Valuation of a wholesale company which owns it's own warehouses
Hi,
Looking for advice on valuation of a wholesale company, which owns its own warehouse (and property) it operates from.
Let's take the example of just an EV/EBITDA valuation. If we use the current EBITDA figure (not adjusted for market rent) and multiply it with the appropriate multiplier, does the resulting Enterprise value include the real-estate the company owns? i.e. could one justifiably bid for the company on the basis of this figure?
Or, should I value the company using an EBITDA adjusted for market rent, and then add the value of the real-estate to the Enterprise value, to arrive at a total figure for the value of the company?
Thanks for any input, it is appreciated.
bump
interested as well
I am not an expert but I would like to get involved in the conversation...
I know that valuing fixed assets of a company usually means considering the company as a NOT going concern, meaning that you are considering the firm as a mass of assets that do not product value (i.e. cash flows).
If you are interested in valuing a firm you should be more interested in valuing what it is able to produce in the future so I think is proper to consider just DCF or EBITDA (the multiple), whitout taking in account serious consideration on the values of fixed assets.
Fixed assets value should represent just an "on top" consideration to be added at your final valuation analysis.
One method is to value the real estate separately, which involves using the proper cap rate and NOI (which should reflect the market rate). The whole EV (RE included) would be based on the cash flow of the business that pays no rent for the warehouse, which you could find via normal operating business valuation methods. Then just subtract the RE value you found initially to obtain the value of the operating business. Open to correction or modification to this since I'm not a RE guy by trade
I'd imagine the appropriate approach as follows: 1) adjust the EBITDA for the FMV rent expense, deriving a valuation for the operations 2) add on the value of the real estate (NOI, cap rate etc).
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