Appraisal Process
The Appraisal Process
Appraisals
PetroVal provides its clients with superior quality appraisals of retail petroleum properties. Our appraisals of these going concern properties include the segregation of real estate, equipment, and business value by three methodologies. Being former bank reviewers, the principals recognize that well documented reports delivered in a timely manner are key to your success and ours.
Convenience Stores
Travel Plazas
Service Stations
Truck Stops
Valuation Philosophy
Owner operated convenience store and retail petroleum outlets are businesses. These businesses are heavily invested in real estate and personal property that combine with labor and management to create a going concern. Appraisals of these facilities must consider concepts, terminology, and methodology that goes beyond the typical commercial real estate appraisal and requires the professional appraisal services of an experienced expert.
The Going Concern Premise
A going concern typically consists of both personal and real property. The personal property includes tangible personal property (such as equipment and trade fixtures) and intangible personal property (such as goodwill and assembled workforce). In order to credibly value the real property and tangible personal property it is necessary to first value the total assets of the business. This is referred to as the going concern premise. This is necessary because, among other reasons, most comparable sales of retail petroleum outlets are also ongoing businesses that are typically sold as going concerns. It must be assumed that the sale prices of these facilities are based on the business’s income producing capabilities unless there are facts to the contrary.
The Wrong Way
Absent consideration of the property’s business income, it is quite possible to undervalue or overvalue the tangible components of an enterprise. PetroVal has reviewed numerous appraisals where the analyst has assumed the comparable sales were real estate only and because of that concluded unit values that well exceed the subject property’s real estate value. Conversely, PetroVal has observed analysts who unknowingly selected lower performing facilities for comparison to a higher performing facility resulting in an unreliably low valuation. It should also be noted that the rental rates for these facilities are often based on a percentage of the net business income (EBIDTA) and market rents based on a survey of other leased facilities can similarly result in a faulty valuation.
Experienced Professionals
Other property types that require a going concern premise valuation include lodging, restaurants, hospitals, and nursing homes to name a few. Experienced and knowledgeable appraisers realize that the tangible components of these facilities cannot be reliably appraised in isolation. Thus, the valuation of the tangible assets including real estate begins with an appraisal of the total assets of the business (TAB). PetroVal professionals are the experienced experts you need for retail petroleum property appraisal assignments.