Where a significant proportion (e.g. >50%) of the income from operations is generated by activities undertaken in concentrated environments such as enclosed sheds etc.
The common concept across those industries classified as “Intensive”, “Specialised” or “Special Purpose” is where the land use cannot be easily converted to another enterprise or it is exposed to changing consumer tastes that could not be adjusted to quickly.
The following list, whilst not exclusive, provides examples of properties that may be deemed as specialised / intensive / special purpose:
- Intensive piggeries
- Commercial cool stores and/or packing sheds
- Forestry / Timberland
- Orchards (includes tree nuts, exotic fruits, etc.)
- Irrigation water, as a stand-alone asset
- Intensive horticulture (e.g. glass houses)
- Dairy farms (however, less developed farms with basic infrastructure only may be considered as a standard rural asset)
- Poultry sheds (including broilers, layers, etc.)
- Hot houses or covered farming
- Properties subject to carbon farming or renewable energy agreements (or similar)
- Properties subject to a Managed Investment Scheme (MIS) or a lease to third party for more than 50% of the net farm area
- Specialised improvements (i.e. a cheese factory on a dairy property)
- Non-permanent improvements (i.e. greenhouses)
- High Country (New Zealand)
When undertaking valuations of such properties it is important that the following be considered and commented upon, depending on the exact nature of the property:
- Plant varieties, ages, condition, residual economic life
- Tree spacings and trellising
- Quality of infrastructure, handling capacity, residual economic life
- Plant & equipment quality and adequacy (e.g. irrigation, broiler shed equipment, etc.)
- Any ongoing supply contracts / obligations
- Financial performance in recent years (if available)
- Average / achievable results for location / industry
The interest to be valued should be the freehold or leasehold (as the case may be) interest subject to any ongoing supply contracts, leases, license agreements, management agreements and/or registration. The valuation should consider the highest and best use, and be undertaken on the following bases:
- As a “going concern” including any goodwill and necessary plant and equipment; or
- On an “in use” basis, similar to the “going concern” basis but specifically excluding any added value associated with goodwill and movable plant and equipment.
An “alternative use” basis should also be considered, and is strongly recommended for mortgage security purposes.