11.09.2017 Retail Trends and Forecasts for 2017 and Beyond
GASB 2015 Webinar Presentation - Final
1. Date: July 8, 2015
Time: 12 p.m. CT
D ti 120 i tDuration: 120 minutes
GASB Final Statement on Fair Value
Measurement and ApplicationMeasurement and Application
Presenters:
Justin Glasser, ASA, MAI, MRICS
Senior Director
Adriane Bookwalter, CPA
Director
Cushman & Wakefield
Deborah Beams
Practice Fellow
Cushman & Wakefield
Moderator:
R b t E Di t i h MAI CRE CCIM MRICSGASB Governmental Accounting Standards
Board
Marius Andreasen, CFA, MAI
Senior Managing Director
Robert E. Dietrich, MAI, CRE, CCIM MRICS
Senior Valuation Services Director
Colliers International
Senior Managing Director
Cushman & Wakefield
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4. Getting Started
120 minutes
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5. Disclaimers
The views and materials presented in this webinar represent only the opinions and views of
the presenters and/or speakers. Although the materials may have been reviewed byp p g y y
members of the Appraisal Institute, the views and opinions expressed herein are not
endorsed or approved by the Appraisal Institute as policy unless adopted by the Board of
Directors pursuant to the Bylaws of the Appraisal Institute. While substantial care has been
taken to provide accurate and current data and information, the Appraisal Institute does notp , pp
warrant the accuracy or timeliness of the data and information contained herein. Further,
any principles and conclusions presented in this webinar are subject to court decisions and
to local, state, and federal laws and regulations and any revisions of such laws and
regulations.g
This webinar is presented for educational and informational purposes only with the
understanding that the Appraisal Institute is not engaged in rendering legal, accounting, or
other professional advice or services. Nothing in these materials is to be construed as the
ff i f h d i i If t d i i i d doffering of such advice or services. If expert advice or services are required, readers are
responsible for obtaining such advice or services from appropriate professionals.
Slide 5
8. Robert E. Dietrich, MAI CRE CCIM MRICS
Professional and Industry Experience
Robert E. Dietrich is the Director of the Specialty Valuation Practice of Colliers
International Valuation & Advisory Services, and is located in the Newport Beach office.
Robert E. Dietrich,
MAI CRE CCIM MRICS
Mr. Dietrich has performed valuations involving a wide variety of property types ranging
from high rise offices to farms and ranches. He has appraised special purpose
properties such as port facilities, ski resorts, and others. Areas of specialization include
planned developments, subdivisions, leasehold/leased fee analyses, and project
modeling. He has appraised all types of commercial, industrial, and multi‐family
properties in the Western United States for more than 30 yearsMAI, CRE, CCIM, MRICS
Senior Director
Colliers International
865 S. Figueroa St.
Suite 3500
Los Angeles, CA 90017
properties in the Western United States for more than 30 years.
Mr. Dietrich has been designated as an expert in real estate valuation issues in courts
and has testified on over 60 occasions in State Superior Court, federal court,
Bankruptcy Court, US Tax Court, JAMS, state and county assessment appeals boards,
and others. He was selected as an independent arbitrator and has been approved as a
commercial appraiser by several nationally chartered banks and government agencies
Education, Licenses &
Certifications
B.S. University of Arizona
Member, Board of Directors of the Appraisal
Institute (2008 – 2012)
President, Southern California Chapter of the
Appraisal Institute (2014)
commercial appraiser by several nationally chartered banks and government agencies.
Representative Clients
Latham & Watkins
Wells Fargo Bank
Representative Complex Assignments
Compensation for inverse taking of water
Rental value for a recreation lake in Southern California
President, Southern California CCIM Chapter
(1997)
Volunteer of Distinction Award, Appraisal Institute
(July 2012)
MAI designation - Appraisal Institute
CRE designation – Counselors of Real Estate
CCIM designation – CCIM Institute
MRICS designation – Royal Institution of Chartered
S
American Ag Credit
Metropolitan Water District
Elsinore Valley Municipal Water District
AEGON USA Realty Advisors
William Lyon Homes Company
Valuation of largest development company in California
Valuation of largest land holding and development in Bermuda
Valuation of 2.2 million acre cattle ranch
Valuation of Queen Mary Seaport development
Valuation of highest grossing retail complex in US
Slide 8
Surveyors
Member – Lambda Alpha
Licensed Appraiser (15 States including California,
Arizona, and Nevada)
Tribune Company Valuation of 18,000 acres of almond orchards in Central Valley
9. Deborah Beams, GASB Practice Fellow
Professional and Industry Experience
Deborah Beams joined the GASB as a Practice Fellow in November 2012. She is on rotation from the
Dallas office of Grant Thornton LLP, where she is an Experienced Manager in the Audit practice. She has
been with Grant Thornton for ten years, during which time she primarily served clients in the state and
local government and not for profit industries Deborah was on the GASB project team that led to the
Deborah Beams, CPA
Practice Fellow
local government and not-for-profit industries. Deborah was on the GASB project team that led to the
issuance of Statement No. 72, Fair Value Measurement and Application. She currently leads the GASB
projects on Leases and External Investment Pools.
