Agenda - Council - 04/11/2017 - Laserfiche WebLink

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Adjustment Process— "AS-STABILIZED" BASIS Adjustments can be applied through quantitative or qualitative analysis, or both. Quantitative adjustments are specific numeric adjustments that are most credible when adequate data and analysis can be performed such as statistical analysis or matched-pair-sales. Consistent with the scope of work for this assignment, we present numerical adjustments (using percentages) in the sales comparison analysis that follows, but note that they are based on qualitative judgment rather than empirical data. This methodology is commonly used by participants that buy and sell property similar to the subject property,therefore, it is considered the appropriate methodology to use in this assignment. Our qualitative adjustments are based on a scale calibrated in 5% increments, with a minor adjustment considered to be 5% and a substantial adjustment considered to be 25%. Downward adjustments were applied to those factors of comparison where the comparables were considered superior to the subject and, conversely, upward adjustments where the comparables considered inferior. Property Rights Conveyed The property rights conveyed in a transaction typically have an impact on the price that is paid. Acquiring the fee simple interest implies that the buyer is acquiring the full bundle of rights. Acquiring a leased fee interest typically means that the property being acquired is encumbered by at least one lease, which is a binding agreement transferring rights of use and occupancy to the tenant. A leasehold interest involves the acquisition of a lease, which conveys the rights to use and occupy the property to the buyer for a finite period of time.At the end of the lease term, there is typically no reversionary value to the leasehold interest. In this case, since we are valuing the fee simple interest, an adjustment for property rights is not required. We account for differences in rent and investment risk in our Economics Characteristics adjustment category. Financial Terms The financial terms of a transaction can have an impact on the sale price of a property. A buyer who purchases an asset with favorable financing might pay a higher price, as the reduced cost of debt creates a favorable debt coverage ratio. A transaction involving above-market debt will typically involve a lower purchase price tied to the lower equity returns after debt service. We analyzed all of the transactions to account for atypical financing terms. To the best of our knowledge, all of the sales used in this analysis were accomplished with cash or market-oriented financing. Therefore, no adjustments were required. 80