Estimated Remaining Economic Life

[Ariba]

Just curious. What is the estimated economic life of a condominium unit in the 50 story skyscraper? Also, what is the definition of vacant? This is a second home fully furnished but no personal items. Would you consider it occupied or vacant?

 

[glenn walker]

Most 40-100 story structures are designed to last well over a 100 years unless it blows down or is attacked by a terrorist in a Boeing-707. I would check occupied and in my comments state it's a second or vacation home. If the lender does not like it you can always go back and change to vacant.

 

[jay trotta]

Just curious. What is the estimated economic life of a condominium unit in the 50 story skyscraper? Also, what is the definition of vacant? This is a second home fully furnished but no personal items. Would you consider it occupied or vacant?

What does your prospectus say You Own ? IE: if it's from the paint in, do you have an "economic life" to be considered ?

 

[J Grant]

If a person/owner is occupying it even part of the time, its not vacant. If it's a seasonal second home you can explain that. Remaining economic life is how long the unit , and one assumes the building, is viable economically as a structure for people to live in. Since many skyscrapers are over a century old, or at least decades old, one can assume a few more decades at least, if building is well maintained and decently built .

 

[Mike Garrett RAA]

most terrorists would use a 757.

 

[Terrel L. Shields]

Check your cost book for TEL table. Or do market extraction

http://pages.jh.edu/jrer/papers/pdf/past/vol05n01/v05p041.pdf

 

[Howard Klahr]

By reporting the answer from the above equation in years presumes that the useful life is 100 years. The equation however is intended to reflect a percentage rather than a time period. The actual answer is 65% remaining life not 65 years. As the actual age is 19 years (effective age) dividing the age by the percentage will give you the remaining economic life as extracted from market sales.
19 years / (1 - 0.65) = 73.28 years Say, 73

 

[Mike Garrett RAA]

Much confusion exists about remaining ECONOMIC vs PHYSICAL remaining life. Outside influences can be so different and often can change quickly.

 

[Elliott]

Howard said, "By reporting the answer from the above equation in years presumes that the useful life is 100 years."

Terrel's equations uses "100" to convert into or out of percentages. It doesn't presume a 100 year useful life. Seventh grade algebra.

 

[leasedfee]

Much confusion exists about remaining ECONOMIC vs PHYSICAL remaining life.

What Mike says.

In 50 years from now what will be of this highrise condo?

• Asphalt will be shot and replaced every 7 years or so;
• landscaping scrappy at 30-40 yrs.;
• pool components and shell will have been replaced 100% over during that time;
• at 50 years (or 20) the curtain wall facade will leak;
• the roof will have been replaced twice or more;
• during periods of maintenance over-sight water will drip into the underground garage slowly eroding the foundation;
• carpets, tile, and paint will have been replaced 5 or 6 times;
• kitchen remodeled at least once, and now ready for a second or third turn;
• boiler nearing end of life;
• leaks forming in pipes and radiators;
• elevators rebuilt at least once whether all in one fell swoop or here or there in the course of "routine maintenance".

So what will still be on its 1st round of physical life?

• Foundation;
• structure or frame;
• electrical;
• maybe something else I'm forgetting.

Long-lived components are about 20%-33% of the overall value, of which the foundation/structure is about 10%-15% of the total. So the question is how much longer is a skyscraper's life versus a frame/masonry building's life? This differential multiplied by the 10%-15% weighting would tell us how much more economic life the one would have. Amsterdam's historic masonry buildings are 500 years old and the long-lived components would have been rebuilt or reinforced many times by now. My extraction of the long-lived components (only) of a masonry building is about 150 to 250 years. I have no idea how long a skyscraper's foundation/structure would be. My guess is that the additional "weighted" economic life is small.