Three Approaches to Value SAMA May

What is happening in SK? 2

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Cost Approach Highlights – Historically, we have completed the Cost Approach in SAMA with all appraisers (80 to 100) but in order to make it a more efficient process we set up our procedures so all the Cost Analysis was completed by 20 Appraisers. 4

Cost Approach We had fully documented procedures that were used by the Appraisers to take a Municipality from start to finish. The project started in February 2012 and ended in December Incorporated a ‘piecewise’ time adjustment instead of linear 5

Cost Approach The existing stratifications were tested first and then consider other stratifications if necessary. Approximately, 800 Municipalities were completed ranging from small hamlets to high valued Rural Municipalities 6

Cost Approach -Cost Analysts were located across the province in Regional offices so we had 2 forms of communication to deal with issues quickly -1. ‘One on One’ meetings every week -2. Weekly conference calls involving all Staff involved in the project 7

Vacant Land Example Base Year Land rate $/SF ASRCOD Value (9076 SF) 2006$ %$ $ %$

Residential Improvement Example Population: 500 Standard B class house with a basement, basement finish, attached garage, deck 2012 improved value = $ improved value = $

Resort Property 10

Lakefront Land Base Year Land rate $/SF ASRCOD Value ( SF) 2006$ %$ $ %$

MRA The MRA team developed a Global model for 9 Municipalities. This model helped us understand market relationships and price trends across a wide spectrum of sales. A Guideline was developed to ensure consistency across market areas. – Also assists in handling features with no or few sales or that generates unexpected results often due to few sales. 12

MRA After the Global model was developed one municipality was chosen to develop a market area model which became the starting point for the other market area models. 13

MRA Three years of sales were used in all the MRA models ( ). The following enhancements were made to the models that will be presented in 2013: – Addition of vacant land – Addition of row house, townhouse, semidetached and mobile homes 14

Land value was determined by: Example: Fully serviced lot Land Size: 8160 SF X $3.14/SF = $ X Land Servicing (0) X Neighbourhood (1.53) X Abuts Apartment (1) X Abuts Greenspace (1) X Abuts Railway (1) X Abuts Highway (0.95) = $37,343 15

Improved value Example: this is a one storey house, no basement, 3 car attached garage built in

Improvement Main living area: 1763 SF X $98.82/SF = $ PLUS Basement Area: 0 Plus Basement Finish: 0 Sum = $ X Construction Type (1) Equals $

Improvement Attached Garage: 1128 SF X $42.82 = $ Deck: 192 SF X $18.57 = $3565 Extra Plumbing: 4 X 1325 = $5300 Sum: = $ ($174,219 + $57,165) X (Construction Quality) X 1.0 (Condition Rating) X 1.0 (Poor quality factor) = $ 336,201 18

Improvement $336, (A/C) = $340,201 $340,201 X (age adjustment) X 1.0 (Building Neighbourhood Adjustment) X 1.0 (Abuts Highway) = $335,387 MRA Land Value $37,343 MRA Improvement Value $335,387 MRA Total Value = $372,730 ($ ) 19

INCOME APPROACH General Commercial Models were completed in 4 Cities and selected commercial properties in their surrounding Rural Municipalities 20

General Commercial Base rents were calculated for each tenant with structural maintenance being accounted for Rent stratification followed to derive the typical rents for a particular property type 21

General Commercial Once the typical rents were complete then a non linear model structure was used to develop a rent table for the municipality Time adjustment was also checked with a regression model Vacancy analysis was completed Capitalization rates were then calculated 22

General Commercial Building Type Size SF Effective year built 2012 Rent/Cap 2012 Assessment 2013 Rent/Cap 2013 Assessment Warehouse $2.70/ 13.5% $ $5.15/ 11.9% $ General Retail $7.60/ 13.5% $ $10.65/ 11.9% $

Income – Multi Family Multifamily models were created and applied Provincially in all SAMA jurisdictions Average rents were calculated Then the Effective Gross Income Multiplier was developed Vacancy study was also conducted based on the vacancy reported by the property owners 24

Example: Average Quality 4 Plex 2013 Revaluation Suite Size Floor Location # of units Rent/Mo PGI 1 BR Bsmt 1 $583 $ 6,996 2 BR Bsmt 1 $676 $ 8,112 2 BR Main 2 $689 $16,536 Total 4 $31,644 Market Vacancy 2.00% -$ 633 Effective Gross Income $31,011 EGIM 8.69 EGI x EGIM = Value $31,011 x 8.69 = $269,486 ($269,500) ($ ) 25

Income-Limited Service Hotels – Calculate a weighted average daily rate (rack rate) – Occupancy is developed by weighted average daily rate and annual income from the rooms – Review expenses to develop the NOI – Review all allowable expenses – Stabilize expenses over the reporting period – Typical rate for rooms, occupancy, room expenses eg cleaning, supplies for the rooms and property expenses eg utilities, taxes, management, reserves for replacement – Combine all limited service and develop a model – develop a cap rate 26

Limited Service Hotel - Comparison # Units Effective Year Built 2012 Cap Rate 2012 Assessment 2013 Cap Rate 2013 Assessment %$ %$ %$ %$

One Final Laugh 28