Governmental Accounting Standards Board
401 Merritt 7, P.O. Box 5116
Norwalk, CT 06856
T +1 (203) 956-5210
dbeams@gasb.org
Education Licenses & CertificationsEducation, Licenses & Certifications
Certified Public Accountant, State of Texas
BS and MS in Accounting from University of North Texas
Member, American Institute of Certified Public Accountants
Member, Texas Society of Certified Public Accountants
Slide 9
10. Marius Andreasen, CFA, MAI
Mr. Andreasen is a Senior Managing Director and Americas Practice Leader of the Financial Reporting
Practice within the Valuation & Advisory (V&A) Group at Cushman & Wakefield. The Financial
Reporting Practice is a specialty within V&A focusing on corporate engagements involving real estate
related consulting services with a primary focus on valuation for financial reporting fair valuerelated consulting services, with a primary focus on valuation for financial reporting, fair value
measurement (ASC Topic 820) and purchase price allocations (ASC Topic 805), intangible real estate
assets, fractional/minority interests in real estate holding companies and partnerships, real estate-
related going concern enterprises and real estate investment trusts (REITs), and valuations of
investments across the capital stack including, equity, preferred equity, and mezzanine and senior
debt.
Mr Andreasen has worked on a national and international level with services provided from coast to
Marius W. Andreasen, MAI, CFA
Mr. Andreasen has worked on a national and international level, with services provided from coast to
coast in the United States, while also performing real estate valuations and consultations within
Mexico, Canada, India, Ireland, Aruba, and the Commonwealth of the Bahamas. These valuations and
consultations have been on a variety of assets, including office buildings, regional malls, neighborhood
and community shopping centers, hotels and destination resort properties, golf courses, convenience
stores and gas stations, apartment complexes, transportation rights-of-way, solar photovoltaic plants,
data centers, hospitals, subdivision developments, and a variety of industrial facilities including single
and multi-tenant distribution heavy manufacturing research & development facilities and cold-storage
Senior Managing Director &
Americas Practice Leader, Financial Reporting
Cushman & Wakefield of Illinois, Inc.
200 South Wacker Drive, Suite 2800
Chicago, Illinois 60606
T +1 (312) 470-1881
M +1 (847) 722 8992 and multi tenant distribution, heavy manufacturing, research & development facilities, and cold storage
warehouses. These studies have been in conjunction with real estate portfolio and joint-venture
valuations, merger and acquisition due diligence support, asset impairment studies, internal planning,
highest and best use analysis, financing, litigation support, sale-leasebacks, fresh start accounting, and
estate planning.
Over the past decade Mr. Andreasen has provided valuation and consulting services on more than $60
billion in transactional value, having performed numerous studies assisting public and private REIT
M +1 (847) 722-8992
marius.andreasen@cushwake.com
Functions and Specializations
Valuation
Buy-Side Advisory
Financial Reporting
Litigation Support
Fractional Interest Valuations
Debt Valuations
, g p g p p
clients in the application of FASB Statement No. 141R / ASC Topic 805 (Business Combinations),
FASB Statement No. 159 / ASC Topic 820 (Fair Value Measurements and Disclosures) and ASC Topic
852 (Reorganizations). Furthermore, Mr. Andreasen has extensive experience advising some of the
largest U.S. pension funds with regard to their real estate and infrastructure fund investments. Over
the past several years Mr. Andreasen has valued equity interests in funds which, in aggregate, total
more than $7 billion in assets under management, and span across all property types and investment
strategies, ranging from stabilized core assets to Greenfield infrastructure investments.
Education, Licenses, Certifications
B.S. in Finance, University of Illinois at Urbana Champaign
Member, Appraisal Institute, MAI Designation #12432
Chartered Financial Analyst (CFA)
Member of the CFA Society of Chicago
International Valuation Standards Council (IVSC)
Cushman & Wakefield Leadership Council, Board of Advisors
Guest lecturer, University of Illinois at Urbana-Champaign
Appraisal Institute Government Relations Committee 2013-Present
Certified General Real Estate Appraiser in numerous states
Slide 10
g g gpp
11. Justin Glasser, ASA, MAI, MRICS
Professional and Industry Experience
Justin Glasser is a Senior Director and West Region Leader of the Financial Reporting Practice within the
Valuation & Advisory (V&A) Group at Cushman & Wakefield. The Financial Reporting Practice is a
specialty practice within V&A focusing on engagements involving real estate related consulting services,
with a primary focus on valuation for financial reporting (GAAP & IFRS) including fair value
Justin R. Glasser, ASA, MAI, MRICS
Senior Director & West Region Leader
Fi i l R ti
with a primary focus on valuation for financial reporting (GAAP & IFRS), including fair value
measurements (ASC Topic 820), purchase price allocations (ASC Topic 805), capital leases (ASC Topic
840), and reorganizations (ASC Topic 852).
Mr. Glasser joined the San Diego office of Cushman & Wakefield in 2015. Prior to joining Cushman &
Wakefield, Mr. Glasser held a senior management position in the real estate valuation practice of KPMG
LLP, where he consulted with real estate clients in a variety of industries, including hospitality, healthcare,Financial Reporting
Cushman & Wakefield Western, Inc.
4747 Executive Drive, 9th Floor
San Diego, CA 92121
T +1 (858) 558 5687
M +1 (619) 723 6110
justin.glasser@cushwake.com
, y , g p y, ,
retail, residential development, manufacturing, and financial services.
Mr. Glasser has provided tax consulting and transfer pricing services to public and private REITs with
respect to structuring real property leases for qualified lodging and healthcare properties. He has prepared
transfer pricing planning and documentation studies to determine the range of fair market lease payments
for taxable REIT subsidiaries (TRS). He has also provided guidance on structuring TRS leases.
Function and Specialization
Financial Reporting
Litigation Support
Education, Licenses & Certifications
Masters of Science in Real Estate, University of San Diego
Alpha Sigma Gamma Award Recipient
B.A. in Economics, University of California at San Diego
Member, Appraisal Institute, MAI #497209
Mr. Glasser was a contributing editor to The Appraisal of Real Estate, 14th Edition and has presented to
the Appraisal Institute on Purchase Price Allocations for Financial Reporting & Tax and International
Valuation Standards. Speaking engagements also include presentations on valuation of real property for
tax purposes to the Society of Auditors/Appraisers at their annual conference September 2014 and to the
International Association of Assessing Officers Fall Appraisal Seminar in October 2014.
