Category: Gift Tax

Tennis and Racquet Sport Clubs

It all started in England in 1873.  That was the year lawn tennis was introduced by Major Walter Clopton Wingfield.  In fact, the game of tennis may be traced back to the days of ancient Greeks.  Tennis was brought to the United States and organized in 1881.  In recent decades, the bulging demand and the construction of thousands of tennis courts from public agencies, private clubs, resort operations, and residential developments have occurred.   The different types of tennis courts are outdoor clubs, indoor clubs, indoor/outdoor clubs, resorts, residential tennis facilities, in addition to racquetball, squash, paddle tennis, and platform tennis. 

Before the appraisal is undertaken of a new facility, the appraiser must do some careful research.  Breakeven points are rising as expenses increase the sale.  The measurement of demand is traditionally made in terms of players per tennis court.  For instance, for an appraisal that reports a level of approximately 120 players per court, the figure is based on the total number of existing future tennis players in the area and the total number of courts currently available within an area defined by a 15-minute driving time.  Other appraisers estimate the potential number of players in an area by computing a percent of the number of persons and families with incomes of a certain level.  There does not appear to be any loyalty to clubs, so convenience is an important factor.  The final component of the tennis facility market analysis is a survey of existing competitive tennis facilities and plans for proposed tennis courts serving a particular area.  The appraiser must perform independent research to determine the level of demand in any specific location and the supply of facilities representing the demand. 

Part of the site consideration includes location, size, shape, access, and zoning.  Some of the physical characteristics of a facility that must be considered include design, building type, tennis court layout, tennis court construction, lighting, heating and ventilation, and special equipment. 

Financing of a tennis club has been one of the major impediments to construction of enough courts to meet demand adequately in the United States.  There are many reasons why racquetball courts and tennis courts are not financed.  They include: (1) the property is too specialized; (2) uncertain long-term appeal; (3) difficult to judge management expertise; (4) lack of long-term financing; (5) no prolonged experience to draw from; (6) concern about overbuilding; (7) lack of financial strength of principals; and (8) investors are not interested in this type of property.

The Income Approach is the reliable approach to use when appraising tennis and racquet clubs and can inform the client of how to capitalize estimated future earnings.  The process is to project gross revenue from all sources and deduct from them the estimated annual operating expenses of all types.  The resulting net income may be converted to application of a capitalization rate, and may include both the direct capitalization analysis and the yield capitalization analysis.  The Sales Comparison and Cost approaches are often used too.  The approaches are then reconciled into a single value.  Be careful that any intangible assets and furniture, fixtures, and equipment are not included in the appraisal of real property. 

Only two typical situations involve appraisals of clubs: (1) the club operates in leased quarters, and (2) the club owns the real estate and other assets.  Leased quarters can be a multiple tenancy or in a freestanding building.  An analysis of contributions of intangible factors to the overall value follow the same methodologies in all cases.  As a simplification, the business value may be estimated as the difference between the Income Approach and the Cost Approach. 





Appraisal of Religious Facilities

In general, religious facilities tend to operate on a local basis.  Other than a mega-facility, most religious facilities draw members from a very localized market.  As a particular neighborhood evolves, the likely users of a given facility generally will be consistent with the neighborhood.  Individuals typically practice their religion near their home and with individuals whose beliefs, socioeconomic standards, and values are similar.  Thus, trends in an area tend to influence the valuation of partaker facility.  In general, there are four basic groups that tend to exist geographically as follows: (1) Baptists in the South; (2) Lutherans in the upper Midwest farm belt; (3) Roman Catholics in the Northeast; and (4) Mormons in Utah and other Rocky Mountain states. 

Because many religious facilities fulfill more than just worship service function, peripheral areas and activities are expanding.  Many of the following features may be found in religious facilities today.  In some properties, only a few of these items will be present:

Sanctuary, chapel, narthex, baptistry, mikba, belltower, meeting rooms, administrative office, choir room, quiet room, cry rooms, library, classrooms, kitchen, gym, theater, concert hall, community center, media room, bookstore, restaurant, daycare center, nursing home, family life center, outreach facilities, field activities, parking garage, amusement park, game room, dance hall, rectory, parsonage.

Facilities are generally consistent with the desires and beliefs of the group proposing the facility.  Religious groups that profess to live the simple life tend to gravitate to more traditional architecture.  Others that are progressive or consider themselves modern, tend toward a more contemporary look.  After analyzing the religious facility and its area/neighborhood influences, an appraiser must be certain that the highest and best use is a religious facility, and after determining this, then the three traditional approaches to value (including Cost, Sales Comparison, and Income Approach) are applied.  Finally, a reconciliation of these values is arrived at for a conclusion of the market value. 


Gift Tax

gift-tax-copyA graduated tax, imposed by the federal government and some states, on gifts of property during the donor’s lifetime; under the law, gifts may include irrevocable living trusts.

(Dictionary of Real Estate Appraisal, 4th edition.)

Translate »