Truck Rig Wash Commercial Appraisal
Tale in Competency
At Argianas & Associates, we think of every assignment as an opportunity to not only do good work, but to establish a relationship built on trust with our client. No matter how odd or complex the assignment might be, we’re always ready to roll up our sleeves to provide our client with a credible appraisal. A previous valuation of a truck rig wash proved just how valuable trust is in a client relationship.
not your average wash facility
Truck rig wash properties are different from car wash facilities. These types of services frequently involve handheld spray wands with overhead water/solvent delivery and drive-in bays – but usually, the bulk of the work is done by hand with technicians treating individual areas. When comparing the two, you’ll also notice that truck rig wash facilities tend to have more than enough land to allow for additional services, such as maintenance or support buildings involving oil changes and safety checks.
In contrast, the more common no-touch passenger vehicle washes rely on heavier fixtures and infrastructure including water jets, piping, drainage, overhead heavy cloth washers, hot water/floor heat boilers, auto cashiers or tellers, undercarriage management conveyor belts, chemical/solvent management system, fans and undercarriage cleaning (think the car wash behind your local gas station). Both property types are therefore fundamentally different and serve different vehicle types. They are not interchangeable.
Water & revenue streams
A big component of a property’s success is its demand and ability to generate revenue. In this case, the revenue from a truck wash is commensurate with how many truck washing bays it has, how many mechanical bays it has, and, of course, the demand for those services. A truck servicing mechanic has service bays that are tall enough to allow for the truck to drive in with cut outs in the floor that provide truck undercarriage access. As we do in all appraisals, one must assess revenue as it relates to demand. Although the mission may be to appraise the real estate only (land, structures, and improvements), a good appraiser should analyze business operations to determine if the facility is capable of generating adequate financial demand (financial viability).
highest and best use analysis
Although we consider the business when beginning our assessment of the property and value, the true starting point of the appraisal is a highest and best use analysis. Put differently, is the property developed to its most reasonable and probable use? Was the land worth more than the improvements? Our analysis and research suggested that the subject, located on a main arterial and edge of a heavily trafficked industrial park, was developed to its highest and best use; however, the excess land surrounding the property would most likely be developed for commercial uses were it ever to be broken up.
The land to building ratio (the ratio of the underlying land as compared with building footprint) was significant. Its location near a heavily trafficked industrial area was optimal, and our random sampling from satellite imagery over an extended timeframe indicated trucks lined up waiting to be serviced and/or washed (there was certainly demand).
So what’s the problem & why mention competency?
We weren’t actually hired to complete an appraisal, we were hired to do an evaluation/restricted appraisal. We completed our efforts and our report was issued. As is not uncommon, our client reached out to us with questions and concerns. Why? Our valuation differed significantly from previous appraisals of the property on file, our client needed to reconcile these differences to value.
These types of calls are not a problem. Dialogue provides opportunities for valuation professionals to disclose and qualify nuances involving ownership and/or lending and decision maker risks. When reviewing the previously available appraisals the bank provided, we were quickly able to identify the discrepancy which was the use of non-like-kind comparables. Put differently, the previous reports included comparable sales of passenger vehicle car tunnel washes, with some of the prior appraisers supporting data inclusive of trade fixtures/equipment and the going concern value. As a commercial real estate appraisal of the land, structures and improvements only, the use of a going concern comparable sale was erroneous.
How the bank dealt with the discrepancy is outside of the scope of what we do but it does highlight the importance of working with appraisers that you trust. Even though we were initially hired for an evaluation/restricted report, the acceptance of an assignment means you can’t just do the minimum. The Argianas team focuses on critical thinking, analysis and continued training/mentorship because that is how you become a leader at your craft. “Everyone can hang a shingle and open shop once they receive their Certified General License”, says Vice-President Alexander Argianas. “Integrity in your career means you never stop being open to learning more – 1000s of attaboys are undone with one oh no.” In the final analysis and despite a faulty prior appraisal, the subject property’s highest value was concluded to be in the land although the servicing/wash facility financial viability was not at issue.
polishing out your details
Valuation mistakes happen and no one is infallible; it’s the reason the team at Argianas places as much importance on client education as we do on writing the actual appraisal report. Mischaracterization of the property coupled with use of non-like-kind comparable sales could have been avoided had the report preparer exercised greater care and attention to the property type.
Do you have an odd property type or tricky Commercial Real Estate property leaving you in need of expert help and advice? Call the expert team at Argianas today at 630.390.0113 or email us at [email protected]. You can also fill out this form on our website. Join our mailing list to receive our e-newsletter featuring case studies, industry events and news.