Board of Equalization Meeting   7/6/2023

So we're gonna call this meeting to order.

It's 804 now.

This is the Board of Equalization for Albemarle County.

This is our July 6th meeting.

So our agenda is to call order.

We have approval of minutes from a prior meeting.

We don't have a copy of that all.

Can we look at the, so we might actually.

I have electronically no paper copies.

Okay.

Are we, I don't know if we have a copy in front of us.

Maybe we'll wait till next meeting to approve those.

Or later on.

Later this meeting.

Okay.

Yes.

All right.

So let's

Kind of just a housekeeping matter, but I guess since Mr. Patel is here, maybe let's do hearings one and two.

And then since we have a number of hearings today where we have the same tax representative, we may, in Mr. Patel's case, we might do the same thing.

We'll have all the presentations done before we do our conferences.

So kind of do things a little bit out of order.

So the timing might be a little bit different, but we'll just see how every applicant wants to do it.

So, Mr. Patel, good morning.

And I don't know if I mentioned already, but Chairman and Chair of the Quorum, we have all five members present today, so we should have a quorum.

This is an additional, what I'm going to say right now.

Oh, OK.

So do I get it?

There's two additional.

OK.

So this is case number, it's BOE application 58, PID 19779.

The applicant is the Patel Living Trust.

So Mr. Patel, I'll give you the option here.

You have two applications back to back.

Would you like to go ahead?

Because what we often do is do a presentation and then we'll confirm.

Yeah, that's fine.

I can present it on the phone.

OK, so we can do one at a time.

But it's just going to be.

OK, so let's go ahead.

Let me just do the introduction real quick.

I believe it was while you were before us last year.

So you have something like virtual.

Yes.

Yes.

So the first time we're doing it in person.

So again, welcome.

We're the Board of Equalization.

The board is comprised of five citizens of Elmore County who are appointed by the Board of Supervisors.

We're an independent board, and here's how the hearing will work.

You're going to have 10 minutes to present your case, and this is for each one of these cases.

The assessor will have seven minutes to present theirs, and you'll be provided three minutes for rebuttal.

During the hearing we may stop to ask you and assess your questions.

Please note that per Virginia law there is a presumption of correctness so the burden of the proof is on you as the applicant.

So before we begin let's swear in the witnesses so whoever is planning to testify both from the assessor and as the applicant please raise your right hand.

Do you solemnly swear or affirm that the testimony, both oral and documentary, which you are about to give, will be the truth, the whole truth, and nothing but the truth?

Thank you.

Any questions before we begin?

I know, sir.

All right.

Please proceed.

Thank you all for this opportunity.

In reference to what I will be stating today, I'm just passing out a handout.

So I'll continue with that and then we'll get from there.

Expected members of the Board of Equalization and County Assessor staff, I thank you for the opportunity to present my case.

My name is Vipul Patel.

My wife and I own two properties within half an hour of each other.

One is our primary residence at 3250 Barracks Road and the other is a vacant residential parcel located at Colters Drive.

given the 10 minutes allotted time, which you've already indicated is to each, but we'll continue.

I will begin with my primary residents.

At the real estate review form submitted February 13th, I had the opinion of value by owner of agents as of January 1st, 2023, stated a total value at 901,460 dollars, which meant,

which led to a land increase or accepted land increase at 9.8% at 267,200 and building increase at 9.1% at 634, 260,000 which equals up to the 901, 460.

With minus stated valuations, the county realized the total valuation increase of both land and building at 9.3% and $83,860 increase

and that is based on the opinion that I provided.

In my opinion, there are several key factors to why my building is not justified by the 15.3 degrees which the county had presented.

One, the arbitrary assignment to Foxfield, which is far distant and comparable as on view.

It is my understanding that there is not an assigned Foxfield jurisdiction, but rather an arbitrary divide.

In fact, there are four of the residents at Old Garth Heights that probably face the same dilemma.

Number two, it is also important to state that in past years, I have gained reduced assessment.

Still, the Dominion Transformer Station exists both visually and audibly.

In fact, standing at my parking area, the concept humming is 24-7, and in fall, the station transformers are clearly visible.

No Foxfield residents say the same.

Three, in my opinion, the three residences at Montview subdivision align closely to my residence with building appraisal increases between 4.22% to 5.71% of the three that I indicated in the forms that I submitted in the county.

Number four, the county comp

Comparative data includes 14 items from 2022 at Foxfield Assessing District, ranging in acres from 1.19 to 24.95, and appraised values from 631,000 to 2,190,400.

For I'm not an expert, but can clearly decipher that my residence should and does not apply to the data provided.

In my opinion, Foxfield does and will generate ridiculousness, but I, as a long-term resident of Charlottesville, do not fall into that category.

In closing, I say that I do not live on Garth Road, but rather on Barrack Road, just as my neighbors at Montview subdivision.

Thank you.

Any questions at this time from the board?

So this property we do have as part of the Foxfield market area.

And, you know, we break properties down by similarities.

So the Foxfield is a rather large area, kind of like a market area.

and a rural area property group.

And we have several areas as you can see on the map that's displayed up here.

We have several other neighborhoods that are broken down like Montview or Colthurst in Farmington.

And these properties are all, you know, they have a lot of

similarities in their groups, but Foxfield is more of a larger market area in which we combine the similar properties.

Mr. Patel's property as we found last year when we did our review and it came to the board, we discussed the power station and we made an adjustment for that.

The assessment changed with the entire market from last year to this year.

The adjustments on the property stayed the same.

They were percent adjustments, so they remained.

So we believe that based on the comparables that are provided in the Foxview neighborhood, that it is more appropriate than Montview is, which is a different set of properties and their

They're older and they're inferior to the general Foxfield area.

Certainly, the property is not similar to Colthurst or Farmington, which are both very superior to Foxfield in general, and certainly this property.

Well, yeah, I would just like to refresh on the presentation or the information provided to me of the 14 items, the comparables provided.

They're all listed in Foxfield, which I'm grouped into.

But is there any information of the distance from my property to the nearest comparable sale?

and two, I would disagree with Montview's assessment that they're much older and not comparable.

I do believe they're highly comparable.

I have folks who live there and many of those houses are modern just as can be, just as modern as mine or up to date as mine.

So the olive green there is the Foxfield neighborhood?

Exactly.

Or to the right?

To the right is Montview.

And so if you zoom, can you zoom out from there?

Sure.

Yeah, Foxfield is kind of a large market area that the other ones are real subdivisions within the rural area that were developed together.

And in Montview, one of the other issues with Montview is the roads.

And are there, what were the power lines situated?

So yeah, that's the substation and I can take off this layer so you can see.

And it would just get applied to the land?

Correct.

No, I mean, the question I have is which proximity is the closest box field that's reported on this data?

and you're looking at the bottom of page two.

Well, the Ingleside Drive, it's the fifth one on that list and it's three tenths of a mile away.

It's pretty close.

There's two on Ingleside.

And in the rural areas, sometimes there will be something that's physically close to the subject, but overall we're looking for what that area is, how much those areas rights need to be adjusted in order to recharge.

It's not always a case of having something obviously very close or even next door that is very similar

a grouping of all the properties, which in the rural areas will vary greatly.

The houses will vary greatly, the sale prices, their locations.

Please.

So the two comparables that were mentioned are Inglecrest, which is an area that I'm familiar with, but that's an entire upscale community, far more upscale than Montview.

Montview's $175,000, but it's not necessarily for a two-acre lot, because those are smaller, I would just do the 255 for a two-acre home site in Foxfield.