Member, American Society of Appraisers, ASA # 106380
Royal Institution of Chartered Surveyors, MRICS #6504539
State of California Real Estate Appraisers License # AG045014
State of Colorado Real Estate Appraiser License #CG100042083
State of Florida Real Estate Appraisers License # RZ3544
State of Hawaii Real Estate Appraisers License # CGA1038
State of Maine Real Estate Appraisers License # CG3337
State of Michigan Real Estate Appraisers License # 31944
State of Montana RE Appraisers License # REA-RAG-LIC-6037
State of Oregon Real Estate Appraisers License # C001151
State of Pennsylvania Real Estate Appraisers License # GA004001
Representative Clients
Ashford Hospitality Trust
CBRE Global Investors
DiamondRock Hospitality Co.
Dubai World
Pebblebrook Hotel Trust
Terreno Realty Corp.
The Blackstone Group
Tropicana Entertainment
Harrah’s Entertainment Inc
Hilton Hotels Corporation
Hyatt Corporation
Luxury Resorts & Hotels
Slide 11
State o e sy a a ea state pp a se s ce se # G 00 00
State of Texas Real Estate Appraisers License # 1380207
State of Utah Real Estate Appraisers License # 8548636-CG00
State of Virginia Real Estate Appraisers License # 4001017045
State of Washington Real Estate Appraisers License # 1102240
Dubai World
EPR Properties
GEM Realty Capital, Inc.
p
UBS Realty Investors, LLC
Westport Capital Partners LLC
y
Marriott Vacation Worldwide Corp.
MGM Mirage
12. Adriane Bookwalter, CPA
Professional and Industry Experience
Ms. Bookwalter is a Director of Financial Reporting within the Valuation & Advisory (V&A) Group at
Cushman & Wakefield. She specializes in a variety of engagements including debt valuation, ASC 805
financial reporting, acquisition due diligence and lease operating expense audits. These projects include
all property types located throughout the U S and internationally
Adriane F Bookwalter, CPA
Director, Financial Reporting
all property types located throughout the U.S. and internationally.
Prior to joining C&W, Ms. Bookwalter worked at PricewaterhouseCoopers, where she also focused on
commercial real estate consulting within an advisory group called Financial Instruments, Structured
Products, and Real Estate. Her clients included national/regional banks, REITS, hedge funds, insurance
companies, Fortune 500 companies, etc. Below is a more detailed summary of Adriane’s experience
throughout her career:
Cushman & Wakefield of Illinois, Inc.
200 South Wacker Drive, Suite 2800
Chicago, Illinois 60606
T +1 (312) 470-3805
adriane.bookwalter@cushwake.com
Function and Specialization
g
Responsible for overseeing acquisition due diligence investigations for retail, hotel, apartment
and office properties.
Valued commercial real estate loan pools related to the acquisition and recapitalization of banks.
Modeled future cash flows based on market, industry, and property level analysis.
A l d f i l t t d b dit li t f it d d bt i t t fFunction and Specialization
Financial Reporting
Due Diligence
Debt Valuation
Operating Expense Audit
Valuation
Education, Licenses & Certifications
B.S. in Business, Indiana University - Bloomington (major:
Fi R l E t t )
Analyzed fair value measurements reported by audit clients for equity and debt investments for
quarterly and year-end financial statement purposes.
Valued real property assets and liabilities for purchase price allocations in conjunction with
mergers and acquisitions for a broad range of clients.
Analyzed distressed commercial loan portfolios to assist clients with strategic asset management
and disposition strategies Performed stratification loan underwriting and valuation for variousFinance-Real Estate)
Licensed Certified Public Accountant (CPA) – State of Illinois
Certified Commercial Investor Member (CCIM) Candidate –
Pending Credential
Top Secret Government Security Clearance
and disposition strategies. Performed stratification, loan underwriting, and valuation for various
possible scenarios.
Performed credit risk reviews for the purposes of determining appropriate loan risk ratings and
estimating loan specific credit losses.
Managed the operations of the lease operating expense audits for PwC’s leased office space
located throughout the United States, which includes over 5.5 million square feet. Additionally,
Slide 12
performed lease operating expense audits for a variety of clients, which resulted in savings
recovered.
13. Disclaimer
The views and materials presented in this webinar represent only the opinions
and views of the presenters and/or speakers. Although the materials may have
been reviewed by members of the Appraisal Institute, the views and opinions
expressed herein are not endorsed or approved by the Appraisal Institute asexpressed herein are not endorsed or approved by the Appraisal Institute as
policy unless adopted by the Board of Directors pursuant to the Bylaws of the
Appraisal Institute. While substantial care has been taken to provide accurate
and current data and information, the Appraisal Institute does not warrant the
accuracy or timeliness of the data and information contained herein Furtheraccuracy or timeliness of the data and information contained herein. Further,
any principles and conclusions presented in this webinar are subject to court
decisions and to local, state, and federal laws and regulations and any
revisions of such laws and regulations.
This webinar is presented for educational and informational purposes only with
the understanding that the Appraisal Institute is not engaged in rendering legal,
accounting, or other professional advice or services. Nothing in these materials
is to be construed as the offering of such advice or services. If expert advice or
Slide 13
services are required, readers are responsible for obtaining such advice or
services from appropriate professionals.
