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Turner Drake & Partners Ltd.
6182 North Street
Halifax, N.S.
B3K 1P5
Canada

Tel.: (902) 429-1811
Toll Free: (800) 567-3033
Fax.: (902) 429-1891

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Saint John, N.B.
E2L 5G5
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Tel.: (506) 634-1811

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Charlottetown, P.E.
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St. John's, N.L.
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Tel.: (709) 722-1811

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111 Queen Street East
Toronto, ON.
M5C 1S2
Tel.: (416) 504-1811

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# Friday, 18 August 2017

Of Heaven and Sea and Earth 

Please be suitably impressed by this photo: it has all three of a church, a lighthouse and a commercial heritage building


Five years ago, the Chronicle Herald reported that some of Nova Scotia’s churches were exploring the option of deregistering their buildings’ heritage status under the provincial Heritage Property Act.  Nova Scotia’s churches are often their town’s signature property, featuring architectural details ranging from elaborate stained glass windows to ceilings built by 19th century shipwrights using the same techniques used on the hulls of wooden ships.  But cultural and demographic shifts have reduced demand for churches in the province.  Dwindling congregations mean reduced budgets unable to cope with the high costs of maintaining and operating historic properties.  Deregistration is required for demolition, the only option some congregations saw in the face of financial realities: maintenance requirements outweighed the ability to keep these architectural gems standing.  Recent years have seen other churches amalgamate congregations, keeping and maintaining a single building while selling the rest off for (hopefully sympathetic) redevelopment.

Wolfville United Church as it was

A more literal beacon facing a similar threat of extinction is the Canadian lighthouse.  Changing technologies have rendered redundant their function, if not their cultural attraction.  In May 2008, Parliament passed the Heritage Lighthouse Protection Act, a bill to designate and preserve lighthouses of historic significance.  It took effect in May 2010, only to be followed in June by an announcement declaring almost all Canadian lighthouses surplus, no longer to be maintained by the Coast Guard.  Since then, community groups have become the champions of select historic lighthouses, while the rest, presumably, will suffer the same fate as many an unfortunate ship along our rocky coasts.  

Peggy’s Cove lighthouse, a likely survivor

The foregoing each illustrate the perils of functional obsolescence: when a building’s functionality no longer meets market demands only its cultural significance can protect it – and then only if a champion steps up, e.g. government, community group, or passionate property owner.  Urban heritage properties are particularly susceptible to rising functional obsolescence due to the high value of the land on which they sit: the financial rewards of redevelopment contrast starkly with the economic pitfalls of retaining and maintaining them. Demolition is tempting. 

This year we celebrate Canada 150.  With our history and heritage, for better or worse, on prominent display, we decided to turn our attention to the uphill battle faced by commercial heritage properties in Halifax.

Size Matters

Hemlines are the harbinger of stock prices.  Construction of the tallest skyscraper marks the dawn of recession.  Floorplates sound the death knell of heritage properties?  

Open concept office-in-waiting

Downtown heritage buildings in Atlantic Canada are at an inherent disadvantage versus modern construction because they are simply too small.  Even 30-year-old buildings are feeling the strain imposed by their new, more spacious contemporaries, whose design is able to accommodate demand for open concept offices.  In Halifax, total demand has yet to catch up with new supply. Rental rates are restricted and tenants can afford to move into the new buildings, leaving the last generation of Class A office space struggling to stay relevant – and occupied.  The trend is toward larger floorplates as companies are opting for large, open concept offices with collaborative workspaces and few individual offices.  Downtown Halifax doesn’t have a supply of unused historic warehouses with high ceilings and large floorplates ripe for conversion well suited to modern tastes. Instead, our heritage properties are mainly small buildings, 3-6 storeys high and with floor plates between 1,000 and 6,000 square feet (typically at the lower end of this range). 

Halifax has a few examples of what can be done to overcome this drawback.  Barrington Espace and the RBC Waterside Centre both maintained the façades of a number of adjacent heritage properties while completely overhauling their innards, joining the buildings within to allow for larger floorplates (Saint John’s CentreBeam Place is another example of where this technique was used successfully).  If done carefully, this can present a best of both worlds compromise.  If not, the result may be the Disneyfication of heritage: it looks about right, but there’s no soul.  Either way, it is not an option for detached heritage properties: they are left to find occupants happy with the original floorplates size.

Barrington Espace, RBC Waterside Centre, CentreBeam Place…thanks, Google Street View!

