At BVR’s exhibit hall booth at the 2023 American Society of Appraisers International Conference in New Orleans, we had a conversation with Barry Cunningham (Property Tax Research LLC) about potential pitfalls when valuing real estate-centric entities (RECEs). A RECE is a business that owns its own real estate (e.g., a hotel, nursing home, golf course, etc.).

Cunningham feels that business appraisers need a better understanding of how real estate appraisers think about property rights, which can lead to understating or overstating intangible assets in these types of entities. The distinction between the terms “fee simple” and “leased fee estates” is important in understanding the potential for misstating intangible value. Also, above- and below-market rents need to be considered. Cunningham explains this in a recent article he wrote, “Property Rights and the Real Estate Appraiser,” which is in the Spring 2023 issue of the ASA’s Business Valuation Review. He intends the article to be a primer to foster more in-depth discussion within the appraisal community.

The article is available if you click here (free to subscribers of the BVResearch Pro platform, which has the full archive of Business Valuation Review).