Level of Detail of Lease Comparable Data

[BigBlueGA]

Just curious of what the prevailing level of detail is for lease comparables by most of us here is. It has always seemed odd to me that we share lease data in a report when it is by nature relatively sensitive information. I think that the property owners that willingly talk about these leases with us don't necessarily have the expectation that we are publishing it in a report that will be shared with other competing landlords in the market, and if we explicitly disclosed that we would never get rental data at all.

Knowing the rate that your competition is charging and when the leases of their tenants began and under what terms is a pretty big competitive advantage.

I have often wondered if it would be smarter to "anonymize" the lease comparables within a report and include a statement that "specific information regarding the property is contained within the appraiser's work file". Does anybody do this? Do you get any pushback from lenders?

I have been going the "full info" route but I always feel a little hesitant when I use a comp from a landlord that I have a good relationship with and is forthcoming with info... I always suspect that maybe they don't have an expectation that I'm explicitly publishing the info they have given me and that they might be angry if they found that I had used it in a report.

Thoughts?

 

[TerryRohrer]

Given that you have expressed the concern, I would do as you propose and keep the identity of the comps confidential. Many around here have been doing that for years with sales. In some cases, I have verified sales on my promise not to disclose the details. In the latest, I was appraising half of a large, very high priced ranch where the other, adjoining half had sold within the past year. That sale was in my analysis and relied on, but only mentioned as relevant but confidential data in my report. Did not hear a word.

 

[Terrel L. Shields]

Just curious of what the prevailing level of detail is for lease comparables by most of us here is.

I give what I have. OTOH, in farm (poultry) these contracts are fairly uniform on a per operation basis, that is, if a Cobb-Vantress breeder hen farm, it is going to pay the same as another C-V breeder hen farm. Expenses are likely to be very similar. Further, many integrators (chicken companies) have records which show the average performance of all growers and the average expenses for them. they usually are willing to share that in the same way they share the data with potential new growers.

 

[Raven59]

I anonymize lease comparables, providing enough information to support analysis without revealing identifiable details. I include a statement in the report indicating that specific lease information is kept in my work file. My position is reporting detailed lease data can compromise confidentiality and trust.

 

[Red Flint]

I provide enough data but not enough to trace the lease, i.e. leasable area, building age (rounded if too specific), rough location, lease terms, CAM percentage. Private contracts are confidential, especially when collected while doing prior appraisal work.

 

[Gobears81]

I present a redacted rental format in most appraisals. No rental pictures, addresses, or tenant names shown. I have not yet received pushback, though once in a great while, a reviewer will request more information on the rentals.

It is a scope of work issue, though. If it is a report that you might testify on or it is compared to appraisals from the opposing side, you might consider making an exception to the redactions.

 

[David S]

I just did a duplex appraisal assignment. Most difficulty is to find rent formation, including unit sq ft. I called seller's agent and / or buyer's agent many, many times to get some information. Sometime even agent don't know the rent figure. I just asked how much you think it can be rent out for each unit? Some agent said my duplex shall be rent $3,000 each unit; some agent said my duplex shall be rent $3,500 each unit because we just did total remodel / upgrade. I just fill these figures into grid and comments: " this unit rent information is from local agent's survey.

 

[zaclan]

Just curious of what the prevailing level of detail is for lease comparables by most of us here is. It has always seemed odd to me that we share lease data in a report when it is by nature relatively sensitive information. I think that the property owners that willingly talk about these leases with us don't necessarily have the expectation that we are publishing it in a report that will be shared with other competing landlords in the market, and if we explicitly disclosed that we would never get rental data at all.

Knowing the rate that your competition is charging and when the leases of their tenants began and under what terms is a pretty big competitive advantage.

I have often wondered if it would be smarter to "anonymize" the lease comparables within a report and include a statement that "specific information regarding the property is contained within the appraiser's work file". Does anybody do this? Do you get any pushback from lenders?

I have been going the "full info" route but I always feel a little hesitant when I use a comp from a landlord that I have a good relationship with and is forthcoming with info... I always suspect that maybe they don't have an expectation that I'm explicitly publishing the info they have given me and that they might be angry if they found that I had used it in a report.

Thoughts?

Think about sales comps for a moment. I work in a non-disclosure state but have experience in disclosure states as well. In disclosure states, it's difficult to miss relevant sales, whereas non-disclosure states it can be challenging to find enough relevant sales to support an opinion of value. I've always thought that the sheer volume of sales in disclosure states improved appraisal quality due to more data. Likewise, non disclosure states seem to protect the competitive position of buyers/sellers.

Knowing the rate that your 'competition' charges is a key element of leasing. The more of that information that gets redacted by real estate professionals, the harder it becomes for all parties to buy/sell/lease at market and seems to me to create greater amounts of volatility. I would imagine investors would trade over market lease rates for lower volatility everyday of the week.

Imagine there is one, large commercial brokerage in a small town. It is a non-disclosure state. They do 70% of commercial transactions in your market but only share a fraction of their sales/leases and only those that show an appreciating market. Nonetheless these sales/leases make up the majority of available comps. Because appraisers work in arrears, and brokers have invested interest in rising values, it takes several months or even a year or more for the local market to catch on. Once it does, vacancy rises sharply and lease rates return to normal, but the local market takes a serious hit. In this example, if the local brokerage had simply told the truth by sharing ALL of their comps, this would have been avoided.

I suppose we are only as good as the data we analyze and present.