Every day now one hears references to the performance of businesses and economies in 2019 which has become the benchmark for normality before Covid and the war in Ukraine. But, at this stage, isn’t there a risk that traditional valuation methods, referencing old information, may be becoming obsolete?
That’s a conundrum I posed to Caroline Kirrane, CFA, MBA, a financial analyst and former Central Bank economist. She agrees that there is a problem in comparing with older information but told me that now, more than ever, business valuers must return to the base principles of how we value things.
Valuers, (and I include property and business valuers in that) must be aware of the structural changes that are taking place in markets and economies, Ms Kirrane told me. For example, we have moved from where tangible assets – property and infrastructure – dominated company balance sheets, to where many of the most valuable companies in the world are valued on their intellectual property and goodwill.
Developers and valuers have to be aware of the impact on their markets of the extraordinary times we are seeing. For example, after almost a decade of free money, interest rates are rising rapidly.
We have war in Ukraine, an energy crisis and talk of recession. We are now in a post-Covid world, Ms Kirrane told me, and in any big shifts in markets there are always winners and losers. “We haven’t had significant inflation for 12 years,” she said, “that’s a generation of finance managers who haven’t dealt with inflation outside text books.” But developers must now reappraise their markets, because of these shifts.
While valuers in estate agencies usually find themselves valuing businesses in the hotel, pub and leisure sector, Covid has accelerated a move to “turnover rent” leases in the retail sector.
Ms Kirrane agreed that there has been a shift in the balance of power from landlords to tenants, and a move away from an often adversarial system of long leases and upward-only rent reviews.
Now, developers and landlords must have a much better understanding of their tenants’ business and cashflow. “Landlords are taking on more of the risk,” she told me and are taking on what were traditionally some of the banking roles.
Ms Kirrane is running an online workshop for the SCSI titled An Introduction To Business Valuation on November 25, which I recommend.
In a busy marketplace it can be hard to stand out from the crowd but a sure way to be conspicuous is to be adjudged to have achieved a standard of excellence that sets the benchmark for your profession.
Returning after a three-year interruption, the winners of the KPMG Irish Independent Property Industry Excellence Awards 2022 will be announced at a gala dinner at the Convention Centre, Dublin, onNovember 24.
Judges have made their decisions in categories incorporating agency, investment, design, contracting, sustainability and community.
One of the reasons why the awards have become the beacon for excellence in the property sector is the independence and integrity of the judging process, and no sponsor can receive an award.
The awards ceremony, which I have the honour of co-presenting, will see over 1,000 people attending, and the evening is also a networking bonanza. There may be some tickets available from firstname.lastname@example.org.