Presentation by Schwartz Heslin Group, Inc. (SHG)

Business Valuation: Real Estate

How a business valuation professional appraises a company can be significantly impacted by the size of a company’s real estate holdings

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

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.

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.

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

Gray Areas

Some companies do not fit into the real estate- related vs. unrelated dichotomy. E.g. a gas station

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

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

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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