14. GASB Final Statement on Fair Value
Measurement and ApplicationMeasurement and Application
Justin Glasser, ASA, MAI, MRICS
Slide 14
16. GASB Framework
Financial Accounting Foundation (FAF)
Financial Accounting
Foundation
(FAF)
Financial Accounting
Standards Board
Financial Accounting
Standards Advisory
Governmental
Accounting Standards
Governmental
Accounting Standards
Private Company
CouncilStandards Board
(FASB)
Council
(FASAC)
Board
(GASB)
Advisory Council
(GASAC)
Council
(PCC)
Slide 16
17. GASB Framework
Financial Accounting Foundation (FAF)
Organization
Financial Accounting
Foundation
(FAF)
Financial Accounting
Standards Board
Financial Accounting
Standards Advisory
Governmental
Accounting Standards
Governmental
Accounting Standards
Private Company
CouncilStandards Board
(FASB)
Council
(FASAC)
Board
(GASB)
Advisory Council
(GASAC)
Council
(PCC)
FAF Organization
Independent, private-sector organization est. 1972
Slide 17
18. GASB Framework
Financial Accounting Foundation (FAF)
Responsibilities
Financial Accounting
Foundation
(FAF)
Financial Accounting
Standards Board
Financial Accounting
Standards Advisory
Governmental
Accounting Standards
Governmental
Accounting Standards
Private Company
CouncilStandards Board
(FASB)
Council
(FASAC)
Board
(GASB)
Advisory Council
(GASAC)
Council
(PCC)
FAF Primary Responsibilities FAF Primary Responsibilities
Oversees, administers, and finances its standard setting
boards, the Financial Accounting Standards Board (FASB)
and the Governmental Accounting Standards Board
Slide 18
and the Governmental Accounting Standards Board
(GASB), and their Advisory Councils.
19. GASB Framework
Financial Accounting Standards Board
(FASB)
Financial Accounting
Foundation
(FAF)
Financial Accounting
Standards Board
Financial Accounting
Standards Advisory
Governmental
Accounting Standards
Governmental
Accounting Standards
Private Company
CouncilStandards Board
(FASB)
Council
(FASAC)
Board
(GASB)
Advisory Council
(GASAC)
Council
(PCC)
FASB est. 1973
Primary responsibilities are to establish and improve
standards for financial reporting for nongovernmental
Slide 19
standards for financial reporting for nongovernmental
entities. The FASAC advises FASB on technical issues.
20. GASB Framework
Governmental Accounting Standards Board
(GASB)
Financial Accounting
Foundation
(FAF)
Financial Accounting
Standards Board
Financial Accounting
Standards Advisory
Governmental
Accounting Standards
Governmental
Accounting Standards
Private Company
CouncilStandards Board
(FASB)
y
Council
(FASAC)
g
Board
(GASB)
g
Advisory Council
(GASAC)
Council
(PCC)
GASB est. 1984
Primary role is "to establish and improve standards of state
and local governmental accounting and financial reporting that
Slide 20
and local governmental accounting and financial reporting that
will…result in useful information for users of financial reports”
21. GASB Framework
Private Company Council (PCC)
Financial Accounting
Foundation
(FAF)
Financial Accounting
Standards Board
Financial Accounting
Standards Advisory
Governmental
Accounting Standards
Governmental
Accounting Standards
Private Company
CouncilStandards Board
(FASB)
Council
(FASAC)
Board
(GASB)
Advisory Council
(GASAC)
Council
(PCC)
PCC est. 2012
Primary role is "address the needs of users of private
company financial statements”
Slide 21
company financial statements
22. GASB Framework
Intended Use
Financial Statements allow Users to
Assess the finances of the government in its entirety
Determine whether financial position improved or deterioratedDetermine whether financial position improved or deteriorated
Evaluate whether current-year revenues were sufficient to pay
for current-year services
See the cost of providing services See the cost of providing services
See how programs are financed—through user fees and other
program revenues versus general tax revenues
U d t d th t t t hi h th t h i t d Understand the extent to which the government has invested
in capital assets, including roads, bridges, and other
infrastructure assets
Slide 22
23. GASB Framework
GASB Users
Users of Financial Statements
pension plans
endowments
buy- and sell-side analysts
rating agenciesendowments
public universities
research institutes
l i l t d th i t ff
rating agencies
bond holders
general public
iti d t legislators and their staff
municipal bond insurers
citizen and taxpayer groups
community organizations
Slide 23
24. GASB Framework
GASB Investments
Examples of Investments Requiring Valuations
Real estate meeting the definition of an investment asset
Land and land rights classified as investments, including oilg , g
and gas properties or natural resources classified as
investments
Invested securities lending collateral
Alternative investments reported by endowments Alternative investments reported by endowments
Equity securities (including unit investment trusts and closed-end mutual funds), stock
warrants and stock rights that do not have readily determinable fair values
Intangible assets that meet the proposed definition of investments
Co mingled investment pools that are not government sponsored Co-mingled investment pools that are not government sponsored
Life settlement contracts—when there is no insurable interest the purpose of the
instrument is solely to generate cash and should be measured at fair value
Debt securities reported as assets, regardless of whether they meet the definition of
an investment or they were acquired or originated by the government
Slide 24
an investment or they were acquired or originated by the government
Securitized debt obligations
25. GASB Framework
GASB Statements
Statement No. 34, Basic Financial Statements For State
and Local Governments (Jun 1999)
Established basic financial statements and requiredEstablished basic financial statements and required
supplementary information
Statement No. 52, Land & Other Real Estate Held as
Investments by Endowments (Nov 2007)Investments by Endowments (Nov 2007)
Fair Value Requirements for Endowments & Governments
Statement No. 72, Fair Value Measurement and
li i ( b 201 )Application (Feb 2015)
Definition of Fair Value; Measurement; Application; and
Disclosures
Slide 25
26. Disclaimers
The views and materials presented in this webinar represent only the opinions and views of
the presenters and/or speakers. Although the materials may have been reviewed byp p g y y
members of the Appraisal Institute, the views and opinions expressed herein are not
endorsed or approved by the Appraisal Institute as policy unless adopted by the Board of
Directors pursuant to the Bylaws of the Appraisal Institute. While substantial care has been
taken to provide accurate and current data and information, the Appraisal Institute does notp , pp
warrant the accuracy or timeliness of the data and information contained herein. Further,
any principles and conclusions presented in this webinar are subject to court decisions and
to local, state, and federal laws and regulations and any revisions of such laws and
regulations.g
This webinar is presented for educational and informational purposes only with the
understanding that the Appraisal Institute is not engaged in rendering legal, accounting, or
other professional advice or services. Nothing in these materials is to be construed as the
ff i f h d i i If t d i i i d doffering of such advice or services. If expert advice or services are required, readers are
responsible for obtaining such advice or services from appropriate professionals.
