Copyright 2016. Kevin Casserly. All rights reserved.


Personal and Professional History of Market Analysis,

Feasibility Analysis, and Highest And Best Use

In 1974, as a geography major at the University of Minnesota, I wondered how many supermarkets there were in the neighborhood of my family home on 16th & James in the near north side of Minneapolis. I prepared a report showing that there were three, down from six (and there would soon be one then none). There were eight convenience stores containing lesser variety, higher prices, and little or no fresh food.

In late 1991 one of my first appraisal assignments was a large parcel of land in the city of Plymouth that had been foreclosed during the 1990/1991 Recession. City Planning staff insisted that municipal sewer would not be available to this neighborhood until 2002. The Wayzata School District bought the property out of foreclosure and built Wayzata High School after the city ran municipal sewer and water run to it. Within two years the area was developed with low density multi-family housing. This event taught me to try to anticipate the unexpected by doing greater and deeper research.

In 1994, after getting a bank finance assignment and being told by both the property owner and the listing Realtor that the subject property had only one right of access to a county road, I called the highway department to verify this information. I learned that it had more than one right of access, resulting in my opinion of value being nearly 50% higher than the sale price.

In 1996, I appraised a proposed multi-tenant industrial building. I was aware of many vacancies in the area and for the first time I researched, analyzed and delineated the market for this type of property - a Level C Market Analysis in appraiser parlance. My appraised value was less than the land and construction costs - meaning the property "as proposed" was not financially feasible. The bank asked me to reconsider my value opinion for this good customer who was also the mayor. The lender invited me to his office to "discuss" economic principles, not realizing that I had taught macro and micro economics. His opinions had nothing to do with the market value. I didn’t change the value. He stopped giving me appraisal work. The building was built but was underutilized with second tier quality tenants. Not long afterwards, the mayor asked me to appraise his parents’ property and has since invited me to visit him at his Florida home; and, the city gave me lots of appraisal work to do.

In 1999, I met one of the most astute land bankers in western Hennepin County who asked me to appraise the land value of a golf course. Over the next six years I appraised more of his large parcels of land, two for litigation purposes. I advised him on a variety of other properties. None of the appraisals was of property ready for immediate development. A parcel he bought in 1994 for $800,000 on a contract for deed with a small down payment he sold 2002 to a national developer for $12,000,000. My experience working with him taught me that claims of high values can be credible.    

In 2001, I appraised a well-kept, excellent-quality, engineering building near the northwest quadrant of I-494 / I-394. The building was undersized for its site. The result was that the value of the property "as improved" was the same as the value of the "site as though vacant" after demolition costs were considered. Thus, the highest and best use had two results:  "as vacant" as a buildable lot, and “as improved-as is”. The reviewer for the large national bank criticized the appraisal until realizing that the collateral for lending purposes would be exceptional - because there would be two different types of probable buyers – someone needing land or someone needing a well-kept, excellent-quality, engineering building at a prominent location.

In 2005 I appraised a liquor store on a major arterial street in South Minneapolis. It was a large, low-cost, one-story, retail building in fair condition on a large lot with lots of parking and lots of nearby redevelopment. It had potential for a four story apartment / condo building with retail on the first floor. The appraisal was for litigation in family court and every word was reviewed by attorneys. My $1.6±M appraised value was more than twice the value of the other side's appraisal. The conclusion was a settlement within 10% of my value. I expect that this client would be happy to be a reference.

In 2006, while appraising 4 residential lots in Montrose Minnesota for an umbrella mortgage, I learned that there were eight steps in the creation of the supply of finished, buildable lots: 1) lots ready to build; 2) lots under construction, 3) lots with final plat approval but no construction, 4) lots coming in for final plat approval; 5) lots with preliminary plat approval but not yet coming in for final plat approval; 6) lots coming in for preliminary plat approval; 7) lots with sketch plan approval but not yet scheduled for preliminary plat approval; and 8) lots coming in for sketch plan approval. Had all these lots been built, there would have been more than a 12 year supply based on a straight line projection of the 120 to 125 single family residential home permits per year pulled over the previous five years.

In 2007, I completed appraisals of two properties which I concluded were not financially feasible, i.e., the value would be less than the cost. One was an industrial condo building which was built and then bought out of bank-ownership in 2013. The other was a proposed residential subdivision that was not only not feasible but the underlying land was worth less than the owner / developer had recently paid for it. Within a year the newly developed subdivision was bank-owned. 

In 2008, I completed a mini-storage feasibility analysis that indicated that a site was not feasible for this use in a small city on the western fringe of the metro area. It was not built. Interestingly, at this time this city was assessing every residence $150 per month for the city's debt payments related to the city having underwritten infrastructure costs for residential subdivision development that had gone bankrupt.

For much of the time period between 2008 to 2016, the work on the developing fringe was to gauge the market for existing properties amid a glut of supply and a lack of demand. Interestingly, in 2012 farmland prices were so high, and demand for land with development potential so low, that agricultural values were similar to developable land values in far western Hennepin County - a market condition not seen in nearly 20 years.

From early 2015 to early 2018, land valuation of the developing fringe of the northwestern Twin Cities Metropolitan Area required in-depth analysis because some types of lots and land sold after 10+ years on the market.

During the summer of 2019 while doing rental appraisals for space in and near large shopping centers in the Portland Oregon and Des Moines Iowa metropolitan areas, I learned that profitable retail center space included three additional types of uses: food service, exercise space, and office space. 

In 2021, I have learned that 1) the values of some types of land in the developing fringe are worth less than they were during the pre-Great Recession bubble; 2) rural residential subdivision approvals in the exurban fringe are requiring extensive and expensive planning, including "ghost platting" for municipal sewer and water access some unspecified time after 2040; 3) Highly qualified potential buyers are not getting purchase agreements from sellers after offering $40,000 (10.5%), and $50,000 (12.5%), over list prices with terms including no inspections and the willingness to pay the cash difference should an appraisal come in low - because sellers have had better offers, e.g., cash, no inspection, no appraisal, and an immediate closing; and 4) Parents, of married young adults with a child, are worried that this young family will not find an affordable home.

Prepared: May 27, 2021