Appraising a Correctional Facility
Big or Small, We Appraise Them All
As appraisers, we’re often asked about the most unique properties we have valued. And, just as often the response to our list is, “Wait – you appraised what?” For 30 years, Argianas & Associates has been known as a firm that tackles commercial valuations ranging from the typical to the out-of-the-ordinary, from the big to the small, and definitely the unusual and the challenging. So, when we received a call from a CPA firm needing a real estate appraisal of a large correctional facility for one of their clients – a challenging assignment that required specialist expertise – we didn’t hesitate to say “We’re in!”
Scope it out
The Argianas team was retained to prepare an estimate of Market Value for a maximum-security correctional facility subject to the highest level of confidentiality given the sensitive nature of this property type. State and federally operated correctional facilities have differing operating requirements (differing physical property designs) associated with cellblock/pod features, prison grounds including administrative and service buildings, libraries, classrooms, gymnasiums, healthcare facilities, and visiting areas. Before proceeding, we crafted a scope of work plan, and after working with the client to assure our efforts would meet their needs, we issued a detailed engagement letter that summarized the assets to be appraised (in this instance, the real estate only, i.e., the land, structures, and improvements). Why you may ask? Well it’s all part of the strategy!
The subject property consisted of a large-scale self-contained multi-building maximum security prison with pre-cast reinforced concrete walls. Built to house aggressive and violent inmates, the cellblocks featured accommodations for 1,500 + beds in multiple pods, with the complex including a gatehouse, a warehouse, guard towers, on-site waste treatment, laundry, food prep area and extensive specialty security features.
Using the Cost Approach, the property’s land value was summed with the complex’s depreciated construction costs. Physical, functional and external obsolescence factors were carefully considered. We also researched sales involving Correction Centers – both a) market-level transfers and b) sale-leasebacks – while comparing correctional center operating agreements with lease transactions involving the real estate only, imperative for this property type. Despite societal needs for incarceration facilities, this property type is not frequently bought or sold as real estate only notwithstanding specialty furniture, fixtures and equipment needed for operations. For this property, we exercised care to assure our valuation pertained to the property’s real estate to provide a clear analysis for ownership.
the experience that matters
Appraisals require careful confirmation of details provided for our work. In this engagement’s preparation, something didn’t seem right. Following our investigative efforts, we determined the subject property had been built at a different scale than indicated in building plans provided to us. While overlooked by other appraisal and consulting firms, the Argianas team took the time to verify the basics before proceeding forward. Remarkably, the property’s gross building area was substantially different than what many had simply assumed to be factual.
Appraising a correctional facility requires careful, confidential research, resulting in a strong in-depth analysis. We considered physical, functional and external obsolescence factors, researched public policy issues involving incarceration, analyzed public and privately-operated facilities (private management operating agreements), recognized general obligation vs. revenue bond financing differences, and took the time to pre-verify basic details other appraisal/consulting companies remarkably accepted as true without taking the time to check for reasonableness. These are some of the reasons Argianas’ valuations are trusted coast to coast.
Ask a member of our team about our favorite valuation and we’ll respond with, “How much time do you have?” With a reputation built on honesty, integrity and attention to detail, Argianas & Associates takes pride in our ability to tackle any assignment, big or small. If you have a unique, special purpose property that requires appraisal or consulting services, or if you have questions about the valuation process, don’t hesitate to contact our experts. Call us at 630.390.0113 or email us at [email protected] to learn more about how our services can satisfy your specialty valuation needs. Join our mailing list to receive our e-newsletter featuring case studies, industry events, and news.