Have you made a request for adjustment on the land value?

No, I've accepted that.

So that's the one thing Mr. Mayo is kind of indicating is when the assessor is looking at the difference in the subdivisions where you're looking at Boxfield versus Montview, and I'm looking at the like the assessed value on their owner-provided

It's like your property is 267 for three acre versus like 3.1 acres on Montview is 204.

So that's where your difference is going to be.

It's not going to be on the improvements.

So it looks like the difference between the ones you're looking at Montview are those are older homes within 962-68.

What are these base rates and the difference in those neighborhoods?

So there are two different things.

So the base rate will apply to the land, but then there's an adjustment to the improvement of multiplier for each neighborhood that is applied to the improvements.

And in Montview, and just to correct something I said.

But there is a 100% res factor in Montview.

There's a 110% res factor or adjustment multiplier for the improvements in Foxview.

Because we have found, you know, so when we're doing the basically the sales study and the analysis of each neighborhood, we're looking at that balance of land and improvements and we have to get to the 100% ratio.

and the question is do we adjust the land or do we adjust the building or the multiplier for the building or do we do both?

So we need to balance, we can't obviously adjust the land above what the land sales are showing us.

So that multiplier in lot view is lower

It goes through Monview.

It goes through Monview, yes.

like I said there, Montview, there's the property, straight through here and right down Magnolia Drive it looks like.

So you've already adjusted for that and the land values in Montview.

Now, I'm not sure if we also adjusted those properties that are specifically on it.

You mean for the improvement?

I mean for the power lines.

Just the land.

Correct.

Correct.

But the 10% you took off, that was just off the land or that was the total value?

Yes, they have power line adjustments in Monacan to the land.

That is just the land.

Not for me.

Okay.

I've heard several times, in my view, almost much older, I would agree with that.

However, that does not make them not be modern.

There are several houses that I've seen and witnessed that are updated to be on my house.

So if age is the only factor, yeah, then I mean, I have nothing to say.

I think we're going to look at some of the factors applied towards their versus yours and as we go great.

So if there's nothing further on that one, I think we have a pretty good idea there.

Let's move on to the next case.

So this is BOE application number 59.

The ID is 19907.

And Mr. Powell, please.

Yeah, thank you.

This is the vacant residential parcel at Colters Drive, which I've owned for, I believe, last 10 to 12 years.

and again at the real estate assessment, I'm sorry real estate review form submitted February 13th, I in the opinion of value by owner of agents as of January 1, 2023 indicated total value of $271,950 representing a 4.76% increase

who are equal to $12,950 increase.

In my opinion, my vacant parts by the edge of culture subdivision is not justified by the 9.8% increase.

In my understanding of uniformity,

Three residential land values at or near my vacant parcel realize land value increases from 5.0 states to 5.7%.

In closing, my vacant parcel is justified to valuations of direct neighboring lands which value at or near 5%.

Thank you.

Any questions from the board at this time?

So I just want to say

and not the amount of change in the assessment of different properties that are somewhere.

So it's difficult when you start looking at change in value from year to year.

Different groups of properties might change in different years.

They end up catching up to each other over time if they're in different neighborhoods or subdivisions.

But if you look at that changeover,

One year, my property changed 15%.

This one changed 5% or something like that.

That is not really an appropriate way to look at the change.

Is the land value or the improvement value appropriate for this year based on sales or based on the assessments of other properties that are similar, but not based on the change?

This property is right next to Culver's.

And as we just

And actually, I do not know the origins of that parcel.

But I do believe, well, obviously, it's outside of the Coulter subdivision.

And I believe there's a, well, there is a church at the corner there.

I'm not sure if it's infill land that came about.

I don't know if it's church, my lot.

So those three have come in over the last, I would say, 10 to 15 years.

Any other questions from the board?

No, sir.

And is that the driveway there going to the back property?

Is that an easement?

There's an easement on that lot, yes.

It's a gravel road, I would assume.

10 to 15 feet for me.

Yeah, just enough for the car.

Okay, I think that is all at this time.

We appreciate your time.

We're going to confer and make a decision, and we'll have a decision to go to the next two weeks.

Okay, thank you very much to all of you.

You guys have a great day.

I think you guys have a busy day.

Thank you.

Thank you very much.

Something that he said to me is that Foxfield is blatantly like an infill neighborhood, right?

Like there are other neighborhoods that are more sort of geographically distinct and then everything else is Foxfield.

So to some extent, the argument that I just happen to be on one side of an arbitrary line there is persuasive to me.

Peter, if you don't mind pulling up the map again, going back to the house.

My only, and this has been our hangout last time,

My only hang up would be the fact that the 1.1 factor being applied to this one and not Montview where this I think he has a good argument to say this is similar to Montview in the sense that I think part of why Montview is what it is is because there's a big power line going through the middle of this neighborhood that's like a big negative factor he has the power line relatively close which we haven't factored in but that substation being right there is so

The fact that we're only applying the 10% off the land value, but not the structural value, that's where I've kind of my, that's my hang up with this valuation, is the, if Month use being applied as one-to-one in terms of improvement, and you're adding 10% of this one, I don't know if the 10% increase is appropriate and the power station kind of levels that off.

I wish for you to, yeah.

I hesitate to even raise this as a political correction, but it's 110 over 100 and you're trying to get back to 100.

Are you talking about undoing the 10% increase for the neighborhood or are you just talking about giving the same 10% that's on the land to the improvement?

It's 9.1, so it seems like it should be around, it's a nine.

79.6 is what that would result in.

Let me ask you a question.

79,600 productions?

I see, yeah.

Oh, that's the total average, yeah.

Before we do that, is there any sort of cognitive dissonance in granting him a greater reduction than he requested, given that he's got the burden approved?

Well, that does bring up another point because that 10% adjustment that you're making, well, let's call it a 10% adjustment in my view.

You know, you have partially, you have said there are some road issues, et cetera,

Exactly.

So that's the problem is it's there while there's a land adjustment on the parcels that are actually on the power lines at Montview.

It's probably more to it than just the power line, right?

Because the power lines are only in front of a number of the middle parcels and they don't affect the other ones.

While the analysis will use all the sales within Montview to determine that 100% or multiplier.

Late 87.

Five is 909.

Six is 902.

And he said 901.

I could vote in favor of a six person seconder senator.

Sure.

All right, do we have a motion?

Do we have a second?

Second.

Aye.

Aye.

Aye.

Is anybody keeping track?

Please keep in track.

OK. And the land was 267.2.

All right.

Here on this one, if you don't mind bringing the map up.

Is that right?

Even though it's on the border.

The lines aren't, I wouldn't call them arbitrary lines between these subdivision neighborhoods.

They might seem like it sometimes, but when you're talking about a neighborhood like Colthurst or Montview or certainly Farmington, there are definite differences in a property considered to be within a neighborhood as opposed to being just in the rural area and not associated directly with the neighborhood.

Now there are some little subdivisions that are built within the rural areas that we cannot just call a neighborhood by themselves.

We can't value a five or 10 neighborhood subdivision because there's just never enough sales.

So we have to include it in a wider area.

But when you're talking about a difference in some of these established neighborhoods, there's definite reasons why those properties are separated or should be separated.

Now, maybe there may or may not be benefits in living within what's determined to be cold thirst.

There could be a homeowners association there, you know, there could be actual benefits.

So the, the ones, the comparisons we gave are all within the subdivision.

