Мирзоян Н.В. Valuation based approach in property management (Стоимостной подход в управлении недвижимостью)

Статья опубликована в сборнике материалов Восьмого международного научного конгресса «Роль бизнеса в трансформации общества -2013» - М.: Экон-информ, 2013

Valuation based approach in property management (Стоимостной подход в управлении недвижимостью)

Н.В.Мирзоян,

к.э.н., доцент кафедры Оценочной деятельности, фондового рынка и налогообложения

Московского финансово-промышленного университета «Синергия»,

г.Москва, РФ

In economical literature Value Based Management is defined as the management approach that ensures firms are run consistently on value (normally: maximizing shareholder value) [1, p.113].

Employing a Value-based approach to management, investors, property owners and property managers can make better and more informed decisions.

Valuation is part of most decisions during the life cycle management of real property. It is necessary for informed decision making, benchmarking performance, and demonstrating that the value-for-money principle has been achieved. For transactions, the focus of the valuation is on market value and investment value.

Value based management was developed primarily for business management [1, p.113] . However, the management of any asset can be based on the value, including property management.

The goal of real estate management could be used the certain level of various indicators, such as the maximization of income from property, attainment of the specified margins, increase loyalty tenants, reducing operating costs, etc. However, none of these indicators can not be used for the comprehensive analysis and evaluation of strategic plans for development of the property.

In many cases, value-destroying decisions are the result of pursuing legitimate objectives, such as growth or increasing profits. The problem is that managers often lack understanding of the difference between decisions that lead to higher profits and those that create value. For example, reducing the cost for routine maintenance of the property in the current period increases the net income from the property, but in the long-term lack of maintenance work will not allow the property owner to keep the rental high.

Practice shows that the increase in the market value of the property for the owners, investors, does not contradict the long-term interests of other stakeholders. The successful investors create value for all participants in the economic environment - realtors, property managers, government (through taxes paid), etc.

In managing the value of the property combines conflicting interests of:

government (federal, state, municipal), which regulate the functioning of the real estate market conditions;
development;
banks and other institutions (investment funds);
property managers;
realtors;
public and private notary;
construction companies, etc.

In VBM, the presence of a single, governing objective makes the process both easier and harder. It is easier because there is no need for the trade-offs between different objectives that encumber traditional strategic planning.

But it is also harder, as the choice that adds the most value may go against the accepted wisdom of what constitutes success.

VBM - integrating process aimed at improving the strategic and operational decision-making at all levels considering the realities of the market [2].

Obviously, the way of setting goals to achieve it in practice to be monitored and controlled. All actions in property management, analytical methods and management techniques, implementation of investment projects or their deviation should be aimed at the same goal: to maximize the value of the property.

Value Based management of the property is a system of interconnected elements, through which it is possible to solve tasks and achieve positive gains.

The focus on strategic planning has been one of the hallmarks of managing for value. In VBM, successful strategies don’t just happen. They are not the result of good fortune, individual genius or a having a “lucky run”. Instead, successful strategies are the end product of a structured and disciplined decision-making process.

It is not only the priorities dictated by the governing objective that make strategic planning more disciplined in VBM. It is also the unrelenting focus on good quality performance information and on the creation of alternative strategies and the means of implementing them.

Generating the relevant information for decision-making is only the first, relatively simple, step in the process of strategic planning. Finally, strategic plans can never be accurate predictions of the future, despite the rigour of VBM. Perfect forecasts remain impossible and VBM is no guarantee of success. All it can do is to make the various assumptions that normally go into decision-making a little more explicit. And this, in turn, means that decisions about investments or resource allocation can be better explained and justified.

Technically, in order for the value of the asset to be accurately determined, free cash flow for all future years should be estimated. In practice, however, a short-cut approach can be applied, where by the future cash flows are divided into two time periods: those that occur during, and those that occur after, an explicit “planning horizon”.

For making decisions appropriate to measure the change in value as a result of these decisions.

We can calculate the value of the property before making a decision and the value after taking the decision. As a result we can observe increase in value as the value effect of the decision.

Value-based management thus places the interests of owners and investors in the centre of decision-making.

In this way, managing for value has the potential to bring a more comprehensive approach to property management.

Bibliography

Copeland T. et al Valuation: measuring and managing the value of companies, John Wiley and Sons Inc, 2000