SOW_0006_2014_04_16.pdf

Public Buildings Service of the General Services Administration

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Scope of Work Land FY14

SCOPE OF WORK FOR THE GSA

NARRATIVE MARKET VALUE APPRAISAL REPORT FOR LAND

GENERAL

The scope of work is defined by the complexity of the appraisal assignment as set forth assumptions and hypothetical conditions. The following sets the minimum inspection, analyses and reporting requirements for this assignment.

The purpose of this assignment is to obtain an estimate of value that a private sector purchaser would pay for the asset(s) as vacant and available to be developed to its highest and best use. The information will be primarily used for financial analyses within GSA and is not intended for the use of any parties outside of GSA. Additionally, the condition of ownership by a private sector purchaser is hypothetical and is to be

In the preparation of this report, the contract signatory, herein after known as the production appraiser, shall follow current professional appraisal practice in developing an opinion of value of vacant land. Should certain approaches or requirements covered herein not be applicable to the assignment, the production appraiser must obtain written approval (e-mails are acceptable) from the GSA Project Manager for the assignment prior to the decision to omit any approaches or requirements, and must document the reasoning and approval for the omission within the appraisal report.

The assignment requires that a credible appraisal be conducted and documented in an appraisal report consistent with the Uniform Standards of Professional Appraisal Practice (USPAP) promulgated by the Appraisal Foundation that are current as of the effective date of the appraisal; in conformance with this Scope of Work, any supplemental Statement of Work, and applicable regulations promulgated by the state, commonwealth, territory or district in which the asset(s) is situated.

The production appraiser and any signatory to the report must hold a certified general or equivalent state real estate appraisal license, and his/her signature must be affixed to possess, and the expiration date of the license. The contract signatory must also inspect the asset(s) to be appraised, unless prior written permission to the contrary is given by the GSA Project Manager responsible for the assignment.

All information provided by GSA about the property is considered to be confidential. The production appraiser must not disclose any confidential elements of the appraisal report, or any confidential information given to the appraiser by GSA or to any parties other than GSA appraisal staff except when required by law or Federal

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Scope of Work Land FY14 regulations. Information provided by GSA may not be used, included or cited in the preparation of reports other than those being prepared for the GSA, nor under any circumstances can a report prepared for GSA be used as work sample. Access to any information provided by GSA must be restricted to individuals involved in the analyses and preparation of the report. The production appraiser shall maintain the work file, and it shall be the only work file. Continuing access to the file shall be permitted to contributing appraisers and such personnel as stipulated by USPAP and the policies and procedures of other regulatory entities. The production appraiser shall take reasonable precautions to ensure that the appraisal, the work file and any electronic media used to create, transmit or store confidential information is adequately secured.

PROCEDURES FOR REPORTS PREPARED

FOR GSA

Upon completion of an appraisal(s) by the production appraiser, a draft report will be submitted for review to the GSA Project Manager to ensure that the data and analyses developed by the production appraiser substantiates the estimated valuation and conforms to the Scope of Work.

An electronic copy of the draft report is to be submitted for review to the GSA Project Manager within (45) days of the beginning of the assignment, or within a time period that is approved by the GSA Project Manager prior to the commencement of the assignment. The draft report must be complete and fully assembled with all exhibits included. Exhibits and addenda include, but are not limited to: maps, photographs, plats, comparable data summary sheets, cash flow documentation, this Scope of Work, and the qualifications of the appraiser(s).

Upon his review, the GSA Project Manager (or his designate) will send a completed review document detailing any questions or issues to the production appraiser for necessary consideration, corrections or revisions. After all revisions are complete, an electronic copy of the final appraisal report is to be submitted to the GSA Project Manager. All exhibits must be included in the the final appraisal report. The invoice for the assignment is to be submitted per the instructions given in the notice-to-proceed letter, but only at the time of submission of the final report. Unless prior approval of the GSA Project Manager for the assignment is obtained, any invoice submitted to GSA before completion of the review and revision process will be rejected.

The GSA Project Manager will be the point of contact and project coordinator throughout the appraisal assignment and review. All questions relating to the appraisal must be directed to the production appraiser though the GSA Project Manager.

FORMAT

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Any spreadsheet files used in the analyses are to be provided in electronic form and must be compatible with the most current version of Microsoft Excel (or compatible approved by the GSA Project Manager prior to commencement of the assignment.

To provide uniformity for GSA files, the text shall be divided into four parts as outlined below:

PART I - INTRODUCTION

1. TITLE PAGE. This shall include (a) the name, street address and GSA control number of the property, (b) the name of the individual(s) signing the report, and (c) the effective date of the appraisal.