Slide 26
27. GASB Final Statement on Fair Value
Measurement and ApplicationMeasurement and Application
Deborah Beams, GASB Practice Fellow
Slide 27
29. GASB Statement 72
Highlights
Statement provides further guidance on fair value measurements
Basis is FASB Topic 820, “Fair Value Measurement”
Scope is not limited to investmentsScope is not limited to investments
Certain assets and liabilities measured at fair value
Includes derivatives
T t St t t Two-part Statement
Measurement
Application
Objective of the Statement
Increased comparability between governments, greater
accountability, and a better measure of the resources available to
Slide 29
accountability, and a better measure of the resources available to
governments
30. GASB Statement 72
Key Ideas
Definition of fair value
The price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at
the measurement date.
• Apply to assets and liabilities
An exit price
Other characteristics of fair value measurement
Market-based
Based on a government’s principal or most advantageous market Based on a government s principal or most advantageous market
Slide 30
31. GASB Statement 72
Key Ideas
Unit of Account
Stand-alone asset or liability or a group of assets or liabilities
Determined by the standard that requires fair value measurementy q
Market participants
Fair value measurement determined using the assumptions market
participants would use in pricing the asset or liabilityparticipants would use in pricing the asset or liability
Price
Not adjusted for transaction costs
When market information is not available
Estimate the price at which an orderly transaction would take place
between market participants at that date (for example, a valuation
Slide 31
technique)
32. GASB Statement 72
Key Ideas
Nonfinancial assets at fair value
Value at the asset’s highest and best use
• A government’s current use is presumed to be the highest and best
use, unless otherwise suggested
• May be in combination with other assets and liabilities or on a stand-
alone basis
Fair value is an accounting estimate
Slide 32
33. GASB Statement 72
Valuation Techniques
Apply valuation technique(s) that best represent(s) fair value in
the circumstances
Market approach – Using prices and other relevant information
generated by market transactions involving identical or similar
assets and / or liabilities
Cost approach – Amount that would be required currently to
replace the service capacity of an asset
Income approach – Converts expected future amounts to a single
current amount (i.e. present value techniques, option-pricing
models, etc.)
Slide 33
34. GASB Statement 72
Inputs to Valuation Techniques
Maximize use of relevant observable inputs and minimize use of
unobservable inputs (see next slide)
Inputs should be consistent with the characteristics of the assetp
or liability
Sometimes includes an adjustment, a premium or discount
Do not include premium or discount that is inconsistent with the unit Do not include premium or discount that is inconsistent with the unit
of account established for the asset / liability
Do not include premiums and discounts that reflect size as a
characteristic of a government’s holdingscharacteristic of a government s holdings
• For instance, blockage factors that adjusts the quoted price of an asset
or liability based on the market’s trading volume
Slide 34
35. GASB Statement 72
Fair Value Hierarchy
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities, most reliable
Level 2: quoted prices for similar assets or liabilities, quotedq p , q
prices for identical or similar assets or liabilities in markets that
are not active, or other than quoted prices that are observable
Level 3: unobservable inputs least reliable Level 3: unobservable inputs, least reliable
Inputs categorized within different levels of the hierarchy
Fair value measurement is categorized in its entirety in the same
l l th l t (i t f li bilit ) l l i t th t ilevel as the lowest (in terms of reliability) level input that is
significant to the entire measurement
Slide 35
36. GASB Statement 72
When Buyers Disappear
Measuring fair value when volume or level of activity for an asset
or a liability has significantly decreased
If it is determined that a transaction or a quoted price does not
represent fair value, an adjustment would be necessary
Risk adjustments
• Includes a risk premium reflecting amount that market participantsp g p p
would demand as compensation for uncertainty
• Reflects an orderly transaction between market participants at the
measurement date under current market conditions
Change in valuation technique(s) may be appropriate
Slide 36
37. GASB Statement 72
Transactions That Are Not Orderly
More difficult to tell when there is a significant decrease in the
volume or level of activity for the asset or liability
Assessment should be performed taking into account:p g
Market exposure and marketing period
Whether the sale was distressed or forced
The transaction price compared to other recent similar transactions The transaction price compared to other recent similar transactions
If the transaction is deemed to be not orderly, little weight
should be placed on the transaction price
Quoted prices provided by third parties may be used if
developed in accordance with this standard
Slide 37
38. GASB Statement 72
Investments That Calculate NAV
Net asset value per share (or its equivalent) may be used as a
practical expedient to estimate fair value
Adjustment to NAV per share amount may be necessary to be
consistent with measurement principles
May be applied on an investment-by-investment basis but must be
applied consistently to fair value measurement of the government’s
entire position in a particular investment
If sale of a portion of an investment at an amount different
from net asset value per share is probable, the practicalo et asset a ue pe s a e s p obab e, t e p act ca
expedient may not be applied
Slide 38
39. GASB Statement 72
Application of Fair Value
Definition of an investment
A security or other asset that a government holds primarily for the
purpose of income or profit and with a present service capacity that
is based solely on its ability to generate cash or to be sold to
generate cash
Investment asset
Present service capacity
• Refers to a government’s mission to provide services
Held primarily for income or profitHeld primarily for income or profit