That's, that's probably why there was the increase was on not as much because the base rate probably didn't increase as much.

Exactly.

Culpers didn't change that much.

It was already pretty high to begin with.

Should there be?

Is there usually an adjustment for that?

That is correct.

And what is that?

Ten percent.

That actually is the first thing I checked when I saw that comment.

That it wasn't adjusted for that.

I don't have any problem correcting this.

Again, he has a higher number than that, but I think if that's how you all do it, you're in problematic.

So what's, what was the old number?

As a matter of order here, will you get any type of feedback about why that adjustment was made?

Because it occurs to me that he may leave thinking that the argument that he made resulted in that adjustment and really it was a correction of basically a scrivener's error in the calculation.

And that's probably good information for him to have.

We just report them.

If they want to know, they contact us and we share that with you.

Okay.

All right.

Do we have a motion to reduce to 261.7 for application number 59?

We reduce the assessment to $261,700.

Second.

And all in favor?

Aye.

All right.

So good morning and welcome.

We're the Board of Equalization.

We're comprised of five citizens of Albemarle County who are appointed by the Board of Supervisors.

We are an independent board.

Here's how the hearing will work.

You'll have 10 minutes to present your case.

Assessor will have seven minutes to present theirs.

You'll have about three minutes for rebuttal.

So we'll just do that for evening one.

During the hearing, we may stop to ask you any assessor questions.

You know, the presumption of correctness.

One other thing I just want to note as a tax rep, to the extent you go before Board of Equalization all the time, we are, we're a relatively sophisticated Board of Equalization.

We've been on the board for a couple of years.

And a lot of the folks who are on here have pretty good experience with this stuff.

Well, I don't know how they are, but you don't have a dumb it down for us kind of thing.

But we will, if we have questions, we will be happy to ask you and kind of jump in.

Do you have any questions before starting?

Yes, sir.

Let's go ahead and get started.

So I will call the first hearing.

This is hearing number three today, application number 43.

PID 30766, property owner, First Charlottesville Associates, LLC.

So please proceed.

Oh yes, we need the swearing in, thank you.

We've already done it once, I don't think we need to do it for the whole, yeah, I think for the assessor's office.

There's no one new from the assessor's office to do the swearing in from this morning, we're good.

So all persons who attempt to testify, please raise your right hand.

Do you solemnly swear or affirm that the testimony, both oral and documentary, which you're about to give, will be the truth, the whole truth, and nothing but the truth?

Thank you.

Thanks.

So I knew these better by ownership name.

This property is located at 1200 Stony Ridge Road.

It is leased by a company called Builders First Source, which is, of course, building materials.

It's kind of an oddly industrial site.

You know, they have a lumber yard as well as a warehouse, which is enclosed.

They got 33,140 square feet, built in 1993.

So it's, you know, on the border of class and essentially class B.

The owner takes good care of it, or I should say Alessi takes good care of it.

It's triple net lease.

if you turn to page two it's essentially you know the case here it's we looked at it based on Marshall and Swift cost approach you know it's essentially how the assessor would look at you know these smaller industrial sites and we also looked at it based on the actual income here page three is the math we use the actual base rent so 220,436

We imputed a vacancy loss of 5%, could be probably 3%.

Very minimal expenses, triple net lease, of course, 5% plus 20 cents a square foot for reserves.

NNY of 192,315 at a second tier base cap rate of 7.2.

Even at 6%, it would be less than the assessment.

But I think what really drove the value here this year is they re-equalized a lot of land values in this area.

We also did a cost approach assuming an assessor's land

Marshall Swift indicated per our calculations 1,367,000 for the improvement cost plus the assessor's land value indicates 2,975,000 or about $90 a square foot which is in line with kind of a tier one sort of warehouse property.

This of course doesn't include the developer profit which would be 10% onto that so it'd bring it up to you know 3.1%

On page four is our CoreLogic Marshall & Swift calculator.

We have this.

It's automated everything, so it's a lot easier.

We just kind of input what the assessor had on their work card, and this is what came down.

I think usually what drives the difference here is the effective age.

Of course, we don't get out to this property every year and see what's been improved or what's been kept up.

So we assume based on the actual age.

On page six is the lease with the Second Amendment with the rents we used.

and then the cap rates we used was continued on starting on page nine and we used second tier rate which is on page 11.

The east investment criteria is at the bottom of these pages, the bottom three rows so you have your pre-tax yield rate going in cap rate, terminal cap rate.

We used the 7.2 which is the industrial warehouse rate average for the going in.

Yes, I do have you just repeat your last little section.

Okay.

Yes.

So you'll see this report and a lot of our tactics, but it's probably best to kind of lay out how it works.

So if you'll turn to, for example, page 10.

There's at the top is the West investment criteria, so the West Coast, then Midwest, South, and then East.

We use the East rate, which encompasses the mid-Atlantic as well.

I just want to know what line we're looking at.

Exactly.

And so that's where your 7.2 came from.

Exactly.

OK. Where is this?

This is going in right.

Yeah.

The range is 5.5 to 9.8.

Those are third tier.

Yeah.

Second tier.

OK. Any other questions?

All right.

The assessor.

Well, I'll get us started, and Deb can chime in if she has one question in that relation.

Kind of the main points here that the property was purchased for $3,462,500 just in 2021, just two years ago.

And they're asking for a value which is about $700,000, $800,000 less than that.

and the market has not gone down since 2021.

Now we do not, we determine our value based on the cost approach in this type of property, the income approach, you know, we don't have good rental information, the cap raise information for this type of property and the information provided by, that is used by the tax rep is,

the rents are we believe are below market and that they also as shown on the page highlighted here it's on the

The second amendment to the lease, which has a page six at the bottom, but it's back right before the real estate report in the packet.

And if you look at the factual basis in item B, the rent includes a credit against the base rent payable by tenant.

The cumulative prior overpayment.

So it's actually below the below market rent because it includes credit for a prior payment.

So we don't believe that the rent that's being used to determine the value based on income is appropriate.

Also, we disagree with the class grade and effective age that's used in the cost approach.

So we don't believe that the values that are being derived from these approaches are appropriate.

The fact that it's

Coming up with a value that's well below the actual sale price from two years ago when the market has gone up.

At this point, our assessment is $3,963,400.

It's 14.5% above the sale price from two years ago.

Any questions for the assessor?

I guess, you know, we were contesting a value of $4,343,400.

We made a change and I thought we notified you of this change.

So one of the things that now that I have actual people that are working with me, I don't get to, you know, have hands on with all the cases.

Did you contact David Scheiderer?

He's the one.

I'm not sure who exactly.

You know, I think that that's a fair value, especially based on the purchase price.

This was kind of, you know, this year has been interesting because a lot of our owners have been very, very worried with what's going on within an interest rate market.

So, you know, I think, you know, a little bit up from the purchase price is probably fair for this property.

So I'm assuming nothing further on this one.

Next one is BOB application number 44, PID 30767, owner name is Mountain Industrial Properties, LLC.

I guess before you proceed, let's make sure that the numbers are...

I just checked.

The assessment here is $7,713,600.

The address is 1122 Stony Ridge Road.

It's an industrial warehouse property.

It's occupied by FedEx.

It's built in 1998.

The building has 48,064 square feet, sits on 6.5 acres.

We looked at it based on the income here.

This property was

Well, the company that owned this property was purchased by a large REIT.

I think it was $21 a share for the entire thing.

It was an enormous amount of properties.

