The Valuation of Billboards

1. The Valuation of Billboards Scott Mac Williams

2. USPAP ConsiderationsCompetency Competency requires: • The ability to property identify the problem to be addressed • The knowledge and experience to complete the assignment competently • Recognition of, and compliance with, laws and regulations that apply to the appraiser or to the assignment. Lack of Competency If the assignment cannot be completed competently the appraiser must decline or withdraw from the assignment

3. USPAP Considerations Scope of Work Rule For each appraisal, an appraiser must • Indentify the problem to be solved • Determine and perform the scope of work necessary to develop credible assignment results • The expectations of the parties who are regular intended users • What an appraisers peer actions would be in performing the same or similar assignment • Disclose the scope of work in the report

4. USPAP Considerations Standard 1 Real Property Appraisal Development Rule 1-4 In developing a real property appraisal, an appraisermust collect, verify, and analyze all information necessary for a credible assignment result. • When a Sale Comparison Approach is necessary for a credible assignment results, an appraiser must analyze such comparable sales data as are available to indicate a value conclusion • When a Cost Approach is necessary for a credible result an appraiser must: • Develop an opinion of site value by an appropriate technique • Analyze comparable cost data available to estimate the cost new • Analyze such comparable data as are available to estimate the difference • When an Income approach is necessary for a credible assignment results, an appraiser must: • Analyze such comparable rental data as are available and/or potential earning capacity of the property to estimate the gross income potential of the property • Analyze such comparable operating expense data as are available to estimate the operating expenses of the property. • Analyze such comparable data as are available to estimate the capitalization and or rates of discount; • Base projections of future rent and/or income potential and expenses on reasonable clear and appropriate evidence • When developing an opinion of the value of a leased fee estate or leasehold estate, an appraiser must analyze the effect on value, if any, of the terms and conditions of the lease (s)

5. Problem to be solvedWhat is being Valued? • Sign Structure • Sign Site • Leased Fee Interest • An ownership held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the lessee are specified b the contract terms within the lease • Leasehold Interest The interest held by the lessee (the tenant or the renter) through a lease transferring the right of use and occupancy for a stated term under certain conditions. • Leasehold Value • Difference between contract rent paid to the owner and market rent at the time of the appraisal • Leasehold Value Method • Leasehold interests are typically valued usi9ng the income capitalization approach. The income to the position is the difference between the market rent and contract rent. The capitalization • Location • Location is of paramount importance • Valuation should include the value of the location

6. Just Compensation is to compensate only for the value of the property taken. Just Compensation does not include compensation for loss of business profits, . Recognition of, and compliance with, laws and regulations that apply to the appraiser or to the assignment.

7. Accepted Valuation Methods • Nichols on Eminent Domain • 23.04[4] As a general proposition, it can be said that any professionally accepted appraisal methodology or technique tat is adequately supported will be admissible • Cost Approach 23.04 [4] 23-56 to 23-59 • Income Approach 23.04 [4] 23-59 to 23-62 • Market Approach; Gross Rent Multiplier Method 23.04 [4] 23-62 to 23-64

8. Accepted Valuation Methods Continued • The Valuation of Billboards (Appraisal Institute) byDwain R. Stoops MAI and Marvin L. Wolverton PhD, MAI • Chapter 4 Highest and Best Use and the Cost Approach Cost Approach ; • Chapter 5 Sales Comparison Approach 126-139 • Income Capitalization Approach 142-157 • Discusses the use of two multiplier applications for valuing interests in sites and structures separate from the business operation- the potential gross income multiplier (PGIM) and the effective gross income multiplier (EGIM)

9. Questions Regarding Compensation/Methodology • Compensability is a question of Law • Change 2010 Jurisdictional Exception • An assignment condition established by applicable law or regulation which precludes an appraiser from complying with a part of USPAP. • In an assignment involving a jurisdictional exception, an appraiser must • Identify the law or regulation that precludes compliance with USPAP • Clearly and conspicuously disclose in the report the part of USPAP that is voided by that law or regulation; and • Cite in the report the law or regulation requiring this exception to USPAP compliance. • Law includes constitutions, legislative and court made law, and administrative rules and ordinances. Regulations include rules or orders having legal force, issued by an administrative agency. Instructions from a client or attorney do not establish a jurisdicational exception • Consider the Use of an Extraordinary Assumption USPAP defines an Extraordinary Assumption as: “an assumption, directly related to a specific assignment, which, if found to be false, could alter the appraisers opinions or conclusions.” • Get Supported Legal Instructions for any questionable damages or employed methodologies

10. Conclusions • Do work that you are competent to complete • You the appraiser are ultimately responsible for the scope of work decisions. • Instructions from a client or attorney do not establish jurisdictional exception • Get Supported Legal Instructions for any questionable damages • Use Extraordinary Assumptions where applicable