Estimating Market Value and Establishing Market Rent at Small Airports (2020) / Chapter Skim
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Pages 29-41
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From page 29... ...
29 4.1 Introduction By conducting a thorough analysis of applicable FAA guidance and policies (see Chapter 3) , it becomes eminently clear that federally obligated airports need to fully understand the compliance issues associated with estimating market value and establishing and adjusting market rent for aeronautical and non-aeronautical uses.
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From page 30... ...
30 Estimating Market Value and Establishing Market Rent at Small Airports a determination must be made if and when it is appropriate to compare airport land and/or improvements (aeronautical or non-aeronautical) with off-airport properties, as well as to the underlying approach (component or blended approach)
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From page 31... ...
Estimating Market Value and Establishing Market Rent 31 and best use is -- when appraising the market value of real property -- the "reasonable, probable, and legal use of vacant land which is physically possible, appropriately supported, financially feasible, maximally productive, and results in the highest value." From a different perspective, highest and best use has been discussed as the most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future. However, the highest and best use analysis (as outlined in this chapter)
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From page 32... ...
32 Estimating Market Value and Establishing Market Rent at Small Airports As stated in the FAA Policy on the Non-Aeronautical Use of Airport Hangars, a non-aeronautical market rent must be established for non-aeronautical use of hangars. Utilization of Off-Airport Properties The process of estimating market value or establishing and adjusting market rent will be impacted by the underlying use of the property being analyzed (aeronautical or non-aeronautical)
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From page 33... ...
Estimating Market Value and Establishing Market Rent 33 each individual component based on "other aeronautical property serving the same function at similar airports" versus analyzing the subject airport land and/or improvements on a blended approach (analyzing the entire leased premises as one unit)
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From page 34... ...
34 Estimating Market Value and Establishing Market Rent at Small Airports direct market forces through a proposal to determine the demand in the market and ultimately as a methodology to establish market rent. Airport sponsors are encouraged to determine if and when a competitive process is most appropriate for leasing land and/or improvements at the airport.
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From page 35... ...
Estimating Market Value and Establishing Market Rent 35 Under an RFP process, which is utilized to receive proposals for developing land, occupying improvements, and conducting aeronautical or non-aeronautical activities at an airport, proposers are typically required to include a financial aspect. The financial aspect of the proposal typically outlines a proposed rental rate for the subject land and/or improvements and may include a minimum annual guarantee.
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From page 36... ...
36 Estimating Market Value and Establishing Market Rent at Small Airports Valuation Approaches The appraisal process, consistent with the Dictionary of Real Estate Appraisal, includes three approaches to value -- cost, sales comparison, and income. Central to each approach is the principle of substitution, as an astute real estate investor will pay no more than the value of an equally desirable alternative property or investment.
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From page 37... ...
Estimating Market Value and Establishing Market Rent 37 Uniform Standards of Professional Appraisal Practice Requirements As outlined in the USPAP, appraisals must meet certain requirements. While it is beyond the intended purpose of this report to identify and examine each of these requirements, certain aspects warrant discussion: • Market Analysis/Market Conditions -- The market analysis/market conditions section must contain data and analysis consistent with the complexity of the appraisal assignment, with the focus on current market trends that affect the value and exposure time of the subject property.
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From page 38... ...
38 Estimating Market Value and Establishing Market Rent at Small Airports Upon selection of the appropriate approaches, supporting data will determine the ultimate value conclusion. The cost approach can be substantiated by utilization of a widely recognized and highly regarded national publication (e.g., Marshall Valuation Service)
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From page 39... ...
Estimating Market Value and Establishing Market Rent 39 aviation purposes can be established using any reasonable, justified, and consistently applied methodology. A comparable rent analysis compares rental rates for similar land and improvements at similarly situated airports (i.e., comparable and competitive)
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From page 40... ...
40 Estimating Market Value and Establishing Market Rent at Small Airports 4.4 Adjusting Market Rent Consistent with the Assurances and other FAA guidance, airport sponsors, airport management, and airport property managers should determine a fair, reasonable, and consistently applied approach for adjusting rental rates for aeronautical land and improvements at the airport. This approach should outline the frequency, methodology, and any pertinent parameters.
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From page 41... ...
Estimating Market Value and Establishing Market Rent 41 Additionally, an airport's minimum standards or leasing policy may dictate certain capital investment levels for each type of lessee to attain a certain length of term (e.g., 30 years)
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