The Valuation of Billboards

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The Valuation of Billboards

• Scott Mac Williams

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USPAP ConsiderationsCompetency

• Competency requires
• The ability to property identify the problem to
  be addressed
• The knowledge and experience to complete the
  assignment competently
• Recognition of, and compliance with, laws and
  regulations that apply to the appraiser or to the
  assignment.
• Lack of Competency
• If the assignment cannot be completed
  competently the appraiser must decline or
  withdraw from the assignment

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USPAP Considerations Scope of Work Rule

• For each appraisal, an appraiser must
• Indentify the problem to be solved
• Determine and perform the scope of work necessary
  to develop credible assignment results
• The expectations of the parties who are regular
  intended users
• What an appraisers peer actions would be in
  performing the same or similar assignment
• Disclose the scope of work in the report

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USPAP Considerations Standard 1 Real Property
Appraisal Development

• Rule 1-4 In developing a real property appraisal,
  an appraiser must collect, verify, and analyze
  all information necessary for a credible
  assignment result.
• When a Sale Comparison Approach is necessary for
  a credible assignment results, an appraiser must
  analyze such comparable sales data as are
  available to indicate a value conclusion
• When a Cost Approach is necessary for a credible
  result an appraiser must
• Develop an opinion of site value by an
  appropriate technique
• Analyze comparable cost data available to
  estimate the cost new
• Analyze such comparable data as are available to
  estimate the difference
• When an Income approach is necessary for a
  credible assignment results, an appraiser must
• Analyze such comparable rental data as are
  available and/or potential earning capacity of
  the property to estimate the gross income
  potential of the property
• Analyze such comparable operating expense data as
  are available to estimate the operating expenses
  of the property.
• Analyze such comparable data as are available to
  estimate the capitalization and or rates of
  discount
• Base projections of future rent and/or income
  potential and expenses on reasonable clear and
  appropriate evidence
• When developing an opinion of the value of a
  leased fee estate or leasehold estate, an
  appraiser must analyze the effect on value, if
  any, of the terms and conditions of the lease (s)

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Problem to be solvedWhat is being Valued?

• Sign Structure
• Sign Site
• Leased Fee Interest
• An ownership held by a landlord with the rights
  of use and occupancy conveyed by lease to others.
  The rights of the lessor (the leased fee owner)
  and the lessee are specified b the contract
  terms within the lease
• Leasehold Interest
• The interest held by the lessee (the tenant or
  the renter) through a lease transferring the
  right of use and occupancy for a stated term
  under certain conditions.
• Leasehold Value
• Difference between contract rent paid to the
  owner and market rent at the time of the
  appraisal
• Leasehold Value Method
• Leasehold interests are typically valued usi9ng
  the income capitalization approach. The income to
  the position is the difference between the market
  rent and contract rent. The capitalization
• Location
• Location is of paramount importance
• Valuation should include the value of the
  location

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Recognition of, and compliance with, laws and
regulations that apply to the appraiser or to the
assignment.

• Just Compensation is to compensate only for the
  value of the property taken.
• Just Compensation does not include compensation
  for loss of business profits, .

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Accepted Valuation Methods

• Nichols on Eminent Domain
• 23.044 As a general proposition, it can be said
  that any professionally accepted appraisal
  methodology or technique tat is adequately
  supported will be admissible
• Cost Approach 23.04 4 23-56 to 23-59
• Income Approach 23.04 4 23-59 to 23-62
• Market Approach Gross Rent Multiplier Method
  23.04 4 23-62 to 23-64

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Accepted Valuation Methods Continued

• The Valuation of Billboards (Appraisal Institute)
• by Dwain R. Stoops MAI and Marvin L. Wolverton
  PhD, MAI
• Chapter 4 Highest and Best Use and the Cost
  Approach Cost Approach
• Chapter 5 Sales Comparison Approach 126-139
• Income Capitalization Approach 142-157
• Discusses the use of two multiplier applications
  for valuing interests in sites and structures
  separate from the business operation- the
  potential gross income multiplier (PGIM) and the
  effective gross income multiplier (EGIM)

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Questions Regarding Compensation/Methodology

• Compensability is a question of Law
• Change 2010 Jurisdictional Exception
• An assignment condition established by applicable
  law or regulation which precludes an appraiser
  from complying with a part of USPAP.
• In an assignment involving a jurisdictional
  exception, an appraiser must
• Identify the law or regulation that precludes
  compliance with USPAP
• Clearly and conspicuously disclose in the report
  the part of USPAP that is voided by that law or
  regulation and
• Cite in the report the law or regulation
  requiring this exception to USPAP compliance.
• Law includes constitutions, legislative and court
  made law, and administrative rules and
  ordinances. Regulations include rules or orders
  having legal force, issued by an administrative
  agency. Instructions from a client or attorney do
  not establish a jurisdicational exception
• Consider the Use of an Extraordinary Assumption
  USPAP defines an Extraordinary Assumption as an
  assumption, directly related to a specific
  assignment, which, if found to be false, could
  alter the appraisers opinions or conclusions.
• Get Supported Legal Instructions for any
  questionable damages or employed methodologies

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Conclusions

• Do work that you are competent to complete
• You the appraiser are ultimately responsible for
  the scope of work decisions.
• Instructions from a client or attorney do not
  establish jurisdictional exception
• Get Supported Legal Instructions for any
  questionable damages
• Use Extraordinary Assumptions where applicable