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I have worked on many types of valuation issues over the years, but am now confronted with something new. I 've been asked by a utility to value a water well located between two fairways on a golf course. The utility would like to purchase the well from the course owner. My feeling is that the well should be valued like any income producing asset, such as an apartment - take the revenues generated by the water, exclude expenses until you get to the net income, then capitalize that net income using a capitalization rate that seems appropriate for the market. The value really isn't in the land, in my opinion; the property is already developed and it is a viable business. It's really the income stream the utility is buying. Any comments or suggestions would be appreciated.

You don't mention where you are and what rights are involved. Here in New Mexico, water rights don't transfer with the well. The value of the well is simply the land that it's on (if owned in fee) plus the depreciated cost. The water rights have an independent right, and they are transferred separately.

I would be concerned about valuing the well based on water "production" without knowing what the specific rights in that water are.