Finding a Fit

Heritage properties need a certain tenant.  The predominant competitor of the heritage office building is the home office: to attract a tenant away from this “free” space, a historic building must provide cachet and interest, and must find a tenant who wants (or needs) both as marketing tools for their business.  Heritage tenants are drawn from a pool of largely creative firms represented by public relations and marketing firms, IT companies, and (interestingly) employment recruiting agencies.  Often, these firms are start-ups; there is a symbiotic relationship between the two, with the heritage property providing an inspiring ambiance (and maybe cheap rent: see below), and the company providing income and life to the building.  What the heritage property has more trouble providing is a flexible workspace that can grow with the company.  When they become too large for their space, they must seek a larger floorplate in a more modern building.  There is a happy medium: mid-sized companies who could occupy an entire heritage property as a single tenant.  But in Atlantic Canada, most companies are either large or small, a by-product of provincial regulatory demands which force companies to “get large or go under” (Atlantic Canada is made up of four small provinces each with their own regulatory requirements for businesses: half the population and half the land area of any other province, but four times the regulations…but this is a topic for another day).         

The Champions

There are three classes of champions for heritage properties: passionate owners (hopefully with deep pockets), community groups who recognize the social benefit of maintaining our built heritage, and governments which either have a measure of both these characteristics or are open to the influence of those who do. 

Heritage property owners must appreciate the unique features of old buildings.  To quote one (you’ll never guess who), they “speak to you in a way new buildings don’t.  There is a sense of calm, a personality.  They have been there for centuries, and if the economics can work, they will be there long after you’ve turned to dust.”  Ah, the economics.  Heritage properties in Halifax do not attract a rental premium as they do in some larger cities, such as Toronto’s trendy Distillery District.  There may be a purchase premium, albeit not driven solely by heritage, but location as well, due to the prime situation some heritage properties enjoy by virtue of having gotten there first.  Halifax’s downtown is distinguished by its waterfront; heritage properties with a connection to it in particular may enjoy a purchase premium, provided this connection is maintained (pause now to be thankful for the public outcry that halted “Harbour Drive” before it started…and hopeful that the redevelopment of its first phase, the Cogswell Interchange, will be successful in repairing the fabric of the area). 

 

Toronto’s Distillery District, as modelled by a pair of junior TDPers

There is a social benefit to heritage properties, usually external to the site itself.  A 2011 study by Place Economics highlighted six areas of positive economic impact attributed to heritage preservation: jobs, property values, heritage tourism, environmental impact, social impact and downtown revitalization.  Heritage properties differentiate cities from one another, providing a unique draw to residents, visitors and immigrants alike.  The world’s most successful cities have vibrant heritage architecture, often interspersed with modern buildings.  Community groups recognize this and fight to preserve historic built environments, but it is often the building owners who fund these broader social benefits by bearing the increased costs of renovation and upkeep.  It is here that governments can play a vital role via heritage preservation policies, but they must take care that they get them right.       

Incentivise or incense?

Halifax Regional Municipality recently commissioned a study to investigate heritage incentives.  However structured, these are a means by which society as a whole, via taxes, can help pay for the social benefit of heritage properties.  Two of the largest pitfalls of which governments must be wary when enacting policies to protect heritage properties both involve the risk of (inadvertently) penalizing property owners. 

The first is the more obvious one, wherein the owner of a protected building is prevented from redeveloping a site to a more lucrative density, diminishing the ability to make money from the property and potentially its market value.  One avenue available to the city is to compensate the property owner for the diminished value by purchasing the air rights, i.e. the space above the building in which they would otherwise be allowed to build, but are prevented by heritage preservation policy.  This could be accomplished either directly, with the municipality retaining ownership of the air rights, or by opening the market for air rights trading, allowing heritage property owners to sell their air rights to developers of non-heritage sites to increase the allowable height on their sites.  (Yes, this has the potential to open another can of worms, but it’s a good theory if the policy is well thought out). 

The second potential pitfall lies in supporting some, but not all heritage properties; such as with the creation of a heritage preservation zone.  While those properties (and their owners) located within the zone stand to benefit from financial incentives offered by the municipality, any heritage properties outside the zone are placed at greater disadvantage.  Still competing against larger modern buildings, they are now on an uneven field against their direct (heritage) competition.  The supported properties have the money to modernize without deficit to their owners’ bottom line, while unsupported properties are further penalized physically and financially. 

For more on heritage rights and wrongs, don’t miss our Summer 2017 newsletter, coming soon to a mailbox near you.  If you are not already subscribed to this informative and gutsy publication, please get in touch with us at 902-429-1811 or tdp@turnerdrake.com.

Alexandra Baird Allen is the Manager of our Economic Intelligence Unit, a position which makes surprisingly good use of her liberal arts degree in history & cultural studies, as well as her expertise in GIS.  For more information on our Economic Intelligence Products, visit our website or contact Alex at 902-429-1811 ext. 323 or abairdallen@turnerdrake.com.

