Garden Center Valuation - Going Concern or no?

[tsiegel]

I am being asked to appraise a garden center/greenhouse. I am curious as to whether people would value this type of property as a going concern or just simply real estate only. Seems to me, that I see garden centers selling with the business enterprise often, but do not see them selling as real estate only for continued garden center use all that often.

The garden center cannot really be removed from the real estate and still be the same garden center. Seems that one would need to include the intangibles in order to appraise the property in its highest and best use. Am I way off on my thinking on this?

Curious to get some feedback on my thoughts. Thanks.

 

[CANative]

Does it use up a lot of valuable commercial/retail land to keep and maintain their living inventory and have a relatively small retail building/showroom?

 

[tsiegel]

Does it use up a lot of valuable commercial/retail land to keep and maintain their living inventory and have a relatively small retail building/showroom?

I am not sure just yet. That's what I am envisioning, though.

 

[Tim The Enchanter]

Is the Garden Center H&B use of the land? Maybe an interim use for a while longer?

 

[Terrel L. Shields]

I have seen one sell as RE - plants were valued separately. I saw another sell out because the land was too valuable - Sold for land only, then they bought up a competitor's property a couple miles away with pretty much had all the buildings they needed - No BEV as this one was REO.

Generally, green houses are treated as real property. The enterprise value is in the sales of plants, etc. and often there may be an element of landscaping offsite to consider so I attempt to value the RE only when asked to do these. Typically, the HBU could be something else. I can't think of a sale in the past 5 yr. where there was anything more than a metal building or two plus land...usually 2 acres plus land.

 

[sail143]

Well established garden centers often have suburban development around them. This combined with limited value buildings typically result in there being another highest and best use "as is".

 

[BRCJR]

If your subject is to be used for a regulated transaction remember page 9 of 45 in the Interagency Appraisal and Evaluation Guidelines states:

Be based upon the definition of market value set forth in the appraisal regulation.
Each appraisal must contain an estimate of market value, as defined by the Agencies'
appraisal regulations. The definition of market value assumes that the price is not
affected by undue stimulus, which would allow the value of the real property to be
increased by favorable financing or seller concessions. Value opinions such as
"going concern value," "value in use," or a special value to a specific property user
may not be used as market value for federally related transactions. An appraisal may
contain separate opinions of such values so long as they are clearly identified and
disclosed.

 

[Lost Cause]

How you should look at the property depends on the intended use and user. If the assignment is in connection with a mortgage loan, then the lender needs to know the value of the real estate. From your client's perspective, should a default/foreclosure situation arise, the garden center business will quite likely no longer be viable, making the business value irrelevant.

 

[Michael S]

I appraised a property like this recently. It was sort of a garden center/furniture store. They sold some plants but mostly furniture, pottery, home decorations, and touristy kind of stuff (jewelry, etc.). More than half the value was in the land but some of the improvements were pretty substantial so from a HBU standpoint it wasn't a land play yet. Perhaps in the future as the location was pretty solid along a major commercial road. I did manage to find one recent sale of a very similar property with a similar business model. There was no going concern in that case, just a straight forward real estate transaction.

The property I appraised was originally a nursery/greenhouse and the buyer purchased it as land many years ago and demolished all but one of the greenhouse buildings. That one got converted into a sort of seasonal retail building.

 

[tsiegel]

Thanks all. Sounds like doing the going concern isn't likely appropriate for my client's use. It is not difficult to get to a value of real property only on this, so that is likely the way to go. Thanks again. Merry Christmas!