Real estate business valuation: independent reports for transactions and disputes

Valuing a real estate company: more than multiplying square metres

Valuing a real estate company or a portfolio of physical assets goes far beyond applying a market price per square metre. The value of a real estate company depends on the quality and duration of the leases, the actual occupancy versus the potential occupancy, the capex investment needed, the leverage of the vehicle, the latent tax liability on unrealised gains, and the market outlook in the specific locations of the assets.

At BMC we carry out independent valuations with rigorous methodology, adapted to the specific purpose of the report: a valuation for a purchase and sale transaction between parties who need it to negotiate the price is not the same as a valuation for a shareholder dispute where the parties need it to defend a position before a judge, or a valuation for the tax authority where the parties need it to justify the price of a transfer.

Real estate valuation methodologies

The choice of methodology depends on the type of asset and the purpose of the report:

NAV (Net Asset Value) is the standard for funds and SOCIMIs: market value of assets less liabilities, with an adjustment for latent tax liability. DCF (Discounted Cash Flow) is most appropriate for income-producing assets with known lease agreements: it projects the asset’s cash flows over the lease horizon and in the reversion scenario, and discounts them at the rate of return required by the investor for that type of asset in that location. Capitalisation of rent is more direct: it divides the net annual rent by the market yield for that type of asset. Market comparables adjust the value relative to recent transactions in similar assets.

It is common to combine several methodologies and analyse the reasonableness of the results against each other.

Reports for corporate transactions

In purchase and sale transactions involving real estate companies or portfolios, the valuation report is the basis of the price negotiation. A rigorous report, with transparent methodology and sensitivities on the key parameters, enables the buyer and seller to understand the reasonable value range and negotiate the price with technical arguments rather than arbitrary positions.

Reports for disputes and litigation

When the value of a real estate asset is the subject of a dispute — between shareholders with divergent valuations, in matrimonial property proceedings involving a business estate, or in challenging a tax valuation — the independent valuation report is the key piece of the defence or the claim. Our reports are drafted to withstand scrutiny from the counterparty’s experts and to be understood by the judge or tribunal.

Request more information about our business valuation service for your transaction or dispute.