October 13, 2016

APPRAISAL & FIRST NATIONS LAND/PROJECT VALUATION

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• About Kent-Macpherson– Rod Cook & Cliff Smirl

• Our First Nations Clients

• What is an Appraisal?– Purposes of Appraisals– Key Definitions– Market Value of Reserve Land Interests– Terms of Reference– Assumptions– Highest and Best Use– Types of Appraisals

Kent‐Macpherson

• Based in Kelowna and serving B.C.

• Established in 1973 – 43 yrs in Business

• Reputation for Professionalism and High Standards

• Recognized as one of Western Canada’s leading authorities in Real Estate Valuation and Consulting

• 20 Awesome People; including 10 Appraisers, plus Associates and Support Staff

• Serving all of B.C. & special project assignments throughout Canada

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• 39 years Commercial Appraisal and Consulting experience

• Qualified as an expert witness before – Supreme Court of B.C.– Federal Court of Canada.– Specific Claims Tribunal.

• First Nations Expertise– Provides real estate appraisal and consulting services to 69 First Nations across

BC and Canada.

• Designations:– AACI, (Accredited Appraiser) Appraisal Institute of Canada;– RI, Professional Designation, Real Estate Institute of British Columbia.– C. Arb., Chartered Arbitrator, Arbitration and Mediation Institute of Canada Inc.– P. App., Professional Appraiser, Appraisal Institute of Canada.

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• 10 years Commercial Appraisal and Consulting experience

• Qualified as an expert witness before – Supreme Court of B.C.– Specific Claims Tribunal.

• First Nations Expertise– Provides real estate appraisal and consulting

services to 32 First Nations across BC.– Completing PhD in Aboriginal Housing Experiences.

• Designations:– AACI, (Accredited Appraiser) Appraisal Institute of Canada;– P. App., Professional Appraiser, Appraisal Institute of Canada;– MAI, Appraisal Institute (Chicago, USA).

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First Nations Lands ValuationTreaty NegotiationsFirst Nations Specific ClaimsSpecial Use and Institutional PropertiesCommercial Real Estate ValuationDevelopment, Impact and Feasibility StudiesExpropriation Valuation Land Use EvaluationAssessment Review, Negotiation and AppealCost Benefit Analysis 

Commercial Real Estate Lease Evaluation Right‐of‐Way Valuation and Negotiation Insurance Appraisals Arbitration and Mediation Services Expert Evidence and Litigation SupportGround Rent ReviewsValuation for Mortgage LendingDepreciation Reports/Reserve Fund Studies

Adams Lake • Beecher Bay • Bonaparte • Boothroyd • Canim Lake• Cayoose Creek • Cheam • Coldwater • Fort Nelson • Haisla Nation

• Iskatewizaagegan • Halfway River • Katzie • Kitselas

Ktunaxa • Lake Babine • Little Shuswap • Long Plain • Lower Nicola• Lower Similkameen • Lyackson • Lytton • Metlakatla • Moberly

• Musqueam • Nadleh Whut’en • Namgis • Neskonlith • Nlaka’pamux

Okanagan • Osoyoos • Pauquachin • Penticton • Popkum • Sakimay • Seaspunkut• Semiahmoo • Shoal Lake • Shuswap Tribal Council • Siksika • Simpcw • Siska

• Skway • Skeetchestn • Skuppah

Sliammon • Splatsin • Spuzzum • Squamish • Squiala • STÓ:LŌ • Sucker Creek • Takla Lake • Teslin Tlingit • Tk'emlúps • Tsawwassen

• Tobacco Plains • Toosey • Tsleil-Waututh • Tsawout • Tzeachten

• Union Bar • Upper Nicola • Upper Similkameen • Westbank• White Bear • Whispering Pines • Williams Lake • Xaxli’p

Appraisal, Development Consulting and Negotiations on First Nations Lands69 Bands in BC and across Canada

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1. What is an appraisal?

2. Who is qualified to prepare an appraisal?

Accredited appraisers with a national designation AACI (Accredited Appraiser Canadian Institute) are the only ones accepted by INAC and PWGSC,  financial institutions and government agencies 

P. App. – Professional Appraiser

3. Appraisal standards; CUSPAP (Canadian Uniform Standards of Professional Appraisal Practice)

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• The Appraisal Institute of Canada requires compliance with Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP).

• While conformance with the Standards is important, members are constantly encouraged to engage in “best practices.”

