The Owl Grill and Tess’ Kitchen in downtown Grass Valley are up for sale, according to bizbuysell,com, which shows business listings.
The Owl Grill is for sale for $395,000, according to the website. The bar has been in business for over 100 years and the restaurant has been a steakhouse for over 80 years, it reads. The owner is retiring.
Tess’ Kitchen is for sale for $175,000, the site reads. The owner also is retiring after 13 years.
Filed under: Uncategorized
It appears that in both cases it is the business being offered for sale –– and not the real estate. If that is not the case, I hope someone will set me straight.
Not to beat a dead horse, (re: my comments yesterday about the Holbrooke), but if the Holbrooke Hotel real estate is being offered for only $1.4 million, how in blazes can the Owl (business only) be worth nearly $400K? Answer: It probably isn’t.
I’m not a real estate professional nor much of a student of economics, but if the market is merely adjusting toward reality — and property is finding its true 2010 value — then the trickle-down impact is likely to have profound ramifications for Nevada County property owners and commercial renters.
I hope I’m wrong, but time will tell.
Steve Cottrell
Steve: At SBC we are tracking sales of businesses, and commercial real estate sales trends, in several locations in the Sierra Nevada. Bottom line, your fears are quite reasonable.
Value at sale of businesses is way down, values seem to have dropped about 40%. Business closure seems to be a better option for most, because there really are not many buyers out there, and holding on to sell a business while running at a loss is just leading to greater pain.
Part of the problem is the drop in retail sales, about 30% in most of our region, leading lenders to have little confidence in earnings. This is exacerbating the problem that almost no capital is available for loans to cover sales of businesses. Banks are requiring about 40% equity. In other words, if I wanted to buy a business valued at 400K, I would probably need to come with $160K in security, as well as pledge the existing business as security for the loan. My revenue contribution to my debt to equity ratio would be discounted by about 30-40% and the security I would be most likely to put up real property, like my home, has been discounted by about 20-30%.
It is a pretty heavy burden. (Perhaps a banker reading could compare this to previous historic debt to equity ratios?)
The reality is that this may be a historic correction that we have not really seen the bottom of yet. The ripple effect of 9-15 (the Lehman bankruptcy date) is still reverberating. Most people I have talked to in the last year who are either lenders or venture lenders, or real estate developers, are describing this the same way the author and social critic Richard Florida is: it is The Great Reset. We are resetting our economy, in almost every sector, at about 20% below where we were in 2007. There is an accompanying reset in values along with the economic reset, and we are still seeing that reverberating through our society as well.
Some sectors–like technology, biomedicine, energy, entertainment, short trip travel–will recover quickly. Others are in for a long, tough, and perhaps futile slog.
By the way I am a commercial renter in Truckee and I have dropped my rental rate from 2.23 per square foot to .93 per square foot between October 2008.
Steve:
Thank you for responding. I know more now than I did an hour ago….and that’s part of the value of Jeff’s blog.
Steve Cottrell