Scott Pettifer, MAI, AI, Here Come the Judge!

Posted by Cochise on March 20, 2008 at 14:12:30:

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"Hi guys,

I recently accepted an assignment to appraise a 5 acre parcel improved with an older 60 unit apartment building in an economically depressed area. The assignment involves a dispute between the owner of the ground lease and the lessee. The lease is up for renewal and the new lease terms are to be based on the current market value of the land. The lease has 15 years remaining. I have not reviewed the lease but rental payments are reported to be based on the value of the land and a percentage of the net income from the improvements. The property is in a redevelopment area and the building probably needs a complete rehab and/or be demolished. The main problem I see is I won't be able to find anything close to 5 acres, this one of probably on a couple of apartment buildings on ground leases in So Cal so same use ground lease rate data will be minimal. Also, the dispute started because the lessor wanted to based the new rental payments on the highest and best use of the land which could be industrial, retail, or multi-family, etc. The Judge in the case recently ruled in favor of the lessee that the parcel's land and rental rate should be based on the highest and best use as multi-family. Don't know yet if that means the current improvements or a new building. I guess the Judge's ruling will be a condition or assumption in the appraisal even if my analysis does not support multi-family as the H & B use. I have a preliminary plan of attack on this but if would like to get some feedback on how other appraisers might handle this one.

Thanks,

Scott Pettifer," MAI, Appraisal Institute, AI

• Appraiser

Follow Ups:

• Re: Scott Pettifer, MAI, AI, Here Come the Judge! (url) - Cochise 14:14:43 03/20/08 (1)
  • Re: Scott Pettifer, MAI, AI, Flying Blind or Blind as a Batt (url) - Cochise 14:20:36 03/20/08 (0)

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