Valuation of real estate management business

Along with property appraisal, Colliers International offers its services in the valuation of the business generated by real estate assets. Our standard equity valuation employs three approaches: cost-based, market-based and revenue-based.

The cost-based approach to business valuation views company value in terms of its costs. The book value of a company's assets and liabilities is not usually the same as their market value in consequence of inflation, market changes and changes in accounting policy. So before the value of a business can be estimated using the cost-based approach, its balance sheet has to be realigned with reality. First off, we will appraise the fair market value of each individual asset on the balance sheet, then appraise the current value of the company's liabilities, and, finally, we will deduct the current value of all of the company's liabilities from the fair market value of all its assets. The result is an estimated value of the company's equity.

The market-based approach to business valuation assumes that the value of any assets equals the amount they can be sold for in a solid financial marketplace. This comparative approach, based on the current market data on companies and their share value, typically yields the most accurate picture of what the business is worth.

The revenue-based approach to business valuation assumes that no potential buyer would pay more for a business than the net present value of its future revenues. Therefore, the worth of a company's equity is defined by the current value of its future business revenues.

At the final stage in our valuation process, we will analyze the credibility of our value estimates and make sure the approach used is consistent with the stated valuation objectives; then we will weigh and reconcile the results, produce our final valuation report, and have our valuation certified. We apply discounts for low liquidity or poor controls, and premiums for good controls.