It was a billion dollar, was it maybe a trillion dollar transaction?

So there's, yeah, there's no good way to, you know, allocate that amongst all the properties that were involved here.

So we looked at it, you know, what is the income approach based on the rents here?

The assessment here went from 6.4 up to 7.7, which is a 19% increase.

The value per square foot is $160.

If you'll return to page three, this is the math we have for you.

We have the teacher of 12 through September, 2021, and our pro forma, we consider those being the best indications of value because the actual 2022 income and expense was missing a couple of months because of the transaction and the changeover of accounting.

We used the base rents of $329,000 to $238,000.

They're triple net.

We used the same very low expense ratio of 5% plus $0.20 per square foot reserve.

The triple net expenses are essentially management fee plus insurance.

NOI of $303,164.

We didn't even take a vacancy allowance here.

We used this first-tier cap rate of 6.2%.

indicates a value of $4,889,700 or $101 a square foot, which is in line with a Class A sort of industrial property in sales around Virginia.

Sorry, but page four and five are in the rent roll.

It's not exactly legible.

to kind of deal with what the clients give us.

Page six of the income and expense from problem 22.

And then on page nine, this is the income statement through September 30th, 2021, which is more indicative of a T12 for this property.

And this is from the fryer at Mountain Beach.

We also have on page 10 and 11 a profile of the property.

We also have some sales comps.

I don't really put a lot of weight on these because they're kind of spread out amongst

probably was on 64 and up past Rutgersville.

There's only one from within Charlottesville and that one for $82 a square foot.

The highest sale we saw was 109 a square foot.

That was for a 218 vintage.

18 vintage warehouse, 20,591 square feet, so a little bit smaller than the subject, but that was a great property.

It's just not located in Charlottesville, so if you add a premium to that, you know, you get around 120 square footers, so, but this is essentially just based on income.

We included those sales comps, so you can look at the details, and then on page 19, it's the same, it's a survey that we rely upon.

Thank you very much.

Borg, at this time.

So, yeah, so we agree, obviously, the sale was 126 properties for $4 billion.

It really isn't an indication of anything for value that we can use.

Relying on the cost approach, we believe that the rent that's being collected on this property from FedEx

which was a lease that was established back in 1998.

It was below market.

It's a long term and it's getting close to the end of its term and that basically the value would not be based on that lease.

It would be based on the market.

And we found comparable or we found properties that were

could be considered a comparable rent analysis.

In Waynesboro and Troy, they're higher than the rate that is being used in the income approach here, and they're very inferior in location.

and we've got some local rents now they are on smaller areas but they're much higher rents up to 16 and a quarter so we believe that if you're going to do an income approach on this property it wouldn't be based on 685 which is just the contract rent and there's some you know questions about the contract rent with the

Yes, it was due to the partial year.

So we just find that it's difficult to...

determine a value on this property based on that income stream.

The cost approach is appropriate in this case.

Also the sales, we provided some analysis on the sales.

Some of them as Mr. Owen indicated, they're from foreign superior or inferior locations, or they have other issues

that would make them not necessarily comparable directly to this property, with one of them being built in 1965, high-vacancy, multi-tenant buildings, obsolete 10-foot

Sealing Heights, which would not compare to the warehouse.

Build a suit with 45% finish office area.

The property in Madison, which is lower area, Augusta, which is a lower area.

Blue Vanna, also lower, but all of that was also a sale leased back, specialized to the tenant.

So those comps themselves, we don't believe support a value for this project.

Yeah, we did have a few sales, although they are smaller than the subject.

And that's on page eight of our light up that showed a little bit more clearly what the

Value of industrial properties is here in Albemarle County, and it's due, a lot of it is due to the fact that we have very little inventory and zero vacancy.

I mean, they can't find it, and if they could find it, there's a bidding war on leasing it.

So the rent that is shown in FedEx is,

has been escalating, I guess, flatly for 10 years.

Every 10 years, it's been escalating.

Any questions for this episode this time?

Not really.

You know, we just try to look at these sort of properties based on a lease fee, because a lot of times, you know, that is the easiest way to take a look is what is the are the rents that they're achieving?

You know, this is a kind of unique property because there's a lot of door bays.

You know, FedEx is in there.

Of course, they have a tangible value to them being there.

It's part of their logistics center.

But

This is what we're seeing from kind of across Virginia, you know, the best Class A brand new mega warehouses are selling for you in between 120 and 140.

And this is up at 160.

Do you know when it ends?

I can't tell from this, but I think my colleague got more legible.

I put it in the lease summary.

It's on page two.

So soon, but not super soon.

Any questions for either of the parties?

Our next one is VOE application number 46.

PID is 22181.

Okay, so you all probably know this best as the former Red Lobster there near the mall.

The site was purchased by Home Depot, I guess, for redevelopment to the Home Depot store.

But this, a lot of Red Lobsters are still on the hook for the property taxes here.

We have no cash flows.

This has been sold.

It's going to be demoed, I assume, at some point.

The subject assessment is 3,881,200.

It was a formal restaurant, of course.

Back in 2010, so, you know, it was purchased by Honey Depot.

The allocation for this was $1,762,000.

Of course, it's hard to value what an empty chain restaurant is worth, so we thought that was the best indication of value.

On page three is some substantiation.

You all you're aware of the ground this is only a personal ground piece right now but the not the feasible okay okay that's

So that's the one thing I really wanted to point out is this $1,762,000 sale price is actually the purchase of the fee symbol of four different little sections within the mall area.

None of them actually include this property.

This is very complex.

Let me put on the borders here.

And it doesn't show on our map at all because the little separations.

The separations of what's included, I had to talk to the attorney in Atlanta about this, we have several, we have four parcels, tax records for what Home Depot purchased for $20 million, $200,000.

and that's the leaseholds rights to the improvements and the right to use those four parcels.

However,

This $1,762,000 transfer was for four small little sections in which the fee was not under land lease and it's just for the fee simple and it includes a very small little triangle here

a little rectangle over here and you know so it's it's not just they're all non-contiguous the four little sections it just happens to be four like our force but they're they have nothing to do with ours so these are not they have nothing to do first of all with the the red lobster there's they're not even included in anything on the red lobster parcel but they don't represent any

of the tax parcels that we have because of the complexity between the land lease and these four little pieces.

So what happened was they, to clean up the record, they paid for these four little pieces and then they paid for the leasehold of the overall to be able to use the rest.

That is still subject to the land lease on everything but those four little pieces.

We have a map of it that actually shows the exact thing.

They paid the same amount.

That transaction is not on record.

I got that from the attorney.

That was the confusing part.

I've done research on this property, but I don't know if I should limit my knowledge or don't know, but that ground lease was very, well, I won't discuss it, but it's just,

When it comes to this property though, the Red Lobster property, we're not, you know, this is a nice location, but it's not that old a building, a restaurant.

We're not convinced it's actually gonna be demoed at this point.

It is currently on the market for lease.

And, you know, so we believe that the,

The Red Lobster is actually valued appropriately at this unless something were to change in the picture.

Yeah, so I can I can bring this over and I just need to identify the parks.

It's this yellow yellow.

Was it three or four?

There we are.

OK, I'll show this Mr. On first.

This is what the

the seller's agent or our attorney shared with us.

It's just this square, we're up at this and everything else is under land.

So it was a third party down with these little pieces or what was the, what was the story with this exact?

It was included within our tax parcel, but not according to, I believe, their title, the way they looked at their title.

This was the seller, though, who was actually selling it.

