Real Estate and Business Valuations
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Transcript of Real Estate and Business Valuations
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Presentation by Schwartz Heslin Group, Inc. (SHG)
Business Valuation: Real Estate
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How a business valuation professional appraises a company can be significantly impacted by the size of a company’s real estate holdings
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For simplicity’s sake, we will identify two, mutually exclusive types of businesses: Companies whose productive capabilities
are inherently tied to real estate Companies whose productive capabilities
are independent of real estate
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Directly Related to Real Estate Some business models are inherently
tied to real estate. E.g. Amusement parks Farming operations Real estate management firms
Their revenue generating capabilities are tied to the land.
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Indirectly Related to Real EstateBut many business models are NOT directly related to real estate holdings…
In these cases, it is often more useful to determine the value of the company and the value of the real estate holdings independently.
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Why Independent Valuations? The future earning potential of the
company and the future earning potential of the real estate are separate A prospective buyer wants to know the
income potential of the BUSINESS not the
REAL ESTATE
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Gray Areas
Some companies do not fit into the real estate- related vs. unrelated dichotomy. E.g. a gas station
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All Together
Real Estate value + Business value = Total enterprise value These should be prepared separately by
experienced professionals when: A company holds significant valuable real
estate assets on its books AND When these real estate holdings are only
indirectly related to the core competency of the company
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Business Owners
Your real estate may not be an integral part of your business Buyers will often look for earnings potential
in the enterprise They often do not want a business
valuation skewed by the value of large real estate holdings
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Presented by:
Schwartz Heslin Group
Web: www.shggroup.com
Phone: 518-586-7733
Address: 8 Airport Park
Bvld.Latham, NY 12110
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