1. JUST COMPENSATION WHEN LAND IS USED FOR A RELOCATED PROPERTY FEATURE
S. Steven Vitale, MAI
valbridge.com

2. Severance Damages
Per Eaton, severance damages are the “diminution of the market value of the remainder, in the case of a partial taking, which arise (a) by reason of the taking (severance) and/or (b) the construction of the improvement in the manner proposed.”
Appraisal Institute Dictionary of Real Estate says severance damages are “generally used to mean those damages to a remainder property that are compensable.”
WI Jury instructions state “Severance damages reduce the fair market value of the remaining property because of the partial taking.”

3. Consequential Damages
Per Eaton, consequential damages are damages “arising as a consequence of a taking and/or construction on other lands.”
Generally non-compensable.
Certain items challenged at times such as noise, dust, odors, damage to business, frustration and loss of goodwill.

4. Cost to Cure
Applied when remainder has suffered damage that can be corrected, both physically and economically.
Cost to cure cannot exceed diminution of value as uncured After Value.
Uncured After Value frequently very difficult to measure accurately due to lack of appropriate market data.

5. Cost to Cure
Per Eaton: If a property with a deficiency is placed on the market, both the buyer and seller will consider the cost to cure the deficiency, if it is physically and economically curable. The price at which the property will sell is the value of the property as deficient or the value of the property without the deficiency minus the cost to cure the deficiency, whichever is higher.

6. Surplus vs. Excess Land Dictionary of Real Estate Appraisal, 5th Edition
Surplus Land
Excess Land
Land that is not currently needed to support the existing improvement but cannot be separated from the property and sold off. Surplus land does not have an independent highest and best use and may or may not contribute value to the improved parcel.
Land that is not needed to serve or support the existing improvement. The highest and best use of the excess land may or may not be the same as the highest and best use of the improved parcel. Excess land may have the potential to be sold separately and is valued separately.

19. Other Examples

20. Apartment Example 100 unit apartment complex 12 acre parcel
2 acres being acquired (landscaped surplus land)
No loss of parking or impact of functional utility

21. Apartment Example 100 unit apartment complex 12 acre parcel
2 acres being acquired (landscaped surplus land)
No loss of parking or impact of functional utility
However, site allows density of 10 units per acre (12 acres x 10 units/acre = 120 units)
Owner had intended to add an additional 20 units

22. Apartment Example

23. Apartment Example

24. Apartment Example

25. Apartment Example

26. Drugstore Example
15,000 SF drugstore built 2 years ago. 20 year lease; 18 years remain. Triple net lease with $25.00 psf rent (15,000 psf = $375,000 annual net rent)
4 acre parcel
1 acre being acquired (landscaped surplus land)
No loss of parking or impact of functional utility

27. Drugstore Example Before Value Fee Simple vs. Leased Fee?
Sales Comparison Approach
Based on comparable sales, but really driven by Income Approach
$375,000 ÷ 6.0% = $6,250,000 or $417 psf
Allocation of Value:
Land (4.0 acres at $400,000/ac.): $1,600,000
Improvements: $4,650,000
Total: $6,250,000

28. Drugstore Example Just Compensation
Land (1.0 acre at $400,000/ac.): $400,000
Site Improvements: $20,000
Total: $620,000
After Value (Fee Simple vs. Leased Fee)
No change to lease or income stream
Sales Comparison Approach (But really driven by Income Approach: $375,000 ÷ 6.0% = $6,250,000 or $417 psf)
Allocation of Value:
Land (3.0 acres at $400,000/ac.): $1,200,000
Improvements: $5,050,000
Total: $6,250,000

29. Other Issues

30. Other Issues
Dehydration
Hunger
Thirst

31. The End … Thank You S. Steven Vitale, MAI svitale@valbridge.com
valbridge.com