Leaders in Racetrack Valuation
One of our specialty practice areas is in serving the Motor Vehicle Racing Industry. We are experts in the appraisal of race tracks and in the financial valuation of facing facilities. Among others, the spectrum of our services has been utilized by tracks that accommodate various automotive bodies, associations and clubs, including: SCCA, DIRT, NASCAR, NHRA, IRL.
Cambridge has appraised racing facilities across the country, including tracks in California, Pennsylvania, Virginia, Illinois, Connecticut, Ohio, Indiana, Missouri, Montana, Louisiana, Nevada, New York, Massachusetts, Wisconsin, North Carolina and numerous other states. End-use applications of motorsport appraisals completed by Cambridge Partners, include: bank financing, real estate tax (ad valorem), management and financial planning, stock valuations for purchase and sale agreements, and valuations for estate (tax) planning purposes, among others.
In preparing race track valuations, Cambridge Partners will consider use of the cost, market and income approach, with the ultimate selection based on specifics of the facility (e.g. operational, stabilized, pre-revenue, etc.).
In using the market (also referred to as the sales comparison approach), the value of the track property is based on the assumption that if racetrack's comparable to the subject property have sold within a certain price range, then the value of the subject track will be related to that price range. Properties are comparable if they are similar in their condition, utility and income generating capacity. The reliability of the market approach depends upon the availability of recent sales data points for comparable items. If reliable sales can be found, this approach may assist in indicating a value conclusion.
Cambridge Partners has compiled an extensive list of automotive racing market transactions, including road course facilities, oval race tracks, drag strips and others. If the sales data includes pertinent income and revenue data from which we can draw a meaningful basis for comparison, the sales comparison approach will be easier to apply. Conversely, if this data does not exist, comparability will be more difficult. Other factors that impact value include location, income generating capacity, number of track days/events, etc. Each of these affords the appraiser additional basis for comparison.
The income approach considers expected returns on an investment, which are discounted or capitalized at an appropriate rate of return to reflect investor risks and hazards. A discounted net cash flow analysis is generally utilized in ongoing race track valuations, which provides an indication of value based upon the present value of anticipated future cash flows, discounted at an appropriate present worth factor reflecting the risk inherent in the investment.
In utilizing the income approach, we review the track’s projections, industry and economic trends, competing track data (usually proprietary) and other factors, as well as, have discussions with management. Our income and expense estimates compare the subject's categories of expenses and estimated revenue to other motorsports facilities. Income streams we have seen include track rental fees, garage rental fees, on-site camping fees, guest entrance fees, concessions, leasing of concession services, sponsorships, training, car sales, etc. Another key factor to consider is consider the available number of operable track days (e.g., April through October). Measuring the maximum track days tests the reasonableness of the projections.
Once these projected revenues and expenses are tested to determine they are reasonable, we then forecast net cash flows and apply a discounted net cash flow method to determine a value indication of the racetrack.
Please call us to discuss your facility, our experience and how we may be of assistance to you.