SPOOZ Inc (SPZI)

[I ll be back]

Not likely.....

What if there's a quid-pro-quo?..in other words..."I'll give your property value a high appraisal if you let me list and sell other real estate you own."

No appraiser will put his license at risk for someone like Parks. While I've personally seen "structured" appraisals between (large) developers in order to please a client that brings them a "lot" of business. It is not hard to estimate that the appraiser provided a low end cap rate on a student housing project. Especially when you consider the age of the apartments.

It wouldn't take a great deal of time to research the current cap rates for apartments in NJ. All one has to do is go online (LoopNet) and pull up large apartment projects and compare the NOI against the asking price. Based on my professional experience and background, a 4% cap against the $37.4M is on the low end (higher valuation) it likely not much of a bar.

Keep in mind, the higher the cap rate, the lower the value of the project.
Meaning I'm going to pay you less for the project, because I need a higher yield for the related market risk.

Have I seen over stated valuations (appraisals). More than my fair share. Had this been an arm's length purchase, I can assure you that no bank would have signed off on a 4% cap. We just sold a down town parcel that appraised two years ago at over $2.5M for $200,000. The appraisals are nothing more than an opinion of value. Put three appraisers in a room and you will come up with three different values.

That being said, there is no way in HELL I would ever advise a client to pay this low of yield. The current market is a GREAT example of why not. I believe they call it buying high and selling low 😆