Vet Clinic

[Thebookdoesnthaveit]

Hi Everyone,

I have been asked to provide a value of a dumpy house that is used as a vet clinic. Nothing special about the building - Constructed in 1966, x-ray room in treatment room, no air-exchange system in operating room (that's what windows are for) etc.

Here is the dilemma..The property is used as a vet clinic and is now currently zoned for residential use only, so it is a grandfathered use. A H&B use analysis indicates that continued use is better. Since it is located in a residential zoned neighborhood I am using residential land comps. If I use the CA and SCA I come up roughly to around $800,000, but the income approach suggests something like $1,000,000, based on their annual net rent. When I spoke to the tenant, he stated that the rent is based on a % of gross income (obviously that's to the business).

So, my first question is does anyone know how vet clinics (if leased) structure their rental rates?? Is it based on income? I know some restaurants and retail spaces in our market have a base rent + % over a stipulated amount, but I am not familiar with the veterinary world, although I practically live at the vet's office )

I just don't know if this is a special use property or not given the value discrepancies.

I should note that the property sold for around $650,000 in 2005. It was owned by out of town people and was sold to the tenant (vet) who had been leasing the property for years. I asked the realtor if she marketed the property as a vet clinic, and she pretty much did not have a clue. She said the owners just wanted to get rid of the property. This particular vet now leases the building to another local vet who is considering buying the property.

Thanks

 

[Michael S]

I helped with the appraisal of a vet clinic when I was a trainee several years ago. As I recall, we had to use medical office and regular office buildings for sale and lease comps.

The rental rate was only about $13/SF NNN, or about $15-16 on a full service gross basis. That's in-line with Class B office space or lower-end medical office space in the market. It was a typical office lease. We appraised it for about $100/SF which was well below the option price in their lease. They never exercised their purchase option (purpose to the appraisal was to see if exercising the option was a good idea) and eventually vacated the building. I believe it sold vacant to an owner-user a year or two ago for somewhere around that price.