||The appraisal of industrial property
(refineries, gas processing plants and other manufacturing processes) involves
understanding a myriad of petroleum and chemical industry processes along with
their economic relationships to other market sectors. Often the
industrial property P&A appraises is an integral downstream partner to the
oil and gas industry we are already appraising, sometimes even the same
company, so that we are in a unique position to analyze the property with
details specific to that property but in conjunction with a macro-economic
And as industry in Texas and other states is becoming more
diverse every year, P&A industrial appraisers are correspondingly gaining
appraisal expertise in non-petroleum industry manufacturing processes like
cement plants, wallboard plants, peanut and other agricultural processing
facilities, plastic injection molding plants, silicon wafer computer chip
manufacturing, and construction of other consumer products and staples.
To appraise industrial properties, the Cost Approach based on
the economic principle of substitution is the predominant method used for mass
appraisal, although it can be argued that mass appraisal does not really exist
for industrial property because of its wide diversity. P&A industrial
appraisers inspect facilities every year to verify inventory deletions and
additions. Industrial property is also subject to inflation and
depreciation in all its forms.
The use of the Market Approach is limited in appraising
industrial property since sales data of comparable properties is not readily
available or in sufficient quantity for meaningful statistical analysis.
Nonetheless, many of the cost schedules that P&A uses, either commercially
available or developed in-house, are derived from actual market data.
Sales of plants for purchase prices significantly different from net book value
must be investigated for evidence of functional or economic obsolescence and
intangible value that cannot be attributed to taxable property.
The Income Approach to value is applicable only to industrial properties that
produce income. Capitalization of typical net income or discounting of
future net income can give appropriate indicators of market value.
However, the accuracy of this approach is limited to the ability to obtain
accurate historical data from the company whose assets are being appraised and
from which reasonable projections of future parameters can be made.
P&A industrial appraisers are trained to evaluate income potential, if
necessary, to validate or otherwise reconcile with indications of value derived
by cost and market analysis.
[ Back ] [ Up ]