The grand tour was Charlottesville, JP, 2014-C21 LLC.

The owner of the bank.

That might have just been an internal thing.

And that's why that was a separate transfer only because it included the feasible rights.

So the point is that $1.7 million really doesn't mean anything in the value of the lease.

Is it the red lobster?

I'll highlight a bunch of them.

Anything else to add on this?

No?

Okay.

Yes, just with regard to the comparable sales, there are a lot of small restaurant sales in that market area.

The Apples, the Wendy's, the parties, and they all sold bacon as sales were already changing to another use and they were

All right, well, I think we're done with this unless the board has any other questions.

All right, let's move on.

We're staying very efficient here, thank you.

So with my job, I get to see a lot of interesting underwriting and business plans that, you know, it's hard for me to keep in mind that, you know, you might scoff at them a little bit as they're supposed to be the experts, even though I'm feeling that a few of them are just glorified fundraisers sometimes.

This is a, it's better known as Riverside Center.

It's four different addresses on Seminole Lane.

it is a medical office and they hope to convert it to more research and development sort of use but you know they bought it when interest rates are low they've obviously turned around they've owned it for two years now they haven't been able to implement as much as their business plan as they wanted to and the income here just doesn't really support the overall assessment the 2023 assessed value is pretty much in line with

a little bit less than the purchase price from a couple years ago.

It's Class B medical office, flex, and research development property.

It's currently being repositioned.

So, you know, as time goes on, they're going to let the leases lapse.

They're hopefully going to get some better paying tenants in there, switch over to more research and development, even though I would say this isn't the best area for what they're really looking for laboratory wise.

I actually represent a lot of properties up in Montgomery County, along the DNA alley.

That's where the money is.

They're coming to Richmond to a certain extent with VCU.

Obviously with UVA's Medical Center, they have a great base.

It's just a matter of getting some local companies to kind of get into that sort of life sciences market.

And that's where they want to reposition this.

The subspace improvements were built in 1986 and 1990, so there's obviously some build-out that needs to occur to get these laboratory components in their space.

As of 1-1-2023, the property was only 68% occupied.

The property was purchased two years ago for slightly less.

the proposed assessment is less than that there's still a lot of work to be done to re-establish it and of course because the debt market changing you know what they purchased it for a couple years ago would not be achieved today we looked at it based on a direct cap income approach just based on the income in place we don't feel enough to get any basic value it only supports about about 10.7 million so we looked at it based on a

Helen Appraiser, we stabilized the property and deducted the cost of lease up.

What we did was we used the actual rents for the rents that are in place.

And we used the actual recoveries for the occupied spaces.

However, we excluded the tenant improvement rents associated with the surgery center and the pathogen associate's office as those payments pertain to the tenant improvement loans for the build-out personal property at the site and will not continue once paid off.

So we felt that's inappropriate to capitalize that into value.

Permanente.

Probably the better way to do that is to take the lump sum, add it to the value at the end as a below-the-line adjustment.

We looked at the vacant spaces, and we used expected rents for those spaces.

We used a stabilized 5% vacancy rate, expenses in line with actual performance, $0.26 a square foot for reserves, and then capitalized the NOI at the same base rate as the assessor plus the tax rate.

And we deducted the present value pieces of the local line

We also deducted $138,000 which is the cost of reconfiguring the parking lot, so capex, and they're also going to use some landscaping and they also need a new roof for building 2315.

If you look on page three, this is the math.

The blue column, hopefully you guys have copies with some color.

If you don't, it's the, okay, good.

That's always, it's the lighter gray or darker gray.

But it's the blue one.

So the total rents, you know, once stabilized should be about 1.7 million.

We use the ratio of recoverables, which is in line when the property was better.

as well, $306,020 total income here, about $2.1 million, we use that 5% vacancy allowance, we use expenses about 20%, 2% for reserves, and then the base cap rate of $7.75 plus the

Tax Rate Load.

The expenses in the past have the real estate tax rate deducted, so we load the cap right there.

Discount for lease of about $1.8 million, which is pretty conservative, especially considering some of the build-outs will probably be well over $8,800, especially for a laboratory sort of space.

CapEx $138,000 indicates that $715.1 million

On page 4 is a summary of the rent roll.

Just easier to read.

You can see that the vacant spaces, which are at the bottom of the rent roll, have estimated rents from the owner until we get about $20 a square foot for most office space and $10 square foot for the plug space.

Below is our pro forma calculation to come up with our indicated PGI.

On page 5 is our leasing assumptions from the owner.

$22.25, $20, $12.

They expect a little bit less of that from the asking.

The TI's are included rent increases these terms.

So obviously, long-release terms are willing to spend a lot more to build out.

Page six are the calculations for present value lease up for the office.

This does not include and sort of develop for profit.

And it also does not include lost

Let's see, any sort of adjustment for expenses from the gross rent loss.

Page seven is the flex lease up cost, which is of course much lower than the office space.

Page eight is the actual rent roll and then

After that are the income expense.

On page 11 and 12 is an email from the owner indicating how their business plan is going.

Now it's intact, but it's a much slower placement than they anticipated.

As far as there's been very little leasing activity outside of UVA Health.

and those conversations were moving pretty slowly.

They also have a floating rate loan, which is of course where most of our clients are concerned.

Interest payments have gone from roughly 30K to 100K.

So obviously that has a huge impact on their value based on the subject.

Moving back, where income and expense, and then some operating history from where they purchased.

We also included some bad news articles for you, just based on where the market was at the turn of the year.

Contestant sentiment fall for previous pandemic blow, page 22.

Page 25, investment sales, office market, expected slowing wake of higher interest rates, inflation in 2020, et cetera, et cetera.

A lot of pages, and I won't need to take a look at all those, but we included a couple of cap rate surveys and also a PWC mass one on page 45.

So you can see what the national secondary office market is.

The average rate is 7.31, in line with the assessor's cap rate as well.

Thank you.

Any questions for the other hand on the slides?

We actually were assessing it.

Much more of that was actually in transition between a shopping center

with non-medical tenants to medical tenants prior to that.

And there is a deed of trust for $18.5 million.

So we're looking for a value that's actually below the amount that's been borrowed on the property.

We did an income approach that represents an adjustment for the vacancy.

If it's a high vacancy amount, don't just use that high vacancy amount.

The way that the reimbursements are done was very unclear.

I had some question that I couldn't really get an answer on with regard to loans that were given to tenants for improvements and how they were being paid back.

Yeah.

So if they're being reflected in a short term loan, but not in the rent itself, using that rent doesn't capture that part of the value of the property.

in that analysis.

So the value should be there somewhere for those purposes.

That was it.

Any further?

Any questions from the board?

All right, thank you very much.

Next one is application number 65, 66, and 67.

So the subject property is a food line anchored neighborhood shopping center.

The property was purchased for, let's see, $9.3 million in early 2022.

The property is being kind of brought up into a more typical triple net sort of

Arrangement with the in-line tenants.

To this reason why the purchaser purchased it was because most of the in-line tenants are on gross leases, which is very unusual for this sort of shopping center.

And what their business plan is, is to have those expire or switch those over to a triple net arrangement.

So big property, if you'll turn to page two, I'll just do it.

The summary property has 75,497 square feet.

It's built back in 1990, and there's another portion of it that was built in 2005.

The assessment increased 36%, of course, due to the sale, except for that the assessment increased

because the purchase price is, of course, as a much different, better market.

This is something that they're going to be working to that purchase price.

