I recently heard of a business that was for sale, with real estate included, was listed for 18 months for $2,600,000. The owner thought maybe the land was worth more than that, so a commercial property appraisal was done. The value of the real estate, without the business? $5,800,000. (Probably worth even more 18 months ago) The owner at first did not want to spend the money on the valuation. However, now it seems like it may have been worth it!
Gee, and I thought our markets were more efficient than that. You would have thought someone would have realized the value of the land was worth far more than $2.6mm and snapped it up. Heck with the business.
Actually, in all seriousness, to heck with the business. The proper term for that is “highest and best use”. The value of the land, in this case, has far surpassed the ability of the business to support it. To get what he wants from the real estate, he’ll have to sell the land and shut down or move the business. That is why businesses continually get replaced in areas of growth.
In fact, my wife is a veterinarian and owns her own practice. It is located in a very nice location with a lot of character. Of course I want the real estate to appreciate greatly, but then again I will feel terrible if it grows to the point that the vet clinic can’t support the value of the land. Luckily that isn’t something to worry about for quite some time.