FY2018_FAR_SCOPE_OF_WORK.docx

Fair Annual Rent Appraisal Consolidated Statement of Work

FY 2018

Purpose The purpose of the appraisal is to estimate the Fair Annual Rent (FAR) for the subject property based on specific characteristics that define the Subject for purposes of this appraisal.

The subject property:

The subject of the appraisal is a space: the size of the largest current tenant in the building; having the Tenanted Floor R/U ratio as its efficiency or load factor; that is of the average quality for tenanted areas throughout the building.

There are currently eight agencies leasing space in the building. DOL alone has approximately 18 occupancy agreements for the building.

GSA Definition of Fair Annual Rent (FAR) Fair Annual Rent (FAR) is the annual amount that may reasonably be expected for the right to the agreed use of real property, as established by competition in the open market. The FAR is a fully serviced rental rate; the annual rate includes the cost of all services except Security.

Assignment Conditions

· The appraiser must comply with USPAP and GSA Contractor Instructions (current versions) in performance of this appraisal assignment.

· The contracting appraiser must inspect the subject property.

· Results and analyses must conform to the guidance provided in the most current versions of the GSA Contractor Instructions and Report Templates. The appraisal contractor must use the latest version of the Contractors Tools, v6.73.

· Training Requirements: Contractors are required to attend the on-line GSA seminar “Understanding Fair Annual Rent Appraisal” prior to developing FAR rent appraisal reports for FY2018.

Assignment Framework

· Consider Building Space Classification Reports to identify tenanted areas versus unique floors. The concluded rent will apply to the tenanted floors only.

· The appraised rate is the starting rent for a full-service ten-year term:

1. Fully serviced (gross) excluding Security.

2. Appraise the “as is” condition and use(s), unless otherwise requested, including consideration of existing tenant improvements.

3. Concluded operating expenses for subject property must be supported by market-derived data. Cite expense comparables where possible. In concluding operating expenses, consider pertinent energy improvements to the subject.

4. Allocate the concluded full service rent between operating rent (services) and unserviced rent as defined in the Contractor Instructions

· The appraised rate should reflect the market rate for average, finished, tenanted areas within the subject building (or the market rate for comparable warehouse space for warehouse buildings).

· Calculate a levelized (unserviced) rent for the entire term (GSA uses this for billing purposes), using the provided rent levelization worksheet, and applying your estimated annual escalation factors for the following nine years.

· A separate parking analysis may be required, establishing a bulk-user (generally multiple-space) rate for the subject building.

· In some cases, distinct uses or characteristics of the building may require separate comparable leases, analyses, and conclusions. However, we may still require a single, blended rate. Please consult the regional appraiser.

· In these cases, each rate must have sufficient support to be credible and must be reconciled into a single blended rate (unless otherwise stated).

· The completed appraisal includes conclusions of market rent at specific points in time:

· Date of Inspection.

· Prospective (effective Fiscal Year) dates: 10/1/2015, 10/1/2016, 10/1/2017.

The Appraisal Requires:

· You must provide no fewer than three executed and confirmed rent comparables; frequently additional comps are necessary to provide a credible analysis. You must provide a sufficient number of comparables to accurately reflect the market and support your conclusions. In urban or volatile markets, you may be asked for additional listings and/or confirmed lease comparables.

· Exclude all Federal government leases. If it is necessary to include state or local government leases, confirm that they are arms-length and are representative of the market.

· Follow the rent comparable data sheet format provided.

· The Rent Comparison Grid must be fully completed. All adjustments must be explained in the report and supported.

· A determination of levelized rent. Escalation factors require market support, which may include and of the following (which must be explained in the report):

· Information from rent comparables

· Local real estate surveys

· Market participants such as buyers, sellers and brokers

· The completed report must contain all exhibits, maps and photos, signed certification(s) by the appraisers, limiting conditions to which the value is subject, the appraiser’s qualifications, and a copy of the appraiser’s current Certified General license effective in the state where the subject is located.

· The report addenda should include a copy of the summary page of the Space Classification Report.

· Appraiser shall estimate square foot rent adjustments for comparable properties to account for market value differences owing to the estimated value of payroll tax expense exclusions that are provided by the City of San Francisco for businesses operating in the Central Market & Tenderloin Area. The exclusion adjustment shall be developed on a square foot basis to adjust the rental rates of comparable properties in the Central Market & Tenderloin Area. According to the San Francisco Treasurer’s Office, these tax benefits totaled $33,672,584 in 2014.

· Appraiser shall estimate square foot rent adjustments to account for the relative inflexibility of the federal space at 90 7th Street, San Francisco. Unlike private office space, building space in the Tower may only be rented by tenants in half-floor increments and is not divisible without compromising the security of tenants. The appraiser shall estimate the economic value of only allowing tenants to lease space in half-floor increments. The flexibility adjustment shall be developed on a square foot basis to adjust the rental rate of the federal building.

For detailed guidance on specific issues please refer to Contractor Instructions Page 3