My 1st Leadership Development and Advisory Council Session

For more than 85 years, the Appraisal Institute (AI) has been a global professional association of real estate appraisers.  AI works to develop real estate industry leaders and establish an appraiser presence in the United Stated Congress through its Leadership Development and Advisory Council (LDAC).  The Council is a group of dedicated appraisers who together once a year in Washington DC to generate solutions to challenges facing the appraisal profession.

Last month, I had the pleasure of attending my first LDAC session in Washington DC.  I entered with no expectations other than using it as an opportunity to learn more about the Appraisal Institute and offer up a thought or two on promoting our industry.  By the end of the week, I walked away from LDAC exceeding those expectations.

The LDAC discussion sessions afforded the opportunity to engage and brainstorm with appraisal professionals from all around the country.  The sessions served as opportunity for us to come together to generate actionable ideas to solve some of the appraisal industry’s toughest problems.  Serving as a member of the Ohio Chapter’s education committee I was very passionate about the education discussions. Based on my experience, I know that AI’s educational offering is superior to other competitive offerings.  Our group discussed ideas on how to not only get non-AI members to take AI courses but to also use our education offering to entice non-members to become members.

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Adventures in Property Inspections

As a MAI designated commercial appraiser, over the past 10 years, I have conducted a couple of thousand commercial property inspections, and each inspection is as unique as the commercial property appraisal.  During an inspection I am typically accompanied by the owner or the owner’s agent.  Most times the inspections are uneventful, and the owner/agent is helpful in providing insightful property, neighborhood and market area information needed to complete a comprehensive appraisal of the subject property.  However, there have been occasions when the inspection becomes eventful –

The Helpful Owner

I do occasionally encounter owners who want to point out all the subject property’s current or planned amenities that they believe will significantly impact the value.  Earlier this year I appraised an office park complex located parallel to a major highway in central Ohio.  I was advised by the lender that the complex was fully leased and thus the income approach would be required.  During the inspection, the owner shared that he thought it was vital that I consider the fact that he could have a billboard on his property which would generate additional income.  Further, the owner spent a considerable amount of time sharing his marketing brochures to clearly demonstrate the type of tenants he would soon have in the complex.  At the time of the inspection, the owner was the only tenant in the office complex, while the lender thought the property was fully leased.

The Fearful Tenant

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Eminent Domain: What Options Do Property Owners Have?

As a MAI designated appraiser who completes right-of-way, acquisition and disposition appraisals, I have encountered a variety of situations where property owners are unaware of the complex process involved in a full or partial taking of private property. During this process, the appraiser can in fact assist the property owner in making sure they achieve the best possible outcome when selling their property to a government agency.

For example, once a state agency has determined that property is needed for public use, the property owner does not have an option to simply refuse the sale of their property. However, the government is required to ensure they compensate the owner fairly and cannot place any undue burdens or hardships on the property owners during this process. Thus, when the state claims private property through eminent domain, the property owner can have an impact on getting the best deal possible.

Here are some ways that property owners can make sure they are justly compensated, in the case of a state claim to their property:

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FRG Continues Expansion Into Mid-Atlantic Region

Feasibility Research Group (FRG) has been selected to provide Appraisal Services for the District of Columbia Housing Authority.

University Heights, OH (April 3, 2019) — FEASIBILITY RESEARCH GROUP (FRG), a real estate appraisal and consulting firm based in Northeast Ohio, has been selected for Appraisal Services with the District of Columbia Housing Authority.

The District of Columbia Housing Authority requires professional appraisal services to support its Office of Capital Programs.  The programs that FRG will support include the appraisal of mixed income, mix use development, public housing apartments.

“FRG looks forward to supporting the District of Columbia Housing Authority with their appraisal needs” said Gregory Williams, MAI and FRG‘s Owner and Managing Director. “FRG’s appraisals will support DCHA’s initiative to provide livable housing to support healthy and sustainable communities.”

