Can anyone suggest how to value an orchard of organic, tropical and rare-fruit trees? Most of these trees are at the beginning of their fruit producing life. There are 103 varieties of fruit on 71 trees (15 are grafted). The list of trees is at http://loc-ads.com/myyard.htm
Reply to post by Scott, on October 06, 2002 at 18:16:53:
Appraising trees in commercial orchards is quite a bit different than appraising landscape trees. You will need to do some research for this one.
The trees are just reaching fruit production stage. How long did it take to get there? How much fruit will they produce over a specified period? How much over the tiime to grow new trees to this stage? How much is that fruit worth? What are the costs to plant new trees of same species, and care for them to the same stage as current trees?
This becomes an economic exercise. You can determine the loss of sales and what it will take to replace the trees over time. The actual loss is loss of fruit sales until the new trees reach parity. (Note that parity is not necessarily the same as the age of the current trees- it may be more if these trees are will be increasing production over a period of years.)
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Reply to post by Russ Carlson, on October 06, 2002 at 18:16:53:
Russ is correct, a typical income-crop producing orchard would be valued by the economic loss. You would take an income capitalization approach to value. For income you would look to historical data and productivity projections for other similar age-variety sections of the same orchard or other orchards in the same market.
Universities and cooperative extension in fruit producing states have published a lot on this. This is the oldest, documented appraisal exercise. Look at the book of Leviticus in the Old Testament.
Russ may have mixed up income and cost appraisal terms, though. Age "parity" is a Guide for Plant Appraisal, Cost of Cure term. You could estimate the cost to replace these special trees and grow them to current age "parity." That would give the damaged party back the value of what they have today. Russ's point is that if the plants are X years old today and have Y production today and are young trees just coming into production that in year X+1 production may be >Y. Y may continue to increase in years X+2, X+3...X+n where n=2X. 2X assumes that the new growth period starts at the date of loss and will take the same term of years as the original growth period. So in that delay period from X to 2X, the second X if you will, there will be income incremental to the income at age X that is not reflected in current age cost parity. So you could use 2X as age parity... but then you would overstate the loss because the income increment would be declining rather than constant in the secons X period. Sounds complicated? It is, try explaining it to the jury.
Better IMO to try to create a schedule of lost income by year from date of loss to 2X. Loss per year would increase (both productivity and inflation) from date of loss to X and decrease (productivity catching up) from X to 2X. The term might not be 2X it will be whenever income returns to lost levels. To do this you'll need to create a productivity schedule of the lost orchard first so you can deduct new productivity (if any) of the replacement orchard to get net loss each year. And then discount each year's income back to date of loss to get PV of the loss.
Add additional damages such as appraisal and legal fees, site restoration, etc. Costs to create the new orchard and maintain it are not considerd in the income approach.
OK now the hard part. This does not sound like a typical, producing orchard. What was its purpose. A demonstration. Botanical garden. Tourist attraction. Personal pleasure of owner. Specialty production.
If specialty production you may have a hard time with income figures. There may be no comparables. There seems to be no economy of scale here.
If it's really for one of the other uses principal benefits may not be fruit production income. So it really becomes an exercise of understanding those benefits and deciding on the best way to value them.
Reply to post by Scott, on October 07, 2002 at 06:42:17:
You may find that the income attributable to these trees is no greater than any common varietes. Should the owners be willing to take that value when the real value to them was in the rarity of their collection... with some income merely a bonus.
These trees might be valued as if they were rare ornamentals which also throw off an income stream.