2nd Street Industrial Appraisers

As appraisers, we are as good as our clients ask us to be. That is true of any business people. For the heart surgeon, "good enough" needs to be very good: one slip, and the client is dead. For the maker of peanut butter, on the other hand, good enough may mean only that the contaminants in the product are kept below some maximum tolerance level. The requirements for an appraiser are somewhere in between.

Appraisers are judged not so much on the accuracy of their price predictions but on form and credentials. The quality of a doctor's work can be measured by the percent of patients that are cured. The quality of a baseball player's play is measured in a ream of statistics: batting average, on-base percentage, or earned run average. No one much cares whether the pitcher throws the ball in an unorthodox way. Results, not form or credentials, are all that counts.

Appraisers are judged on whether their product, the report, is "credible." The Uniform Standards of Professional Appraisal Practice make credibility the standard. And credibility is open to broad interpretation. It is never as clear-cut as whether the ball got to first base before the batter. Joe and Enid compete for appraisal business. Joe does a great deal of business, in spite of the fact that his value estimates are consistently well below what the properties he appraises eventually sell for. Enid, conversely, is very accurate as a price predictor. But she does far less business, because she is a rookie, without credentials. No one knows how good Enid is because no one is keeping score on what should be the primary task of an appraiser: to be an accurate price predictor. Appraisers and their clients are in serious need of a scorekeeper. We need umpires, and we need statisticians.

Second Street Industrial Appraisers is the new branch of Eric Reenstierna Associates. Second Street Industrial Appraisers specializes in the valuation of workplaces - offices and industrials. Rather than generalize, like a doctor who may operate on a stomach one day and a brain the next, we specialize. And by specializing, we bring a level of knowledge to an assignment that is more likely to lead not only to credibility but to higher accuracy in price prediction.

We use the tools of a statistician. We answer questions that our clients may not be in the habit of asking:

- what will the value of this property be in ten years?
- what are the circumstances that would produce a high or a low price?
- how is this property likely to perform as an investment?

For investors, the answers to these questions are important. The data are available to provide useful answers. Data services make projections of vacancy, rent, and capitalization rates over five- and ten-year horizons. Appraisers can use this kind of data to answer investment questions and to forecast price.

Excellence sometimes comes not so much from what is asked of us but from what we ask of ourselves. At Second Street, we operate on that basis. We want to know how we are performing, in terms of answering a broad range of our clients' important questions. We track the accuracy of our answers. We want to compete not just on adequacy, or "good enough." We want to compete on excellence.

Eric T. Reenstierna, MAI