22 Nov

8 Tips for Your Next Valuation Exercise

Are you about to appoint an independent valuation company for appraising your operating asset? Here are some tips to make sure nothing get lost (including values).

  1. Show your usual three year historical data but always come with a good justification about each year’s actual performance and what improvements have been done over the years to strengthen and solidify the cash flows.
  2. Provide a well explained projection for the future financial years, backed up by documents provided by the operator. Discuss the market (hopefully market growth), penetration methods and detailed analysis on the expected type of clients.
  3. Provide a well-documented historical and future maintenance plan and detail the positive impact on the future performance.
  4. Detect and show commercial terms in the HMA that will have a positive impact on the value, such as a well written early termination clause or well-structured performance tests.
  5. Illustrate source of revenues by type, showing diversified business sources and markets. There is nothing more risky than relying on a single country or a single vendor for future performance.
  6. Information about the competitive set would help the valuation approach, especially for the future forecast, but remember that you want to come with a strong justification about your current market penetration and ideally prove that there will be room for growth in the future.
  7. If possible, show evidence of other market transactions (land or buildings) in the area and, ideally, provide evidence about possible offers for your property as evidence of market value. Remember that appraisers value real estate, not dreams, the more you are able to prove, the stronger the value could be.
  8. Provide costing structure with department detail, ideally the appraiser would be able to judge whether there will be space for cost saving and better margins.