Friday, 18 August 2017 12:21:25 (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Brokerage | Counselling | Economic Intelligence Unit | New Brunswick | Newfoundland & Labrador | Nova Scotia | Planning | Prince Edward Island | Property Tax | Turner Drake  | Valuation
# Thursday, 01 June 2017

I can honestly say that these 13 weeks have been nothing short of amazing, over this time I have learned so much and gained experience that will help me throughout my life. I expected to come in one day a week for 8 hours a day and job shadow someone. I never thought that I would have my own space to work and be able to do so many things on my own. Every Tuesday morning I would meet with Ashley Urquhart (my boss for the day) and she would tell me the plan. If I had any questions that her door was always open, she was always very upbeat and happy, that made it extremely easy to talk to her.

I got into a morning routine of doing certain jobs, I would do Tenders, Google Analytics, and they even let me post on their social media accounts! I got to tweet about news that I thought was important, that was probably one of the best parts of my Co-Op experience. I never thought that they would give a Co-Op student in high school this much responsibility, I am beyond grateful that they did.  I always had someone close by to help me if I ever needed anything. The person sitting closest to me was Michael McCurdy, he made the day fun and I got to see how to be professional in the workplace and how to talk to clients over the phone. I worked with a great bunch of people that made this experience a lot of fun and helped me learn new things. My aunt, Patti Farewell, has work at Turner Drake & Partners for 26 years and now I see why, it is a very enjoyable place to work and everyone makes you feel welcome. The owner, Mike Turner, would always talk to me and ask me how things are going, along with his wife Verna, who would always make a point of talking to me and saying how nicely I was dressed, they were nice little conversations that made me smile. One day I got to sit in on a support staff meeting, we got lunch and talked about new ideas for TDP, I felt very included and like I was a part of the team.

The Co-Op interview was with Mark Turner (Vice President of the company) it was professional like a “real” interview would be so that I would be prepared for the actual thing when I go to apply for my full time job later in life. He was very nice and made me excited to start, I later got to work on a small project for him.

Right away I was being trained by two people who did exactly what I wanted to do. Ashley Urquhart and Alex Baird Allen were my safety nets throughout this time. The first few things they let me do on my own was, Tenders- finding new jobs and properties for the company to look at. The next job was Google Analytics- finding out how many people looked at the websites and how many people follow TDP’s social media accounts. They also trained me to do a few other jobs that would help me later, Data Mining- updating client’s information, Media Sheets- updating who they send things to. There were also basic jobs such as, photocopying, mail-outs and manuals. After a bit of time went by I was able to post on the company’s twitter. I was given the job of making a new flyer that would later be sent out to clients, I was surprised that they felt like I was doing well enough to be given a project that important. I spent many hours on it and got nothing but positive feedback. It’s going to be weird not seeing these people for a while, I would really like to come back for my grade 12 Co-Op and give it my all once more. Lastly I liked how much responsibility I had. They gave me my own place to work but it was also around people so I never alone. This is definitely a place I would love at work at after I finish school.

Help us prevent youth migration, hire a coop student today!


Thursday, 01 June 2017 16:08:11 (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Brokerage | Counselling | Economic Intelligence Unit | Lasercad | New Brunswick | Newfoundland & Labrador | Nova Scotia | Planning | Prince Edward Island | Property Tax | Turner Drake  | Valuation
# Monday, 08 May 2017


(Image via Global News)

Symptoms of an Election
In the run up to the now transpiring Nova Scotia provincial election, our governing party engaged in the time-honoured tradition of the spending announcement roadshow. A few million for a community centre here, a few million more for an overpass there, culminating finally in the double whammy of a new outpatient facility in suburban Halifax, and toll-free twinning of several sections of highway.

Unlike most spending announcements, the outpatient facility drew immediate criticism. While the highway twinning has started to attract some rightful critique, the patently foolish choice of locating a medical facility in the retail backlands of a dysfunctional industrial park was apparent to many; not the least of which being senior municipal staff who’d advised the Province of these issues months prior. Embarrassingly, the location is a miserable failure when measured against the Province’s own aging population action plan, Shift, which it had announced along with nearly $14 million in funding mere weeks before.

As an aside: of the opportunities for criticism of the outpatient location, and there are many, the purchase price of the land is not a fruitful one. Without the benefit of knowing the particular details of the deal, the $12.00/ft² paid by the Province for the raw land includes the cost to bring the site to a state of development-readiness. Land in this condition elsewhere in Bayers Lake has sold in the neighbourhood of $11.50/ft², so this is hardly the 12,000% markup insinuated by some reporters and rival politicians. (For future reference, comparing purchase price to assessed values for development land – or any real estate for that matter – can be extremely misleading. Media Types: if you’re looking for a real estate angle on a story, give me a call… I know some people.)

A Bad Prognosis if Left Untreated
So here’s the rub. Atlantic Canada, as we’ve described many times, is facing a serious demographic crunch that will constrain income tax revenue to the provinces, and property tax revenue to municipalities (in Nova Scotia, see Canso, Springhill, Hantsport, and Parrsboro for a preview). Given the scale of these trends, immigration is not likely to alleviate this difficulty. This means public investment utilises increasingly precious dollars; long gone is the time where we could rely on growth to overcome poor decisions.

Yet, public capital spending is and will remain one of the most significant factors in the trajectory of our communities. The provision and location of these facilities influences development trends for decades. A new medical facility is not just a site for convenient patient care. It is also a major employer, and consumer of both public and private services. It generates broader impacts; spinoffs that if harnessed properly can enhance the benefits of other facilities, strengthen neighbourhoods and local business, and mitigate future infrastructure costs. A newly twinned highway is not just a safety improvement for the travelling public, it is a half-billion dollars no longer available to be spent on other priorities. We’ve got to get serious, we’ve got to be scrappy, and we have to be careful to maximise the benefits our public spending generates. Opportunities of an equivalent scale from private-sector activity are few and far between.

By narrowly constraining their site selection study (I presume, as this information is also not publicly available), the government has perhaps saved money on the land for the outpatient facility, only to create far greater costs in the form of municipal servicing expenses, diminished economic spinoff, and foregone social benefits. This short-sightedness is not resigned only to our provincial overlords, municipalities large and small consistently miss opportunities to strengthen and improve neighbourhoods or commercial main streets. At best, we have a habit of placing community facilities in a location that only performs well on measures of land price and vehicular accessibility. At worst, it is directed by decades of parochial bickering and ends up in a location agreed to be equally terrible for everyone.


Nice wellness centre you have there, shame about the sidewalk.
(Image via Pictometry ©2015)

Prescription As the highway twinning issue has shown, no “overwhelming public consensus” is going to emerge on any policy or funding choice other than those promising a free lunch. It is going to take political guts to lead the way: the decisions we need to make are pound-wise at the risk of appearing penny-foolish. Better analysis can help identify the optimal site selection and communicate the wisdom of that choice. A paltry million saved in cheap land will pale in comparison to full lifecycle costs of poorly located public infrastructure. The property taxes generated by that good natured economic development project might never recoup its initial cost. And increasingly, methods are available to help quantify and communicate the broad community and economy strengthening effects that government undertakings can create. A complete approach to site selection and capital project analysis in a time where each dollar counts is the difference between spending decisions that achieve lasting public value instead of fleeting public relations.


Remember, an ounce of prevention is worth a pound of cure, and we have the skills required to evaluate your options in the context they deserve. Neil Lovitt, our Senior Manager of Planning & Economic Intelligence can be reached at 428-1811 ext. 349 (HRM), 1 (800) 567-3033 (toll free), or nlovitt@turnerdrake.com.

Monday, 08 May 2017 10:29:39 (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Brokerage | Counselling | Economic Intelligence Unit | New Brunswick | Newfoundland & Labrador | Nova Scotia | Planning | Prince Edward Island | Property Tax | Turner Drake  | Valuation
# Wednesday, 26 April 2017

Property tax is by far the most important source of revenue for municipalities in Canada, accounting for 49.5% of revenue in 2008 with an annual average growth rate of 1.6% (1988-2008). As reliance on property tax increases, so does the complexity of administering this regressive but necessary evil. Increased computing power in the mid-1960s prompted a shift towards automation of property tax systems, beginning with simple tasks and culminating in today’s fully automated assessment, notification, and payment systems. Modern Automated Valuation Models (AVMs) allow for rapid processing of data with minimised human-bias… but (and this is a large but) real estate appraisal is a nuanced trade: reducing the role of Appraiser to AVM Technician can have significant negative repercussions.

Service New Brunswick’s ongoing cleanup of their attempt at an AVM is a prospective case study in the dangers of a “hands-off” approach to the valuation process. Massive value errors were created by a computer-driven system with insufficient checks in place to alert users to suspicious results. When reviewed by human appraisers many of the shockingly incorrect valuations were easily overturned based on traditional market comparison valuation. Autopilot replaced the flight crew and actual appraisers are left cleaning up the crash, while their political and bureaucratic colleagues deal with the rightful public outcry.

While seemingly seductive, potential time and cost savings offered by an AVM should never mask the fact that, in order to operate successfully, an AVM must integrate human expertise throughout the valuation process. At Turner Drake the “A” in our in-house AVM stands for Accelerated to reflect the role that expert opinion plays in our two-stage computer-assisted mass appraisal model. Stage One combs through real property sales to select comparable properties based on locally relevant, value-defining attributes such as size, location, and design. Stage Two adjusts and weighs a unique set of comparable sales to create a market-based value estimate for each subject property in an assessment area. Throughout each stage of the model, a professional appraiser defines the selection criteria and adjustment values for comparable properties based on market evidence and local expertise. The model does the heavy lifting but certified appraisers evaluate and refine the results.



