COVID-19

Feasibility Research Group (FRG) is a privately-owned real estate services company specializing in commercial real estate appraisal, inspection, and research.  Like many small businesses, FRG has been impacted by COVID-19.

However, the services that we provide are deemed essential by most states and thus we remain willing and able to assist you with your appraisal services and market research needs.

FRG practices social distancing.  Currently, all employees are working from remote locations.  Further, if an FRG appraiser is conducting an on-site inspection he/she will practice social distancing during the subject property inspection.

The FRG appraiser conducting the inspection will:

  • Maintain six feet distance from all property contacts
  • Request that only one person accompany the appraiser on the inspection
  • Not touch any fixtures, door handles, light switches, etc in the facility
  • Require unobstructed access and views of the interior of the building
  • Wear protective covering including but not limited to gloves and face masks

Further, as much as possible FRG appraisers will seek to conduct virtual interior inspections leveraging technology such as Skype and/or FaceTime*.

FRG will continue to monitor the coronavirus and its impact very carefully and provide updates as needed.

 

*NOTE: USPAP does not require a physical inspection. Appraisal Foundation Statement

The Appraisal Foundation, Fannie Mae, Freddie Mac and the Appraisal Institute have deemed virtual inspections to be acceptable.

 

The Struggle to Find Home Sweet Home

As our MAI appraisers complete multifamily housing commercial appraisals and rent comparability studies (RCS) for HUD and private clients, FRG has extensive multifamily housing knowledge.  And as a result FRG has a great deal of interest in remedies to the affordable housing shortage.

I can still remember signing my first apartment lease.  I was 19 years old and excited to move into my very own 500 sq-ft, one bedroom, one-bathroom home.  Well it wasn’t all mine, because I could not afford the apartment, thus I had a roommate.  Even with a roommate, this was the first time I felt like a responsible adult.

Unfortunately, many today are struggling to find a place to call home.  Nationally, the number of renters has reached historic highs, and as a result it is becoming increasing difficult for many to find safe, quality affordable housing.  In fact, according to a Harvard University Housing Study the availability of affordable rental housing is being affected by:

  • High rental demand and low vacancy rates, which allow landlords to continually increase rental rates
  • Demand from higher income renters is driving the construction of luxury vs affordable multifamily rental housing

A recent Ohio Housing Finance Agency report that assessed the state’s housing needs noted that lower income Ohioans are struggling to pay for housing as they spend more than 30% of their income on housing.  The agency discovered that there are only 43 available and affordable rental units for every 100 extremely low-income renter.  And these extremely low-income renter households are typically made up disproportionately with seniors and/or small children.

The shortage of affordable housing units will not be solved overnight, however, a lot can be done now to begin to spur an increase.  City officials can work with developers, lenders and state officials to leverage innovative approaches to drive an increase in the building of affordable housing units.

  • Offer private developers incentives and tax breaks to devote a portion of their multifamily housing developments to affordable units
  • Donate undeveloped land to developers seeking to build affordable housing
  • Explore lower cost construction methods eg prefab, containers, etc.
  • Encourage the conversion of blighted buildings into affordable housing.

The Ohio Development Services Agency is working to help finance projects, many of which will add affordable housing units throughout the state.  Recently the state awarded twenty-three projects with historic preservation tax credits, six of which are conversion projects in northeast Ohio, including the following:

  • Clark-Fulton neighborhood industrial complex vacant since 2008 to be converted into a mixed-use development with affordable units
  • Cleveland school (Longfellow) building closed since 2017 to be converted into affordable housing for seniors.

The affordable housing shortage presents an opportunity for city planners to drive growth and redevelopment in underserved areas.

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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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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Growth on the Lake: The Power of Green Technology

Over the last couple of years Cleveland has really done a lot to change outsiders’ perception of the city. No longer is the city referred to as the ‘Mistake on the Lake’. In fact, recently I was on an Amtrak train traveling from Washington DC to Baltimore, and in the seat pocket was “The National”, Amtrak’s onboard magazine. And on the front cover of the National was a gorgeous plate of food and the caption “Next Stop: Cleveland – A booming food scene is helping this postindustrial city shake off the rust”. The six-page cover story featured Cleveland’s hippest neighborhoods, celebrity chefs and their restaurants.

After reading the article, I thought to myself, Cleveland really has a lot going for it – exceptional museums, cool neighborhoods, world class healthcare, it has the 2nd largest theater district in the country, stellar higher educational institutions, home of big budget film productions and a championship sports team. And on top of all that, Cleveland is becoming known for making real advances in green technology.

Lake Erie TurbineCleveland, like most metropolitan cities has its environmental issues, whether that be runoff from urban fields or commercial sites contaminated by prior use or contaminated sediments at the bottom of Lake Erie. Cleveland is starting to find unique solutions for these issues.

One of the region’s greatest assets is the Great Lakes, which provide freshwater for drinking, transportation, power and recreation. And 21% of the world’s supply of freshwater comes from the Great Lakes.

So, I am happy that the U.S Army Corps of Engineers (ACE) and the Ohio EPA are working together to find a better solution for where to put the sediment dredged from Lake Erie, a solution that does not include dumping the sediment back into Lake Erie. Recently, it was reported that they are exploring the solution that the Port of Cleveland is using to re-purpose sediment. The Port contracts with a supplier that recycles the dredged sediment and uses some to restore wetlands near the harbors being dredged and sells some of the clean sediment to construction companies to use on their sites. Re-purposing prevented the need to build a containment dike, thus saving the Port of Cleveland $150 million.

Another green technology project in development is the placing of six (6) 3.45-megawatt wind turbines eight miles off the shore of Lake Erie. The goal of putting wind turbines in Lake Erie is to funnel renewable energy into Cleveland’s Public Power infrastructure, enough to generate energy to power 7,000 homes.

Initiatives like these are exciting to see as they build on Cleveland’s strong science and technology competency and continues to diversify the area’s economy. A diversified economy attracts diverse talent from all over the world. The need for more talent can help to increase the area’s population and ultimately increases the need for housing, retail and infrastructure development. All of which are things needed for a thriving city. It’s nice to see ‘Growth on the Lake’.