A Monumental Task for a Dying Industry

A Cemetery Valuation

Cemeteries and mausoleums serve as the last resting place for your loved ones, whether they be human or the four-legged variety. Cemetery appraisals are an obscure assignment, to be sure. Yet even these property types need valuation services. The expert team at Argianas has been called on to appraise both human and animal cemeteries. While the occupants vary, the procedure for appraising them is the same.

Often owner-operated enterprises, cemeteries are purchased and sold based on current income-producing potential. Over the last few decades, cemetery and mausoleum ownership has trended towards consolidation. How do you determine the value of such properties? The devil is in the details!

Does the property have a modified plot to burial ratio? Some plots are used for more than one burial.
Does the property include nuanced language in the agreement of plot usage rights? (sold, leased for a period of time, or used in perpetuity)
Do the burial plot agreements speak to the maintenance of the facility? While older facilities may have no remaining plots for sale, cemeteries must be maintained in perpetuity. Is there a sufficiently funded endowment for continual maintenance?

These considerations are not always evident, but they impact the property’s value.

not your great-grandparents’ cemetery

Due to cost and changing socio-economic and environmental concerns, cremation services have continued to gain in popularity. Nonetheless, the number of traditional funeral and burial arrangements remains relatively stable. Historic cemeteries with elaborately carved headstones or monuments have given way to large memorial parks with expressive topographical features and gravestones set flush to the ground.

Full service cemeteries can feature a variety of services available that include a mortuary, crematory, mausoleum, chapel(s), columbarium, sales offices, florist shop, maintenance facilities, and staff by appointment counseling centers.

Parks may designate land for families, religious, social, or other cultural groups. Not surprisingly, investment and upkeep of such a facility is significant. It is not uncommon that interment areas are developed in phases to correspond with projected absorption rates.

unearthing market demand

Location, location, location! Cemeteries in dense urban locales must have the zoning and entitlements necessary for interment/burial of a corpse in graves or tombs. The majority of cemeteries are non-profit entities – military, religious, municipal, fraternal, etc. Cemeteries may have differences in terms of length of interment (permanent or movable), limitations due to historical/national registry status, and limits due to ownership status, often regulated at the state and federal level. While many non-profit cemeteries are small or inactive, it is not uncommon for them to be owned by a for-profit chain.

Although macabre, metrics surrounding deaths are essential when determining the demand for cemetery and mausoleum services. Deaths per capita, area supply (and absorption), average age of death, societal preference for death care services, and population dynamics all play a crucial role and provide a broader picture for future cemetery success.

It’s fair to say that demand has changed over the last 200+ years, and the available plots’ inventory has reduced. Although more efficient facilities have come into the market collectively, there has been a downward trend in mortuary and crematory facilities. Few are being built and existing locations have become attractive sites for redevelopment due to lack of land availability.

grave mistake to use the wrong approach

The life stage of the cemetery predicates the type of approach used for valuation. Is it a new development with multiple plots or a historic cemetery with limited future revenue potential? The analogous approach is that of a subdivision or waste fill (we know it’s crass, but we’ll explain why). The income capitalization approach is the preferred technique for appraising certain portions of profit-oriented cemeteries. This approach may also be considered appropriate for parts of a non-profit cemetery.

Newly developed cemeteries usually have strong revenue potential, with revenues associated with the sale of future burial plots, similar in how an appraiser would value a new subdivision utilizing gross retail sell-off methodologies. In contrast, a historic cemetery without available plots has limited future revenue potential. But even if the cemetery is full, the land must be maintained in perpetuity. To this point, state and local laws often require the establishment of funds from the proceeds of plot sales to be placed into an endowment for future support.

Several factors determine ground burial prices, such as plot location, headstone material (marble or granite), garden setting, indoor or outdoor interment, etc. Mausoleum prices also depend on location, either inside the structure or outside in a garden setting.

After understanding the cemeteries’ future revenue potential, a discount or risk rate is applied, and the present value of future revenue is calculated. Although a subdivision retains a residual value and terminal rate, this is not true of cemeteries. A lump-sum negative reversion is applied to value to account for the operational costs to maintain the cemetery in perpetuity.

the future of cemeteries remains to be seen

Time will tell how society’s views on cemeteries change. Cemeteries require large tracts of land, specialized improvements for future occupancy, and require investment many years before reaching full absorption. Time alone can result in both functional, physical, and external obsolescence.

Finally, cemetery maintenance in perpetuity is a costly endeavor, with funds sometimes derived from limited revenue potential. Although endowment care funds, collected from cemetery property purchases and placed in a trust, exist, the management of such funds varies, and often only the interest earned by such funds may be used for the care, maintenance, and embellishment of the cemetery.