The site was 84% occupied as of 1-1-2023.

There's six tenants whose leases are set to expire in 2023, which results in an additional 11,535 square feet vacant space.

The owner is expecting to lose those tenants because those tenants don't want to switch to that, triple that sort of arrangement.

So we value the site using an income approach using the actual 2020-2021 financials when the property was completely occupied and 4% for reserves.

We also did a pro forma income approach using the rents from the 1 on 2023 rent roll, 2% for other income, 5% for vacancy, 30% operating expenses, 4% for reserves, and lease of costs deducted below the lines.

Both in valuations indicate values about 7.7 or 7.2.

Of course, the purchase price here was 9.3, 123.

which is high for a food line shopping center.

If you look at the hierarchy of anchor tenants paying food lines at the bottom then you have Kroger which is equivalent to Wegmans but that's just because Wegmans always gets much larger spaces and then above that you usually have Harris Teeter and then Publix if you're looking at the overall rents usually paid.

We use an 8.6% cap rate.

8%, 8.6 is fair for a second tier sort of shopping center such as this.

Goodline is definitely a second tier grocer.

We feel that the assessor's 6.75% cap rate is too low for this type of asset.

If you look at sales around the Commonwealth, food aisle and anchored shopping centers usually sell for between $90 a square foot and $120 a square foot at most.

That's where this one kind of,

Way too, but of course this is part of the, you know, they paid more for the business plan.

They're in it still.

On page, sorry.

On page three is the math.

You can see the far left is the correct format income approach.

Income was valued at 7.5 at the 8.6% cap rate, deducted $278,767 of increase of cost, $7.2 million, and then the 20-21 income at that 8.6% cap rate indicates 7.7, which is what the assessor would have relied upon on this particular calculation.

Page 4 is the rent roll.

We imputed rents for the agent's space of $20 a square foot per the ownership guidance.

On page 5 is our calculation of leaseout costs.

It's a bit less extensive than the other reports you've seen because we assumed that they would be able to stabilize in a year.

So we have both the, this is the out parcel is still on page five.

The rear building is on page six, which is more of that light space.

Females from the ownership start on page seven, which indicate, you know, what they were thinking, where things are going and how their business plan is working out.

Then on page nine on back is the actual income expense.

Further on, let's see, on page 17 are the sales we looked at.

It's probably the most similar sale is from Midlothian where I live.

Genito Crossing is a Food Lion anchored shopping center.

It's sold in 2021, so at a good time in the market, you know, low interest rates.

for $104 per square foot, 8% base cap rate.

It's definitely the most similar property.

It's a little bit older than the subject, but it's very similar to smart footage.

The market was better then.

The property as well, it's close to my house.

I've been to some of the in-lines shops there.

And then most similar, that's definitely the most similar attributes, but you didn't know the sales and details there.

And then we have, of course, our bad news.

articles.

I did include, or my colleague Jake included, an article on the federal funds rate.

So, of course, you know, as of the purchase date of this property, you know, the interest rate for between 0.25 and 0.5 percent for the federal funds rate since then, or for 1-1-2023, they increased 425 basis points.

So, obviously,

are the interest rates here.

Moving on back, cap rate surveys, methodology, and then we even included the PWC, which is always a more aggressive cap rate survey.

They indicate an average for national fair shopping center market of 7.33 for essentially top tier for first tier storing properties.

That's what I have for you this time.

Did you say the Janita crossing was one that you thought was most comparable?

We originally had a total value for all three parcels of $9,300,000.

And that was based on our estimates in our income approach.

Under the initial review we did earlier this year, we got actual income from the property and using that actual income for rent rolls that were included

who adjusted that income approach to have the more appropriate income levels.

And that brought it up to $9,586,000.

So that is the value that we're deploying today.

So that is 103% of the sale, which is appropriate range.

I think we need to use within 95 to 105 percent of sales and still be appropriate and accessible based on our criteria.

So the income approach as a shopping center, you know, we've found that in the end of 2022, the cap rates did not change that much with the interest rates changing.

I just wanted to point out that two of the parcels prior to this ownership were owned by an LLC called SSQ and the financials that we received combined those two parcels together and we couldn't separate those two parcels, the income and the expenses, especially the expenses,

because one has the food line anchor and the other has the as inline shops the shops at Forest Lake which have different expense ratios based on the tenancy so the estimates that we used for those two parcels are why the there was no change on them from the internal review the internal review changed

the property that was owned by Furman LLC from estimated income to actual operating income.

EID 11896 is the retail strip that runs on 29.

Okay.

That's the one you increased.

Okay, I did have a question on that on page five.

I don't understand why you've got that effective gross income of minus $21 million.

I don't think it's relevant to your valuation, but

No, I think that's a type I would assume.

Oh, yeah, you have 11,000 or 12,000 per sec.

Yeah.

That's not relevant to the evaluation.

Yeah, that's good to point out.

Any other questions from the board?

It's, I guess, counterintuitive to the owner that the assessment would be pushed above what they actually positioned for.

They figured that would be the best communication value as of their purchase date early in 2022.

Obviously, they were ready for an increase here.

But I still think that it comes down to that cap rate and just being inappropriate for Food Lion Anchorage Shopping Center.

Obviously, they're a good payer, but the rest of the online shops have pretty much mixed bag.

They have some office space.

They have some retail space.

Well, I do have a question.

Can you refer me back to these many pages of your

Yeah, no problem.

This is a long one.

Hence why I always use my iPad for days so I don't have to print out a million pages.

But that's going to be found on page 39 and 61.

And this is going to be second tier east.

So it's that bottom four tile of the page.

And then it's going to be neighborhood, community center, and the detail columns.

Any other questions?

If anybody needs a break, just stop me, but I'm just going to keep going.

Okay, next one is BOA application number 68 and 69, PID 22175, 22176, Abington Crossing 1 LLC.

You can do them all together.

The only difference between the analyses is that, you know, assuming the assessor's cap rate changes between those, that's the only real difference.

These are all based on actuals and

OK, so I'll go ahead.

So the next one, we'll discuss all three of these applications or these together.

The second one is BOV application number 70, PID 22171.

This is Raya Road Associates is the property owner.

And then the final one is BOV application number 71, 72, 73.

Can I ask you to just speak a little more slowly?

Thank you very much.

I thought it was me.

Yeah, it's okay.

I had to drink a bit of coffee this morning, so it might be

So all three of these next cases are where I kind of get stuck in a crossfire between the

Ownership or Management Team's Accounting Team, and then what they give me.

So apparently the accounting team, unbeknownst to the management team, had been submitting the income expense.

And, you know, that comes up on the assessor's worksheets.

It's like, okay, you know, they have the actuals for these properties, and then management sends me their income and expense, and it doesn't match.

So I don't really know what to do, but the accounting team and the management team kind of cleared things up for me, and they told me, okay,

so for our debt service we have to report these certain things and we have to be limited in what we report for our management fees and what we report for certain other expenses and that's where I kind of caught caught in crosshairs these three properties but two of which were increased after the first level and I think one was sustained but I tried to use you know I you know work with

Peter and Deb often so I try to use their own methodology and you know make it easy for them to make it easy for us so you know we looked at the worksheets we assumed their cap rates and then we plugged in the actuals that we were provided by the management company unbeknownst that the accounting team had been submitting so Deb and I had a few conversations about this and you know management was very

Let's use these actuals that we report because they are more reflective of the actual operations here.

And this is a great, you know, Weinstein is located down in Richmond.