2. TABLE OF CONTENTS

3. LETTER OF TRANSMITTAL.

4. SUMMARY OF SALIENT FACTS AND CONCLUSIONS. Summarize the important data and conclusions in a concise manner, including: Property Identification, Purpose of the Appraisal, Scope of the Appraisal, Date of Value, Site Description, Zoning, Highest and Best Use, Value Indications, Final Estimate of Value.

5. PROPERTY IDENTIFICATION. Identify the property by name, location, and address.

6. SCOPE OF THE APPRAISAL. The asset is to be appraised as if vacant and available to be developed to its highest and best use as of the effective date of value. The hypothetical condition of ownership by a private sector purchaser is to be assumed.

7. PROPERTY RIGHTS APPRAISED. Generally, Fee Simple interest will be appraised. Fee Simple is defined as follows:

FEE SIMPLE - Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.

If the land is subject to a ground lease, the value of the Leased Fee interest created by a ground lease is required. Leased Fee is defined as follows:

LEASED FEE An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of leased fee owner and the leased fee are specified by contract terms within the lease.

8. REQUIRED DEFINITION OF VALUE. The value to be appraised is the Market Value which is defined as:

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Scope of Work Land FY14

The amount of cash, or on terms reasonably equivalent to cash, for which in all probability the property would have sold on the effective date of the appraisal, after a reasonable exposure time on the open competitive market, from a willing and reasonably knowledgeable seller to a willing and reasonably knowledgeable buyer, with neither acting under any compulsion to buy or sell, giving due consideration to all available economic uses of the property at the time of the appraisal.

The report will contain only this definition of Market Value within the content of the report, or any addenda or glossary attached to the report.

9. PURPOSE OF THE APPRAISAL. The purpose of the appraisal is to provide an opinion of the value of the asset for analyses by GSA in determining the appropriate strategy for the asset.

10. DATE OF VALUE. Unless otherwise specified by the GSA Project Manager, the date of value will be the same date as the date of the most recent comprehensive physical inspection of the asset. The date of the inspection may not be more than 45 days before the date that the final appraisal report is received and accepted by GSA (typically, but not always, the Date of Value and date of inspection will coincide).

11. EXHIBITS.

PHOTOGRAPHS. Pictures shall show a street scene, and any salient features.

Photos of the comparables shall be included. All graphic material shall include captions, and each subject photograph shall indicate the date the photograph

MAPS. All maps of the subject property and the comparables must be included and be legible.

12. STATEMENT OF LIMITING CONDITIONS AND ASSUMPTIONS.

13.

provide a certification as required by the licensing board in the State where the property is located and USPAP. This shall include a statement that signatories have no undisclosed interest in property, that they have personally inspected the premises, date and amount of value estimates, etc. Any hypothetical conditions required by these specifications must be included.

PART II - FACTUAL DATA

14. REGIONAL AND CITY ANALYSIS. In a concise manner, discuss the pertinent aspects of the asset's city and or region (e.g. geographic, legal, social and economic factors). Include a succinct description of the regional market for the asset's property type. This data should include such information as it affects the appraised

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15. NEIGHBORHOOD DATA. Clearly define the asset's neighborhood, including boundaries, land use patterns, transportation issues, vacant land (especially developable land), as well as the lifecycle of the neighborhood (e.g. developing, stable, declining, redeveloping). Include a description of the local market for the asset's property type, and any other characteristics that have an impact on the asset, either positive or negative (vacancy rates, market rents, efficiency factors, and R/U ratios). Provide a comparative analysis of the subject property within the context of its market.

16. PROPERTY DATA -

a. LEGAL DESCRIPTION - This description shall be complete so as to properly identify the property appraised. If lengthy, it can be referenced and included in Part IV.

b. SITE - The property description will be based on information provided by GSA and confirmed on the appraiser's inspection. Describe the relevant characteristics of the site (both positive and negative) that impact its use and value. Describe the site's location, size, shape, access, ingress/egress, soil, topography, utilities, mineral deposits, easements, and off-site improvements, and any other relevant factors. Discuss any issues that impact the functionality of the site, such as drainage/flood plain, soil, visibility, developability, environmental issues or excess land. On and off-site improvements including utilities and their availability must be identified to determine any contribution to value. Conversely, the absence of utilities and typically required site improvements should be discussed and analyzed.

While appraisers are not normally expected to be environmental experts, they should at least make a reasonable attempt to discover if there is contamination on the property. The appraiser shall note in the report any observed, suspected or other knowledge of environmental contamination. The impacts of any noted environmental issues will be appropriately addressed.

c. LEGAL RESTRICTIONS. Discuss the zoning that regulates the development of the site, or the most likely zoning that would regulate the development of the site under private ownership. Include relevant requirements such as permitted land uses, maximum building height, FAR, and minimum setbacks and parking spaces. Recite any other legal restrictions (binding agreements, covenants, easements), and other regulations (historic designations or local comprehensive plans) that would impact the value of the site under private ownership.

d. HISTORY - State briefly when GSA took possession of the property and, if possible, cite the deed book and page of the transaction. Include a copy of the deed in the report, if possible.

e. REAL ESTATE TAXES. Estimate the real estate tax assessment under private ownership. State the tax rate and give the dollar amount of the tax estimate.

