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Welcome to our 1st Quarter 2016 Newsletter, highlighting our recent work.  In this edition you will find information on how (in the world!) to value a wind tunnel, the charter school market, an upcoming symposium on the Future of Cities at Stanford, and the challenges of development under EB-5 guidelines.

Anytime we can provide you with market research information, consulting, or simply answering a question, just let us know; we are happy to be of help.  It's why we are here.


Steven R. Norris, MAI, CRE

Norris Realty Advisors
Low Speed, High Value
Valuing One of the Nation's Few Privately Held Low-Speed Wind Tunnel Test Facilities  
Over the past 16 years, Norris Realty Advisors has had many opportunities to value a number of unique and unusual properties.  Earlier this quarter we were presented with one of the most challenging tasks we have undertaken - the valuation of perhaps the nation's only privately held low-speed (non-supersonic) wind tunnel test facility. 

According to NASA, wind tunnels are elaborate structures for "flying" aircraft on the ground; tube-like structures in which wind is produced, usually by a large electric-powered propellers, to flow wind over objects such as aircraft, engines, wings, rockets or models of these objects. 

The subject aerodynamic testing facility was built in the 1950s.  How does one value a wind tunnel with improvements dating back this far?  With the goal of answering this question, we contacted a number of major aerospace defense firms we have worked with in the past who have highly specialized expertise in this area.  

The Cost Approach could not be utilized, as only a handful of similar wind tunnels have been constructed in the US in the past 25 years.  The Sales Comparison Approach was also not useful in valuation of the property as an operating wind tunnel testing facility, due to its unique nature.  Our research of wind tunnel facilities across the nation (and around the world) reveals there is no identifiable market for this type of improvement.  Confirming this, the subject is among only a handful of private defense contractor-operated facilities in the world.

Unlike other almost all wind tunnels worldwide, this specialized improvement was operated under a long-term lease.  The overwhelming majority of wind tunnels are operated by their owner/users.  Given this, contract rent for this property was significantly higher (>400%) than the industrial leases in the surrounding region. 

The majority of the value of the property was contained within the recently renegotiated lease.  The defense contractor tenant has occupied the facility since its opening, and has extensive data on the calibration of the facility for their specific testing processes.  Therefore, the factorial differential between local rents for warehouse space and the subject wind tunnel is entirely a function of the very specialized testing equipment inherent in the wind tunnel design.  For more on the history of and "fun with wind tunnels", see the NASA-created video below.
Stanford University - Global Cities in an Era of Change
In early April, Steve Norris will be attending a unique symposium at Stanford University entitled "Global Cities in an Era of Change", formed and sponsored by the Counselors of Real Estate.  Key topics to be addressed will include:

* Defining the global city of the future
* Risk management and resiliency
* Terrorism - Cyber and Domestic
* Smart cities on a human scale
* Global capital flows
* Leveraging technology
* Sustainable urban infrastructure
* Autonomous vehicles

Stay tuned for a summary of this meeting in our Q2 Newsletter.  For more on the symposium, visit the Global Cities web site, here.  
Charter Schools: 
California's Fastest Growing Educational Trend

Earlier this year, Norris Realty Advisors was retained to value a portfolio of charter schools for one of California's larger charter organizations.  The campuses were scattered up and down the California coast, from Oakland to Los Angeles.  This assignment is in keeping with our valuation of over 100 charter and private school campuses throughout California and other parts of the country. 

In our research, one trend was undenia
ble: the growing number of charter schools opening yearly in California.  According to the National Alliance for Public Charter Schools, 104 new charter schools opened in California the 2013-2014 school year with a total of 519,000 students enrolled, a 10.3% increase in enrollment over the previous year. 

At present, the future of charter schools in California may be unknown, as state funding has recently come into question.  Larger public teachers' unions have opposed the expansion of charters.  An initiative to repeal the California Charter School Act of 1992, aimed to be on the November ballot, has just been introduced and could potentially shut down charter schools.  However, despite efforts to limit the spread of these independently run schools, there is ample evidence that they have substantially changed the landscape of public education in California.

To learn more about Charter Schools in California, visit the California Charter School Association, here.  

EB-5 Immigrant Investor Program:
Real Estate Heaven or Purgatory?

In the recent past Norris Realty Advisors has provided consulting on several now-troubled major "EB-5" real estate developments.

Our research indicates that a significant number of these development efforts suffer from an array of problems, including poor planning, inadequate and unsightly architecture, uninformed lenders and investors, and a lack of successful leasing following construction.  Are some of these developments merely a ticket for a green card, or brilliant investments in America's future?

To learn more about the risks and rewards of EB-5 development, visit these articles at:

The Wall Street Journal  

Thank you for taking the time to review our Newsletter.  Contact us directly with any questions.

Steven R. Norris, MAI, CRE View our profile on LinkedIn
Norris Realty Advisors