They're a great management company.

They own a lot of properties all around the Commonwealth, I think over 40.

They are able to achieve very high rents for the age of these properties.

You know, it says Class C on Avenue x1.

I would consider this Class B+.

It is renovated in 2005.

The bones are old, but it's a very well operating property.

And the expense ratio here is amazingly low because of the great management.

So we looked at it based on the income approach used year end 2021 actual financial information.

We use a $500 per unit reserve, which is appropriate for the age of this property, which is also in the assessor's methodology.

we, you know, just use that and use based on that simple calculation indicates the value of for Abingdon Crossing 1 combined value for the two parcels of 44,598,000 or about 170 per unit, which is, you know, within the range of class B sort of sales.

I'd put the range between 160 unit up to 220 per unit at the very high newest range.

You know, the expense ratio here is

based on 2021 actuals is 37% Wynn, including those reserves.

There is 2% for routine capital projects, because this is the older property.

It needs these routine injections of capital to keep them competing for the rents they're achieving.

So if we're going to use actuals, let's use actuals.

If you'll turn to page three, this is the map here.

You can see that the operating expense ratio is amazingly consistent for the actual operating, so it's 23% to 25%.

Management Fee, 6%.

I think they earn it with that sort of low ratio for this age of property.

2% for, you know, that routine capital projects, obviously they're in a time of investment period.

$500 per unit for reserves.

Indicates an NOI for a case on 2021 of $2 million since there's $75,833.

At a 6% cap rate, which is in line with similar

Part of the building is that we also represent the jurisdiction and it gets a value of $44,598.

You know, even if we use the assessor as 5.75%, it would still be lower than the $49.99.

I think the next thing I'd like to point your attention to is the property statements.

So you can see what sort of routine capital expenditures are.

So on page seven, eight and nine are

No, 789 are the actual income and expenses 2021.

They have federal controllable operating expense.

Well, let's see.

so you know about twenty thousand dollars of appliances that's you know ten refrigerators for this many units it's pretty understandable you could easily add ten refrigerators that blow up in a year I know I've had lived in my house for five years it's kind of refrigerators stop working twice you know carpets obviously you have to refresh for new

Tenants, Kyle floor replacement, pretty typical, only $10,000, mini birds, lines, water heaters, just it looks like essentially two water heaters, 1300 hooks.

So just to kind of confirm our expense ratio and how well this property is running, we included a bunch of reports at the end.

from the National Apartment Association.

And their average for garden apartment properties, just the general average, is right about 37%, amazingly enough.

So they are right at the average, especially for an older property.

I think an interesting chart is found on page 47, 93 of this packet.

So it says operating expenses by age of property less than five years old.

It's the lowest, of course, a little bit less than thirty seven, five to nine years.

and actually it's a little bit lower than, I guess that's probably coming from the efficiencies that you develop after operating a property for a little while.

10 to 19 is up to about 37 and a half, 20 or more is up to about 38.2.

So, you know, the expense ratio, even including those other expenses is reasonable and we just ask that, you know, those would be included in the expense ratio as well.

And that's going to be the case for the other two.

I do have a question about this one on your yeah can you reconcile your NOI on your page nine with your NOI calculation on page three it's a little bit it's like there's about a 40,000 or more difference

Okay, we excluded the admin fees, and we excluded the quarterly bonus.

I mean, I don't really know what that entailed, but I got the bonus part, maybe low expense ratio, but that's the difference.

And that's going to be the difference in the other two as well.

The math is found on page three.

2021, they also have, you know, three team capital projects, only about 57,000.

Of course, this is only 159 units of the total.

However many units, I think it's more than some plus.

But it's the same calculation.

We use the actual revenues

We use the actual expenses, including those 13 half hour projects, and we use that 6% management fee.

We assume that $500 per unit reserve allocation.

And then we use the original cap rate for this property, which on the first worksheet of 6.75,

There was a different cap rate used on Abingdon Crossing 1 than Abingdon Crossing 2 and 3.

So, you know, we used what the assessor used first around after the first level of appeal when the ownership was so adamant about using the actuals, the cap rates were switched a bit.

And obviously when this trades, it'll trade as one property.

It works as essentially one economic unit, even though there are different accountings for these subunits.

so this one the assessment is 27 or the original assessment was 26.7 it went up to 27.1 it's not a huge increase but 400 grand and then our indication of value added 6.75 is 23,83,000 and then Abingdon Crossing 3 same sort of case this one was also increased after the first level the assessment here

$7,260,400, an increase from $8,149,000 to $100,000.

But we use the same methodology on page three as the math.

The reserves per unit is $475 per unit, which is what was on the assessor's worksheet.

We use the original cap rate here, 6.75.

I think it's about $7,085,000 or $150,000 per unit.

Obviously, it's essentially the same story.

Should these routine capex be included in the operating expense ratio?

The operating expenses here was 40% for 2021, which is still within that range near that 37% of the standard, so to speak.

And then going back to Abingdon Cross, too, the expense ratio there was 40%.

Okay, so we agree that all three of these properties

might transfer together, but it is quite possible they would sell separately.

All the amenities are in the main, what is it, Abington Crossing 1, the first property under appeal.

So if the other property sold separately, they would be subject to, they wouldn't have their own amenities, so they might have to

have an agreement to use the amenities or you know so there's always that that little bit of you know maybe not uh included in there so because of that and as a part of this analysis there there are two things going on here we adjusted the cap rates because we adjusted the grades so this main property that has the all the amenities we made a grade three

This is a change, actually we changed from a grade three to a 3A, but we believe that this one is a higher grade because it has all the amenities.

We actually lowered the grade to a 3A because of the age of the property and felt that the three was not appropriate.

However, the other two properties, which were 4As,

we believe were actually too low a grade and we raised them to a four from a 4A.

So we still believe they're a lower grade than this middle main property with the amenities, but we didn't believe that what we had on it before is a 4A was appropriate.

So we made those adjustments to the grades on the properties, which in turn changed the cap rates.

Now, there was a statement made in here that we've punitively made changes to these.

All we're looking at is the facts of the property and trying to grade it properly and use the correct income.

So what actually happened on some of these, like on the main parcel, that's where the statement showed up at least.

increased the cap rate by lowering the grade from 3 to 3A, which would actually have caused a lower bag.

However, there is this other issue with the statements of income.

We're supposed to be receiving certified statements of the income and expenses from the owners.

We don't understand this.

We create two, you know, have two books.

We have one set of books for the lender and one set of books for everybody else.

I don't quite understand that.

So we had based our initial value on the analysis of the first set of statements and then were presented the second.

So we

When we're looking at, let's talk about management fee first.

Management fee is pretty standard.

When a property owner manages their own property, it doesn't matter what they pay themselves.

That is not the management fee that we're going to use in the analysis.

The management fee that really is in the market is what a management company would charge somebody else to manage a property, and they would accept for managing the property.

So we're not going to use

2%, we're not going to use a 6% or 8% management fee on a normal property like this.

So our standard is, what is it, 4%?

And so we've replaced the management fee that was reported in the second set of books with that 4%.

Also, we do find items which are replacement items in the statements.

So if you're talking about replacing your appliances, talk about replacing carpets and stuff like that.

Those are covered by the replacement reserves.

So instead of, you can't double dip on that and count both the actual replacements you're doing in a specific year and count $500 for replacements.

That $500 per unit is not just to replace roofs.

It's to replace a lot of the replacement items that go on in there.

There's standard maintenance that goes on.

