A few years ago I was struggling to complete my continuing education and came across an Appraisal Institute class called Appraising Automobile Dealerships instructed by Brad Carter, CRE, MAI, CCIM, CDEI. Mr. Carter also wrote a book on the subject, or rather the book on the subject, which is titled The Guide to Appraising Automobile Dealerships and is the basis for the curriculum. The course turned out to be very thorough and informative, and covered all of the nuances of automobile dealership appraisals, touching on all the unique drivers of value and reasons for site selection involved with the property type. This is definitely not a “click-through” continuing ed course—not that anyone here would ever click through a course just to fulfill a continuing education requirement…
Anyway, I credit this course for allowing me to pursue this property type without hesitation, and for this reason I highly recommend it.
Our subject this time around was a national credit tenant-flagged dealership at the end of a 35+ year lease that changed hands several times over the decades. One thing I learned about car dealerships is that the leases are often so dated that the current rate is way off market, depending on how the lease was originally negotiated, which makes them challenging to analyze. In this case, the fee simple value was about 50% less than the leased fee value, with only a few guaranteed years remaining on the subject lease, which created a nightmarish capitalization rate selection scenario. With no decent market comparables available, this is when you get on the phone and call people who buy and sell these properties and ask how this set of circumstances would affect their offer price. Then you listen to what they have to say.
Special thanks to Mosaic Property Valuations analyst Mitchell Ledet for his help on the inspection.
