Horse Arena

[skijoring]

This is a consulting assignment (near as I can tell).
A ~300 acre tract of rural land has a conservation easement encumbrance that prohibits subdivision and protects open space. The easement was purchased with some public funding. The land is vacant. A prospective buyer wants to build a home and horse arena. The easement allows a residence and a barn of unspecified size. The land trust holding the easement is unsure if allowance of the arena would be in keeping with the intent of the easement. The land trust and buyer struck a deal: a horse arena of specified dimensions and use is allowed if the buyer will give up the right to build tennis courts and install a swimming pool. My job is to determine if allowing a horse arena will enhance the value of the property beyond the loss of the pool and tennis courts.
I am looking for any information regarding the contributing value of horse arenas. I am currently researching the local market for sales of properties with arenas but I am also looking for any "studies".
(Terrell, feel free to wade in!)

 

[Jerry Dell]

SE Alabama and NW Florida, I have seen some horse arenas on the market but appear to never sell. It appears this is basically a specialized custom improvement with contribution being less than cost.

 

[Vernon Martin]

There's at least one subdivision associated with the Colorado Horse Park in Parker. Maybe you can find some meaningful sales there.

 

[hastalavista]

I am looking for any information regarding the contributing value of horse arenas. I am currently researching the local market for sales of properties with arenas but I am also looking for any "studies".
(Terrell, feel free to wade in!)

I'm thinking this analysis is very market-specific and significantly dependent on the size of the equestrian facility and the competition for similar-type properties. Is the facility going to be so large as to change the primary H&BU of the property (from residential to commercial)?

In areas of my market there are limited horse-properties available so they sell at a premium to a specific buyer-type (these properties are significantly smaller than your subject, usually 5-10 acres).
However, on some of the larger lots (50-100+ acres), there are larger equestrian facilities that board and train and, as a consequence, are not primarily residential.

It seems to me that it would be helpful to identify the competition level (and the resulting effect on value) among horse-allowed vs. non-horse allowed properties because that is what the building restriction effectively creates: the ability to have horses or not have horses.
If there is a difference (let's assume a premium for a horse-property such as exists in my market) then the appropriate comparison is horse properties with equestrian facilities vs. non-horse properties with pool/tennis courts.
If there is no difference between the two types, then you'll probably have more comps to choose from. In fact, if there is no difference between property types, the analysis becomes much easier because you can compare
(a) properties with tennis courts/pools and
(b) properties with horse facilities, against
(c) properties with neither
and see which feature adds the most value.

 

[Terrel L. Shields]

(Terrell, feel free to wade in!)

fools rush in where angels dare not tread, they say.

I would think the additional improvements - regardless which - would suffer some functional obsolescence in terms of being overbuilt for market (or you can argue it is economic obsolescence, a form of External obsolescence) I'd follow Denis's suggestion to extract some values from sales (even if old sales) and see which is likely to contribute the most. Apparently the easement allows for animal grazing.

 

[Metamorphic]

We deal with horse keeping amenities attached to SFRs around here all the time.

I've extracted adjustments for them several times but its a difficult thing to get a handle on; its not always there when you go looking for it.

It seems there's a lot of nuances. The details of location is important; horse facilities next to riding trails/back country is worth more than facilities on land where you have to trailer to actually ride the horse. Barns/stalls, their size, construction, amenities are a big deal (probably a bigger deal value wise than the arena - an arena is not much good without a place to keep the horse) but you rarely get good enough information about them to do real comparisons. Same with fencing; what kind of fencing, how much of the acreage is fenced, is it cross fenced. Same with arenas. At it basic level an arena is just an area with sand where you can safely work the horse. I've seen them as simple as a1000sf area outlined with rail road ties and filled with sand. I've also seen them in the 5-10k feet range some with roofs and fancy split rail or metal fences, lights, etc. The latter are obviously more commercial'ish.

There's one other confounding factor; that's the horse people themselves. To put it simply, they're frequently insane and unpredictable. When they find their dream property, they're VERY willing to pay top dollar for it; its almost like it becomes a non-arms length deal at some point. Supply and demand go out the window. The quality, condition and appeal of the house their children will be living in take a back seat to the quality and condition of the barn. There is no principal of substitution at work. Talk to realtors, they'll tell you....crazy....sometimes. On the other hand when horse property sells to non-horse people they dont put much value at all on the horse improvements; the fencing is just a property boundary, the barn is just a place to store a car. So you've got this amenity that can be worth a lot...maybe even cost....or it can be worth about what a tuff-shed is worth. Just depends on which buyer you draw. I'm starting to think marketing time will be a very crucial factor on horse properties. If your market is stable or appreciating, you can wait for the insane horse person, and clock a very high sale due to the contribution of the horse amenities. If your market is depreciating or your sale is forced at some level, and you cant wait for the ideal buyer, your horse ameniteis may be worth nothing.

As a practical matter, we tend to see basic horse amenities adjusting at about $10k to a $400k property, and more deluxe amenities adjusting into the $50k range.

Sorry that's kind of a long ramble, but this is a tough amenity to deal with and I'm still getting my arms around all the variables.

 

[Michigan CG]

It is my experience with small acreages that have nice indoor riding arenas, stalls and ample paddocks that constructing one of these is akin to buying a Kia. Build it, buy it and lose 75% right after driving it off the lot.

 

[J Grant]

I am not a commercial appraiser, am residential, but am one of those "insane" horse people, lol. I can tell you in a state like CO with winters, an indoor arena would add a lot of value, as the resale buyer of a 300 acre property would most likely be another horse nut ( or they can use the arena for something else) There are luxury home magazines avail in tack stores if you live near one or go online to horse sites, try Chronicle of the Horse. ask some of the people there what they would be willing to pay. Punch in luxury equestrian homes/estates in CO on you computer, Sothebys and so on, and look at the ones listed with arneas and acreage. The buyer of a 300 acre tract is diff form a buyer of a small 5 acre farm. what is the main house like, that should give you a clue, and is this a second home (vacation) home? That means they have money to burn. I would not be surprised if it were .

In FL, a covered arena was recenlty built that cost $200,000. That is far more than a pool or tennis courts. If they board horses, people are willing to pay a few hundred or more a month to board at a place with a covered arena. IF they keep their own horses there, and can afford a 300 acre property, they are most likely the type of people that would pay almost full value for the arena, this is different from a few acre home barn place with family horses, where of course nobody is going to be able to pay much for a covered arena.

If this is not a commercial property and is residential, the arena is equally, or more contributory value than tennis or swimming....it is personal as they are custom building for what they want. I'd imagine in CO with limited summer months pools and tennis courts would not be worth a huge amount, but would be part of a luxury estate for the few months of use they provide. A horse resale property would be to a specific buyer, look at resale equestrian facilities on large acreage throughout the state, they would have more in common with this than a 10 acre horse farm down the road.

 

[skijoring]

Many thanks everyone!