Going Concern Appraisals

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The Market Value of a Going Concern measures the value of the entire business enterprise, which includes the underlying real estate (land and building); furniture, fixtures & equipment (FF&E); and intangible assets (business value). We have appraised many going concerns in the local and regional market for lending institutions, buyers / sellers and even for tax appeal. Our experience results in a credible appraisal report that the client and intended users can rely on. Below are a few property types that involve a Going Concern analysis; call us to learn about other property types!

Hotel appraisals require a thorough understanding of the appraisal process and operating metrics that are unique to lodging facilities. Some key metrics include: Revenue Per Available Room (RevPar), Average Daily Rate (ADR), Occupancy Rate, Gross Operating Profit per Available Room (GOPPAR), Market Penetration Index (MPI), among many others. These metrics for the appraised property are tested against current industry standards as well as an internal database that we have developed through many hotel appraisals in the region. After developing an opinion of Market Value of the Going Concern, the real estate appraiser completes allocation analysis to separate the value among the real estate, equipment (FF&E), and business value / the intangible assets. 

Gas / Convenience Stores have a unique operating profile that is sometimes volatile from year to year due to the ever-changing price of gas, and in recent years as a result of inflation and increasing labor costs. Our real estate appraisers have appraised dozens of operating gas / convenience stores and have the experience necessary to competently analyze a property’s operation and provide a credible opinion of value based on current valuation multiples. 

Golf course appraisals require a thorough highest and best use analysis as the underlying land value can sometimes exceed the value of the operating golf course. In this case, a buyer may consider ending the operation and redevelop the land. If the best use of the property is to continue the golf course operation as a going concern, the real estate appraisal will consider the potential income from all sources (food and beverage sales, golf rounds, driving range fees, membership income, etc.) less operating expenses to achieve a net operating income (NOI). The NOI is capitalized to Market Value based on current market conditions, after which an allocation analysis is needed between the real estate, equipment (FF&E), and business value. 

The restaurant industry was significantly changed by the COVID-19 Pandemic, and a current appraisal needs to consider these changes. Despite the numerous challenges presented, some operators were able to adapt their business model and improve their operations. The value of an operating restaurant relies heavily on its financial history and current business model, and our real estate appraisers have the necessary experience to understand the nuances of each restaurant operation that ultimately influences the valuation. Depending on the scope of work, the final opinion of value may include not just the real estate but also the equipment (FF&E) and business value / intangible assets including the liquor license (if applicable).  

A car wash appraisal should consider the property's operating history, but the real estate appraiser must also research the local market for recently added competition or upcoming competition. When a new car wash enters the market, it is typically at the detriment of existing car washes. The projected operating statement for the appraised property needs to reflect the upcoming market conditions. If no new competition is uncovered, the real estate appraiser will rely mostly on the subject's operating history with support from industry data in order to project a reliable operating statement for the valuation. After applying an appropriate capitalization rate or valuation multiple, the appraiser will need to allocate the various value components.

Our office is located in Erie, Pennsylvania,  which is on the shores of Lake Erie and the Great Lakes. There are many marinas in the local market, and as a result our real estate appraisers have had the opportunity to appraise most of the local marinas. A real estate appraisal of an operating Marina follows the same process as other Going Concern valuations, but the income sources, expenses and valuation metrics are unique to this property type.  

The campground industry grew substantially as a result of the COVID-19 Pandemic, and our real estate appraisers are familiar with current industry trends. Like other Going Concern appraisals, the property's business model needs to be studied in order to arrive at a credible value opinion.