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FRG Expands into Maryland

Feasibility Research Group (FRG) awarded multi-year contract to provide appraisal services for the Maryland Department of Housing and Community Development.

University Heights, OH (March 11, 2019) — FEASIBILITY RESEARCH GROUP (FRG), a real estate appraisal and consulting firm based in Northeast Ohio, has been selected for Appraisal Services with the Maryland Department of Housing and Community Development.

The Maryland Department of Housing and Community Development requires professional appraisal services to support its Business Lending Division.  The programs that FRG will support include the appraisal of mixed-use commercial properties.

“We are excited to work with the state of Maryland’s Department of Housing and Community Development” said Gregory Williams, MAI and FRG‘s Owner and Managing Director. “Our commercial appraisal reports will be key in helping the Business Lending Division make sound lending decisions.”

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Affordable Multifamily Housing

According to the United States Department of Housing and Urban Development (HUD), today there is nowhere in the U.S. where a full-time, minimum wage worker can afford the local fair-market rent for a two-bedroom apartment.[i] Communities across the nation are reporting high levels of evictions, homelessness, and a lack of affordable housing.

So, let’s talk about affordable multifamily housing.

Affordable housing means different things depending on if you are an investor, property manager, tenant or government agency. For me, a commercial appraiser, affordable housing represents complex property types with a myriad of funding, ownership, and rental structures that require careful consideration to define property values, fair market rents, or physical conditions. Or put more simply, affordable housing can be very complicated!

And lining up the financing for affordable housing can seem more insurmountable than trying to convince your wife Valentine’s Day is a made-up holiday– what’s the point in even trying? There are several available sources of funding including bank loans, municipal loans, Low-Income Housing Tax Credits (LIHTC), Community Development Block Grants, tax abatements, and other local subsidies or support provided by Community Development Corporations, and other specialized subsidies, tax credits and financing such as assistance by the USDA Rural Development Office (in rural areas).

While there are a lot of possible funding sources, there are often not enough to cover the development costs and it can be tricky to qualify or take a long time to get approved.

As a commercial appraiser, I understand the financial hurdles overcome by developers and providers of affordable housing and in my work, I strive to support the financial well-being of these developments in several ways:

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Small Business

Shortly after becoming a MAI designated appraiser, I founded FRG. The firm was built on a client base of strong regional financial institutions who needed quality commercial real estate appraisals for their loans and portfolio management. For a good three or four years that client base grew as banks provided loans to small businesses that were seeking to expand their own business. However, there has been a shift over the last twenty-four months, and I have noticed a flattening and decline of financial institution business lending.

I can’t say with 100% certainty the reason for the decline, as there is no one single reason for this shift. However, over the last couple of years I have observed some bank lending trends:

Shifting Geographic Focus to High Growth Markets
Several banks that previously held a strong presence in the Midwest have shifted their focus to higher growth areas on the east coast. One such bank is First National Bank of Pennsylvania; in 2015 and 2016 they stated that the Cleveland and Pittsburgh MSAs were focus areas for growth. However, as we moved into 2017 and 2018, their focus shifted to the mid-Atlantic and Southeast. First National Bank confirmed this shift in their 2017 Annual Report, stating that Raleigh, Charlotte, Winston-Salem, Greensboro, High Point, NC and Washington, DC joined Pittsburgh, Baltimore and Cleveland as the bank’s largest commercial regions .

Prioritizing Mid-Cap Companies over Small Businesses
Banks have been shifting their lending to mid-cap companies instead of lending to small businesses. A reason for this shift could be because it is more difficult to package loans under $1M into bonds that can be sold to a third party.

