Parking Easement
Negotiating a 10 parking spot easement from a neighboring property Class-A office building. Are there any comps in terms of what to offer on a monthly basis or for a cash price? Both the owner and I have zero idea what a permanent parking easement should fetch.
[{"id": "fqdpes2", "text": "How much are monthly rental spots going for in the area? I don't expect it to be 'retail' pricing like that, but might give a good idea on an upper bound.", "replies": [], "depth": 1}, {"id": "fqdqvx1", "text": "Need more information, but that could easily be a 6-figure easement if you're in a CBD or high demand area and significantly less if not. I certainly wouldn't encumber my property over income for 10 parking spaces. I'd just lease them monthly/annually at the prevailing rate and retain the right to terminate. To build off tpm's comment, go see what spaces rent for in your CBD and you have your high number to work backwards from.", "replies": [], "depth": 1}, {"id": "fqdsh6g", "text": "Figure out monthly parking rates, and then an appropriate multiple.  100x monthly rate seems like a good start?", "replies": [], "depth": 1}, {"id": "fqdukwr", "text": "There are comps out there. Tracking them down is the challenge. The more common scenario you'll find are sales to residential condominium owners which happen pretty regularly. My assumption is that a parking space in an office building would command less than in a residential building since the parking is primarily only used weekdays during the day but I haven't verified that in the market.\n\nAs a point of reference, a permanent parking easement within the below-grade parking structure beneath twin 24-story condo towers (\\~2007 vintage, units selling for around $800k) in downtown Bellevue, WA most recently sold for $60,000 in May 2019.\n\nEDIT: As another point of reference, an unreserved parking space in that same garage can be leased for $185/month.", "replies": [{"id": "fqfaawt", "text": "Oh wow, that's like a 3.4% CAP rate were it an unreserved parking space.", "replies": [{"id": "fqfayc4", "text": "thats probably pretty close to the cap on a condo there so kinda makes sense", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fqdz7sh", "text": "depends on whats included. im a commercial re lawyer in the middle of drafting one for a very large developer giving an easement to another very large developer and every dealpoint is being heavily negotiated. where are you?", "replies": [{"id": "fqfcbud", "text": "Los Angeles metro.", "replies": [{"id": "fr8ch6o", "text": "Not trying to be greedy, but I\u2019d want to understand the other sides motivation and alternatives before just flippantly \u201cselling\u201d an easement. Need to think through it b/c it could/will impair the value of your land. Are they using this to get a large project approved or just securing parking to fill a new need?  \n\nAlso, who will pay the costs to restore in the event of a loss?  Do you have to repair at your own cost?  What about cleaning and regular upkeep?  These answers would clearly be different if you sold them fee simple land, so I would make sure to think about it. \n\nGiven that it\u2019s in LA, I would expect this to have a lot finely negotiated deal points and pretty big price tag.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fqecyww", "text": "I would just do a lease if possible- what happens when the parking garage needs to be restriped and repaved. Are you on the hook as well? \n\nIf it is a development deal, then I get it. Would take the estimated cash flow of the individual spaces and cap it a average cap rate. Find out what a monthly rate would be for the area, annualize it and then divide by a market rate. Should get you a fair approximation of the value.", "replies": [{"id": "fqfamdr", "text": "So regional cap rate approximation then look for it to be specific to my commercial property type, right? So like, SoCal light industrial has a CAP rate of, say, 6% then I would apply the rate based on the market rent for such a space, like $200 a month. Okay, excellent, just looking for an approximation which your guide nicely provides.", "replies": [{"id": "fqfvjss", "text": "Regional for sure. \n\nIf it is class A office I would argue for that CAP rate for that sort of property. \n\nIf it is a development deal, then some codes require a minimum parking number or ratio so in that case it will have to (most likely) a transfer with the easiest route being a stipulation to the code that you are getting a long term lease on the parking or that you are only under parked so much.", "replies": [], "depth": 3}], "depth": 2}, {"id": "fqfghu8", "text": "I wasn't clear on that - my assumption was that OP was talking about open air spaces, but your mention of a parking garage made me realize it might be different.  OP, if we're talking about enclosed spaces in a garage I agree with this comment, sign a long-term lease, an easement only makes sense if it's dedicated space on the ground that could be shown on a survey, along with dedicated access, and a maintenance agreement on the spaces and the access to them.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fqedeji", "text": "A permanent easement is legally different from selling the land outright, but from a practical standpoint there's minimal difference.  So you don't really have to find easement comps as such, you can simply find sales of vacant land sold in fee simple.  Use that as your basis, and if the subservient and dominant parties (or the \"seller\" and \"buyer\" if you like) agree there should be some difference, maybe a discount if the subservient parcel retains some rights, or some premium for land size or superior frontage, you can apply those to the basis derived from the fee simple land value.", "replies": [{"id": "fqfc7il", "text": "Do you think an easement is substantially below the value of a fee simple deed? I feel like I could get the easement and down the road the property should switch hands and one land owner wants me off the property at any cost and tries to throw paper at my lawyer until I just relent and sign over the easement instead of having to try to litigate any minor thing. So, for me, the value of owning the land would be quite a bit more to avoid the headaches.", "replies": [{"id": "fqffxzi", "text": "No, a truly permanent easement is \"appurtenant\" in that the dominant party remains in that position even if the subservient party sells their interest.  \n\nIt's not the proper legal term, but let's call you the \"buyer\" of the easement. Your interest is not full ownership, but it is a true transfer of the most important property rights, control and access.  If you're getting parking spots, I'm assuming that means they are reserved spots, so you probably get the right of exclusion as well.  You could probably sell your spots without the \"seller's\" permission (maybe they get a first right of refusal?  That's negotiable).  So you get disposition as well.  And the \"seller\" would be a fool if they didn't make you pay the maintenance, and the pro rata property tax. \n\nSo, given all that, there's only a sliver of difference between your easement rights and the full fee simple rights.\n\nIn my experience, ground rent cap rates are typically lower than most other leased fee real property rates.  They're typically more secure, longer term, have less headache.  I'm not saying I know anything about your market, but in another comment you said you might be thinking about a value that equates to a 3.4% cap rate, which doesn't sound unrealistic to me at all.  Maybe I would nudge it up a few basis points based on being an easement rather than fee simple title, but I might not, depending on the circumstances.\n\nAll that being said, you should probably consult an appraiser, and you should definitely consult a real estate attorney, to make sure this goes in your favor, financially and legally.", "replies": [{"id": "fqg1z1v", "text": "Brilliant, thank you.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]