The valuation of self-funded retirement villages in Australia

Changing demographics will see an increasing demand for self-funded sector retirement villages in Australia. As such, valuers can expect to be more involved in providing valuation advice in this sector, although the central issue remains that retirement villages are complex businesses. They have been described as management intensive operating businesses with a substantial real estate element. As a result the valuation process in this sector requires a different type of analysis, in comparison to the traditional real estate based investment.
This paper provides an analysis of recent trends in the demand for retirement villages and examine current practise with respect to valuation thereof. It emphasises the need for a greater awareness of the ‘business enterprise value’ component and provides a framework within which the components of value can be better understood. The purpose of the paper is to provide a foundation for a greater reliability with respect to valuation advice.

The valuation of fast food outlets in Australia : methodology, analysis and reliability

Fast food outlets are a significant sub sector of the Hospitality and Tourism Property Market and a specialized form of business. This form of hospitality outlet has experienced significant growth and change in the last 20 years. Their value as an asset is therefore of significant interest to many involved in the tourism and hospitality industry, not least fast food operators or potential operators and their financiers. However, little attention has been given in professional and academic literature to valuation methodology, the analysis of the major components of asset value, and the underlying factors which influence asset value. As such the reliability of the valuation process could justifiably be questioned.
This paper sets out a working definition of a fast food outlet. It investigates the major determinants of value with respect to asset value and examines the accepted methods of valuation of fast food outlets in Australia as well as establishing the methods most commonly used. It clarifies the major components of asset value and examines to what extent these have changed with the changing business environment. In particular it isolates the role of Goodwill in assessing Going Concern Value. Sources of data include a comprehensive literature review and personal interviews with professionals involved in the valuation process. The paper concludes that an efficient valuation process requires that fast food outlets be considered as both a real estate and business investment. The contribution of both tangible and intangible assets to the value of the asset must be identified.

Business valuation practice issues under Family Court of Australia proceedings

The study investigated the valuation of businesses valued for property settlements in the Family Court of Australia and related issues. The findings have important implications for the Family Court of Australia, the legal profession and the accounting profession in highlighting deficiencies in valuation practice at various stages of the settlement process.

Stock-in-trade valuation in the United Kingdom 1840 to 1959

Commentators have made a number of unsubstantiated claims about why the lower of cost and market rule had become the accepted method of valuation. It is demonstrated that none of these explanations can be substantiated. Leon Festinger's theory of "dissonance reduction" is used to explain why the significant criticisms of the rule have been ignored.

The use of heuristics in valuation practice : implications in a changing market

Despite the existence of prescribed frameworks, valuation remains a cause of much controversy and variety of opinion. It does not matter whether procedures are undertaken in exactly the same way, the conclusion of ‘value’ will vary from valuer to valuer – sometimes considerably. This uncertainty within valuation is founded on property’s heterogeneous nature and the imperfect market that is the property market; in addition to the unpredictability of human behaviour in making judgements (French and Gabrielli 2004). Uncertainty, in valuation is found in the amalgam of locational, physical and legal characteristics and innumerable other forces which control and energise the property market (Whipple 1995). Particular irregular occurrences, or drastic changes in property markets, from either within market evolution or external forces, for example the creation of global financial markets, cause further uncertainty for valuers and provides challenges in identifying ‘market value’ in valuation practice. The praxis of valuation in a commercial sense navigates this complexity using a combination of algorithms and heuristics to identify the value of a property. The application of theoretical mathematical algorithms based on economic theory (Brown 1995), is augmented by valuers’ ability to apply appropriate adjustment based on their knowledge of the market, their ability to analyse, assess and compare the attributes of a property in comparison to its market, and their practical experience (Sliogeriene 2008). Despite the necessity of algorithms, the application of appropriate adjustments and assumptions are important in arriving at a value. This paper is a critical reflection on the basis of valuation practice as guided by standards, methods, and ethics (algorithms), and the use of heuristics in practice. This is important because changes within property markets challenge the inter-relationship between these two aspects of valuation practice. Through the authors’ industry experience and a review of previous research and statements of practice norms this paper provides an analysis of the ability of valuers to address market change in their valuation practices.

Valuation and sustainability : are rating tools enough?

The lack of sufficient financial drivers are preventing significant investment in sustainability because stakeholders have only very limited ability to measure the sustainability of the building or understand the impact upon the value. Valuers are unable to indicate or clarify whether sustainability is affecting market value as there is an absence of detailed market evidence, sales data and lease transactions of sustainable building. Leaving both Valuers and other stakeholders uncertain of the value implication as there is no reliable evidence as to whether sustainable buildings are feasible (Lutzkendorf and Lorenz, 2005). One of the key barriers is the confusion evident in the industry particularly the measurement of sustainability in commercial property. Although a range of environmental rating tools exist for buildings globally in commercial property, the synergy between these tools and identification of the relationship between the measurement and market value is inherently blurred due to the unique nature of the compilation of points attributed in the rating tools for sustainability or energy certificates in commercial property. The paper examines the challenges that face the Valuation profession in assessing the impact of sustainability on market value.