Need concensus - old industrial "loft" type building

[Ray Ohler]

Looking at an old industrial 5 story building in an area being "pushed" for industrial/commercial development (of course the "pushing" has been on-going for 10 years - only VERY sparse takers). Market area situated about 3 miles north of central business district. Found four sales which I THOUGHT were appropriate, all similar type multi-story "shells" in fair condition (subject in poor to fair condition - probability is it will be torn down). We were "given" five sales that another appraiser is going to use. All of the sales are within 1/4 to 1/2 mile of CBD and all are earmarked and bought for conversions to commercial office, restaurant and condos and 4 of the five are located across the street from each other. Appraiser said all were arms-length and "no unusual motivations".
Sale 1 - Sold to a "development" corp not registered with the state - SP $400,000 - Financing $1.6M Sale "conditions" were - obtaining zoning variance and building permits, AT LEAST $1.5M financing contingency AND presales of 1/2 of proposed units.
Sale 2 - SP $1.5M contingent upon zoning, permits and financing, appraiser had "expense analysis" which lists acquistion of "shell" as $200,000 but used $1.5M for analysis.
Sale 3 - SP $675,000 with $700,000 in financing sold to a LLC which has the CEO listed as the co-purchaser of Sale 1.
Sale 4 - SP $1.3M 2/00. However, appraiser failed to mention that the building had been previously bought for $790,000 in 2/99.
Sale 5 - SP $685,000 - financing $970,000. Buyer is CEO of the corp buying Sale 2.
WELL? Are these "good" sales?

 

[George Hatch]

Location and conditions of sale.

Location - (Location, location, Location) If the 4 sales you found are more proximate then they are almost certainly more comparable than the 5 sales that were fed to the other appraiser. I dunno about Philadelphia, but in most areas gentrification usually occurs closer to the CBD and spreads outward from there. It may be several years before your property benefits from the trend, and that's if the developers of the other projects are successful.

Conditions of sale - a couple of the sales were contingent on changes in zoning, permits, and one included a 50% presale clause. These conditions must have been met because the sales closed. Unless your property has similar elements in progress there's no way you can make the assumption that your property will similarly benefit. Ergo, those sales are not comparable without significant adjustment. It's no different than appraising a parcel of vacant farmland, subject to changes in zoning, permits, utilities, financing and presales to result in a business park. You would only do it if you had plans, specs, cost breakdowns, documented bribery to the right public officials, and some indication that it might actually occur.


You're going for the current value and the typical buyer. If an individual buyer wants to speculate beyond that, let them use their own money; that's why developers make the big bucks.

 

[Ray Ohler]

Just what I was thinking. The sales I found are all in similar type markets, about 1/2 mile from the subject and NOT bought for conversion (would NEVER sell a condo, it's not a condo area. Oh, I forgot to mention, it is public money buying the building. :lol:

 

[Mountain Man]

:roll: Been there, dun that, got a couple of tee shirts. Have fun! 8)
BTW, no matter what you do, someone will be ticked off.
Mell.

 

[George Hatch]

Ray,

If public money is involved, you are supposed to double the "bribery of public officials" discount...

Seriously, though. This looks like a classic illegal turn-n-burn scam, only on a larger scale and using public funds. This is the kind of deal where someone will eventually go to jail. More and more it seems that appraisers are the first ones they arrest, as well they should. I'm sure your 'buyers' will find an appraiser dumb enough to risk it all for thier measly fee. They'll just keep feeing it out until they find a sucker.

I'm glad you aren't the sucker.