Global Explicit DCF models for Valuing Real Estate Webinar - Recorded 25 January 2023

Overview

Discounted cash flow (DCF) is a valuation model used by investors and advisors to give the present value of an asset where the forecasted cash flow of the asset is discounted back to the valuation date. An explicit discounted cash flow model uses predicted input changes, such as growth, rather than existing values.  

Globally, markets and industries use explicit DCF models in different ways. It is quite common for investors and their advisors to use DCF to calculate the worth of an asset to them. Explicit DCF models are less commonly used to calculate market value (or fair value) for real estate assets, although in some countries this has been the accepted basis for some time.

Due to its flexibility, connection with investment analysis and financial reporting, presentational qualities, and perceived openness, DCF valuation has gained popularity in many markets. DCF also presents a few obstacles, such– and where using explicit DCF models, appropriate ways of estimating e.g. growth rates. The sometimes difficult-to-obtain data required for DCF valuation can include transaction data, economic data, property market information and an understanding of investor sentiment. 

The accuracy of DCF, like all valuation, is highly dependent on the assumptions, which can be numerous when compared to implicit income capitalisation models. These assumptions, which, depending on the adopted model, may include the discount rate, the growth rate, and the terminal value, should be based on a comprehensive understanding of the market and economic conditions. This webinar intends to provide an overview of DCF valuation and its application in the market. It will distinguish between DCF models used to calculate worth to a particular investor and to calculate market value (and fair value). It will also look at trends, challenges, and ways to enhance DCF application in the future.

Moderator

• Charles Golding, Senior Specialist, Valuation & Investment Advisory, RICS

Speakers

• Alexander Aronsohn, Director of Technical Standards, International Valuation Standards Council (IVSC)
• Ryan Spear, Product Manager – UK, Forbury
• Peter Sudell, Executive Director, BNP Paribas Real Estate UK
• Neil Crosby, Emeritus Professor of Real Estate, Henley Business School

Learning outcomes