Because it's set the comps for this market.

..a “fire sale” on the 22-story 350 California office tower could see the $300 million building sell for as little as $60 million.

That's 80% loss in valuation.

“We’re all really on the edge of our seats to see the first office trade in San Francisco,” real estate services executive J.D. Lumpkin told the WSJ. A real estate lawyer warned the paper that the 350 California fire sale could prove “a
bellwether for the value destruction in the urban office market nationally,” and not just for San Francisco’s (formerly?) ritzy Financial District.

This is the beginning of a real shitstorm. A bank expert on CNBC recently warned that banks are looking at a capitalization collapse like nothing they've ever seen. Residential real estate in many markets have already slid some 20%. But they've never
seen a major collapse in commercial valuations as well. Particularly in the "gem" markets of San Fran, Seattle, LA, NY etc.
Prime commercial real estate holdings in these markets were always considered AAA+ security.
But that's changing fast. Interesting what one comp in a market that has few sales can do to valuations across the board.

ScottW

--- SoupGate-Win32 v1.05
* Origin: fsxNet Usenet Gateway (21:1/5)

On Thursday, April 27, 2023 at 11:44:53 PM UTC-4, ScottW wrote:

Because it's set the comps for this market.

..a “fire sale” on the 22-story 350 California office tower could see the $300 million building sell for as little as $60 million.

That's 80% loss in valuation.

“We’re all really on the edge of our seats to see the first office trade in San Francisco,” real estate services executive J.D. Lumpkin told the WSJ. A real estate lawyer warned the paper that the 350 California fire sale could prove “a

bellwether for the value destruction in the urban office market nationally,” and not just for San Francisco’s (formerly?) ritzy Financial District.

This is the beginning of a real shitstorm. A bank expert on CNBC recently warned that banks are looking at a capitalization collapse like nothing they've ever seen. Residential real estate in many markets have already slid some 20%. But they've never

seen a major collapse in commercial valuations as well. Particularly in the "gem" markets of San Fran, Seattle, LA, NY etc.

Prime commercial real estate holdings in these markets were always considered AAA+ security.
But that's changing fast. Interesting what one comp in a market that has few sales can do to valuations across the board.

ScottW

I have appraised commercial property, and have managed the process, so I know what
I'm talking about here,

Though it does mean something, comps are not such a big deal when valuing office buildings,
Nevertheless, the market sales analysis is still used in commercial valuation, however, more weight is usually
put to the income approach, which capitalizes net income.
So, rents are more germane to valuation than sales of buildings.
But all in all, it is high vacancy rates, which suppresses net rental income, which then suppresses
valuation, that causes the comps to deflate.

The three approaches to value are :

the market data approach, based on comps

the income approach, based on capitalizing net income

the cost approach, which combines a market analysis of the land (the site) plus the cost of replicating the structure with a new one, less depreciation for age, deferred maintenance,
and functional obsolescence.

An appraisal should include all three, with a reconciliation that weights the approaches against each other.

--- SoupGate-Win32 v1.05
* Origin: fsxNet Usenet Gateway (21:1/5)

On Thursday, April 27, 2023 at 9:27:54 PM UTC-7, Art Sackman wrote:

On Thursday, April 27, 2023 at 11:44:53 PM UTC-4, ScottW wrote:

Because it's set the comps for this market.

..a “fire sale” on the 22-story 350 California office tower could see the $300 million building sell for as little as $60 million.

That's 80% loss in valuation.

“We’re all really on the edge of our seats to see the first office trade in San Francisco,” real estate services executive J.D. Lumpkin told the WSJ. A real estate lawyer warned the paper that the 350 California fire sale could prove “a

bellwether for the value destruction in the urban office market nationally,” and not just for San Francisco’s (formerly?) ritzy Financial District.

This is the beginning of a real shitstorm. A bank expert on CNBC recently warned that banks are looking at a capitalization collapse like nothing they've ever seen. Residential real estate in many markets have already slid some 20%. But they've never

seen a major collapse in commercial valuations as well. Particularly in the "gem" markets of San Fran, Seattle, LA, NY etc.

Prime commercial real estate holdings in these markets were always considered AAA+ security.
But that's changing fast. Interesting what one comp in a market that has few sales can do to valuations across the board.

ScottW

I have appraised commercial property, and have managed the process, so I know what
I'm talking about here,

Though it does mean something, comps are not such a big deal when valuing office buildings,
Nevertheless, the market sales analysis is still used in commercial valuation, however, more weight is usually
put to the income approach, which capitalizes net income.

and being 70% vacant is making that a heavy weight downer.

So, rents are more germane to valuation than sales of buildings.
But all in all, it is high vacancy rates, which suppresses net rental income, which then suppresses
valuation, that causes the comps to deflate.

The three approaches to value are :

the market data approach, based on comps

down

the income approach, based on capitalizing net income

down

the cost approach, which combines a market analysis of the land (the site) plus
the cost of replicating the structure with a new one, less depreciation for age, deferred maintenance,
and functional obsolescence.

and given the vacancy of the property and surrounding properties....they all appear headed for functional obsolescence.
There's a huge question if any modern upgrades and fancying up the place or even building completely new would attract tenants.

The issue isn't in the selling of this one building. It's in banks and commercial real estate bond holders having to write down the value of the equity in their holdings even a fraction of what this place has lost. Makes the recent "bank collapses" a
picnic compared to what may come.

ScottW

--- SoupGate-Win32 v1.05
* Origin: fsxNet Usenet Gateway (21:1/5)

The issue isn't in the selling of this one building. It's in banks and commercial real estate bond holders having to write down the value of the equity in their holdings even a fraction of what this place has lost. Makes the recent "bank collapses" a

picnic compared to what may come.



Definitely. The Fair market value of the collateral portfolio will sink towards, or even below, the outstanding mortgage balances. That can place the banks, on paper, as being insolvent.

--- SoupGate-Win32 v1.05
* Origin: fsxNet Usenet Gateway (21:1/5)