Getting the word out…

“Appraisal techniques for going concern valuations”

Introduction: Lamb Hanson Lamb Appraisal Associates, Inc. Four Generations-

1916 (Ross J. Loranger), 1957 (Berkley A. Lamb), 1970 (Michael B. Lamb), 2010 (Patrick M. Lamb)

Employee Base MAI Designated SRA Designated General Certified Residential Certified Green Designated

Employees are Specialized by Property Type & Location: Development Land, Industrial, Office/retail, Multi-family, Special Use, Residential Form, FHA, USDA, Reviews, Development

Projects, Government…Locations are picked by familiarity and background.

Services & Product Types: Commercial, Residential, and Specialty Use Self-Contained, Summary, Restrictive Replacement Reserve Studies, Insurable Replacement Studies for HOA/Condo Associations.

Going Concern Premise & Liquidation Premise

Going Concern Premise:

“The assumption that a company is expected to continue operating well into the future (usually indefinitely). The Dictionary of Real Estate Appraisal 5th ed. Chicago: Appraisal Institute, 2010.

Liquidation Premise:

“The assumption that a company will cease operations.”

Regulatory Concerns SBA Lending Requirements

Lenders may use a going concern appraisal for an SBA loan if: The loan proceeds will be sued to purchase a special use property The appraisal is performed by an appraiser experienced in the

particular industry, and; The appraisal allocates separate values to the individual components

of the transaction including land, building, equipment, and intangible assets.

USPAP Appraising Requirements USPAP requires that the appraiser must analyze the effect of

personal property, trade fixtures, and intangibles when they are included in the appraisal.

It should be made clear in the report that the allocated value of the various assets applies only in the context of the going-concern premise and cannot be considered regardless of the discount value of the individual assets.

Useful Definitions

Going Concern Valuation or Total Assets of Business Valuation

V-TAB (Total Assets of a Business)

V-RP (Real Property)

V-PP (Personal Property)

V-IA (Intangible Assets)

Total assets of the

Business

Real property

Assembled workforce

Personal property (FF&E)

Contracts, Licenses, Permits

Brand Name

Patents & copyrights

Capitalized Economic

Profit

Cash & equivalents

Accounts receivable

Supplies & Inventory

Tangible property Intangible personal property

Monetary assets

Going Concern Property Types

Lodging• Hotel• Motel• Interval Ownership (timeshares)

Sports & Recreation• Athletic Clubs• Golf Courses• Bowling Alleys• Marinas• Arenas

Consumer Services• Convenience Stores• Lube Centers• Restaurants (full and quick serve)• Shopping Malls and Lifestyle Centers• Bank Branches

• Liquor Stores

Healthcare & Senior Housing• Hospitals• Surgical and Imaging Centers• Rehabilitation Centers and Skilled Nursing Centers• Assisted Living Facilities• Independent Living Facilities• Continuing Care Retirement Communities (CCRC’s)

Other Specialized Assets• Day Care Centers• Educational Facilities• Specialized Manufacturing• Student Housing• Group Homes• Multi-Family (Affordable Housing)

Apartments???

Business Valuation Premise

3 techniques performed by Biz Val guys

Asset Approach

Market Approach

Income Approach

Appraisal Valuation Techniques

3 techniques performed by appraisers;

Cost Approach

Sale Approach

Income Approach

Closing Remarks & Questions