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The traditional approach to valuing land is by identifying the best use and highest value of commercial or residential use and this value is typically driven by supply and demand, i.e., housing, industrial, timber, farming etc. Therefore, it should come as no surprise that contaminated lands have diminished value and can have a negative effect on the value of nearby commercial and residential properties. By the same token, land in its natural state can increase the value of adjacent commercial and residential properties.

Some lands may have a low appraised value because of their location and/or current use. For example, wetlands have historically had a low appraised value until they were filled for commercial or residential uses. We now know that wetlands have a very high ecological value. An ecological appraisal is used to identify and measure this value.

An ecological appraisal is a biological and economic evaluation of the quality, quantity, and use of habitats by vegetation, fish, and wildlife. The objective of an ecological appraisal is to determine the ecological value of a property and to then measure this value in dollars. An ecological appraisal – unlike a traditional land appraisal that determines the value of a market-based use – determines the value of the land for direct or indirect human use (e.g., use by wildlife). Ecological appraisals integrate habitat assessment, ecological use assessment, and natural resource economics. The key element of the appraisal is the conversion of the ecological value to dollars for financial purposes.

An ecological appraisal has two major components. The first component involves the assessment of habitat quality and quantity and the environmental benefits of the site. The second component is a monetary valuation of these ecological assets. Many of the benefits provided by ecological assets (land and associated use) are not generally exchanged in the market place and hence do not have a market price set by the interaction of supply and demand. However, the concept of value extends beyond only those goods with observable market prices, to all goods or services valued by people for any reason. Land in its natural state provides benefits that are valued by humans (i.e., habitat for wildlife and plant species, flood control, waste assimilation, open space, aesthetics, etc.).

Once an ecological appraisal has been conducted, it is then possible to identify various other options that will maximize the value of the property. In essence, determine the preservation value and contrast this value against other options such as its value as commercial property (traditional transferable property assets). It is through this type of assessment that potential disposition options can be identified and compared to maximize corporate property value return. These options can include sale as commercial real estate, sale to public or quasi-public entities, potential tax benefits from donation, ecological value as habitat banking/species banks and trades, conservation credit, air/water compliance/permit negotiations, and habitat restoration to increase value prior to any actions such as remediation. Other alternatives could be carbon credits and land management changes.

Ecological appraisals can be a useful tool to evaluate whether land has greater monetary value in the ecological market than in the traditional development market. This can assure that the best use and highest value of the land is identified. The current regulatory and financial climates promote the ability to realize such values in ways that are meaningful to financial managers and stockholders.

Stephen Friant is a Senior Scientist with Golder Associates Inc. Mr. Friant is located in Golder’s Gainesville, Florida office. Golder Associates Inc. is a premier global group of consulting companies, specializing in ground engineering and environmental science. Our employee-owned consulting firm has Florida offices in Boca Raton, Gainesville, Jacksonville and Tampa.

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July 2006

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