Water Right Valuation for the Former Olympia Brewery

Client: Multiple

Location: Washington

Summary: The Olympia Brewery in western Washington closed in 2003, and later went into foreclosure after being purchased by another company. Because of the high quality water used in the brewing process, multiple cities in the area were interested in obtaining the water rights to meet the needs of their increasing populations. In 2006, three cities, Olympia, Tumwater, and Lacey, condemned the real property, water rights, and easements associated with the former brewery.

Cardno ENTRIX was hired in 2008 by the mortgage and lending companies associated with the foreclosure to evaluate the water rights of the former Olympia Brewery--assuming municipal use as the highest and best use of the subject water. The value was estimated on a ?per-unit? basis through ?comparable sales? and ?avoided cost? approaches. Cardno ENTRIX?s research involved studying the local water market as well as review of the water resource plans and costs of alternative municipal water supplies for the cities condemning the water.

The analysis involved, but was not limited to, developing a detailed database of water transactions in Washington and identifying transactions involving water with similar characteristics; interviewing the various stakeholders as well as potential buyers for the water rights; articulating the restrictions on the subject water based on water laws and policies; and estimating the cost of developing alternative supplies and/or acquiring new water rights. The outcome of Cardno ENTRIX?s research was used during the negotiation process between the mortgage companies and the cities, who reached a settlement in 2009.