COMMERCIAL REAL ESTATE DEVELOPMENT COMPANY
Appraisal Economics has completed the valuation of a New Jersey-based commercial real estate development company engaged in construction management and the development of properties for light industrial use, including warehouses, distribution centers, and light manufacturing. The company also provides property management services. We valued the Company using the discounted cash flow method of the income approach and the guideline transaction method of the market approach. A key issue was the determination of a market-based level of owners’ compensation, as the majority owner was significantly under-compensated for the value of his services rendered to the business.
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PROFITS INTEREST IN MAJOR REAL ESTATE DEVELOPMENT
Appraisal Economics Inc. has determined the fair value of a profits interest in the real estate development of one of the tallest buildings in Manhattan. When completed, the building is projected to be one of the most expensive office towers in the world. Our engagement consisted of analyzing the projected economics of the project, including construction costs, joint venture terms, rental rates and vacancies, future capitalization rates, and myriad other complexities associated with a project of such magnitude. The valuation of this complex security included traditional discounted cash flow analysis and option pricing analysis, based on the terms of the profits interest. We valued the put rights, call rights, and redemption rights inherent in the profits interest. Also included in our analysis was valuation of promote interests embedded in the development project.
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Appraisal Economics has determined the fair market value of minority, non-controlling interests in various companies under common ownership engaged in construction management, construction material manufacture, and construction equipment rental in the Mid-Atlantic region. We determined the business enterprise value and the corresponding equity value of each company using the capitalization of earnings method of the income approach and the guideline transaction method of the market approach. Key issues included normalized levels of contract revenue, given the wide year-to-year fluctuations, as well as appropriate owners’ compensation for each entity, given that each of the owners rendered services in a variety of capacities to all of the companies. As part of our analysis, we made adjustments to the pro rata values of the subject interests to account for their lack of control and lack of marketability.
FIRST AID SUPPLIES MANUFACTURER
Appraisal Economics Inc. has valued the intangible assets of a first aid supplies manufacturer that designs, produces, and distributes burn dressings and other wound care products to first responders, militaries, and providers of industrial and consumer first aid kids around the world. The company was acquired by a private equity firm. Products include burn gels, burn dressings, fire blankets, burn care blankets, antiseptic and antibacterial sprays, creams, and ointments, hydrocortisone-based anti-itch products and other related products. Appraisal Economics valued the trademarks, trade names, patents, and unpatented proprietary technology and manufacturing processes. Typically, customer-related assets are recognized and valued separate from goodwill; however, the company has elected the private company alternative under Accounting Standards Update No. 2014–18.