Boogie Nights to Bingo: Appraising a Senior Citizen Center
Argianas & Associates Become Storytellers to Appraise a Complex Property
Since 1991, we’ve appraised more properties than we can count! From the shining skyscrapers along Chicago’s Magnificent Mile, to inland properties, we are routinely called upon to render services involving unique properties due to location, design, and adaptive reuses.
Duty recently called the Argianas & Associates team to an old, worn down property located near the Illinois/Indiana boundaries. This asset had many uses from its inception, our consulting challenge was to analyze ownership’s redevelopment plan so our client (in this instance, the lender) could better understand the property’s risks. Our team was up for the challenge!
Setting the Scene
When driving by, one first notices a five-story building that resembles an old, multi-story hotel. The property was developed for just this use (hotel), with Interstate Highway on/off ramps contemplated although never approved or installed. As the facility lacked highway access, it eventually failed. The property was eventually repurposed to its adaptive reuse (assisted living facility with adjoining daycare and banquet facilities).
An Interesting History
This property has an interesting history. It opened in the early 1950’s under a swanky banner name that reflected the optimism of the post WWII Era, with operations as an impressive hospitality facility with an indoor/outdoor swimming pool, an ice rink, multiple dining rooms and cocktail lounges and a theater. It had a Music Hall, located where the banquet center now stands, hosted star-studded productions mainlined by popular radio and movie stars; however, the facility couldn’t keep up with its financial expectations and it was eventually acquired by the local municipality for City Hall/Administrative Office use. The subject property had certainly seen its fair share of changes over the past 30 years.
Hurdles Up Ahead
Our efforts required careful formulation of the property’s operating obstacles and risks. We are often tasked with understanding and explaining ownership visions, which is important because telling the story correctly and completely ensures the readers understand all risks associated with an asset. In the current instance, Argianas was asked to provide three value premises: an As Is Value; a Prospective As Complete Value; and a Prospective as Complete & Stabilized Value.
- An As Is Value is exactly what it sounds like. What is the value of the property as is, considering all forms of depreciation.
- A Prospective As Complete Value reflects a property’s value assuming upgrades have been completed.
- A Prospective As Complete & Stabilized Value reflects an assets worth, assuming construction upgrades have been completed, with a further assumption that the property is operating at a financially stabilized level.
Complex consulting and valuation assignments have many moving parts, with analyses requiring development of physical, functional and external obsolescence estimates, as applicable.
- Physical obsolescence is a loss of value due to normal wear and tear and/or abuse (roofs, HVAC, electrical and plumbing systems/equipment, parking lots, tuckpointing, dated finishes, etc.).
- Functional obsolescence is a loss of value due to poor design features or structural defects. For example, multi-story buildings that lack elevator service, lack of compliance with ADA requirements, insufficient HVAC service, floorplates with limited load-bearing capabilities, etc.
- External obsolescence are external factors that result in loss of value and often cannot be cured for example, for example, the value impact associated with impaired highway linkage.
In our current assignment, the Argianas team carefully interviewed ownership as his redevelopment vision was laid out, resulting in a meaningful appraisal/consulting report that addressed the asset’s operating risks.
There Can Only Be One Winner… Or Not!
Just like their efforts for this complex property, the Argianas team wears many hats. Appraisers, consultants, historians, detectives, storytellers… the list goes on! In this case Argianas & Associates wore each of those hats successfully, allowing everyone to be a winner. Our efforts facilitated the lender’s understanding of risks associated with this property – mission accomplished.
Are you looking for help with an appraisal that will tell the whole story of your commercial property? The team at Argianas & Associates is ready to put our real estate appraisal experience to work for you. Do not hesitate to give us a call at 630.390.0113 or complete this form. Stay in the know and join our mailing list to receive our e-newsletter featuring case studies, industry events and news and informational real estate valuation topics.