Grid adjustment question

[bsilver]

appraising air rights is way above my paygrade but sounds interesting - I imagine the fees are good too---​

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Money out of thin air: Appraising air rights Jun 10, 2013​

William Wilgus, the first person to figure out that property owners could sell the right to develop the space above their lots, coined the phrase “taking wealth from the air.” Empty space generating income — an exciting idea. Of course, Wilgus wasn’t an appraiser. It’s easy to say you can sell the sky, but what’s a fair price? How do you value it?

Valuing air rights was an interesting challenge when we did an appraisal on a mixed-use skyscraper back in 1998. This case is also noteworthy because the property was the subject of a U.S. Supreme Court case, in which our appraisal was used as evidence. Here’s an overview of air rights issues and how they’re appraised.

How Air Rights Issues Arise

Wherever there are skyscrapers, there will be air rights issues. They commonly arise when an entity wants to own only specific floors of a proposed building or when an entity wants to develop a property and desires to maximize value of the development envelope.

Chicago saw an air rights controversy back in 2009, when the Fourth Presbyterian Church tried to sell the air rights to one of its lots. The church wanted to build a 1,700-foot skyscraper and retain the rights to the first six floors. The value of the 600-odd feet above the church’s offices? A staggering $25 million. However, the deal never went through, as it was blocked by an alderman.

In a successful air rights case, New York City gave Forest City Ratner Company (FCRC) air rights in downtown Brooklyn in exchange for the cost of a new subway station. The structure, which just opened, is composed of the subway station on the bottom and the Barclay Center arena on top. FCRC ended up paying $76 million for its air rights.

How to Value the Sky

I've done appraisals for avigation easements a number of times. Usually they are cones of airspace that expand outwards and upwards over neighboring properties. Sort of a partial interest in the air rights over neighboring properties. You wouldn't want a 20 story building at the end of a runway take off route. That said, air rights ar very real, and can have significant value.

 

[bsilver]

appraising air rights is way above my paygrade but sounds interesting - I imagine the fees are good too---​

​

Money out of thin air: Appraising air rights Jun 10, 2013​

William Wilgus, the first person to figure out that property owners could sell the right to develop the space above their lots, coined the phrase “taking wealth from the air.” Empty space generating income — an exciting idea. Of course, Wilgus wasn’t an appraiser. It’s easy to say you can sell the sky, but what’s a fair price? How do you value it?

Valuing air rights was an interesting challenge when we did an appraisal on a mixed-use skyscraper back in 1998. This case is also noteworthy because the property was the subject of a U.S. Supreme Court case, in which our appraisal was used as evidence. Here’s an overview of air rights issues and how they’re appraised.

How Air Rights Issues Arise

Wherever there are skyscrapers, there will be air rights issues. They commonly arise when an entity wants to own only specific floors of a proposed building or when an entity wants to develop a property and desires to maximize value of the development envelope.

Chicago saw an air rights controversy back in 2009, when the Fourth Presbyterian Church tried to sell the air rights to one of its lots. The church wanted to build a 1,700-foot skyscraper and retain the rights to the first six floors. The value of the 600-odd feet above the church’s offices? A staggering $25 million. However, the deal never went through, as it was blocked by an alderman.

In a successful air rights case, New York City gave Forest City Ratner Company (FCRC) air rights in downtown Brooklyn in exchange for the cost of a new subway station. The structure, which just opened, is composed of the subway station on the bottom and the Barclay Center arena on top. FCRC ended up paying $76 million for its air rights.

How to Value the Sky

I don't really understand what this air rights / location argument is all about. Location is one factor that impacts the value of property held in fee simple ownership. Location is also a factor that impacts the values of the subsurface rights, surface rights, and the air rights estates as valued as individual property rights. In most locations there is little contribution to market value attributable the air and subsurface rights. Unless there is some forming economic utility associated with those rights, the values are typically nominal, and, yes, any economic utility would be predominantly a locationally derived. Subsurface values in locations where there is no extractable subsurface marketable resources would be quite low. Air rights are similarly impacted by locations. Building into air space can be advantageous is some instances, mostly dense urban areas. Those air rights can have significant values. Air rights near airports or in the path of proposed overhead utility lines clearly have some value.
So, when the statement is made that air rights values of a condo project are in the location, I think the statement is mostly true, certainly not false, and I don't think you actually disagree with his point.
It behooves appraisers to remember that market value is as of a specific date. The air rights over a condo project in an area where there is no apparent or contemplated need for use of any air rights for any kind of project would have minimal contributory value. This would be heavily derived from the location of those air rights. 50 years later, zoning has changed, the area is much more densely populated and multi story building are going up in the neighborhood, and the aging condo project is ready for replacement. The FAA has ordered the nearby airport that was established 25 years ago to expand riots take off and landing clear air safety zones. And we'll, the location of that condo complex that now has a highest and best use of a 12 story apartment complex site is right in the middle if the avigation easement pathway. 50 years ago, location made the air rights vakue very limited. 50 years later, the location has increased the value. Is it a function also a function of zoning and building rights? Of course! These attributes are clearly connected.
Having done a lot of work for airports, utilities, transportation authorities, mineral extraction companies and so forth, i am well aware of your correct assertion that air rights derive value in commercial building rights values. But the other poster is not in any way wrong in stating that that value is heavily associated with location.

 

[Terrel L. Shields]

Subsurface values in locations where there is no extractable subsurface marketable resources would be quite low.

There is always someone though willing to speculate upon a long-term potential at a low price, recognizing that such interest to suddenly arise would increase the value 100x overnight. This happened in the Fayetteville Shale, the Haynesville Shale, The Marcellus Shale, Utica, etc. while OTOH, equally valuable mineral rights just across the line in New York from Pennsylvania were rendered worthless by NY edicts preventing development and equally problematic pipelines. NY had the first gas wells in America. And today people still drill vertical shallow wells to exploit gas in NY. But since this is a drop in the bucket from what a horizontal fracked well would produce, as a consequence leases are cheap. But were that to change, the value of those minerals would also change.

In south Arkansas, a German company managed to extract economic amounts of lithium carbonate from the tailwaters from a bromine plant. This was the old El Dorado field long played out of oil from the 1920s and 1930s. But the brines in that field are so salty they contain all sorts of minerals. Once it was announced that there is marketable amounts of lithium, wild speculation abounded in the area. Some of it is very far away from any real place to process such brines. I have already attempted to discourage mineral buyers from paying too much for the mineral rights to produce the water for lithium. Not all brines are made equal. Further, they are arguing over how and how much to pay for royalties to the mineral owners - where most of the minerals have been severed from the surface. Currently the bromine mineral owners are paid a flat fee per acre per year. The old 1/8 royalty is not the standard. And the O & G commission will have to decide the issue of how are royalties to be paid. The Lithium producers claim they cannot afford a 1/8th royalty as the margins are too slim at current lithium prices which have fallen dramatically.