What do car washes, entertainment complexes, gas stations, hotels, marinas, and urgent care facilities have in common?


These properties are classified as special purpose real estate by the SBA.  By definition, a special purpose property is a limited-market property with a unique physical design, special construction materials, and/or a layout that restricts its utility to the use for which it was built.

Special purpose real estate SBA 504 loan projects require an additional 5% equity from the borrower.

What are some other less common examples?

Assisted living, bowling alleys, cold-storage facilities, sports complexes, and many others are also deemed to be special purpose real estate.  The SBA has a published list of 25 in total, but it is not intended to be all-inclusive as the SBA and/or real estate appraiser could classify a property as special use based on a review of the property.


What are some examples of properties that are NOT considered special purpose?

Restaurants, day cares, and mini-storage facilities are classified as multipurpose despite their unique characteristics.  One thing in common of the three is the higher volume of these properties in the marketplace due to the demand for the services they provide.


Are there some properties that can be either special purpose or multi-purpose?

Auto repair facilities are classified as multi-purpose if they do not have pits and in-ground lifts.  Funeral homes are multi-purpose when they do not have a crematorium.  And finally, cold storage only special purpose when more than 50% of the total square footage is equipped for refrigeration.


Are there any special application requirements for special purpose properties? 

Since these properties are niche businesses, they typically require historical industry experience from the owners.  A 3rd-party feasibility study is normally required in addition to an applicant-prepared business plan with financial projections.  And lastly, financial statements and tax returns from the seller are required even if there is no goodwill included in the sale. This can sometimes be challenging to obtain from the seller.


How are these properties appraised?

For appraisal purposes, the report must separate the real property from the FF&E and the “going concern/goodwill” values.  The appraiser needs to be experienced in the particular industry.