Property management firms, which include both syndic and gestion locative activities, play an essential role in the French real estate sector.
Their expertise ensures the proper management and valuation of real estate assets on behalf of their clients. But what is the value of a property management firm? This article explores the question in detail.
The French property management sector in 3 statistics
- Number of firms : France boasts some 30,000 property management firms, underscoring the importance of this sector to the real estate economy.
- Rental management market: The rental management market represents an annual business volume of over 2 billion euros.
- Growth in the condominium management segment: With over 10 million condominiums in France, the condominium management segment is growing at an annual rate of 3%, testifying to the market's positive momentum.
Factors to consider for valuation in the property management sector
The valuation of a property management firm is influenced by a number of factors:
- Management portfolio: The size and quality of the rental and condominium management portfolio are decisive factors: type of lots (small or large buildings, energy label on management lots, maintenance of rental management lots, etc.), geographical location of lots, etc.
- Regular income: Long-term contracts with condominiums and rental owners guarantee stable income. The length of the management contract (3 years or 1 year), the age of the management portfolio and the age of the rental management principals are important factors in stabilizing the management portfolio.
- Legal and Technical Expertise: The ability to navigate the complex regulatory framework of real estate and offer relevant technical advice adds value. This element is directly impacted by the ability to recruit and retain well-trained teams. Team turnover is a key factor in customers' perception of management quality.
- Reputation and customer relations: Customer satisfaction and reputation in the sector can significantly influence valuation.
Financial ratios generally analyzed when valuing a property management firm
Financial evaluation can focus on key ratios:
- Management ratio: This ratio, calculated as management costs over management revenues, evaluates the firm's operational efficiency. This ratio is linked to the number of lots under management and the growth of the portfolio under management (property management and rental management). In particular, it provides a better understanding of the firm's organization: digitalization, number of employees for a "typical" portfolio, etc.
- EBITDA: Measures operating profitability before financing costs, taxes, depreciation and amortization, providing an overview of financial performance.
- Retention rate: The percentage of customers who renew their contracts year after year, indicating customer satisfaction and stability.
- Return on Equity: Indicates the profitability generated by each euro of capital invested in the firm, reflecting the efficient use of resources.
Transactions and Valuation in the Property Management Sector in France
In 2020, the average investment for the acquisition of a rental management firm was around 1.2 million euros, and 1.05 million euros in syndicates, reflecting the value of stable, profitable management portfolios over many years.
It should be noted that firm valuations rose sharply at the end of the COVID crisis, due to the dynamism of acquisitions by national players (Foncia, CITYA, etc.). This small bubble seems to have faded since the rise in interest rates and a slowdown in acquisitions by national players.
Firm valuations generally vary between 5.8 and 6.5 times EBITDA + net debt, underlining the importance of operating profitability in the sector and the sustainability of sales.
A decisive criterion is the location, size and quality of the property portfolio under management, with firms with over 1,000 lots under management able to achieve the highest valuations, and the same is true for portfolios of over 4,500 lots in the Syndic category.
Add value to your property management business with XVAL
Building the value of a property management firm requires an in-depth understanding of the specificities of the real estate sector. Firms stand out for their management portfolio, regulatory expertise and ability to maintain lasting customer relationships.
To accurately assess the value of your practice, XVAL's service offers specialized expertise, based on a rigorous analysis of key factors and financial ratios in the rental management and property management sector:
