Valuation Issues from Current Valuation Issues from Current CasesCases

Orell C. Anderson, MAIand Stephen G. Valdez

• BackgroundBackground• Case overviewsCase overviews• Implications on valuationImplications on valuation

My SandboxMy Sandbox

Co-founder and partner at Co-founder and partner at Bell Anderson & Bell Anderson & Sanders, LLCSanders, LLC

Co-author of Co-author of Real Estate DamagesReal Estate Damages Expert AppraiserExpert Appraiser

– Specializing in condemnation & contamination Specializing in condemnation & contamination

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Current Cases affecting ValuationCurrent Cases affecting Valuation

• City of Livermore v. Baca City of Livermore v. Baca 

• Texas v. LEDREC, Inc.Texas v. LEDREC, Inc.

• County of Glenn v. FoleyCounty of Glenn v. Foley

• New Jersey Transportation v. New Jersey Transportation v. Marlton PlazaMarlton Plaza

City of Livermore v. BacaCity of Livermore v. Baca

Big PictureBig Picture: :

Severance Damage evidence to be put before Severance Damage evidence to be put before a jurya jury

City of Livermore v. BacaCity of Livermore v. Baca

Baca Baca PropertyProperty

ProjectProject

Street re-alignmentStreet re-alignment Property owner claimed severance due to impaired “view and curb Property owner claimed severance due to impaired “view and curb

appeal”, drainage, and access – while increasing utility service costsappeal”, drainage, and access – while increasing utility service costs Baca’s evidence of severance damages was excluded in trialBaca’s evidence of severance damages was excluded in trial Baca appealed decision to exclude evidence and wonBaca appealed decision to exclude evidence and won

City of Livermore v. BacaCity of Livermore v. Baca

Appraisal ImplicationsAppraisal Implications: : Evidence of severance damages to be put before a juryEvidence of severance damages to be put before a juryThe appraiser needs to know and The appraiser needs to know and understand the audienceunderstand the audience

– Opinions of value and the basis for those opinions need to be Opinions of value and the basis for those opinions need to be easily understood and communicated simply and conciselyeasily understood and communicated simply and concisely

Texas v. LEDREC, IncTexas v. LEDREC, IncBig PictureBig Picture: :

Appraiser speculation that could affect value may Appraiser speculation that could affect value may be proven to be wrong, but is admissible if analyzed be proven to be wrong, but is admissible if analyzed correctlycorrectly

High Rise Casino*High Rise Casino* for for Sale!!!Sale!!!

*Just *Just addadd High Rise Casino High Rise Casino

Texas v. LEDRECTexas v. LEDREC Highway expansionHighway expansion Property owner appraiser based severance damages on decreased Property owner appraiser based severance damages on decreased

setback that would conflict with city zoning… once the nearby city setback that would conflict with city zoning… once the nearby city “inevitably” annexed the subject property“inevitably” annexed the subject property

Condemning agency argued that assumed annexation was too Condemning agency argued that assumed annexation was too speculative and that appraiser opinions should be excludedspeculative and that appraiser opinions should be excluded

Property owner “won,” appraiser speculation admissible because it Property owner “won,” appraiser speculation admissible because it was analyzed correctly (although it may be proven wrong)was analyzed correctly (although it may be proven wrong)

LEDREC before LEDREC after

Texas v. LEDRECTexas v. LEDREC

Appraisal ImplicationsAppraisal Implications: : Appraiser opinions and assumptions that support those Appraiser opinions and assumptions that support those opinions may or may not be wrong, but they will be opinions may or may not be wrong, but they will be considered if the analysis used to reach those opinions is considered if the analysis used to reach those opinions is “reliable”“reliable”

An appraiser, a broker, and a city planner An appraiser, a broker, and a city planner are stuck at the bottom of a well. The are stuck at the bottom of a well. The broker and the city planner can’t come up broker and the city planner can’t come up with a way to get out, when the appraiser with a way to get out, when the appraiser shouts: shouts: “I’ve got it!!! First we “I’ve got it!!! First we assumeassume that that there’s a ladder…”there’s a ladder…”

Glenn County v. FoleyGlenn County v. Foley

Big PictureBig Picture: : What’s a comparable?What’s a comparable?Adjustments to comparables must be objectiveAdjustments to comparables must be objective

Would someone looking for Would someone looking for this….1969 Chevy Malibuthis….1969 Chevy Malibu

……consider this comparable?...1992 consider this comparable?...1992 Hyundai POSHyundai POS

Glenn County v. FoleyGlenn County v. Foley Expansion of adjacent land fill via the taking of Foley’s propertyExpansion of adjacent land fill via the taking of Foley’s property Foley appraiser concluded to highest and best use of “olive orchard” at a Foley appraiser concluded to highest and best use of “olive orchard” at a

value of $1.7mil using “comparable sales” of other orchardsvalue of $1.7mil using “comparable sales” of other orchards County appraiser opined to value of $600,000 based on highest and best use County appraiser opined to value of $600,000 based on highest and best use

of “grazing land”of “grazing land” Court ruled that a property qualifies as a comparable if its sale “can provide Court ruled that a property qualifies as a comparable if its sale “can provide

any rational inference in support” of an estimate of valueany rational inference in support” of an estimate of value Court ruled that adjustments to comparables can be made only if they have Court ruled that adjustments to comparables can be made only if they have

“some rational basis”“some rational basis”

Glenn County v. FoleyGlenn County v. Foley

Appraisal ImplicationsAppraisal Implications: : Appraiser selected “comps” should be rationally Appraiser selected “comps” should be rationally comparable to the subject property appraisedcomparable to the subject property appraisedAdjustments need objective supportAdjustments need objective support

– When those adjustments are difficult / impossible to quantify, a When those adjustments are difficult / impossible to quantify, a “windsock” approach may be more appropriate (i.e. “superior / “windsock” approach may be more appropriate (i.e. “superior / inferior / similar”)inferior / similar”)

All I have to do is All I have to do is come up with an come up with an ocean view ocean view adjustment and a adjustment and a 100’ tall “Pharoah” 100’ tall “Pharoah” adjustment, and adjustment, and these will be perfect these will be perfect comps!comps!

RealEstateDamages.comRealEstateDamages.com

Legal Non-conforming

RealEstateDamages.comRealEstateDamages.com

Legal Non-conforming

New Jersey Transportation v. Marlton PlazaNew Jersey Transportation v. Marlton Plaza

Big PictureBig Picture: : Scope of damages available to a property owner is Scope of damages available to a property owner is limited to damages that are a result of the takinglimited to damages that are a result of the taking

New Jersey Transportation v. Marlton PlazaNew Jersey Transportation v. Marlton Plaza

Project was to eliminate traffic circle in lieu of a grade separated Project was to eliminate traffic circle in lieu of a grade separated interchange to relieve local traffic congestioninterchange to relieve local traffic congestion

Marlton Crossings shopping center agreed to lose an access point Marlton Crossings shopping center agreed to lose an access point priorprior to the project to the project

During condemnation proceedings, Marlton claimed that During condemnation proceedings, Marlton claimed that on site on site congestion congestion impaired the value of the shopping centerimpaired the value of the shopping center

– Specifically cited the loss of the access point, and NOT the project as the reasonSpecifically cited the loss of the access point, and NOT the project as the reason

Marlton won, the agency appealed and the appellate court remanded Marlton won, the agency appealed and the appellate court remanded the case for retrial, stating that compensable damages ought to be the case for retrial, stating that compensable damages ought to be limited to results of the project and proposed taking, not previous limited to results of the project and proposed taking, not previous consensual access modificationconsensual access modification

New Jersey Transportation v. Marlton PlazaNew Jersey Transportation v. Marlton PlazaBeforeBefore AfterAfter

Marlton Marlton PropertyProperty

Marlton Marlton PropertyProperty

Former Former CircleCircle

Current Current OverpassOverpass

New Jersey Transportation v. Marlton PlazaNew Jersey Transportation v. Marlton PlazaBeforeBefore AfterAfter

Former Former AccessAccess

Access removed, per Access removed, per prior agreementprior agreement

New Jersey Transportation v. Marlton PlazaNew Jersey Transportation v. Marlton Plaza

Appraisal ImplicationsAppraisal Implications: : When considering potential severance damages, the When considering potential severance damages, the appraiser should only consider damages that are a result of appraiser should only consider damages that are a result of the projectthe project

ConclusionConclusion

• Questions ?Questions ?

orell@realestatedamages.comsteve@coastappraisalnetwork.com