ag property with proposed grain storage

[MNRural]

Farmer has 200 acres, wants to put $500K in proposed corn drying and storage improvements. Otherwise, there are no improvements, no house, etc.

There are no sales comps that I could find with raw acreage and ag. improvements.

I believe that there will be loss in value to the improvements due to being a grain operation with no home, no other improvements. In other words, if he had to sell the day after completing it, no one would pay full cost for the improvements.

Does anyone have data or any other information that would be helpful to support an adjustment to the improvements for external obsolescence?

 

[farmguy]

In our part of the world right now you could pretty much name you price. Three to four years ago on farm storage sales, although rare, suggested about $0.75 to a dollar for just the typical 4 to 6 grain tanks, dump pit, and maybe a small leg. Due to grain prices and storage costs now the grain tank suppliers and installers are six months behind. Prices are running $2 to $2.25 for what we would call a standard set up down here. Have on lease purchase that has been finalized lately suggesting about $1.50 per bushel on 20 year old tanks still in useable condition. Our guys say they can pay for them in three years with storage savings alone.

Pretty common to have 5 acres and a few tanks seperate from farm. Typical deal, soem old guy retires, keeps the bulk of his place, maybe converts to pasture or rents it to somebody that doesn't need the storage so he cuts of 5 acres or so and sells it.

 

[Ray Miller]

Farmer has 200 acres, wants to put $500K in proposed corn drying and storage improvements. Otherwise, there are no improvements, no house, etc.

There are no sales comps that I could find with raw acreage and ag. improvements.

I believe that there will be loss in value to the improvements due to being a grain operation with no home, no other improvements. In other words, if he had to sell the day after completing it, no one would pay full cost for the improvements.

Does anyone have data or any other information that would be helpful to support an adjustment to the improvements for external obsolescence?

Don't think so.

We have many of those around the upper mid-west. He might even sell for a profit depending on the corn market or he could sell for a lost depending on the cost of fuel for drying or he might break even.

He might even make a bit if the price of scrap continues to climb like it has the past two years.

I assume that you are placing a value on the entire 200 acres is that correct with the new improvemnts, right?

 

[MNRural]

Thanks guys, yes 200 acres via land sales comparison approach, value of other stuff via cost approach, as there are no valid sales.

What items do you consider personal property (FF&E) and what is real estate? Improvements include grain leg, dryer, wet holding bin, 67,000 bu bin, shed, well, and misc. I know the bin can be moved, but much of the cost is in the pad and concrete.

The dryer and grain leg seem like personal property to me. My local assessor only counts the grain bins and shed as real estate. What do you say?

 

[stefan olafson]

Paul,

Hold it! You are about to violate USPAP! You can't value one part with one approach and then the rest with another!

I'm not sure where in MN you are located but if you look hard enough you should be able to find some sales data on this type of property.

The cost approach should be fairly easy with some sales to authenticate percent depreciation. Cost new should be readily available from the client, sales are out there, you may have to work a little harder to find them. The income approach appears to be relevant also, you can find rental info on similar storage around the state, rents on land in the area and on comparable sales. Then the sales comparison approach should fall into place relatively easy.

Good Luck, don't cut corners and violate USPAP!

 

[Michigan CG]

http://www.agr.state.il.us/pdf/licensed grain dealers.pdf

Paul,

The demand for grain storage is huge and there is a shortage. 67,000 bushels is quite small, and I am surprised it is a bin storage proposal. Most people are now building flat storage. Must be for his private usage. This amount of storage would only hold a few hundred acres worth of corn or beans.

Does your property have river frontage or rail service?

The dryer is personal property but necessary for the rest of the operation.

Sales are plentiful once you find one.

Check your PM I have sent you someone to call. We appraised a couple of his facilities twi years ago.

 

[stefan olafson]

Paul,

PM me, let me know where you are located and I'll see what I've got that may help.

 

[Wayne Tomlinson]

In my area of west central Illinois, I find that the presence of typical older grain storage or other improvements on farm land add little to the value of the farm when is sells.

Owner operators are putting up storage as fast as they can, It has run in cycles. The present price of grain is a factor.\

They certainly do not find a warm spot in the heart of an investor buyer. They have a great value to the assessor, but the return to an investor when most of the current leases are for cash for the crop land.

On one farm of 166 acres of Class A land, the real estate taxes on the farm was almost 50% attributed to a harvestore which was equipped totally for grain storage.

This particular structure had problems, had not been used for 20+ years, and still was paying RE taxes on it. It was an estate, I told the trust officer, she protested and the value was removed immediately. Didn't go back however.

I put very little value on grain bins due to having lots of opportunity to compare like kind sales.

Wayne Tomlinson

 

[farmguy]

Wayne, If owner operators are putting up storage as fast as they can, why wouldn't a set of bins have some value?

If you had a set of good bins on the corner of a farm, on a road, and the owner was willing to sell say 5 acres and the bins why would somebody build instead of buy?

 

[Michigan CG]

I'm not Wayne, and Wayne has vast knowledge of this, but from what I have read Flat storage is becoming very popular.