FF&E included in appraised value?

[spieldberg]

Hello - if you appraise a restaurant, do you normally include the FF&E and bundle this into one value.. the appraised value?

 

[Howard Klahr]

It depends. Who is the intended user, what is the intended use and what is the scope of work? This is why these items are required in all reports.

 

[CBBoston]

With restaurants we generally split out FF&E no matter who the client is. Some government agencies require it to be separated. Don't forget about liquor licenses which can be worth several hundred thousand in some places.

 

[Terrel L. Shields]

The appraiser must disclose the FF & E in valuing a property. The FF & E is part of the overall property value. Appraisers often only value the Real property but must disclose the impacts of FF & E and Business Enterprise Value (BEV) upon the property.

Going Concern values are unacceptable for "Market Value" in a federally related transaction (a transaction over $250,000 for a regulated bank.)

 

[MNRural]

It can be included in the final value. The appraiser's job is to disclose whether or not it was included and its 'effect on the market value'.

Like the previous poster said, it depends on the purpose of the appraisal and what it was being used for, whether it is broken out. Most appraisals are for banks and banks can't provide a RE loan on FF & E or business value.

Unfortunately, most banks don't know enough about the appraisal process to know what to ask for or who is qualified to do an appraisal on a restaurant.

Some appraisers put a number on the FF&E based on the depreciated cost, but that is not correct or in compliance with Uniform Standards.

In my opinion, you need a specialist to appraise a restaurant. Most restaurants are a business and real estate, not simply real estate.

 

[Gobears81]

In Illinois, most restaurants (that I've seen at least) don't have allocations on declarations for personal property. An exception is downtown restaurants for some reason.

In the real estate principles class that we have all taken, we discuss how tests to determine whether items that were originally personal property become fixtures, and hence real property. Items such as affixed dishwashing or fryer machines and fully enclosed walk-in coolers will transfer upon sale in nearly all cases for these types of properties, and typically no allocation is made on transfer declarations. Although the depreciated costs of these items could likely be supported, it is unsupported by allocations on transfer declarations, which are often skewed by tax motivations anyways. These items often increase the value of the property, although they also typically qualify under the tests of a fixture becoming real property.

One thing that I think has skewed this argument a bit is statutes for assessment purposes. Gas stations for example have items such as fueling dispensers and underground storage tanks which transfer in nearly all cases. They qualify under the test of a fixture (and hence real property), but aren't included in the assessment, although what is items are determined to be a fixture varies between jurisdictions.