• Acquired first and foremost for future income and profit
Slide 39
40. GASB Statement 72
Application of Fair Value
Measured at fair value
Assets that meet the definition of an investment generally should be
measured at fair value
Examples, if they meet the definition of an investment
Land and land rights
Real estate Real estate
Oil and gas property
Intangible assets
N l Natural resource assets
Generally will be real property held by pension plans and
endowments as investments
Slide 40
41. GASB Statement 72
Application of Fair Value
Additional investment types that would be measured at fair value
Investments that are already measured at fair value
Alternative investments
Equity securities (including unit investment trusts and closed-end
mutual funds), stock warrants, and stock rights that do not have
readily determinable fair valuesy
• Provided such investment-types are not reported according to the
equity method
Slide 41
43. GASB Statement 72
Disclosures
The following information for each class or type of assets and/or
liabilities measured at fair value should be disclosed:
The fair value measurement at the end of the reporting period and
for nonrecurring fair value measurements, the reasons for the
measurement
The level of the fair value hierarchy within which the fair value
measurements are categorized in their entirety (Level 1, 2, or 3)
A description of the valuation technique(s)
Slide 43
44. GASB Statement 72
Disclosures for Investments in Certain
Entities that Calculate NAV
Information that helps users of its financial statements to
understand the nature and risks of the investmentsunderstand the nature and risks of the investments
Information on whether the investments are probable of
being sold at amounts different from net asset value per
share (or its equivalent)share (or its equivalent)
Fair value measurement of the investments in the class and a
description of the significant investment strategies of the
investee(s) in the class
Slide 44
45. GASB Statement 72
Disclosures for Investments in Certain
Entities that Calculate NAV
If distributions are received through liquidation of the underlying
assets of investees, an estimate of the period of time over which, p
underlying assets are expected to be liquidated
Amount of unfunded commitments related to investments in the
classclass
General description of the terms and conditions upon which the
government may redeem investments in the class
h h h h d bl The circumstances in which an otherwise redeemable investment
in the class might not be redeemable; or if the investment is
currently restricted, when the restriction lapses
Slide 45
46. GASB Statement 72
Disclosures for Investments in Certain
Entities that Calculate NAV
Any other significant restriction on the ability to sell
investments in the class at the measurement dateinvestments in the class at the measurement date
If it is probable that the investment will be sold at an amount
different from NAV per share
Di l f th t t l f i l f ll i t t th t t th Disclosure of the total fair value of all investments that meet the
above and any remaining actions required to complete the sale
If individual investments to be sold have not been identified,
di l f l t ll d i i ti i d tdisclosure of plans to sell and any remaining actions required to
complete the sale
Slide 46
47. Disclaimers
The views and materials presented in this webinar represent only the opinions and views of
the presenters and/or speakers. Although the materials may have been reviewed byp p g y y
members of the Appraisal Institute, the views and opinions expressed herein are not
endorsed or approved by the Appraisal Institute as policy unless adopted by the Board of
Directors pursuant to the Bylaws of the Appraisal Institute. While substantial care has been
taken to provide accurate and current data and information, the Appraisal Institute does notp , pp
warrant the accuracy or timeliness of the data and information contained herein. Further,
any principles and conclusions presented in this webinar are subject to court decisions and
to local, state, and federal laws and regulations and any revisions of such laws and
regulations.g
This webinar is presented for educational and informational purposes only with the
understanding that the Appraisal Institute is not engaged in rendering legal, accounting, or
other professional advice or services. Nothing in these materials is to be construed as the
ff i f h d i i If t d i i i d doffering of such advice or services. If expert advice or services are required, readers are
responsible for obtaining such advice or services from appropriate professionals.
Slide 47
48. GASB Final Statement on Fair Value
Measurement and ApplicationMeasurement and Application
Marius Andreasen, CFA, MAI
Slide 48
50. Practical Applications
Illustrations
Capital Asset or Investment
Multi-use or Mixed-use Assets
Natural ResourcesNatural Resources
Highest and Best Use
Valuation Approaches & Techniques
Discount Rate
Transaction Costs
Scenario 1 Scenario 1
Scenario 2
Scenario 3
Slide 50
51. Practical Applications
Capital Asset or Investment
Some tangible assets can be classified as either a
capital asset or an investment.
Different governments holding similar assets may arrive
at different classifications based on the usage of the asset
and the purpose of the government.
• Warehouse used by a public transit district to store vehicles
and equipment (Capital Asset)
• Warehouse held by a pension plan as income producing
property that is rented to a private party (Investment)
Slide 51
52. Practical Applications
Mixed-use or Multi-use Asset
Classification of Mixed-use Assets
The City rents retail space on the first floor of a
government building to generate rental income and
occupies the remainder of the building for its day-to-day
operations.
• The City must determine at the time of initial recognition
h th th it f t i t (th ti b ildi )whether the unit of account is one asset (the entire building)
or two assets (the rental space and the government space).
• The City must then determine classification (capital asset or
investment) of the unit(s) of accountinvestment) of the unit(s) of account.
• The classification must continue for financial reporting
purposes even if the use changes sometime in the future.
Slide 52
53. Practical Applications
Natural Resource Assets
Classification of Natural Resources
Natural resources evaluated based on the unit of account.
