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Overhead Crane In Machine Shop

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DREA Dean

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I have a client asking for a fee quote on an owner-occupied warehouse/machine shop industrial property. The client indicates that "A prior appraisal included the crane in the value due to the difficult nature in trying to remove it from the building’s infrastructure. ... If you would be able to include the crane value in your report and this would increase the fee please note that."

I guess the first question is whether or not the crane is real or personal property. I consider cranes to be personal property, and do not include them in valuation. Yes, they are attached to the building, so a case could be made that they become real property once installed. I think they are more like trade fixtures that are necessary for certain businesses, but not part of the real estate. As an important aside, I work in a rural market, and there are far too few sales and leases to extract any sale or rent value for cranes. But I'm open to suggestions.

My instinct is to say the crane is personal property and should be valued by a machinery and equipment appraiser (not me) if the bank wants to use it as collateral, but thought I would post here for any advice.
 

Terrel L. Shields

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an owner-occupied warehouse/machine shop industrial property.
Without the crane, it isn't a machine shop is it? It is attached to the warehouse right? It is a fixture. Fixtures are part of real estate. Same for air conditioners, light fixtures, etc. It is part of the necessary equipment for it to be a machine shop. That was the way AI taught it anyway.

Depreciated cost is the best way to calculate a contribution .


Fixtures:
Fixtures include all equipment and personal property attached to the building in a permanent fashion and necessary to the utility of the property under its current highest and best use. As such, it is regarded as realty.​
 

Ken B

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I agree with the OP. I have never assigned value to a gantry crane or crane ways and I have appraised more than a couple properties where they were present but not used and the owner didn't know if they were operational or not. Local industrial brokers state that they typically are not included in the price paid for real property. They may be a fixture, but they are a trade fixture that sellers would not typically remove because the salvage value is likely less than the cost to remove.

I think a good analogy here is a floor mounted vehicle lift in a small bay warehouse. The lift may be necessary for the small bay's use in support of a vehicle repair shop, but the next user may be a cabinet builder who doesn't need or want a lift. Does the lift add anything to the rent that could be commanded by the space? Not likely.
 
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Meandering

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I would consider the crane rails as part of the real estate. The motor would be chattle.
 

Gobears81

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Illinois
I agree with the OP. I have never assigned value to a gantry crane or crane ways and I have appraised more than a couple properties where they were present but not used and the owner didn't know if they were operational or not. Local industrial brokers state that they typically are not included in the price paid for real property. They may be a fixture, but they are a trade fixture that sellers would not typically remove because the salvage value is likely less than the cost to remove.

I think a good analogy here is a floor mounted vehicle lift in a small bay warehouse. The lift may be necessary for the small bay's use in support of a vehicle repair shop, but the next user may be a cabinet builder who doesn't need or want a lift. Does the lift add anything to the rent that could be commanded by the space? Not likely.
I tend to agree with Terrel here. To me, this sounds more like the crane is somewhat specialized and doesn't offer significant value. That the salvage value is less than the cost to remove provides additional evidence that it is a fixture and consequently, real property. I appraised a partially complete independent living facility in the past year for foreclosure and the previous owner took the definition of fixture to the extreme and removed everything that wasn't absolutely real property, such as kitchen cabinets. For most industrial properties, the cranes run with the property-I'm not sure that I've ever encountered a case in which a larger crane was removed as part of the transfer. But, I have seen numerous cases in which the machinery/ production equipment was removed.
I suppose that there are limitations, such as the smaller cranes that could be easily removed, but I suspect that these types of cranes aren't the crux of this discussion.
 

Howard Klahr

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I think they are more like trade fixtures that are necessary for certain businesses, but not part of the real estate.
This is somewhat market dependent. As you that you're located in a rural market and that a crane for industrial properties within your market area are not common. Consequently, a crane in your subject would be a superadequacy and not likely contribute meaningful value anyway.

Other market areas with an abundance of industrial/manufacturing properties where built-in cranes are common, this would be included as part of the real estate, considered a fixture to the improvements and likely result in positive amenity value.

Your comp data will bear out both as rentals and sales. When including the crane in the value however I would not base it solely on depreciated cost. How many times has it been state on the forum that cost does not equate to value.
 