Bank Consolidation and Banks Getting Larger
In the past two years, there has been a great deal of bank consolidation. For example:

• The largest bank headquartered in Michigan, Chemical Financial Corporation acquired Talmer Bank, a less than 100 branch bank also headquartered in Michigan and recently announced a merger with Minnesota-based TCF Financial Corp resulting in the bank becoming one of the 50 largest banks in the country.
• The second largest originator of SBA loans for the state, Columbus, Ohio-based Huntington National Bank acquired First Merit Bank of Akron, Ohio

The Federal Reserve Bank’s Small Business Lending Survey reported that in the third quarter of 2018, there was 1.4% growth in large institution loans for commercial & industrial small business, while mid-sized and small banks decreased their loan activity by 4.2% and 1.5%, respectively. Smaller banks are more likely than large banks to lend to small businesses. Therefore, the consolidation of the banking industry, and the rising average size of lenders, might account for some of the shift away from providing small business credit. According to the Federal Reserve’s Small Business Lending Survey, small banks offer lower interest rates on fixed rate terms loans than large banks, meaning small businesses may be able to secure more favorable loan terms from a smaller bank as well.

These shifts in lending make it hard for a small business seeking funds to expand, buy equipment or secure a building to accomplish their goals. So where can these small businesses turn? Many businesses look to the federal and local government to secure loans when financing is unavailable or too expensive elsewhere.

One example of this is the SBA 7(a) loan program, which is the SBA’s flagship loan program.  Proceeds from 7(a) loans may be used to start a business or assist with operations, acquisition or expansion of an existing business. These loans can offer more “flexibility, longer terms and potentially lower down payments compared to other financing options.”[i]  The average 7(a) loan is ~$420,000. In 2015/2016 there was a peak in both the number of 7(a) loans and the dollar amount loaned to businesses nationwide and since 2016, the number of approved loans has declined across the US.

 

In the last six years in the Midwest, SBA loans have increased. However, these states diverge from the national trends with increasing dollars loaned since 2015. Ohio holds the lead in total dollars loaned, reaching over $930 million in loans approved for the FY2018.

 

Added barrier for small business success: 2019 Government Shutdown

For small business across the United States and particularly those located in the Midwest, SBA loans are critical to support business operations and growth. Unfortunately, the recent government shutdown resulted in many businesses unexpectedly losing out on funds or not being able to obtain the finances they need. For small businesses to succeed, they need to be able to plan for growth. This means being able to reliably pay for and invest in that growth. As a fellow small business owner, I understand how important access to capital can be – and as I have observed the shifts mentioned above in financing options for small businesses, it is more important than ever that political differences be put aside and we keep the government open to ensure needed funds can get into the hands of business owners.

FRG wins contract with the Northeast Ohio Regional Sewer District

Feasibility Research Group (FRG) has been selected to provide Appraisal Services for the Northeast Ohio Regional Sewer District.

University Heights, OH (January 4, 2019) — FEASIBILITY RESEARCH GROUP (FRG) a real estate appraisal, market research and consulting firm based in Northeast Ohio, has been selected for Appraisal Services with the Northeast Ohio Regional Sewer District.

The Northeast Ohio Regional Sewer District (NEORSD), requires professional appraisal services to support its property acquisition activities.  The NEORSD programs that FRG will support include the development of various tunnel, collection sewers, plant upgrades, and green infrastructure components, which will result in a variety of real estate and property impacts.

“FRG looks forward to supporting the development of critical infrastructure with NEORSD” said Gregory Williams FRG‘s Managing Director. “Accurate and timely real estate transactions or valuations from FRG can assist NEORSD in providing superior service to Northeast Ohio residents.”

Appraisal consultants with NEORSD are selected to provide property appraisal, appraisal review, and expert witness services, depending on the needs of each individual project. As an appraisal firm experienced in working with Right of Way projects for public entities, FRG’s managing director is pre-qualified with the Ohio Department of Transportation for acquisition services specifically for value analysis, appraisal, appraisal review and title research.  FRG understands the unique challenges or potential issues that may arise during the public right-of-way acquisition process and will ensure NEORSD complies with the most current regulations and procedures.

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