Special Purpose properties are an important valuation specialty. The value of the real estate, as well as the value of the business enterprise and all tangible personal property are intertwined and interdependent.
The business enterprises of Real Property Going Concerns, like restaurants, bowling alleys, gas stations and car washes, are location and real estate dependent. And, if the highest and best use of the real property is for continued operation, then the value of the real estate is directly tied to its contribution to the enterprise.
Given these truths, that valuation of the total enterprise provides crucial information in developing and supporting the value of the underlying real estate. It also provides critical information in the valuation of the business only, since there can be no business value until the real estate is satisfied by the cashflows.
It is the revenues from the business that will pay the mortgage and maintain the property; this is in sharp contrast to the collection of rents, which is more common with general real estate assets such as retail strip centers and multi-tenant office buildings.
Buyers and sellers in the market commonly base their purchase and sale decisions primarily on the income generating capacity of the property and the business together as a going concern. USPAP admonishes appraisers to reflect market behavior within appraisal reports.
An important professional standard involves the allocation of values. Specifically, allocations are explicitly considered by USPAP to represent appraisals of these other components. Further, appraisers are required to comply with the Competency Rules associated with the appraisal of those components.
According to the Appraisal of Real Estate, 14th Ed., “Only qualified practitioners should undertake these kinds of assignments, which must be performed in compliance with the appropriate professional standards. It may be necessary for a real estate appraiser to collaborate with a personal property appraiser or a business appraiser or both on such an assignment.”
Bruce E. Jones MAI, ASA-GC, BCA, CMEA, CTA is a MAI designated Real Estate Appraiser through the Appraisal Institute. Holds the only professional designation in Going Concern Valuation from the American Society of Appraisers. Is also Certified as a Business Appraiser and as a Machinery/ Equipment Appraiser. The BCA is one of the few professional business valuation designations recognized by the SBA as a Qualified Source for business appraisals. Similarly, the CMEA designation is one of the few professional designations for the appraisal of machinery and equipment recognized as a Qualified Source for those appraisals.
The combination of these various appraisal skill sets provides me with unique understanding of these complex property types, while also providing my clients with the unique ability to obtain a single appraisal that accurately and reliably quantifies the underlying value of the real estate, as well as the business and all other component parts of the business.