I was talking with a friend last night about the unfortunate events surrounding the closing of Gloryland Harvest Church in Radcliff, KY. A large percentage of the congregation of Gloryland Harvest Church consisted of military families from nearby Ft. Knox military base which, under the Base Realignment and Closure Act (BRAC), recently lost around 1,000 troops. As things happen, a balloon note came due and, unable to pay the note or to find other banks willing to lend the money, the church now faces foreclosure. So much for the prosperity message. But I digress.
The purpose of my post this morning is to stress the importance of demographic profiling in commercial appraisal work. It’s no secret that the economic fortunes of military towns wax and wane in synch with troop movements. But I wonder if the lender was aware to what degree this facility was reliant on the contributions of Uncle Sam’s finest or the level of risk posed by lending on such a facility? To find out, I went to my brother Wyatt’s website where, using the latitude and longitude of their facility, I was able to create a demographic profile of the area.
Check out this chart:
See how nearly 50% of the local population consists of those employed by the military? In addition to risk from the lack of diversity in the local economy, from 2000 through 2010, this census tract actually LOST population.
As a commercial appraiser, at a minimum, population growth in an area should influence my opinion value, don’t you think?
On more than one recent occasion, local participants involved in the real estate industry actually laughed when I mentioned “the demographics” of an area. Really? Well, laugh if you like. But the charts don’t lie. And there’s at least one bank out there that likely wishes they had lent their money in an area with a better demographic profile.