out there, but I haven't encountered too many church operators engaging in DCF.

 

[Meandering]

We have "places of worship" in strip mall retail space, and in old warehouses.

Church is a type of construction. Period. Not some politically correct reference to anyone's religious preference.

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[Meandering]

We have "places of worship" in strip mall retail space, and in old warehouses.

Church is a type of construction. Period. Not some politically correct reference to anyone's religious preference.

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I would go into the closest area I could find for comps with similar exposure times. I would also likely rely on the cost approach heavily. It sounds like you are trying to compare apples to oranges and I would be very qualitative if I was going down that road and rely on the cost approach. Don't forget the brokers.

Why would he use a cost approach in the projection of marketing time?

Was there an indication this was new construction?

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[Meandering]

When I value development land, the exposure time (backward looking) could be 10 years in some cases. The sales used have been marketed for an extended period. So is my job to determine the anticipated price in 10-years and discount it back? The market could be CONSIDERABLY different in that time frame. It is to assume that the property has been marketed for roughly 10-years prior to the effective date and what it would sell for if the sale is consummated on the effective date.
In the route which you are proposing, an owner would purchase it today for theoretically a price less than what it would have sold for if marketed for the three years prior, list it for three years, then sell it again? That doesn't sound like too many church purchasers that I have encountered-that sounds like a use value. Also, wouldn't you need to factor in operating/ holding costs and rental income in your DCF analysis? I'm sure that there are some out there, but I haven't encountered too many church operators engaging in DCF.

Best answer.



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[Eli]

We have "places of worship" in strip mall retail space, and in old warehouses.

Church is a type of construction. Period. Not some politically correct reference to anyone's religious preference.

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Place of worship is also a type of real estate. A legal description identifies the real estate.

 

[Mr Rex]

I would suspect that any discounting would be substantially offset by the value in use. If any thing the cost to borrow the funds to build new ie interest for 3 years less the value of using the existing building over the 3 year period.

 

[Eli]

We have "places of worship" in strip mall retail space, and in old warehouses.

Church is a type of construction. Period. Not some politically correct reference to anyone's religious preference.

.



Why would he use a cost approach in the projection of marketing time?

Was there an indication this was new construction?

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Don't misquote me but I am a big cost approach fan on unique properties. I don't care how old the property is. I want my hat hanging on something that will hold it.

 

[Terrel L. Shields]

If the seller has to wait three years to get their money, then the NPV is less than the (future) price that they will capture or they will have to discount to move it. That assumes a steady market. There is an argument to be made that you should not discount. I was taught to do so. A PM leads me to a different point of view. To me it is obvious that the exposure time of the comps suggests that the marketing time of the subject is likely to be years. I further believe that because of the size of the facilities (seats 400+ in the primary sanctuary and over 200 in an ancillary "youth" congregation) finding a buyer from another congregation means they will wait years for a buyer. The alternative buyer - a private or public school or institution - also generally takes a lot of time to raise funds.

The typical way I have seen new churches make this move is to build anew before vacating the old. They may build a fellowship hall with temporary use of it as the sanctuary. Once the old church sells, then the Sanctuary building is built.

The sales used have been marketed for an extended period. So is my job to determine the anticipated price in 10-years and discount it back?

If you comply with the Feds you will.

To comply with the Federal Reserve Appraisal Standards for Federally Related Transactions Subpart G 225.64 of the FDIC, an appraiser must among other requirements,


analyze and report appropriate deductions and discounts for any proposed construction and discounts for any proposed construction, or any completed properties that are partially leased or leased as other than market rents as of the date of appraisal, or any tract developments with unsold units;


Further, the FDIC defines tract developments as follows in 225.62. (2)j:


"Tract Development" means a project of five units or more that is constructed or is to be constructed as a single development.​

 

[Gobears81]

If you comply with the Feds you will.

To comply with the Federal Reserve Appraisal Standards for Federally Related Transactions Subpart G 225.64 of the FDIC, an appraiser must among other requirements,


analyze and report appropriate deductions and discounts for any proposed construction and discounts for any proposed construction, or any completed properties that are partially leased or leased as other than market rents as of the date of appraisal, or any tract developments with unsold units;


Further, the FDIC defines tract developments as follows in 225.62. (2)j:


"Tract Development" means a project of five units or more that is constructed or is to be constructed as a single development.​

When I say development land, I am referring to land on the outskirts of town that has potential for development. Perhaps that is a regional term. I am not referring to land that is, in any stage, platted for subdivisions. I think that I've seen you refer to this as transitional land.