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Value-Based Management for Real Estate Developers’ Activities

Value-Based Management for Real Estate Developers’ Activities AbstractReal estate development investments are characterized by a high value of projects, which in the event of irregularities in their implementation may result in significant losses for the economy. The lack of tools enabling ongoing control of real estate developers may result in disruptions in the operation of business entities on the real estate market, affecting the proper functioning of many stakeholders. The article proposes a method of measuring value for real estate companies. Accounting principles that regulate financial statements specify that they cannot be used directly to measure the value of a developer. The article proposes examples of corrections to financial statements supporting value measurement. When calculating value management measures, (i) adjustments excluding the impact of asset valuations, (ii) adjustments of settlement negative EVA of the investment phase, (iii) adjustments of advance payment of NPV of the project, and (iv) adjustments of excluding the impact of interest on foreign capital should be made. Examples of using these adjustments in a short-term housing project and a long-term commercial project were presented. The impact of the proposed adjustments on the comparison of formal financial statements and value measures for a large developer listed on the WSE was also discussed. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Real Estate Management and Valuation de Gruyter

Value-Based Management for Real Estate Developers’ Activities

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Publisher
de Gruyter
Copyright
© 2020 Michał J. Kowalski et al., published by Sciendo
ISSN
1733-2478
eISSN
2300-5289
DOI
10.1515/remav-2020-0031
Publisher site
See Article on Publisher Site

Abstract

AbstractReal estate development investments are characterized by a high value of projects, which in the event of irregularities in their implementation may result in significant losses for the economy. The lack of tools enabling ongoing control of real estate developers may result in disruptions in the operation of business entities on the real estate market, affecting the proper functioning of many stakeholders. The article proposes a method of measuring value for real estate companies. Accounting principles that regulate financial statements specify that they cannot be used directly to measure the value of a developer. The article proposes examples of corrections to financial statements supporting value measurement. When calculating value management measures, (i) adjustments excluding the impact of asset valuations, (ii) adjustments of settlement negative EVA of the investment phase, (iii) adjustments of advance payment of NPV of the project, and (iv) adjustments of excluding the impact of interest on foreign capital should be made. Examples of using these adjustments in a short-term housing project and a long-term commercial project were presented. The impact of the proposed adjustments on the comparison of formal financial statements and value measures for a large developer listed on the WSE was also discussed.

Journal

Real Estate Management and Valuationde Gruyter

Published: Dec 1, 2020

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