Presented to:
CCCMAC
05/03/14
Research Valuation and Advisory Services
Presented by: Cameron McAlpine, BA, AACI
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Altus Group
About Altus
 Five primary business units:
– Research, Valuation and Advisory (Appraisals)
– Cost Consulting & Project Management (Construction)
– Realty Tax Consulting
– Geomatics (Surveying)
– ARGUS Software (Real Estate Financial Modeling)
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International Scope
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Altus Group Research, Valuation & Advisory (RVA)
 13 offices across Canada and approx. 300 staff
 80+ Accredited Appraisers
 2 large offices in Ontario – Toronto and Ottawa covering all of the
province
 Research services provided through Altus InSite
 Advisory services through Altus Economic Consulting
 Specialization by property type and service
 Largest database of sale and lease transactions in Canada
 Appraisal Management Expertise
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Appraisals
What is an Appraisal?
 “A formal opinion of value: prepared as a result of a retainer; intended
for reliance by identified parties, and for which the appraiser assumes
responsibility.” ( Definition, S6.2 of CUSPAP)
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Appraisal Institute of Canada
 The Appraisal Institute of Canada acts as the governing body for
appraisers in Canada
 The Appraisal Institute of Canada sets out guidelines for the required
content of an appraisal report
 Each AIC member must follow a set of standards and code of conduct
set out in the Canadian Uniform Standards of Professional Appraisal
Practice (CUSPAP)
 Majority of financial institutions require appraisals signed by an AACI
designated member for lending purposes.
 Website: www.aicanada.ca
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Highlighted Key Elements
 Define the value of the property you are appraising
– Go Dark Value
– Insurable Replacement Cost
– Market Value
 “The most probable price which a property should bring in a
competitive and open market under all conditions requisite to a fair
sale, the buyer and seller each acting prudently and knowledgeably
and assuming the price is not affected by undue stimulus.”
Definition of Market Value (CUSPAP)
 Effective date of an appraisal
– Identifies the date as to which the valuation was concluded
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Highlighted Key Elements
 Highest and Best Use
– Properties are appraised as to their Highest and Best Use
– Optimum use that is legally allowed and financially viable.
 Valuation Methodology
– Cost Approach
– Direct Comparison Approach
– Income Approach
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Approach to Value
Approach to Value:

Cost Approach:
 The Cost Approach involves adding the market value of the
land to the depreciated value of the building and site
improvements.
 Rarely used as it does not reflect market conditions.

Direct Comparison Approach:
 In the Direct Comparison Approach, an opinion of value is
developed by applying a comparative analysis of properties
that are similar to the subject property that have recently sold,
are listed for sale or are under contract, which focuses on the
similarities and differences that affect value.
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Example: Vacant Industrial Building
 25,000 s.f. industrial building, used for warehouse storage.
 Well located in Markham, 10 years old, attractive office, good shipping
and parking.
 Review of recent sales and listings show other vacant buildings have
sold between $100 and $110 per square foot.
 Discussions with real estate agents active in the market reveal good
demand for industrial buildings.
 Overall, a value of $110 p.s.f. was selected.
 Building value of $2,750,000.
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Approach to Value:
 Income Approach:
The Income Approach is typically used as the primary method of
valuation when a property is expected to be acquired by an
investor
Two primary income valuation procedures are:
Direct Capitalization
Discounted Cash Flow (DCF)
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Approach to Value:
 Direct Capitalization:
– This procedure involves dividing stabilized annual net income by a
singular rate that takes into account all of the comparative
investment characteristics of the property.
– Cap Rate derived from sales of comparable investment properties.
 Discounted Cash Flow (DCF):
– The Discounted Cash Flow Procedure calculates the present value
of the future cash flows over a specified time period, including the
potential proceeds of a deemed disposition, to determine market
value.
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Value Equation
I
(Income)
V =
(Value)
R
(Capitalization Rate)
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4 Key Elements to Income Value
4 Main Elements to Income Value
1. Level of Occupancy

Leased vs. Vacant
2. Level of Income

Relationship to market rent for the space
3. Duration of Income

Length of the lease term(s)
4. Quality of Income

Who is/are the tenant(s) securing the income
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Example – Investment Scenario
 Small, 5 unit retail plaza (15,000 sq. ft.).
 Fully leased, generates $255,000 per year in income.
 Rents are close to market levels. Lease terms are all about 4 years
long.
 Local businesses with only limited operating histories.
 Research determined comparable properties sell for 6.50% to 7.00%
capitalization range.
 Overall, a 6.75% cap rate was determined to be appropriate.
 Value concluded at $3,780,000 ($250 per square foot).
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Different Asset Classes
Multi Residential – Other Key Factors
Location
– Access to employment, transportation and amenities
In place rents within building
– Rent control can limit upside potential
Demographic profile of the neighbourhood
– Investors prefer neighbourhoods that offer potential income growth
Gross Rents
– Operating costs and realty taxes efficiencies fall directly to the
bottom line
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Office – Other Key Factors
Location
Location
Location
Strength of surrounding office node is a key value driver
 Vacancy levels and trends
 New Inventory
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Retail – Other Key Factors
 Location/visibility to a good flow of traffic
 Sales volumes
 Presence of anchor tenants to attract customer traffic
 Percentage rent clauses (Participation Rent)
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Industrial – Other Key Factors
 Functionality of building
 Adaptability of uses
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DISCUSSION
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