Outliers - which no system can avoid - can wreak havoc on the results of an AVM unequipped to handle the inherently diverse nature of real estate. It is critically important to flag potential outliers for review so the model can be adjusted for future assessments. During the initial rollout of an AVM model, refinement is time consuming but absolutely necessary for creating reliable, equitable assessments in successive years. In developing our Accelerated Valuation Model, we put the time in up front so the system flags out of the ordinary results, and the professional appraiser, made aware of the potential issue, is able to quickly and easily account for them.

In a Case Study of condominiums on the Halifax Peninsula, the Turner Drake AVM out-performed PVSC assessment values by a margin of up to 45%. That is, 86% of TDP value estimates were within 5% of an actual time-adjusted sale price versus PVSC’s 41% and 98% of TDP values were within 15% of actual sale price versus PVSC’s 84% in the same pool of properties. Our combination of custom programs and a traditional direct-comparison valuation can produce a list of unique comparables with adjustments for 1,000 properties in about two seconds.

Property tax administration systems are as diverse as the municipalities they serve and every region relies to a degree on the convenience of computers and automation. However, no matter the size or complexity of a property tax system it is important to follow best practices, and learn from the success - or failure - of others. When the pursuit of speed comes at the expense of quality there is a significant risk to the accuracy of valuations and the credibility of the property tax system as a whole.

For more information on how our AVM can benefit you, call James Stephens at 902-429-1811 ext. 346 or email jstephens@turnerdrake.com

Wednesday, 26 April 2017 10:21:10 (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Brokerage | Counselling | Economic Intelligence Unit | New Brunswick | Newfoundland & Labrador | Nova Scotia | Planning | Prince Edward Island | Property Tax | Turner Drake  | Valuation
# Monday, 03 April 2017



Our Economic Intelligence Unit is always on the hunt for new data sources to bolster our maps and feed our spreadsheets: any good analysis begins with high quality data. The majority of our databases are populated with a wealth of information via a process of blood, sweat, and tears (though increasingly data is graciously released by provincial gatekeepers) and it could be that our next trove of valuable data is being cultivated on farms across the Maritimes. The movement of food from field to plate involves numerous stops along the agricultural supply chain and, when property tracked, that data can prove valuable for a host of analytical tasks.

The ability to track an item from Point A to B in a large-scale supply chain is known as traceability. The theory behind it is relevant in all aspects of our lives: be it an Amazon package or a donair pizza, consumers - and businesses - have discovered that real-time knowledge of where a product is, physically, at any point in time is a competitive advantage in terms of marketing and efficiency. Agriculture is no exception. Traceability is already in use as a health risk management tool: it allows for rapid response to health emergencies by identifying exactly where and when afflicted produce or livestock stopped along the supply chain. Efficiently pin-pointing sources of contamination (think E.coli outbreaks) and creating cost-effective responses, such as targeted treatments and recalls, are critical in a modern, globally connected agricultural sector.

In addition to the obvious benefits of using traceability from an epidemiology perspective, there is also major potential for economic spinoff benefits from tracking the movement of agricultural goods. At a recent gathering of Nova Scotian Agrologists, speaker Chris deWaal of Getaway Farm (of Seaport Market fame) touted the very real benefits of offering consumers the entire life history of their food as a competitive advantage over mass-produced “mystery meat.” The introduction of the “Trace My Catch” program for canned seafood provides an example of how seafood processors are embracing traceability as a marketing tool, and provides an indication of the feasibility of doing so. In a province with a growing love affair for all things local it is no surprise that demand for local meat and produce is on the rise.

Benefits beyond health and marketing can be opened with traced agricultural data. Used in conjunction with GIS, the location and density of animals, farms, stockyards, abattoirs, and processing facilities become inputs for site selection and trade area analysis and indicators of economic health in rural economies - an issue of pressing concern for many Nova Scotian communities.

Imagine opening a meat processing and distribution facility to feed growing demand for local, organic products while still maintaining capacity for foreign exports. A standard GIS-based site selection analysis would use static location data (suppliers, purchasers) with network data (highway, rail, sea) to build a short-list of potential development sites which minimize transportation costs for both inputs and outputs. Additional variables such as workforce availability, machinery and equipment suppliers, veterinary services, and property taxes can all be integrated with locational data to suit the needs of the processor. But a standard analysis does not take into account how many animals are produced by individual farms or the variability in production from year to year.

Traceability data can enhance GIS analysis by optimizing site selection so it is based on not just the density of farms within a trade area, but the capacity to bring high volumes of livestock (or produce) efficiently to market. Historic tracking data of individual animals could forecast future production including where livestock are ultimately processed and sold. A savvy processor would use this data to identify opportunities for expansion and generate reliable, defendable business projections.

The agricultural sector already collects traceability data for use in health risk management; leveraging that same wealth of data for marketing and day-to-day business operations is the logical next step. The agricultural sector is a ray of light in the gloom of rural Nova Scotia: according to Statistics Canada’s census, between 2006 and 2011, Nova Scotia was the only province in Canada to see an increase in the number of farms, total farm area, and number of farm operators. Should the 2016 census indicate continued growth, it will clearly indicate that it’s time for all players in the agricultural game to leverage their existing data infrastructure to gain a competitive advantage at home and abroad.