That's outside of the replacement reserves, but there's the replacement items are covered by that replacement reserve amount.

So that covers basically the grades, the cap rates, the actual income and the adjustment of those income items when it's appropriate based on management fee and replacement reserve versus capital improvements.

No, just the cap rates.

Correct.

So we have sales that we presented on page six that These I believe weren't put over here.

Yes.

So we didn't use them.

We didn't.

Great place.

Yeah.

That's our local sales.

Yeah.

Yeah, basically your sales in the region and the cap rates run from three and a quarter to six and a half percent.

And these are sales from 2020, 2021, and 2022.

just to support where we are with our cap rate schedule.

We didn't use these to develop our cap rate schedule.

We used PricewaterhouseCoopers.

We looked at local sales and we used this as support.

So we believe that our cap rate schedule is appropriate for the time period.

That's off of comparable properties that are in the local market that actually have somebody else manage.

And we have also, in response to something Mr. Harlan said, we have found the local market that older properties do not rent for low rents.

Older apartments are getting good rents.

They have low vacancy.

They have low expense ratios.

That's our understanding.

Okay.

Okay.

Okay.

I just think that's a good clarification.

Any other questions from the board?

No, you know, it really just comes down to switching cap rates after the first level.

You know, I get it.

I do this a ton.

I do it all over the Commonwealth.

And then, you know, if we're gonna look at, you know, use the actual income, you know, you have to look at those actual expenses as well.

And I think that those routine cap, you know, the routine replacements are something that they need to do to keep the rents where they are and get that revenue they're achieving.

So, you know, it's,

An argument that usually holds a lot of water in Northern Virginia is something that is just really hard because these guys are good managers.

It's kind of like how do you account for the big projects, those roof replacements or fixing the swimming pool, that sort of thing, versus things that happen all the time.

How often do you have to get your garbage disposal replaced or your refrigerator redone or washers, dryers, that sort of thing?

While that might be included in the $500, these are older properties.

They are going to need their second roofs very soon.

That's coming up.

And I feel like the reserve for replacement, maybe there should be a sub-sector that could be accounted for for the retinal placements.

It's, you know, it's not science.

Any other questions from the board?

I think that's all.

Thank you so much.

And our first one was BOB application that we heard

that we have this deliberated on was BOE application 43, PID 30766.

First, you're also associated with LLC.

This should be a quick one because the applicant was fine with the revised number.

Second?

This is the FedEx building.

This was a part of the bigger sale.

They have a very large discrepancy between what they're asking for and what the assessor has presented.

He's from 98?

current lease term is 2007 to 2027.

And they haven't necessarily moved with the market.

They moved with their contract.

Right.

Okay.

But they didn't give us a cost approach on their end, right?

They just gave us income.

Peter on your side on the assessors.

I'm not on this side.

Okay.

Are you saying what would the camp rate have been?

Based on the assessed year values, but with the actual rent, what would be effective?

But we wouldn't argue that it should have the $7.7 million based on a lower cap rate in the actual income vector.

We're arguing that if we did an income approach, we would use a higher market around, right based on the comparable rentals.

We don't have any other market indicators.

Anyone have any thoughts on this one?

I do have a question about, I guess just to fill the sample, you know,

but if that's what you do across the board I mean you know for a single abuser property but I guess that's appropriate if you're doing it consistently but it does seem like a purchaser would be more inclined to look at the income-producing potential of this property and the only other question I have is just your calculation for depreciation

15% depreciation.

Do you think that's- 15 years, effectively.

And could you talk about that based on your Marshall and Smith appreciation

Was there any permit work done on this one?

Oh permit, no.

So why is the effective age of improvement so 10 years then?

Still 25.

And it was estimated at 15, but there's no known age.

How do you all do that?

Typically it's based on the condition of the property.

So if the condition of the property would be equivalent to a

Then we would, you know, without any work done, then we would have the actual age on there.

But if typically if it's there, if there's updating on the building, that's when we have the effective age then the actual age.

Yes.

That is the showroom warehouse building that Pro Build owns the first one, the first Charlottesville.

They're adjacent to each other down there.

It's the one with the lumber storage yards behind it.

Okay, so it sold at 101 now.

But you can see where I'm headed.

You're looking at those sales.

And it's very difficult.

Sales are very difficult, too, because of the size of the average size of buildings here is not going to be your typical distribution warehouse size.

Than the last sale on the page?

Yes.

So but that, but that they how the investor bought it was probably based on the income approach.

which would have been different because of the fact that they had the below market rent.

They would probably have used some sort of discount because that tenant has to stay in place and below market rent, they're not gonna leave early.

That looks like the big increase in service from land over there.

So just to make sure, well, when you equalize this, these two properties that are adjacent to each other,

You know, once you adjusted your assessment of the first Charlottesville Associates, do you recall what it came in on a square foot basis?

I guess your adjusted value is $3,963,000.

So, you know, on the first platform, yeah.

So this is at 116,

Yeah, the FedEx is a build to suit, it's a distribution, so they've got the dock doors, et cetera.

And the ProBuild was initially another lumber company before they switched hands.

They don't have that same replication of

warehouse and office that FedEx has.

And of course a national pennant, FedEx.

I mean, because you've seen the approaches of relevance.

So you asked for something from 2021 and couldn't get it, and you declined to pursue the analysis you would have used that for on that basis.

Is that right?

which one are you on?

So you had the 2022 stuff and you had three quarters in 2021 but not the last one.

I don't think that actually would have been a deciding factor because that would have been our normal year to use for this reassessment if we were doing an income accreditation.

But it was really the question of the quality of the income, whether it was market or not market, we're saying it's not it wasn't market anyway.

Where do you say, you rented it from more than market rate, we've got to adjust it downwards for you.

It does happen.

It's less likely because markets typically go up, right?

Yes, yeah, Bear Market, okay.

Yeah.

They're pretty legitimate.

So how much more would you have as a premium for Charlottesville on that basis?

Does it possible bring up the two, I think there's two points I think here that I think we have to focus on.

I happen to be familiar with it because of people at high school and we have the exact same slope and it is drastic.

Are there any adjustments on the FedEx parcel?

There's none.

There's just size.

Do we break out that area?

Yes.

Because that might bring our price per square foot.

So typically two things we have to look at when we're looking at this.

There's the usable land as in what they can actually put the building and the parking lot on, but also coverage for open space or yeah, for being able to develop.

Although I thought when they built them that they had the option to expand the building on additional square footage.

With that area here, that's the new cafe first.

It's the one to the south, right?

Let's see.

30766.

We brought it down minus 90% for that area.

They're arguing on this one.

They were arguing on this one.

Yeah.

No, that is not something on the slide.

and such.

47981, Gross Building area.

2673.

Okay.

Do any, I think that's a lot more, but I think that's appropriate to do that.

I think she's got it well supported based on what she said.

$2,283,200.

$3,798,100.

700 and you, not 700.

Do we have a second?

All in favor?

Aye.

Okay, thank you.

Yeah, it goes back out.

I don't like when they outbuild things.

This is for the whole numbers.

I guess it's the total value land use values.

That's confusing.

Oh, that's only because there's no value.

They do have to land above the line.

All right.

Next one.

VOE application number 46 PID 22181 to the Home Depot USA Inc.

And I think the only argument was the sales price, which is flawed.

Do we have a motion to affirm?

And then do we have a second?

Second.

All in favor?

Aye.

Next one is BOE application 64 PID 9677, applicants Riverside MC owner LLC.