The Société Civile Immobilière (SCI) is a legal form enabling several people to jointly own one or more properties. However, to determine the real value of the SCI, it is necessary to carry out an evaluation or valuation of the SCI. In this article, we'll explain what an SCI valuation is, the different methods available and what's at stake.
Definition of SCI valuation
SCI valuation is the assessment of the economic value of an SCI at a given point in time. This valuation is often carried out for tax purposes or for real estate transactions. In particular, it is used to determine the partners' share in the SCI's share capital.
SCI valuation methods
Several methods can be used to value an SCI:
- The market value method: this consists of assessing the value of the SCI based on real estate market prices for similar properties.
- The asset value method: this method is based on the value of the SCI's assets, i.e. the value of the real estate held by the SCI.
- The discounted cash flow method: this method takes into account the revenues generated by the SCI and their future evolution to estimate the value of the SCI.
Several other valuation methods can be used depending on the real estate assets held by the SCI (residential, professional, logistics, etc.). The XVAL consultant will guide you in your choice of methods.
Next, we need to take into account the elements of the SCI's balance sheet that will have a major impact on its valuation: other income, debt, provisions, etc. It's clear, then, that the valuation of an SCI requires dual expertise in real estate valuation and financial analysis.
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Analysis of an SCI's balance sheet
The assets on an SCI's balance sheetrepresent all the assets and rights held by the company. They include fixed assets, inventories, receivables and cash. Fixed assets represent durable goods held by the SCI, such as buildings or equipment. Inventories represent goods held for resale, such as land or buildings under construction. Receivables represent amounts owed to the SCI by its customers or partners. Cash and cash equivalents correspond to liquid assets held by the company, such as bank accounts or cash on hand.
The liabilities side of an SCI's balance sheet represents the company's sources of financing. They include shareholders' equity and debts. Shareholders' equity corresponds to the capital contributions and reserves of the SCI. Debts represent sums owed by the SCI to its suppliers, partners or banks.
Some examples of questions to ask when reading the balance sheet of an SCI :
- Statement of tenant receivables: are all rents paid?
- Current account statement: does the company owe money to its shareholders?
- How should the company's assets be divided between development and more sustainable real estate?
- What are the annual borrowing costs versus net income from real estate assets?
By analyzing an SCI's balance sheet, we can assess its ability to repay its short- and long-term debts. We can also assess the company's profitability by comparing its assets and liabilities. Finally, we can analyze the financial structure of the SCI by studying the breakdown between the different sources of financing.
The challenges of SCI valuation
The SCI valuation is an important operation for several reasons:
- It enables us to determine the partners' share in the SCI's share capital, which is important in the event of the sale of shares, inheritance or transfer of the SCI. The valuation report, drawn up in accordance with the standards recommended by the tax authorities, will enable you to secure your transfer with regard to any tax constraints.
- It enables the profitability of the SCI to be assessed, and informed investment decisions to be made, notably by adjusting financing capacities. Valuing an SCI through an official report is an important lever in convincing a bank to finance a project.
- Â It verifies that the SCI complies with tax and legal requirements regarding minimum share capital.
Starting a valuation process for an SCI
The SCI valuation is an important step in determining the real value of an SCI. There are several methods for doing this, each with its own advantages and limitations. XVAL consultants are at your disposal to carry out this operation and produce a detailed valuation report based on various valuation methods:
