"The Appraisal Journal" Quality Is Improving

[RCA]

For those who read the Appraisal Journal, they may have noticed an improvement in the quality of its articles. The Volume 93, Issue 1, 2025 article titled “The Tenant Is Not the Property” is worth reading. I can sense that they utilized AI to enhance the writing. I can recognize when it’s been used. That’s perfectly fine. They produced a dense and high-quality article. However, I must disagree with the title: Of course, the tenant is not the property.

Leases do, however, run with the property. In a discounted cash flow (DCF) analysis, the current tenant’s rent roll is included with the market rent for subsequent periods. Consequently, the lease becomes essentially a component of market value. As the article points out, the credit rating of the tenant also becomes a component of market value. This shouldn’t come as a surprise, but the issue is whether and how most appraisers handle leased fee interest. It’s a fairly complex subject.

More such good articles expected!

 

[Charles Badell]

I can't imagine the need to try and reinvent how these are analyzed. The market determines the pricing, and we interpret the market. I haven't seen any market participant analyze a purchase in the manner suggested by the article.

 

[RCA]

I can't imagine the need to try and reinvent how these are analyzed. The market determines the pricing, and we interpret the market. I haven't seen any market participant analyze a purchase in the manner suggested by the article.

If you read the articles, saw the tenants, and knew anything about business, having Rite Aid as a major tenant should be a Red Flag. They have been on the brink of bankruptcy for quite some time. Now: What happens if you have a tenant who is way behind on payments and declares bankruptcy, or what could happen? You don't think it will impact market value?

 

[Charles Badell]

Not at all what I said, or at least not what I thought I said. My point is that buyers, sellers, financers of these properties don't price the tangible and intangible seperately.

 

[RCA]

Not at all what I said, or at least not what I thought I said. My point is that buyers, sellers, financers of these properties don't price the tangible and intangible seperately.

Well you said: "I haven't seen any market participant analyze a purchase in the manner suggested by the article."

On top of that you just made another incorrect statement about not pricing tangible and intangible separately. It's your "messed-up" communication again: Tangible and intangible - WHAT? You see, there are tangible assets and tangible liabilities, as well as intangible assets and intangible liabilities. Now, each of these four components of value comes under the category of "property interests". Investors, as standard practice, do indeed "price them separately." I am guessing you don't know what "price separately" means either. It means that they have performed a segregated valuation of each, breaking down the total investment value into distinct components rather than using a single lump-sum price.

You may know what you are talking about, but you are, for some reason or another, just not doing a good job of communicating what you mean. This is a questionable issue, though ( I mean your state of mind, so to speak).

Also, you did not say what you understood by "manner" or what you have seen. So, to communicate what you mean, I suggest you need to try a bit harder. Otherwise, we have to guess at what you mean, and we have to do that.

Personally, I don't think you read the article with any depth or understanding. Something is clearly amiss in your knowledge of these issues.

• The lease obligation travels with the property when sold, making it an encumbrance
• Property appraisers account for lease terms when valuing real estate
• A property with a troubled tenant is worth less than vacant property in many cases
• The lease is intangible, but it's an intangible encumbrance/liability