What is your property worth

1
What is your property worth?
Alan Ameche
2
Valuation Steps

• Review income and expense statement
• Compile rent survey
• Review sales comparables
• Determine cap rate based on current market
• Review financing options
• Determine Value

3
Income Expense Statement

• Income YTD
• Storage rents 2006 2007
• Late / admin fees
• Mail box rentals
• Truck rentals
• Shipping services
• Total Income
• Vacancy
• Expenses
• Manager/relief
• Payroll taxes
• Employee Health Insurance
• Bank charges credit card
• Utilities
• General maintenance
• Elevator maintenance
• Yellow pages/advertising
• Management fees
• Office supplies

4
Income

• Trailing 12 vs. forward look
• Categories and capitalization
• Income
• Storage rental
• Late / admin fees
• Retail sales (net)
• Truck rentals
• Mailbox rentals
• Mail center services

5
Expenses

• Compare past year vs. year to date
• Indentify any peculiarities
• Unusually high or low categories
• Owner s time for mgmt, maintenance
• Owner co-mingling personal expenses
• Professional management?
• Reserves used in appraisals?

6
Vacancy Factor

• Overall market vacancy
• Past year compared to current year
• Square footage vs. economic
• Interpreting computer reports

7
Rent Survey

• Are your rates at market, below, above?
• Does market strength and competition justify a
  rate increase?
• Create new board rate schedule
• Create proforma with new schedule

8
Sale Comparables

• Where to find sale comp data
• Review recent sales looking for
• Location of property
• Size of facility
• Quality of facility
• Cap rate
• Inside story about sale
• Is the market the same today?

9
Cap Rates

• Sale comparables used to determine cap rate
• What causes cap rates to change?
• Forward look revisions for changing markets
• Vary according to facility quality and location
• Lowest cap rates on high barrier to entry mkts
• Higher cap rates on outlying areas

10
Financing Options

• Financing options and effect on value
• - Cash on cash returns
• Review alternatives conduit, life company,
  bank
• Assumable debt
• Non pre payable debt w/ high interest rate

11
Upside Potential

• Below market rents
• Expansion potential
• Large unit mix
• Great location high barriers to entry

12
Fine tuning your facility value

• Bring all tenants to current board rates
• Rent increase if below market
• 3-4 months prior to refinance or sale
• Look for unusually high expense categories
• Yellow pages / Marketing
• Capital improvements lumped into maintenance

13
Determining value

• Create an accurate pro form
• Durable income sources
• Fair vacancy factor
• Good expense underwriting
• Factor in upside potential
• Cap rate reflecting current market

14
Different valuation perspectives

• Lenders perspective
• Appraisal is very important
• Debt coverage ratio limits
• Buyers perspective
• Forward look
• Willingness to be aggressive

15
What are the current market conditions?

• Cap rates
• Buyer demand
• Interest rates
• Conduit vs. local banks

16
Closing thoughts

• Watch for changes in market conditions
• Overbuilding
• Interest rate changes
• Knowing what your property is worth
• Helps make good decisions related to financing
  and selling