For more information on how spatial analysis can benefit your business, call James Stephens at 902-429-1811 ext. 346 or visit: Economic Intelligence Unit

Monday, 03 April 2017 10:02:51 (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Counselling | Economic Intelligence Unit | New Brunswick | Newfoundland & Labrador | Nova Scotia | Planning | Prince Edward Island | Turner Drake  | Valuation
# Monday, 04 April 2016

The Real Estate Appraisal Profession is viewed in different ways by different people. Market value estimates are seen as everything from a financial assurance to a necessary evil. Personal views are typically reflective of the benefits or consequences of the end result; negative views are often the result of misinterpretation or confusion stemming from a lack of direct involvement in the process coupled with the absence of proper explanation. Unfortunately, this has led to several common misconceptions, or myths, about Real Estate Appraisal.

Myth 1: Real Estate Valuation is the same as Real Estate Appraisal

Real Estate Valuation and Real Estate Appraisal, although similar, are not analogous in nature and, contrary to popular belief, should not always be used interchangeably. The term Real Estate Appraisal is a more general term that covers a broad spectrum of value estimates. An appraisal can be anything from an estimate of price provided by a real estate agent to a written value estimate (report) provided to a financial institution by a certified appraiser. Real Estate Valuation, however, is a systematic process which provides an independent or impartial opinion of actual market value that frequently has full legal standing. It’s a complex process that can only be performed by professionally accredited individuals. Although it’s not common practise to point out the misuse of these terms to a potential client, I always like to capitalize on the opportunity to educate my audience and differentiate between the product being offered and the process involved.

Myth 2: Assessed Value = Current Market Value

Although most assessed values are purported to reflect market value, these figures are not necessarily current. For example, in Nova Scotia the assessed value of a property for the 2016 tax year is actually determined by the market value of the property at a base date of 1st January 2014, reflecting the state of the property as of 1st December 2015 (state date). As a result, the current market value of a property could in fact be significantly different than the Assessed Value.

Myth 3: Cost to build or renovate translates into Market Value

Although the cost approach is one of the three traditional methods of valuing real estate (see Myth 7), it is not without limitations. The cost approach can provide a reliable indicator of value for properties where the buildings are fairly generic, relatively new, and have very little depreciation. In this case, the building and improvements likely reflect newer construction trends and support the level of utility demanded by current market participants. However, this approach is less reliable when the building is older and begins to suffer from depreciation, or if the building is not of a typical design or style. The misconception here is that the cost to renovate will be recovered upon sale of the asset. Unfortunately, this is not always the case. In some instances, a retrofit does not necessarily add value to the property; it simply aligns the product with current demand or economic/functional requirements. Similarly, inflated costs due to atypical building designs are not always realized by the local market. In fact, the level of “uniqueness” can actually limit the pool of potential purchasers, therefore lengthening marketing times, and potentially decreasing the achievable value.

Myth 4: Market Value varies depending on who the report is prepared for

Market value is an impartial, unbiased opinion of value. The Appraiser/Valuer has no vested interest in the final outcome of the analysis, and therefore, the final figure should be the same no matter who commissions the report (i.e. borrower, lender, etc.).

Myth 5: A paying client can share a Valuation Report with anyone, and anyone can rely on it

A customer can share the results of a valuation with anyone they please, however the only individuals or organizations that may rely on the conclusions are expressly documented within the report.

Myth 6: A Property Valuation is the same as a building inspection

Although most valuations include an onsite examination of the subject, the Valuer’s task is to render an opinion of the market value for the property. A building inspection typically constitutes a structural survey of the building in order to determine the actual condition of the structure and its major components.

Myth 7: Market Value is based solely on comparable sales

There are three traditional approaches to valuing real estate: the Direct Comparison, the Cost Approach, and the Income Approach. Only the most appropriate combination of the three approaches is utilized in order to properly value a property.

1. The Cost Approach can provide a reliable indicator of value for properties that are fairly generic, relatively new, and have very little depreciation.

2. The Income Approach can provide a reliable indicator of value for properties which are acquired as investment vehicles. The value of the property is determined by its ability to generate revenue. This approach is less reliable when applied to properties which are not likely to be rented to a tenant.

3. The Direct Comparison Approach can provide a reliable indicator of value when comparable sales data are available. This approach is less reliable when sales data is sparse or when the various sales are not truly comparable to the subject thereby requiring extensive adjustments.



Written by Mark Farrow, Senior Consultant in our Valuation Division. For more information about our valuation services, feel free to contact Mark at (902) 429-1811 or MFarrow@turnerdrake.com.

