Commercial property purchase by business owner

[Matthew Stewart]

I am (still) working on a deal to acquire a manufacturing company. The owner of the business also owns the real estate, and it must be included in the sale.

I am very knowledgeable in the business, but not in commercial real estate. I have been estimating an offer price based on an appraisal from 2010, which was independently done by a bank for a re-fi the owner did. I have added some amount for an extension that was added to the workshop building, and some appreciation.

My questions:

1. Generally, how variable/judgemental are the commercial real estate valuations?

2. How can I determine a fair market price? Using my crude calculation as a purchase price, and the financing I am able to obtain, the company cash flow comfortably pays for the monthly mortgage payment, taxes, utilities, maintenance, etc.

3. For my own calibration, how can I determine a fair market value of leasing? I know the lease rate that the operating company currently pays (to separate RE holding), but I do not know if this is a market rate.

Thanks!

MS