How Much is Your Management Company Worth in a REIT Roll-up Transaction?

In REIT roll-up transactions, the value of contributed real estate assets is generally understood, as investors are usually comfortable with the well-established methodologies underlying real estate appraisals. The value of the management company is less straightforward, however, and often becomes an area of inordinate focus in roll-up transactions. So why is the management company a source of value and how is that value best determined?

This article published by GlobeSt.com is an update to our studies performed in 2014, 2016 and 2019 that explores management company valuations from the following perspectives:

• Why it is important to convert to internal management prior to a REIT going public
• The reasons why a manager has value in a roll-up
• Historical trends regarding management company valuations in REIT roll-up and internalization transactions
• Examination of valuation multiples implied by precedent internalization transactions of management companies by equity REITS
• The use of a discounted cash flow analysis to value management companies
• Factors that impact the values of management companies