Monday, 04 April 2016 10:31:10 (Atlantic Daylight Time, UTC-03:00)  #    -
Valuation
# Friday, 23 October 2015

Leading up to the birth of our second little one, I found myself going over the list of what to bring to the hospital to ensure we were fully prepared.  Some of the most important items included diapers, as our almost two year old daughter would say… Momma and Dadda’s clothing, and the ever so important, highly analysed, overly scrutinised… take-home outfit.  While I had originally second guessed my completed to-do list and fully packed, yet functional “go bag” (as I like to call it), the planning and comprehensive process paid off with a stress free stay at Hotel IWK.  Looking back at my eight years with Turner Drake & Partners Ltd.’s Valuation Division, I can recall multiple instances where a small detail had a big impact on the overall assignment.  If not for checking off my due-diligence list, these details may have gone overlooked. 

Below is a list of the areas I spend extra time on when valuing a property:

Zoning/Planning Information

Typically when valuing a property, a zoning map and accompanying Land Use By-Law can be found on the city or town’s website.  Once the existing use is deemed permitted under the current zoning by-law, the next step should not be to move on and consider this section of the report complete.  Instead, the next step is to be speak with the local planner to determine if the existing Planning Strategy is either currently, or will soon be, under review and if that could affect the property in the near future.  An example that I came across was a commercial building with a limited commercial zoning designation.   The property was located on a highly desirable corner; however its maximum height was limited and the redevelopment potential was restricted.  After speaking with the Town Planner, I not only uncovered the zoning designation was in the process of being changed to allow high density residential apartment buildings, but also that the maximum height would be increasing substantially as this street was designated for revitalising the immediate commercial area.  You can surely bet the property owner was pleasantly surprised.

Comparable Sales

I have come to realise that this old saying does hold true with any real estate transaction … “every sale has a story”.  While I would like to assume that all transactions satisfy the criteria of a fair sale, sadly I have been mistaken.  I consistently come across different situations that have impacted the sale price.  If not for speaking to one of the parties involved in the transaction, the sales information may have been misleading.  An example is selling a property to an existing tenant.  The tenant indicated they were willing to pay above market value as their business was established at its current location and this would save them the costs and hassle of moving.  Another example is a sale between two related parties.  While the Deed Transfer appeared to be between unrelated parties, an investigation on the Registry of Joint Stocks may determine otherwise.  I sometimes pat myself on the back, envisioning that Sherlock Holmes himself may not have uncovered this convoluted sale.  Unfortunately, this means another cup of coffee for me and further research for that ever desirable perfect comparable sale.

Easements and Right-Of-Ways

Sometimes reading a Legal Description is as complex as reading Shakespeare… “thence, North at a stone’s throw distance to the old birch tree…”.  While this description sounds like poetry, it proves troublesome when the property has since been fully improved with no birch tree for miles.  A nearby oak tree was noticed from the subject property; however is located within the sidewalk’s planter box so I assumed that was not the reference point.  Nevertheless, a Legal Description should always be read (sometimes deciphered) and the easement and right-of-way portion should be verified on every assignment.  I recently came a across a property owner looking to redevelop their property.  While the property looked good on paper (i.e. large level site with good access from the road and redevelopment occurring in the area), I discovered that a public sewer line bisected the middle of the property which restricted any development above this easement.  This had a large impact on the possible buildable area, overall design, and likelihood of the redevelopment occurring. 

Conclusion

While no two valuations are ever the same, by creating a standardised to-do list that covers some of the essential components of a valuation assignment, no small detail should ever go unnoticed (or take-home outfit left behind!).

Our Valuation Division never overlooks the details. For more information on our valuation services, feel free to contact Matthew Whittleton, the author of this blog post, a Consultant in our Valuation Division and Manager of our Saint John, NB operations, at (902) 429-1811 or MWhittleton@TurnerDrake.com.

Friday, 23 October 2015 11:53:03 (Atlantic Daylight Time, UTC-03:00)  #    -
Valuation
# Thursday, 06 August 2015

There is a common misconception that valuing unimproved parcels of land (i.e. not built on or cultivated land) is fairly straightforward.  Although there is no shortage of land sales to draw from … the sheer number of variables involved with value and mixed nature of the sales makes valuing unimproved property, which includes islands, one of the most challenging exercises in real estate valuation and appraisal. Over my career I have become familiar with the most important variables to consider when valuing land and briefly share them below. This is by no means a complete list but does demonstrate the complexity involved with valuing land.

It all begins with a conversation with a client regarding their unimproved property. A typical conversation will usually go something like this:

“I am looking to have a valuation completed on my property for sale purposes.  I have received an offer and I want to know if it’s reasonable.  They are offering me $375,000 for 250 acres which is $1,500/acre.  Does that sound reasonable to you?”

