Parking lot appraisal

[incognito]

I am doing a favor for a friend and doing a casual review of a commercial appraisal he had completed. Though I am a CG, I have never really considered a parking lot as an income producing property, but this is what it is.

Quick rundown: Port Canaveral FL is one of the busiest Cruise ports in the WORLD. On site parking is inadequate and VERY expensive. A cottage industry of off site parking has developed, mostly in Hotel/motel lots in the surrounding area, much like you see at major airports. A local entrepreneur had a 2 acre commercial-industrial zoned crushed rock paved parcel VERY proximate to the Port, and now provides Park and Ride to the Port Cruise terminals for about 1/2 the price of daily parking at the Port.

The site has an old 5000+/- sq.ft. structure which provides adequate office and administration space, and waiting lobby for the transport busses.

The Port just Stopped issuing licenses for such lots being able to deliver passengers to the cruise terminals), but the existing ones (relatively few) can continue, and they are irrevocable. The business is a goldmine. Without the license to provide off site parking, despite the proximity to the Port and main highway exposure, the land and improvements are at best an RV and boat storage site, or perhaps industrial auto repair, etc. The license is tied to the land, and is not transferable to another location, and would certainly convey with the property if sold.

Should an appraisal of this parcel and improvements consider the income to the property from parking fees, which will continue, and likely increase in perpetuity, or is this a simple land appraisal with minimal value to the improvements, and a very valuable business (albeit only possible on this parcel). Is the license, which is tied to the land, a portion of the real estate? It has no value exclusive of the real estate...

Your thoughts?

 

[CANative]

In many cases fee parking is a transitional use of the land. In this situation it doesn't sound like there will be a foreseeable use that would be more productive than fee parking.

The property has rights (why think of it as a license) that allow for it's use as paid parking.

A buyer would of course consider the income.

I doubt if a sales approach is even needed.

 

[BRCJR]

I believe you could do the income approach via the owner/operator income statement as of the effective date.

It is an income producing property as of the effective date.

 

[Papoua Jose]

The Port just Stopped issuing licenses for such lots being able to deliver passengers to the cruise terminals), but the existing ones (relatively few) can continue, and they are irrevocable. The business is a goldmine. Without the license to provide off site parking, despite the proximity to the Port and main highway exposure, the land and improvements are at best an RV and boat storage site, or perhaps industrial auto repair, etc. The license is tied to the land, and is not transferable to another location, and would certainly convey with the property if sold.

I wonder who on the port authority board has either direct or indirect interest in an existing parking lot(s)?
.

 

[Tim The Enchanter]

I wonder who on the port authority board has either direct or indirect interest in an existing parking lot(s)?

Ya think?

I don't do commercial, but it sure seems the income produced makes the value of the property. A buyer would want the income stream. And maybe free parking passes. :blush:

 

[Highlight17]

I am doing a favor for a friend and doing a casual review of a commercial appraisal he had completed. Though I am a CG, I have never really considered a parking lot as an income producing property, but this is what it is.

Quick rundown: Port Canaveral FL is one of the busiest Cruise ports in the WORLD. On site parking is inadequate and VERY expensive. A cottage industry of off site parking has developed, mostly in Hotel/motel lots in the surrounding area, much like you see at major airports. A local entrepreneur had a 2 acre commercial-industrial zoned crushed rock paved parcel VERY proximate to the Port, and now provides Park and Ride to the Port Cruise terminals for about 1/2 the price of daily parking at the Port.

The site has an old 5000+/- sq.ft. structure which provides adequate office and administration space, and waiting lobby for the transport busses.

The Port just Stopped issuing licenses for such lots being able to deliver passengers to the cruise terminals), but the existing ones (relatively few) can continue, and they are irrevocable. The business is a goldmine. Without the license to provide off site parking, despite the proximity to the Port and main highway exposure, the land and improvements are at best an RV and boat storage site, or perhaps industrial auto repair, etc. The license is tied to the land, and is not transferable to another location, and would certainly convey with the property if sold.

Should an appraisal of this parcel and improvements consider the income to the property from parking fees, which will continue, and likely increase in perpetuity, or is this a simple land appraisal with minimal value to the improvements, and a very valuable business (albeit only possible on this parcel). Is the license, which is tied to the land, a portion of the real estate? It has no value exclusive of the real estate...

Your thoughts?

That license would suggest some measure of value associated with an intagible business asset. The question is; would the BEV be based on capitalizing the 'premium' in parking rates being earned due to its location (which is permissable only due to the license), as opposed to say other 'off-site' parking lots elsewhere, or is it the difference between the fee simple land value versus the indication of value associated the parking operations? There are several ways to look at this, but at the end of the day that license has value, any any sale of the property 'today' would pesummably include that license for a continuation of the current operations, therefore, this is a going concern with value from both real and personal property.

 

[incognito]

Thanks fir the input. The appraisal was done by a trainee, and signed by an older than god MAI. The cover letter read:

This is a Complete appraisal, in a summary appraisal report.

That went out in 2006. This guy has not updated his Boilerplate since 2006! (and may not even know the term is obsolete). I am recommending he select an appraiser and have another done. (the bank selected the first appraiser).

 

[Terrel L. Shields]

That went out in 2006. This guy has not updated his Boilerplate since 2006!

shoot now he is going to change to scope of work just in time to see self-contained and summary report terms go bye-bye in jan. of 2014.

 

[Ken B]

Food for thought - a parking garage serves the same purpose as a surface parking lot. I would think both have value in that use. Whether that use represents the highest and best use is a question to be answered. Another question that might need to be answered is the time that use may represent the highest and best use. The license is irrevocable and would transfer with the property? Do TDRs (transferable development rights) affect value of the real property? I think they might.

 

[Vernon Martin]

Intended use of a parking lot appraisal

One thing that hasn't been mentioned is the intended use and user of the appraisal.

A conservative lender might lend on real estate only, or if they did lend on the going concern value of the property, they might want proof of the long term viability of the parking enterprise (including actual contracts).

A buyer would be much more interested in going concern value.

A condemnation appraisal usually considers just the real estate value, but last week I read of a case where the parking lot owner took the case to trial and won a jury verdict in her favor to be compensated for going concern value. She operated a U-Haul rental business and turned a closed gas station into the number one lottery sales location in Ohio.

For anyone interested in the case go to scholar.google.com, click on legal documents, and type in Cincinnati v. Banks. The appellate court decision is rather amusing towards the end.