Michael S

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New Mexico
I've appraised several properties with cranes and as far as the local industrial market is concerned, they're basically invisible. I've talked to brokers, buyers, and sellers of properties that sold with cranes and the most anyone has ever said is that it was nice to have - but they didn't pay anything extra for it. This goes from the little 1-ton cranes in a machine shop to 5-10-ton cranes in a large manufacturing facility. At most you might just consider it in the overall quality of the property as an amenity and maybe conclude slightly higher than you would have otherwise.

I wouldn't spend too much time on it. Interview a couple of local brokers to see if they think buyers of similar buildings would pay more for a property with a crane (which is probably several years old at least) and you'll probably find out that either they don't have enough information or the answer is no.

Here's an excerpt from an appraisal I did of a large manufacturing building. In this case the cranes could have been removed and the tenant (who was buying the building) indicated that if they moved out they planned to take the cranes with them along with the two-story high metal stamping machines.

"The property contains three overhead cranes (2 – 7.5 tons, 1 – 10 tons) mounted on elevated tracks. These cranes are bolted to the concrete slab and are considered personal property of the tenant, XYZ Metal Company. Additional personal property includes multiple large metal stamping machines and storage rack systems. These items of personal property are not considered real estate and are excluded from our analysis."

Another property was a steel shop that had several cranes including crane ways that extended out into the yard. These were built into the buildings and could not be easily removed and so were considered part of the real estate.

"Comparables 2 and 7 are similar to the subject in that they were both purchased with multiple cranes in place. However, the buyers of both of these properties did not contribute any additional or allocated value to the cranes. This is generally consistent with comments made by several industrial brokers indicating that there is generally little to no demand for these improvements in the current market. While they may offer some additional utility to industrial users with heavy loading requirements, these types of users are limited at the present time."
 

Terrel L. Shields

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Technically, I would never call a crane "personal property" unless it was a trade fixture owned by a renter. Same for frame machines in auto body shops, etc. It is part of the package and usually the change of ownership reflects the value of the on-going operation even when the operation may have a negative return and the buyer is anticipating turning things around. All that is really being sold is the real estate and the expectation that the real estate is complete so that the new owner can resume and hopefully, become profitable.
 

Michael S

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New Mexico
Technically, I would never call a crane "personal property" unless it was a trade fixture owned by a renter. Same for frame machines in auto body shops, etc. It is part of the package and usually the change of ownership reflects the value of the on-going operation even when the operation may have a negative return and the buyer is anticipating turning things around. All that is really being sold is the real estate and the expectation that the real estate is complete so that the new owner can resume and hopefully, become profitable.

In that case it was basically a large warehouse building. It was only a two tenant property. One tenant was strictly operating as a warehouse while the other had a couple of big metal stamping machines (and cranes and storage racks) and was using it for manufacturing. When their lease ended they would unscrew the bolts and haul away the metal stamping machines, the storage racks, and the cranes (except in this case they decided to buy the building rather than renew their lease). In most cases where I see cranes in industrial buildings they are welded to the building structure and permanently affixed. The ones in this warehouse were basically in a receiving area where a semi-truck would back in with big rolls of sheet metal that would be unloaded with the crane, and then moved over to the stamping machines. The whole crane way was only attached to the building with some bolts in the floor and it would have been straightforward to unscrew the bolts, disassemble it, and move it to another building.
 

Russ Kitzberger

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Some good suggestions, here. I can add that two quick items which should be considered in crane buildings related to quality of construction.

First the existence of a "crane way" requires that the area is completely open and has a even clear height, which requires a certain level (or better) of quality of construction.

Second is that sometimes the rails or their support system is part of the building structure, so in those cases the rails clearly are beyond trade fixtures or personal property and are related to quality of the foundation and structure ( and level of engineering). Depending on your state common law you might have a case of method of affixing the fixture making it real property especially with welded or structurally incorporated beams.

Here is a link with some examples of rails which have been engineered into the building structure.

http://www.ytcrane.com/Technical_Support/knowledge-center/structure-of-beam-crane.html#.WA0hh-grJdg

I see quite a few light industrial and heavy industrial crane properties in the industrial areas of Cleveland, Akron, and Cincinnati. Sometimes it is a marketable aspect of the property (depends on submarket). In the case of your example, in Ohio bolted items are usually trade fixtures, so I would account for that crane in an Ohio appraisal as trade fixture with the requisite level of building quality/clear height/floor thickness.
 
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