• Current accounting standards do not address unit account
to be applied to natural resources
• Based on professional judgment
• The Board acknowledges that valuation specialists are
often required to value natural resources
Slide 53
54. Practical Applications
Highest and Best Use (H&BU)
A real property investment should be evaluated with its
current zoning.
Board acknowledges governments are able to affect
H&BU by changing what is legally permissible
• A government may hold industrial land that could be
rezoned for multi-family housing
• Presumption is a government’s use of real property as it is
currently zoned is its H&BU
H&BU of real property may provide maximum value to
k t ti i t t d l t imarket participants as a stand-alone asset, in
combination with other asset groups, or in combination
with other assets and liabilities.
Slide 54
55. Practical Applications
Valuation Approaches and Techniques
There are three acceptable approaches to measure fair
value: market, cost, and income.
A valuation technique is a specific method or combination
of methods used to determine the value of an asset
Valuation approaches allow for many possible valuation
techniques
If transaction price is consistent with fair value at initial
recognition and a valuation technique will be used to
measure fair value in subsequent periods, then the
valuation technique should be used to test the purchase
price in order to calibrate the technique.
Slide 55
56. Practical Applications
Discount Rate for Present Value Calculation
The proper discount rate for a present value calculation
is the rate that would be used by market participants,
as with any input to a fair value measurement.
T ti C tTransaction Costs
The price used in a fair value measurement are not
adjusted for transaction costs* however transactionadjusted for transaction costs*, however transaction
costs should be considered to determine the most
advantageous market; the most advantageous market is
the one that results in the greatest net benefit to thethe one that results in the greatest net benefit to the
participant.
When utilizing the DCF method of the income approach
Slide 56
to derive fair value, transaction costs are applied to the
reversion.
57. Disclaimers
The views and materials presented in this webinar represent only the opinions and views of
the presenters and/or speakers. Although the materials may have been reviewed byp p g y y
members of the Appraisal Institute, the views and opinions expressed herein are not
endorsed or approved by the Appraisal Institute as policy unless adopted by the Board of
Directors pursuant to the Bylaws of the Appraisal Institute. While substantial care has been
taken to provide accurate and current data and information, the Appraisal Institute does notp , pp
warrant the accuracy or timeliness of the data and information contained herein. Further,
any principles and conclusions presented in this webinar are subject to court decisions and
to local, state, and federal laws and regulations and any revisions of such laws and
regulations.g
This webinar is presented for educational and informational purposes only with the
understanding that the Appraisal Institute is not engaged in rendering legal, accounting, or
other professional advice or services. Nothing in these materials is to be construed as the
ff i f h d i i If t d i i i d doffering of such advice or services. If expert advice or services are required, readers are
responsible for obtaining such advice or services from appropriate professionals.
Slide 57
58. GASB Final Statement on Fair Value
Measurement and ApplicationMeasurement and Application
Adriane Bookwalter, CPA
Slide 58
59. Practical Applications
Scenario 1
An endowment acquired a warehouse building 12
months ago. The warehouse is 100 percent leased to a
third party under a long term lease which was signed
prior to the acquisition and the rent is consistent with
asking rents for other buildings within the same
industrial park.
Slide 59
60. Practical Applications
Scenario 1
Valuation Approach – Income Approachpp pp
SUMMARY OF HYPOTHETICAL REVENUE AND EXPENSES
Annual Annual Total
Market Market Market
Tenant
Property
Size (GLA) Rent/Sq.Ft. Reimb $/SF Rent
Suite A 250,000 $ 12.00 $6.60 $ 4,650,553
Annual $/SF % of EGI
TOTAL POTENTIAL GROSS REVENUE $ 4,650,553 $18.60
Vacancy and Collection Loss @ 5.0% 232,528 0.93
EFFECTIVE GROSS REVENUE $ 4,418,026 $17.67 1.00%
OPERATING EXPENSES
CAM $ 625,000 $2.50 14.15%
Insurance 25,553 0.10 0.58%
Real Estate Taxes 1,000,000 4.00 22.63%
TOTAL EXPENSES $ 1,650,553 $6.60 37.36%
NET OPERATING INCOME $ 2,767,472 $11.07 62.64%
Overall Capitalization Rate 7.50% Value $/SF NRA
$ $
Slide 60
$ 36,899,631 $147.60
Rounded $ 36,900,000 $147.60
61. Practical Applications
Scenario 1
Valuation Approach – Income Approach (level 3 inputs)pp pp ( p )
SUMMARY OF HYPOTHETICAL REVENUE AND EXPENSES
Annual Annual Total
Market Market Market
Tenant
Property
Size (GLA) Rent/Sq.Ft. Reimb $/SF Rent
Suite A 250,000 $ 12.00 $6.60 $ 4,650,553
Annual $/SF % of EGI
TOTAL POTENTIAL GROSS REVENUE $ 4,650,553 $18.60
Vacancy and Collection Loss @ 5.0% 232,528 0.93
EFFECTIVE GROSS REVENUE $ 4,418,026 $17.67 1.00%
OPERATING EXPENSES
CAM $ 625,000 $2.50 14.15%
Insurance 25,553 0.10 0.58%
Real Estate Taxes 1,000,000 4.00 22.63%
TOTAL EXPENSES $ 1,650,553 $6.60 37.36%
NET OPERATING INCOME $ 2,767,472 $11.07 62.64%
Overall Capitalization Rate 7.50% Value $/SF NRA
$ $
Slide 61
$ 36,899,631 $147.60
Rounded $ 36,900,000 $147.60
62. Practical Applications
Scenario 1
An endowment acquired a warehouse building 12
months ago. The warehouse is 100 percent leased to a
third party under a long term lease which was signed
prior to the acquisition and the rent is consistent with
asking rents for other buildings within the same
industrial park.
