Northshore mall limited V. Board of assessors of

Finally, Mr. Bouchard considered the concept of business enterprise value (BEV) and its application to super-regional malls generally and the subject property in particular. After a review of current appraisal texts and literature on the subject, he settled on a combination of six factors in large, complex enterprises, such as a super-regional mall, that, in his mind, supported a business or intangible value. His six factors are: operating agreements; mall image, reputation and customer base; established trade name and reputation of anchors; the “agglomeration economics” created by the assemblage of the anchor tenants and brand-name line tenants; trademarks; and advertising and promotional activities unique to the mall. Mr. Bouchard ventured that the interplay of these factors creates an overall going concern of substantial complexity that includes both real estate and business enterprise value such that the going concern should be valued with these two factors in mind.¹⁹

To estimate the value of the subject property’s BEV, Mr. Bouchard suggested two valuation methods. In his first method, he purported to isolate revenues from the property that did not flow directly from the real estate, but, in his view, were attributable to the mall business. He tagged percentage rent receipts and specialty leasing revenues as the income that was generated from the mall business as opposed to the real estate. Mr. Bouchard then capitalized that revenue by fifteen percent to estimate the BEV. Using this methodology, his BEV ranged from $7,699,000 to $9,997,000 for the fiscal years at issue, averaging 5.19% of his overall going concern value.

Mr. Bouchard’s second proposed methodology applied a fifteen percent capitalization rate to a management fee of five percent of total revenues in an attempt to capture that portion of the total shopping center value represented by the business enterprise. He compared this approach with one used for other types of real estate such as hotels and nursing homes. Using this methodology, his BEV ranged from $7,404,210 to $8,260,335 for the fiscal years at issue, or averaged 4.47% of his overall going concern value. In his final analysis of BEV, Mr. Bouchard selected a stabilized five-percent deduction to the going concern value, which was the approximate seven-year average of his two approaches for determining BEV, as best representing, in his opinion, the BEV for the subject property for the fiscal years at issue.