To answer the question of what value is there in a child care center when there is no business being operated from the property, one might answer with a rhetorical "what is the value of a church with no congregation?"
Obviously, there is value. When analyzing the market value of a child care property, it can be challenging to separate the real property from the personal property and the business value, if any. However, it is not impossible. If the highest and best use of the property is continued utilization of the use for which it is designed, in this case, a child care center, it is particularly necessary to interview those who participated in a comparable transaction.
For instance, I recently spoke with a buyer of a child care property I utilized as a comparable sale for a similar property I was valuing. She reported that she had to replace all furniture immediately after purchasing the property and that the business was only operating at 20% of licensed capacity when she purchased it. She reported that she gave no value to the furniture or business operation. After she assumed ownership, replaced furniture, and corrected areas of deferred maintenance, she reported she was operating at 80% of licensed capacity in less than a year after she purchased the property.
I spoke with another purchaser who reported a the recorded sale price included dollar amount that had been assigned the furniture and that there was no consideration for any business value in the transaction. I made an adjustment to that sale price for FF&E.
I spoke with a purchaser who reported that the recorded sale price reflected the value of the real property only and that there was a separate contract for furniture and any business value which was paid outside of the recorded sale price. No adjustment for FF&E or business value necessary for that property.
All of these transactions were associated with the valuation of a property designed specifically for use as a child care center which was operated by a local owner who specialized in the business and who owned a number of similar, smaller properties in the area. The nature of her properties appealed to an owner-user, not to an investor. Thus, for this property, the sales comparison approach was given the most consideration.
I also recently provided an appraisal of a child care property which was owned by an investor which specialized in ownership of larger, higher quality child care properties for lease to national child care operators. The operator of the child care center leased the property on a long-term basis and the lease was structured as absolute net. In other words, the owner's responsibility with this property was almnost entirely limited to depositing the periodic rent check he received from a credit-rated tenant. The tenant was responsible for outfitting the property and operating the business. For this property, most consideration was given the income approach. As the valuation of a net leased property occupied by a national credit-rated tenant, it was not my most difficult assignment that month.
So, to answer the question "can a child care (or any special use) property be valued without inclusion of business value" the answer is "most definitely." How that is done will depend on the characteristics of the property and its market.