Other warehouses within the same industrial park have
similar utility, including lease terms and tenant profiles,
and four of them recently sold in an active market.and four of them recently sold in an active market.
Slide 62
63. Practical Applications
Scenario 1
Valuation Approach – Market Approachpp pp
SUMMARY OF IMPROVED SALES
PROPERTY INFORMATION TRANSACTION INFORMATION
No. Location
Net Rentable
Area (sf) Sale Date Sale Price $/SF NRA COMMENTS
S Subject Property 250,000
1 Same Industrial Park 260,000 1 Month Prior $39,000,000 $150 Directly West of Subject Property. Similar utility.
2 Same Industrial Park 265,000 2 Months Prior $39,750,000 $150 Directly East of Subject Property. Similar utility.
3 Same Industrial Park 235,000 3 Months Prior $35,250,000 $150 Directly North of Subject Property. Similar utility.
4 Same Industrial Park 240,000 2 Months Prior $36,000,000 $150 Directly South of Subject Property. Similar utility.
STATISTICS
Low 235,000 Current $35,250,000 $150.00
High 250,000 Current $37,500,000 $150.00
Average 265,000 Current $39,750,000 $150.00
Slide 63
64. Practical Applications
Scenario 1
Valuation Approach – Market Approach (level 2 inputs)pp pp ( p )
SUMMARY OF IMPROVED SALES
PROPERTY INFORMATION TRANSACTION INFORMATION
No. Location
Net Rentable
Area (sf) Sale Date Sale Price $/SF NRA COMMENTS
S Subject Property 250,000
1 Same Industrial Park 260,000 1 Month Prior $39,000,000 $150 Directly West of Subject Property. Similar utility.
2 Same Industrial Park 265,000 2 Months Prior $39,750,000 $150 Directly East of Subject Property. Similar utility.
3 Same Industrial Park 235,000 3 Months Prior $35,250,000 $150 Directly North of Subject Property. Similar utility.
4 Same Industrial Park 240,000 2 Months Prior $36,000,000 $150 Directly South of Subject Property. Similar utility.
STATISTICS
Low 235,000 Current $35,250,000 $150.00
High 250,000 Current $37,500,000 $150.00
Average 265,000 Current $39,750,000 $150.00
Slide 64
65. Practical Applications
Scenario 2
The City leases an industrial garage as an investment to
a private contractor which historically provided services
to the City (e.g., street cleaning). The 20-year lease is
nearing the end of its term (6 months), but the tenant
would like to renew the lease at current market rents
for industrial space. Surrounding uses are primarily
residential and residential demand within the City is
extremely high due to the limited availability infill
locations.
What is the highest and best use of the site
understanding the site is currently zoned Light Industrial
(LI-1)?
Slide 65
( )
66. Practical Applications
Scenario 2
The City allows for the lease to expire and the building
is now vacant. The property is no longer generating
income for the City and the improvements have fully
depreciated. Surrounding uses are primarily residential
and residential demand within the City is extremely high
due to the limited availability infill locations.
Is the real property (effectively land) considered an asset
or an investment?
What is the highest and best use?g
Slide 66
67. Practical Applications
Scenario 2
The City Council demolishes the improvements and
rezones the site for high density residential use (R-6).
There is demand by private investors to develop a
luxury for-sale housing. In order to meet demand for
affordable housing, the City Council votes to construct
an affordable housing project (owned and operated by
the City).
What is the highest and best use of the land (as vacant)?
Once the affordable housing project is constructed, will itOnce the affordable housing project is constructed, will it
be classified as an asset or investment?
Slide 67
69. Q&A
Use the Questions box to submit a question.
Submit yourSubmit your
question
Slide 69
70. Webinar Handouts
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the resource page which is included in yourthe resource page which is included in your
connection e-mail.
Slide 70
71. Webinars and You
Have an idea?
Do you have a webinar idea that would benefit real estate appraisers and other
professionals aligned with the industry?
Submit your suggestions and proposals for future AI webinars through the AI
website at http://www.appraisalinstitute.org/education/online-education/webinars.
Did o kno
:
Did you know:
• Webinar presenters receive 10 points (2 hrs) of AI CE credit (not state credit.)
These are applied after the webinar.
F t d d l t h t i f 125 i t• For requested development hours, presenters can earn a maximum of 125 points
(25 hrs) per 5-year AI CE cycle under “Service to AI”, and may add these to their
AI CE Log (hours should be entered and AI will convert to points).
Slide 71
BE A WEBINAR PRESENTER!
72. Upcoming Events
Upcoming Webinars
DATE TOPIC
September 16 Contamination and the Valuation ProcessSeptember 16 Contamination and the Valuation Process
September 30 Drones
November 18 Historical and Landmark Home SitesNovember 18 Historical and Landmark Home Sites
Slide 72
73. Upcoming Events, cont.
Upcoming Live Online (Synchronous) Programs
COURSE SESSIONSCOURSE SESSIONS
Unraveling the Mystery of Fannie Mae
Appraisal Guidelines
(One 4 hour day)
• October 13, 2015
(One 4 hour day)
Using Spreadsheet Programs in Real Estate
Appraisals – The Basics
(Two 3 1/2 hour days)
• October 6 – 7, 2015
(Two 3‐1/2 hour days)
Advanced Market Analysis
(Eight 4 hour days)
• October 19 – October 29,
2015
Advanced Concepts and Case Studies
(Eight 4.5 hour days)
• December 2015 TBD
Slide 73
75. Evaluation
Please complete the brief survey that will
appear on your screen immediately followingappear on your screen immediately following
this webinar. We will also send the link to the
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Slide 75