Marina Dock Age, November 2005

A Close Look at Bartering as a Viable Way to Pay for Services Received
by Dennis P. Kissman

One of the consultancy services offered to marinas is something called an “Opinion of Value” of the marina. Unlike a real estate appraisal, where specific guidelines are used to determine value, the “Opinion of Value” looks closely at how the business is being operated and makes a determination of optimum profitability for the existing facility and infrastructure. An “Opinion of Value” will not help in obtaining financing for a marina, but it does provide information to the owner, (or potential owner), of a marina as to what kind of cash flow should be expected from all the profit centers in the marina.

A marina will often want to know the difference between the value placed on a property by a real estate appraiser’s income approach and that of the “Opinion of Value.” The biggest discrepancy in value comes into play when either one of two conditions exist: a) there are nonrecorded cash transactions or b) a number of services are bartered with customers.

It is easy to understand the differences between the first condition and the “Opinion of Value.” The real estate appraiser must rely on recorded financial information to be the basis for his value. What typically happens in this situation is that the cash received never gets recorded, but any expenses associated with the income get recorded. The result is a lower reported income. Even though this is only one of the three methods a real estate appraiser uses to determine the final value of the property, it is often the one on which most of the emphasis is placed. The result is usually a lower value placed on the property by the real estate appraiser’s income approach than by the “Opinion of Value.”

Bartering

It is harder to explain the differences between the “Opinion of Value” and the second condition, in which bartered services are involved. The reason for this is that the value of goods and services offered or received are often subjective. The perceived value attached to what is being bartered has a tendency to vary as time goes on and circumstances change. Continue »