• The rules are “principle based” (they allow members some latitude in how they approach certain appraisal problems).

• However, some members are overly sensitive to client requests or demands to complete work that may not suit the end use due to fee constraints, time constraints, or simplified Terms of Reference.

There are various purposes for appraisals, i.e.

Current Market Value

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Historic Value Specific Claims

Loss of Use

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Prospective or Future Value Appraisal / Feasibility Studies

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Appraisals for LitigationTsleil‐Waututh – Dollarton Highway

‐ 1931‐ Value of R/W‐ Damages!

1. Market Value2. Market Rent3. Highest and Best Use4. Lease5. Leasehold Interest 6. Fee Simple Interest7. Lessee’s Interest8. Lessor’s Interest

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• The Terms of Reference are critical in every appraisal.

• They lay the foundation or basis for the premise of value.

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• What Interest in the land is to be valued?• Is it the Leased Fee interest?• Is it the Leasehold interest?• Is it to be considered on an “as if fee

simple” basis?• What Assumptions are to be made?

– Are they reasonable?– Does it matter?

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• Example of the importance of clear Terms of Reference

• Is this land to be valued as remote oceanfront acreage with no services? or…. Potential deep sea port? If as a Port, are all approvals to be considered in the valuation?

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• Example of the importance of clear Terms of Reference

174.56 acres$ 3,280,000    per annum 

(Market Rent as a special use property)

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• Is the interest in the land marketable? – Leasehold Interests:

• Prepaid Head Lease (typically long-term in nature)

• A lease with predetermined step-ups or participation clauses

• The more traditional lease with periodic rent reviews

$100K

$120K

$140K

$100K

?

?

• The market value of a prepaid leasehold interest is primarily a function of the permitted use and term.

• Generally attracts the most substantial developments.

• Can be readily subleased (if done correctly☺).

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• Market value of land as freehold typically establishes the upper limit of value for long-term prepaid leases as…– The lessee doesn’t enjoy full bundle of rights.– The leasehold interest is more difficult to finance.– The term is finite.– Permitted uses are often limited and defined.– Political climate on the Reserve can impact value.

• The value of a long-term prepaid lease relates more to "market value” than "rental value.”

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• Market Analysis – Supply/Demand• Servicing Issues (water, sewer, gas)• Topography  (flat, steep)• Soils  (gravel, swamp, clay)

• Environmental • Sara Legislation (Set backs, leave strips)• Archaeological Concerns

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SHELTER BAY MARINA

Can be very complex…

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IR # 10 Westbank

Shelter Bay/Concord Pacific

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$1 Billion Buildout

(Until 2008 financial meltdown)

• Can be complex

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Before…

…After

• Separate the politics from the development and approval process.

• Set out a complete, clear, straight-forward approval & leasing process with timelines, costs, etc.

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Lease Structure & Land Use:

• Determine type of lease you would accept (Prepaid or periodic rent review).

• Term of lease (25, 49, 99 year lease and beyond).• Identify land uses you and the Band would

support.• Be patient.

• Identify potential land uses with broad land use planning;

• Identify Multi-family, Commercial & Industrial sites in urban settings.

• Forestry, Tourism/Recreational, Agriculture in rural or remote locations.

• Set aside areas for Band housing, Cultural & Administrative facilities.

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Residential & Recreational Waterfront Lots

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Tk'emlúps First Nation ‐Mt. Paul Industrial Park

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• 5 year rent reviews• Great long term cash flow

Market Value Appraisal / AdviceProposed Retail/Commercial Development

Westbank First Nation

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Hotel / Hospital Feasibility AnalysisWestbank First Nation

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Area 27Osoyoos Indian Band

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• The Highest and Best use of the land must be assessed.

• The lease indenture must be secured for sublease.

• Sound advice from qualified, experienced appraisers, lawyers, and financial advisors is essential.

• The market will always be the driving force for development on Reserve lands.

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• Specific Claims need to be addressed in a fair and reasonable manner.

• Incredible development opportunities exist and will materialize over the next decade as Reserve lands occupy some of the best real estate available for development.

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INAC

DOJ

R/W

Highest & Best Use

Financing

CWS

SARA

QUESTIONS?

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Cliff Smirl, AACI, P.App, MAI304-1708 Dolphin Ave, Kelowna

British Columbia, V1Y 9S4Phone: 250-763-2236Fax: 250-763-3365

csmirl@kent-macpherson.com