Realty Rates

[NewJerichoMan]

Anyone have any experience with Realty Rates? Their website is realtyrates.com. I see the "other side" in tax certiorari cases often quoting this survey. The cap rates have no basis in reality but that's always difficult to prove isn't it? Makes a convenient post for the aggrieved to hang their hats on, so to speak.

Are they specifically designed for tax grievances? I can't see a bank lending ever utilizing these caps despite the website's claims that big banks are among its clients.

 

[stephenbullock]

RealtyRates.com is one more source of support for cap rates along with band of investment, your comparable properties, cap rates on similar properties from CoStar, LoopNet, etc. The hi and low ranges are significant but they also give you averages. It's less than $100 a year and one of the better values out there.

 

[GregoryK]

Their data is provided by surveying market participants. I think you cannot get more real than that. I have used these surveys for years and their sister products. I know of no other source that provides the depth they provide. We also use Pwc survey data, but this is geared largely toward retail properties. Having said that, is no substitute for confirmed sales and cap rates. Survey data is best used as supporting data, and to show trends or fill gaps in data abstracted from the market area. As with any survey, the data is only as good as the information provided and the number of participants providing the information. Historically, mr Watts has had a reasonable number survey participants.

 

[hastalavista]

IMO, it (and Korpazc/PwC) provides background and context for local data and local rate verification.
It is a supplement and not a substitute for first hand data verification.

 

[Gobears81]

IMO, it (and Korpazc/PwC) provides background and context for local data and local rate verification.
It is a supplement and not a substitute for first hand data verification.

Agreed.

It is something that adds evidence, particularly the average. More often than not, I find the average rate to be a bit high, but I might have an NOI to be, say 80% of the PGI for triple net leases, whereas many brokers might just take the triple net rents and divide that by the sale price or listing price to determine cap rates. What I just mentioned could be an issue in tax appeals, as I've seen appraisers use the average rate (or maybe justify a higher-than-average rate), yet the method of calculating NOI would be similar to how I do it. It is always important to verify the anatomy of a cap rate.

While the range between low and high cap rates are typically huge for Realty Rates surveys, I believe part of this could be slightly different ways of calculating NOI (though they do not include reserves in their rate quotes). It is great for us small-towners, as Korpacz is primarily for the metro locations, whereas Realty Rates has surveys in both more and less-populated areas. In terms of customer service, Realty Rates is top notch. Also, the sales which I can extract cap rates are often either uncommon or might be affected by some factor which skews the rate. I typically quote Realty Rates in my appraisals, if for nothing else, to add secondary support.

 

[Terrel L. Shields]

I've used the service and it is reasonable. I run into odd ball projects sometimes and often the support for any market based cap rate is necessarily regional in nature, not specific to any one area. It beats no support for that RV park, mobile home park, etc. that you do once every couple of years.

 

[Michael P Jacobs MAI]

For property profiles that do not trade on market cap rates - like end-user facilities - calculating a cap rate is your only viable alternative. Use a very low ("safe") equity rate.

 

[DanBuck]

Korpacz seems to be the preferred. But know, that these rates are gathered based on surveys of someone calling you up asking something like..

"Hi, Sir would you consider selling your office building for 6% cap rate?" and he answers "ye that sounds about right"...and thats a big part how the surveys are collected...

 

[leasedfee]

RealtyRates is great for its reserve requirements survey, and their land lease cap and yield rates. Their overall average rates are way way higher than Denver. I think if you read the fine print RealtyRates doesn't subtract for reserves which may trim 50 or 100 BP off.

Ultimately, the Gold Standard for capitalization rates is extraction from the market, so you can compare apples to apples. If you're consistent in application the value conclusion will always be correct. During the collapse in 2009-2011, I was also looking at gross rent multipliers (a cap rate without any economic costs removed) as well as running two pro-formas with a high "broker's" cap rate without subtracting reserves and applying a low 5% like vacancy rate. Then I'd run an "appraiser's" pro-forma column subtracting economic vacancy, management, reserves, and it'd be 200-300 basis points lower. The values were essentially the same. So each source depends.

 

[PL1957]

Korpacz seems to be the preferred. But know, that these rates are gathered based on surveys of someone calling you up asking something like..

"Hi, Sir would you consider selling your office building for 6% cap rate?" and he answers "ye that sounds about right"...and thats a big part how the surveys are collected...

I don't know about the surveys you subscribe to, but the larger ones like PwC, RERC, etc. are pretty clear regarding their methodology. Survey participants certainly aren't random and the surveys themselves are pretty detailed and often include follow up questions. There's usually a section of the report (or on the website) that describes the methodology and names participants.