Future trends or prospective changes in the level of taxes should be discussed.

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PART III - ANALYSES AND CONCLUSIONS

17. ANALYSIS OF HIGHEST AND BEST USE. Describe the highest and best use of the site as vacant using standard appraisal guidelines of physically possible uses, legally permitted uses, financially feasible uses, and maximally productive uses.

The analysis should tie the highest and best use to the analyses used in the descriptions of the regional and neighborhood markets and the site. The analysis should include a discussion of the size as well as the type of any buildings that represent the highest and best use. Determine whether any proposed development represents the highest and best use of the site, especially if the proposed use represents a special purpose. The highest and best use analysis will be critical to determining strategies for the asset.

18. LAND VALUE. The Sales Comparison approach is the preferred methodology for developing a land value conclusion. However, alternative methods, such as extraction, allocation, and various income capitalization techniques, may be applicable.

19.

opinion of the value of the land shall be supported by confirmed comparable sales.

Provide adequate details and descriptions of comparable land sales, including location maps. Differences shall be identified, weighed and explained to demonstrate how the sales relate to the subject and indicate the value of the land being appraised. This most effective demonstration is through use of a quantitative adjustment grid. Adjustments should be made from the sales to the subject, either in dollar amounts or percentages for all applicable elements of comparison.

Comparable sales used must be confirmed by someone having personal knowledge of the terms and conditions of the sale as well as the motivation of the principals.

Reference to public records and revenue stamps does not confirm the terms and conditions of a sale. Tie the land valuation to the highest and best use analysis.

The reader should be able to follow the appraiser's logic to his/her conclusion of value.

20. ALTERNATIVE TECHNIQUES: In certain instances, such as when there is insufficient comparable data for the Sales Comparison approach, land value can be estimated by extraction, allocation, or one of the Income Capitalization techniques.

a. EXTRACTION Extract the opinion of value from the sale price of an improved property by deducting the value contribution of the improvements, estimated at their depreciated cost.

b. ALLOCATION The typical land value is inferred by the price range of improved properties in the immediate area if an appropriate allocation ratio can be established in the community for a specific property type. Use this method is to establish land value when the number of vacant land sales is inadequate. Base the analysis on typical ratios of land value to improvement value for specific categories of real estate in specific location or market of the subject property.

21. INCOME CAPITALIZATION PROCEDURES.

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a. DIRECT CAPITALIZATION: LAND RESIDUAL TECHNIQUE In current practice, this technique is used almost exclusively in highest and best use analysis to test the productivity of alternate uses of the land as vacant. The following conditions must be met for this technique to be used:

Building value is known or can be accurately estimated.

Net operating income to the property is known or can be estimated.

Both building and land capitalization rates can be extracted from the market.

b. DIRECT CAPITALIZATION: GROUND RENT CAPITALIZATION TECHNIQUE Ground rent, the amount paid for the right to use and occupy the land according interest in the land, i.e., the leased fee interest. Use market-driven capitalization rates to convert the ground rent into market value. Analyze comparable sales of leased land that indicate a range of rents and capitalization rates. Consider all the benefits to the lessor during the term of the lease and any option periods, and determine when the reversion of the property will take place.

22. FINAL ESTIMATED VALUE. The appraiser shall reconcile the estimates from the approaches used and shall explain why one or more of the conclusions reached in items (19), (20), and (21) are indicative of the market value of the property.

Discuss the appropriateness and reliability of each approach and logically explain the derivation of the final estimated value. Pure "averaging" is not considered defensible.

PART IV - EXHIBITS AND ADDENDA

(Items 23. 26. may be located within the appropriate sections of the body of the report.)

23. PLOT PLAN AND TAX MAP

24. COMPARATIVE DATA MAP(s) Show geographic location of the appraised property and the comparative data analyzed.

25. OTHER PERTINENT EXHIBITS. The production appraiser must include a copy of the Scope of Work identified in the accepted contract of work. The production appraiser must also complete and include the GSA Narrative Market Value Appraisal Report Summary of Significant Conclusions and Scope of Work Reporting Requirements Checklist for Land with the report indicating that the appropriate information required in the report has been included, and identifying the pages where such information is located.

26. QUALIFICATIONS. For all signatories to the report.

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GSA Project Manager for this Assignment

W. Michael Wochna GSA Portfolio Management Northwest / Arctic Region 10 400 15th Street SW Auburn, WA 98001 253-931-7420 mike.wochna@gsa.gov