Specialty purpose properties constitute a wide range of buildings. This is both in terms of their usage, i.e. cinemas, theatres, schools, even government buildings, properties such as museums or art galleries, as well as their ownership and assessment of value or rental.
Many specialty purpose buildings are government or local authority owned, being for the benefit of the community (i.e. libraries or sports stadia), but others may be owned by investors and commercially operated.
Given the diversity of specialty purpose properties and the intricacies involved with specialty purposes, it’s clear that you’ll need a vast knowledge in how best to deal with them. So, no matter whether you are a landlord or tenant, seller or buyer of such buildings, our professional commercial property advisors at Commercial Group of Tampa Bay can certainly assist.
Issues arising relating to specialty purpose buildings may include:
LOCATION
Of course, location is always important, but many specialty purpose properties are destinations, that is they do not rely on passing pedestrian or vehicular traffic, they attract people to go to them. In such cases, effective marketing is very important.
BASIS OF OPERATION
Is the property being run for commercial purposes and, hence, there is an income stream? Or is it for the community benefit and/or run not for profit or even at a loss, with maybe the operation being subsidized by taxpayers?
USAGE
Has the property been designed specifically for its current use (i.e. a theatre) or is there potential for a change of use to a more profitable use? Is redevelopment an option or is the building designated as being of historical importance?
NATURE OF OCCUPATION
Is the specialty building owner occupied by a government or semi-government body or occupied by a commercial entity? If the latter, is it occupied on a lease, a license, concessionary rent, or…?
BASIS OF VALUATION OR RENTAL ASSESSMENT
There may be planning restrictions on what the building can be used for, either building specific or zoning restrictions (i.e. only cultural use), or restrictions on renovations or even redevelopment.
Few specialty purposes buildings are traded on the open market so when it comes to valuation the comparable sales method cannot be used. So, should you take the “income approach” or will the value of the building be in the depreciated replacement cost?
In the absence of rental comparable of similar buildings, the rental assessment will be a function of profitability… not easy to determine! Plus, some rentals are concessionary or may be related to gross or net revenue turnover or number of seats occupied in a year or some other formula.
