Large Bank Supervision Forum 2023

Appraisal Change: Going-Concern/Market Value Confusion, PAREA, etc.

Not since the passage of Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) in 1989 has the valuation of real estate come under such scrutiny and disruptive change as it has in 2022. For much of the past 30-plus years, commercial real estate valuations were credible, even during the COVID-19 pandemic. But commercial real estate valuation has become more complex due to the introduction of three factors: 1.A blurring of real estate and business enterprise value . 2. PAVE, DEI & ESG over COMPETENCY : Environmental, social, and governance (ESG) and diversity, equity, and inclusion (DEI) constraints along with a new set of proposed appraisal guidelines and credentialing that may replace the Uniform Standards of Professional Appraisal Practice (USPAP). 3. Practical Applications of Real Estate Appraisal (PAREA), which is the probable replacement criteria/methodology to overhaul current USPAP and appraisal guidelines. PAREA providing an alternate pathway for aspiring appraisers to fulfill experience requirements. The Appraiser Qualifications Board (AQB) created PAREA with the objective to “create an alternative to the traditional appraiser supervisor/trainee model for gaining appraisal experience .” PAREA was influenced by a 2020-2021 U.S. Department of Housing and Urban Development investigation by The Appraisal Foundation, an entity created by the 1989 FIRREA legislation.

https://www.ccim.com/cire ‐ magazine/articles/2022/fall/appraising ‐ change /

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CIRE MAGAZINE – APPRAISING CHANGE Fall 2022: Blurring of “Going-Concern” and Fee-Simple Market Value

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Complexity from a blurring of the business value (going concern elements of valuation) to the pure real estate fee-simple property rights of value. Today, this blurring of property and business values extends to all property types and industry sectors , including hotels and hospitality variations (including timeshares and Airbnb/VRBO), self-storage, manufactured housing and for-rent subdivision communities, REITs with NNN-lease structures for big-box retail stores, e-commerce warehouses, and mixed-use adaptive reuse projects.

RED LOBSTER has announced that at least eight of its locations were deemed "no longer viable" resulting in them being shut down. Major restaurant chain loved by Americans announces stores ‘are no longer viable’ - see if your eatery is affected | The US Sun (the-sun.com)

Appraising Change | CCIM Institute

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