1. Advancing Municipal or LPA Right of Way Projects
The Role of the RE Valuation Professional in Eminent Domain Projects
April 6, 2017
Richard Pino, MAI, R/W-AC
Petersen LaChance Regan Pino, LLC

2. Topics Covered Valuation Professionals Role – Part of a Team
Who is a Real Estate Appraiser/Review Appraiser
Fundamental Elements One Should Know
Valuation & Reporting Regulations Appraisers Face
Definitions to Know for Infrastructure Valuation
Issues Appraisers Confront in Assessing Damages
Valuation Example

3. Part of Project Team
Most successful projects have been well exposed to the community impacted and well managed.
The Project Team
Legal
Planning and Engineering
Title
Relocation
Right of Way Agent
Appraiser
Review Appraiser

4. A Real Estate Appraiser
One who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.
A Review Appraiser
A valuer preforming a review. The act or process of developing and communicating an opinion to a client about the quality of another’s appraisal or review report.

5. Criteria for Determining Competency
Experience
Education & Other Credentials
Certification/Licensing
Designation(s)
Reputation and Work Ethic

6. Fundamental Elements
Know the purpose and jurisdiction under which you are performing the valuation assignment in order to develop assignment scope.
Establish the basis for valuation development and reporting requirements
Uniform Standards of Professional Appraisal Practice (USPAP)
Uniform Appraisal Standards for Federal Land Acquisitions (Yellow Book – UASFLA)
Federal Transit Administration (FTA) 49 CFR (Uniform Act) and LOCAL PUBLIC AGENCY (LPA) APPRAISAL FUNCTION JOB AID form
Other entities with eminent domain power
Non-federal governmental (state, county, municipal)
Public and quasi-public agency or authorities (State DOT)
Private entities

7. Work with Appraiser/Review Appraiser to develop Assignment Scope
Determine critical definitions
Valuation and reporting requirements
Value (case law, agency, Yellow Book)
Real Estate & Real Property
Personal Property

8. Valuation & Reporting Requirements
Written notice to property owner regarding acquisition and invitation to meet with appraiser. Copy of letter, certified mail receipt and affidavit from appraiser, in report.
The appraiser shall disregard any decrease or increase on the real property caused by the project for which the property is to be acquired.

9. Valuation & Reporting Requirements
5-year sales history of subject property
Identification of personal property included in valuation.
Comparable transactions verification by a party involved.
No appraisal required if property donated or determined to be unnecessary.

10. Valuation Issues
Right of Way projects often involves partial physical acquisitions or easements.
Formally all acquisitions, even minor ones, require “Before & After” valuation.
Where the acquisition is minor, the measurement of damages can be especially difficult.

11. Basic Definitions
Fee Simple Estate Easements Damages Benefits Larger Parcel Remainder Highest & Best Use Federal v. State Valuation Rules

12. Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by governmental powers of taxation, eminent domain, police power and escheat.

13. Easement
Easement A non-possessory interest one has in the property of another for a specific purpose. Temporary Easement An easement granted for a specific use for a limited time.

14. Damages
The loss in value from any cause to the remainder as a result of a partial acquisition.
Generally measured as the difference between the value of the property before the acquisition and the value of the property after the acquisition.

15. Benefits
General Benefits are value increases that accrue to the community in general and to the properties in the community as a result of a partial acquisition. Special Benefits are value increases to the remainder property as a result of a partial acquisition.

16. Larger Parcel
The portion of the property that has unity of ownership, contiguity or proximity, and unity of use.
Unity Tests
Ownership
Proximity
Highest & Best Use

17. Larger Parcel Examples
A building with adjacent parking facilities owned by a single entity.
A lot with a single family home and abutting vacant parcel, both in a commercial zoning district, owned by 2 different entities, with the same controlling interest.
A parcel of land, within different zoning districts (Res. & Com). Acquisition on portion in Commercial Zoning District.

18. Remainder
The portion of a parcel that is retained by the owner after a partial acquisition.

19. Highest & Best Use
The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.
Highest and Best Use Tests
Legally Permissible
Physically Possible
Financially Feasible
Maximally Productive
As if Vacant
As Improved

20. Church, Rectory, School

24. Federal Rule Before Value - After Value Value Difference or
Larger Parcel Value
- Remainder Value

25. State (Summation) Rule
Value of the Part Acquired
+ Damages to the Remainder Property
Benefits to the Remainder Property
Value Difference

26. Assessing Damages Direct Market Evidence – Transactions?
Indirect Market Evidence
Comparative Analysis
Quantitative Qualitative
Paired Data Trend Analysis
Grouped Data Relative Comparison Analysis
Secondary Ranking Analysis
Statistical Analysis
Graphic Analysis
Cost-related Analysis
Capitalization of Rent/Income Changes

27. Assessing Damages Let the Market data tell the story Depth of Analysis
Relevant Property Characteristics
Elements of Comparison
Appropriate Unit of Comparison
Credible Assignment Results

28. Easement Valuation Concepts
Acquisition of easement is a partial acquisition.
Landowner always retains a remainder.
Value measured by what the landowner has lost, NOT by what the condemnor has gained.
Easement value is difference between owner’s interest before and after.

29. Impact Analysis Type of Encumbrance
Surface, Subsurface, Air Rights
Legal and Physical Use & Responsibilities
Exclusive Use or Shared Use?
Duration
Permanent or Temporary?
Location of Easement Area
In Relation to Larger Parcel
Pre-Existing Conditions/Restrictions
Prior Easements?

30. How to Quantify the Loss
Always Indirect Measurement
Cost, Income and Direct Sales Approaches
Difficulty of Isolating Minor Impacts
Bundle of Rights and “Reasoned Judgement” or “Analytical Reasoning”

31. Practice Tip: Analytic Steps
Impacts Within the Easement Area Itself
Development Potential of Land in Easement Area?
Site Improvements in Easement Area?
Buildings within Easement Area?
Impacts On the Remainder
Hinder Development Potential of Land?
Reduce Utility of Improvements?
Stigma?

32. Easement Valuation Case Study
The Project 10 Intersections in City of Boston Sidewalk reconstruction and traffic signal improvement work. Permanent and Temporary Easements Work to take place over a period of days or, in some cases weeks. Construction duration of 4 years.

33. The Project

34. The Intersection

35. The Affected Property

36. The Affected Property

37. The Acquisitions

38. The Acquisitions

39. The Market By-right zoning – 3 Floor Area Ratio (FAR)
Market building to 3.91 to 8.0 FAR
Cap Rates
Land Sales
$388 to $628 per square foot of land area, with an average of $475

40. The Market Market Rents $30 - $50 PSF NNN
Condos - $840 to over $1,000 PSF
Investment Rates Bank Terms

41. Land Sale 1

42. Land Sale 2

43. Land Sale 3

44. Land Value – SF of Land Area
Sale 1- $628 Sale 2- $410 Sale 3 - $388 Indicated Value $400 SF of Land Area

45. Valuation Permanent Easement
The rights acquired:
Easement Holder 40% - Owner 60%
Valuation

46. Valuation Temporary Easement
The rights acquired
Easement Holder 30% - Owner 70%
Land Value - $400 per square foot land area

47. Income Approach Income / Rate = Value (IRV)
Land Value X Cap Rate = Income (rent)
Cap Rate
1.14 % - Adjustment for RE Taxes
5% - Adjustment for Management
8.04%

48. Rent $400. PSF (Land) X 30%= $120.00 PSF Annual Rent Summary
Payment in advance for 4 4%

49. Damage

50. THANK YOU!