This is a difficult question to answer without knowing the details of the property.  In our profession the accepted method for valuing land is to determine an appropriate per unit rate, which is based on similar properties that have sold, and then applying that to the property being valued. However, this approach is often flawed due to the number of input variables involved with value.  For example, you could have two parcels of land that are the same size located adjacent to one another, with one of those parcels having extensive waterfrontage and the other having very little.  So does it make sense to value both of these parcels using an overall per acre rate? Let’s take a look at the most crucial variables …

Access

The type and amount of access can be a large contributory factor to value.  The property, for example, might have enough linear road frontage to be subdivided thus creating several lots.  However, if the road is only maintained and accessible for a portion of the year it can have a significant impact on value.  Alternatively, the property may be accessible by way of a right-of-way.  If that’s the case it would be necessary to review the right-of-way documents to understand what the restrictions are for use of the right-of-way.

Size, Shape and Topography

The overall size, shape and topography of the parcel are also variables which need to be considered.  The parcel may be very long and narrow, short and wide, or have steep terrain or be fairly level, which can have a significant impact on its use and value. 

Location

Location, location, location  If the parcel sits adjacent to a developing residential area it would likely attract a higher value than a property situated in a more rural setting with little development.  Location of the property is very important to consider.

Waterfrontage

Does the property have extensive waterfrontage to a river, a lake or the ocean?  If so, is it susceptible to flooding during certain times of the year?  Is the shoreline badly eroding or is it permanently in a state of wetland?  What is the depth of the adjacent water and does the water level drop significantly during the summer months?  All of these factors affect value and must be explored.   

Cover Type

Another critical variable is the type of land cover.  If the likely use of the property is for forestry harvesting than the cover type would be a critical input variable.  Often times we are asked to value property which contains unique cover types including old growth forests or hemlocks. 

Zoning and Other Restrictions

Even in rural areas where properties are not typically subject to the same level of land controls, there are often restrictions on the use of the property.  For example, the property may be located within a designated wilderness area or within an area designated as a watershed.  These types of restrictions can severely limit the use of the property and thus impact its value.    

Conclusion

Back to the original question; is this offer reasonable?  Well that all depends on a number of factors that need to be investigated before providing any input ... 

The morale of my blog post: Nothing is ever as straightforward as it seems, especially when it involves valuing land.  

If you have questions regarding the value of your property or are interested in learning more, feel free to contact Nigel Turner, Senior Manager of our Valuation Division, at (902) 429-1811 or NigelTurner@TurnerDrake.com.

Thursday, 06 August 2015 09:39:18 (Atlantic Daylight Time, UTC-03:00)  #    -
Valuation
# Monday, 22 June 2015

I joined Turner Drake in 1981, just about the same time the Space Shuttle successfully returned from its inaugural flight to usher in the use of manned reusable spacecraft to return to Earth. Upon landing, I believe astronaut John Young hyped on adrenaline, proclaimed “that was a ride of a lifetime”. While my time with my colleagues at Turner Drake has been more grounded, I also consider it a ride of a lifetime; ushering in new challenges, adventures and innovations along the way.

Operating throughout Atlantic Canada and beyond, we have valued a diversity of properties from airports to smelters; pulp mills to fish plants; convents to quarries and vast tracts of moose pasture … and just about everything in between.    Valuation of real estate is not a simple task or an exacting science: it has always been a combination of art and science.  With a predominance of the former in the years gone by,  giving way to the latter as a plethora of data and technology has,  and continues, to become available. As the saying goes … everyone has an opinion on value. However it is certainly more than just producing fluff and a leap of faith.  As valuers, we have to use the tools developed to capture, analyse and make sense of demographic, economic and market factors that drive real estate values. Clients of real estate practitioners expect and deserve accurate conclusions based on sound analysis and interpretation of the evidence available.

To meet this expectation, it is incumbent on valuers to be leading the wave, not just riding it.  As more and more real estate data becomes available, i.e. published sales data, online property zoning, assessment data, financial analytical tools, etc.,  the valuer’s  time is not so much spent working as an old time private investigator travelling the region and unearthing spotty evidence but more so assimilating the available data and recognising what is relevant and applying the correct analytical tools to interpret it to produce a creditable result.  The tools we use at Turner Drake include our Compuval® Database assembled over the past 35 years comprising over 200,000 detailed property records including sales, assessment, income and expense data on properties throughout Atlantic Canada and across the country; Geographic Information Systems (GIS) databases that focus on demographic trends, land use, spatial connectivity, development patterns and the physical aspects of property; and financial analysis and projection software.  These tools together with the knowledge and skill sets of my colleagues at Turner Drake make the challenge of valuing properties a rewarding experience and as I indicated at the onset … a ride of a lifetime.

 

Rick Escott, Vice President of our Valuation Division and Newfoundland Operations, reflects on his last 34 years at Turner Drake.  To find out more about Rick and his adventures, check out our Facebook page!

Monday, 22 June 2015 10:43:28 (Atlantic Daylight Time, UTC-03:00)  #    -
Valuation