SUPERPROFIT
Superprofit is an
extra advantage that a business enjoys over an otherwise comparable
business because of the site or location. It has value as the intending
purchaser will pay extra for this business advantage. Superprofits
generally arise out of a monopolistic situation.
EXAMPLE
A newsagent in a regional shopping centre enjoys an extra profit
compared to an otherwise comparable newsagent in a "strip" shopping
centre. The extra profit arises from "sole trader" clause found in
shopping centre leases. That is, a clause which excludes any
competition in the subject business in that centre. However, the valuer
should ascertain whether or not the shopping centre is taking part of
that goodwill by way of a higher rent.
Superprofit and site goodwill also arises from a business with a long
lease residue term subject to a rent well below market rent. The
superprofit is the present the profit rent enjoyed by the tenant.