Creating Reliable Valuations
Benchmark valuation data is great, but not always readily available or relevant to your market. Because investors, brokers, lenders, appraisers, servicers, receivers, lawyers and the courts consistently need to understand the current value of an asset, it is important for all real estate professionals to know how to provide valuations that do not rely solely on historical data.
Establishing the correct value for an asset to be sold, or space to be leased is the most important aspect of any transaction. The key to understanding an asset's value is the relationship between the asset type, its geography, and the current commercial real estate cycle. In robust markets there is more than enough data from comparable sales to determine benchmark numbers for cap rates, discount rates, and sales prices per square foot. Not so in secondary and tertiary markets, and not so for properties with values of less than $5,000,000.
Course Outline and Highlights
Through examples and a case study, important valuation techniques that use real time data and forward looking analytics to determine value will be explained and demonstrated. Each methodology will then be tested for its viability in the marketplace.
This class begins with an overview of the current space markets, capital markets and demographic trend risk factors, and the effect of current conditions on established methodologies for determining the value of income producing properties. Primary attention is on creating defensible capitalizations rates and discount rates using real time and forward looking analytics, rather than benchmark data.
The following will all be covered:
- Understanding the current investment marketplace
- Understanding current Real Estate Cycles and Risk
- The importance of historical data in the process of establishing value
- Understanding the dangers of using “down market” data to determine value
- The use of Comparable Sales Data to establish value
- The use of Capitalization Rates to establish value
- Building Capitalization Rates using Band of Investment methodology
- Building Discount Rates using forward looking economic data
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Pricing may vary based on location