Manufacturing facility + separate residential home = challenge?

March 05, 2021

by a searcher from New York University - Leonard N. Stern School of Business in West Chester, PA, USA

We are looking at a business acquisition opportunity in the Northeast. The real estate is also for sale as a part of the deal; however, valuing the real estate (i.e. finding comps) has been quite a challenge.

The real estate consists of an industrial (manufacturing) facility and a separate, residential home that serves as the "office" for the business. This industrial-zoned property is located in the middle of a residential area.

Has anyone else come across this situation? We would appreciate any guidance or insight regarding how to value the property and use that valuation to further negotiations with the seller and bank.

Thank you!

Reply by an investor
from University of California, Berkeley in Moorestown, NJ 08057, USA

I had a similar issue during my search, a weird property. My attorney introduced me to a commercial real estate agent who was familiar with the area and as a favor he came up with a rough comp. The comp was half what the seller wanted for the property so the deal never went anywhere.

See if you can find a RE agent in the town the business is in who will work with you.

Reply by a searcher
from New York University in West Chester, PA, USA

Thank you all for the advice. The seller hired a real estate firm to do an appraisal; however, after several months, the firm said that they could not complete the analysis due to lack of comps - has anyone ever heard of something like this? The response from the real estate firm (communicated to me through the broker) is troubling on many levels.

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