fast-food restaurant appraisal

[grant gryseels]

im not looking for somebody here to pick apart and critique my posts. i dont need a definition of market rent or of a land sale. i want somebody to see the big picture and provide me an answer. not to teach me, but an answer. my book and other people say that there is an ongoing concern value here, the books says specifically that this is typical when appraising restaurants. when in your opinion would going-concern be applicable? and why in this case would it not?

 

[PL1957]

im not looking for somebody here to pick apart and critique my posts. i dont need a definition of market rent or of a land sale. i want somebody to see the big picture and provide me an answer. not to teach me, but an answer. my book and other people say that there is an ongoing concern value here, the books says specifically that this is typical when appraising restaurants. when in your opinion would going-concern be applicable? and why in this case would it not?

Most of the stuff you've posted indicated that you have a typical NNN deal where the real estate is owned separately from the business. Then, every once in a while, you throw in "but people tell me it must be a going concern because my cost approach doesn't work."

You've been given two sets of answers here - one for a NNN valuation and the other for a going concern. PICK ONE!!!!!

For your sake, I hope you pick the correct one, otherwise your client will be very, very upset.

BTW, capitalization really does make your posts easier to read.

 

[Hal Mann]

Don't Get Confused; PL is correct

the owner whom i am doing the appraisal for does not own the franchise, or run the business . he strictly owns the building adn the land it sits on. he rents it to the franchise chain

Based on this information, you are looking at a leased fee encumbered with a net lease. This particular net lease appears to be well over market rent for comparable area buildings. For such a property, the Cost Approach simply does not apply. The only truly applicable method for such a property is the Income Approach. In most cases, a fairly simple direct capitalization of the net rent will suffice. The key issue is selecting an appropriate cap rate.

The difference between capitalized income and your cost approach is the result of the above-market rent advantage the owner of this property enjoys. Forget all the goobledygook about 'value in use'; this property appears much simpler than that.