Indulge me - stabilized value

[CANative]

Indulge me with a stupid question.

If you're valuing a property that is not at stabilized occupancy and the values you are to include are "as is" and "as stabilized" is the as stabilized value a prospective value?

 

[The Warrior Monk]

The answer is a most definite maybe.

It depends on the assignment conditions for the particular assignment.

 

[CANative]

That occurred to me after I posted. I was hung up on the semantics of the way it can be phrased (the stabilized value or the "as" stabilized value.)

So is the "as stabilized" value a hypothetical?

 

[George Hatch]

It is if the occupancy isn't stabilized. (i.e., usually "yes")

 

[The Warrior Monk]

For a current market value it's hypothetical. For a prospective market value, an extraordinary assumption can be used (assuming the market data supports the time frame assumed for stabilization).

 

[Terrel L. Shields]

I think Davo is on to something.

 

[sputnam]

The value can be prospective or current in the same way that proposed construction can be.

 

[hastalavista]

Agree with the others.
The determining factors are the date of value, and the presumption of what state the occupancy level of the subject is at.
If the property is less than stabilized "now", and the requirement is to provide an opinion of value as-if stabilized "now",then an HC is required: the value is based on something that is counter to what exists.

If the property is less than stabilized "now", and the requirement is to provide an opinion of value when-it-stabilizes ("future") , then an EA is appropriate: the value is based on something that is expected to exist, but the reader should be cautioned that if the expectation is incorrect, that could affect assignment results.

 

[Greenra]

Yes, prospective value based on an estimated time to achieve stabilized occupancy--- absorption analysis for a multi-tenant property. Unless your assignment condition includes a hypothetical condition to value the property at a point in time prior to stabilization. Similar to valuing new construction as of the effective date of the report prior to the completion of construction. Typically, a property is first valued as a prospective value upon stabilization then all costs associated with stabilization are deducted to arrive at an as is value. This is typically because generally there is a lack of comparable sales of unstabilized properties for use in the SCA--- when market conditions are stable and reflecting positive absorption. Otherwise estimating time and absorption may be overly subjective and may not be the highest & best use of the property.

Also when an existing property does not reflect stabilized occupancy an appraiser should analyze why the property is not stabilized as there be underlying factors such as location and/or functional issues that may indicate a lower stabilized occupancy rate when compared to other properties in the marketplace--- demand & supply specific to the subject property. Keep in mind properties with a similar use may have different stabilized occupancy levels due to characteristics specific to each property.

 

[Doug DeMars]

Also when an existing property does not reflect stabilized occupancy an appraiser should analyze why the property is not stabilized as there be underlying factors such as location and/or functional issues that may indicate a lower stabilized occupancy rate when compared to other properties in the marketplace--- demand & supply specific to the subject property. Keep in mind properties with a similar use may have different stabilized occupancy levels due to characteristics specific to each property.

So...how and/or who decides what is considered stable for a specific property?