When An Out-Of-The-Ordinary Opportunity Calls, We Answer

Appraising a Barge Facility

Every superhero has a signal for when duty calls. When an emergency strikes in Gotham, Batman sees Commissioner Gordon’s call on the overcast clouds blazing in the night sky. Superman can hear the faintest whisper of need from miles away with his supersonic hearing. Spiderman has the tingling spidey-sense to let him know when it’s time to jump into action. The team at Argianas & Associates has been described as a combination of Clark Kent and Superman a time or two. We don’t mind because we do our best to be our client’s hero. And while the other guys might have cooler ways to know when duty calls, we like to think our clients enjoy the simplicity of picking up the phone when they need us.

Recently, duty called the Argianas team to the shores of Illinois for a special purpose valuation. A family-owned riverbarge facility needed a valuation and report completed on a multi-building and multi-property assignment spanning shores with rights out into the waterway/channel. The owners of the facility needed a team they could trust to understand the complexity of valuating a barge facility that operated as a major thoroughfare for commerce and shipping. Being knowledgeable about Inland Waterway Systems and Logistics involved with the facility would be key to knowing the true value of the property.

The History

Before starting the assignment, the Argianas team sat down with ownership to intrinsically understand the nuances of the property, the history, and where the ownership saw the property’s future. The barging facility’s operations commenced nearly 100 years ago.  Now in its fourth generation, the facility offers stevedoring services (loading and unloading services). No one understands a property like this as well as its owners, and indeed, many pieces of information must be shared; however, the appraiser has to know the right questions to ask, and this is where we shine – we take the time to ask the right questions.

Infrastructure, Infrastructure, Infrastructure!

We valued the main barge facility along with fleet rights associated with other properties sited along the Illinois River’s embankments, with ultimate passage to the Mississippi River down to the Port of New Orleans and then, the Gulf of Mexico. The subject’s location near rail, interstate, and waterways, coupled with infrastructure improvements at exactly the right points in the waterway, were of great strategic importance.  At issue was that the valuation expert needed the knowledge and experience to identify all property rights involved.  There was a lot more to this than simply estimating land value and adding the cost of support structures and improvements, as infrastructure costs can easily run in the millions of dollars.

The subject barge facility was sited along the shorelines of the river’s deepest portion (depth estimated at 30 feet), with the impact of strong current to be considered. Critically important was that barges must have sufficient clearance (barge draft) to leave the dock after they have been loaded and weighted down with materials. Additional costly infrastructure ensured that the facility would sustain operations for years to come such as reinforced cement seawalls, rail lines that connect to major arterial rail shipping, cement/steel dolphins, industrial-scale grain elevators and storage bins, and underground conveyor belts that deliver product to the barges. Further strategic considerations included a property’s proximity to docking and turnaround basins.

We also valued a fleet facility (these properties/property rights are usually proximal to barge loading sites, with river rights and mooring dolphins).

 

The Challenge

The challenge is to identify an appraiser that understands barge and fleet operations. As is so often the case in valuation sciences, one cannot provide competent services if an understanding of industry operations is lacking. Clients are usually at a severe disadvantage and frequently they do not receive credible services that reflect the true value of the property. In addition to the value the property has, the business or going concern operation also feathers into the value. Barge property appraisal reports need to tell the real story – for example waterway proximity to river locks, river terminals, and port facilities, consideration of weather risks, pipeline access, etc. Knowing to ask these types of questions is crucial in giving a credible evaluation of a barge facility. And because owners for this property type integrate the real estate with complex services/operations, they need an expert team.  We at Argianas and Associates offer our clients extensive skills and experience to formulate credible valuations, and importantly, readers of our appraisals tell us our reports are understandable and easy to read.

The Final Recommendation

The first barrier to successfully completing the appraisal was knowing how all the pieces of the properties connected and served each other. The Argianas & Associates team used the cost approach valuation method for this property which is a great method to use for special purpose properties, like a barge facility, that typically have limited available comparable sales data. This approach is often used by a potential owner in deciding whether to commit capital to build a new property versus acquiring an existing facility. Because of laws and regulations including Army Corp of Engineers Waterway Restrictions (permits, licenses, and easements), there is much more to these valuations than meets the eye. The cost approach valuation method can help buyers and sellers understand the value in an older barge facility like this one.

Are you looking for Chicago real estate appraisers to evaluate your special purpose property? The team at Argianas & Associates is ready to put our real estate appraisal experience to work for you. Give us a call at 630.390.0113 or complete this form. To receive more real estate appraisal resources, be sure to join our mailing list to receive our e-newsletter.